<PAGE>
--------------------------------------------------
THE
THAI FUND,
INC.
--------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1999
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
THE THAI FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
Barton M. Biggs
CHAIRMAN OF THE BOARD
OF DIRECTORS
Michael F. Klein
PRESIDENT AND DIRECTOR
Peter J. Chase
DIRECTOR
John W. Croghan
DIRECTOR
David B. Gill
DIRECTOR
Graham E. Jones
DIRECTOR
John A. Levin
DIRECTOR
William G. Morton, Jr.
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT
Harold J. Schaaff, Jr.
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Mary E. Mullin
SECRETARY
Belinda A. Brady
TREASURER
Robin L. Conkey
ASSISTANT TREASURER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. INVESTMENT ADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
- --------------------------------------------------------------------------------
THAI INVESTMENT ADVISER
The Mutual Fund Public Company Limited
30th-32nd Floor, Lake Rajada Building
193-195 Ratchadaphisek Road
Khlong-Toey, Bangkok 10110 Thailand
ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
- --------------------------------------------------------------------------------
CUSTODIANS
The Thai Farmers Bank Public Company Limited
1 Soi Thai Farmers
Ratburana Road, Ratburana
Bangkok, Thailand
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT
Boston Equiserve
Investor Relations Department
P.O. Box 644
Boston, Massachusetts 02102-0644
(800) 730-6001
- --------------------------------------------------------------------------------
LEGAL COUNSEL
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726 or visit our website
at www.msdw.com/institutional/investmentmanagement.
<PAGE>
LETTER TO SHAREHOLDERS
- ---------
For the year ended December 31, 1999, The Thai Fund, Inc. (the "Fund") had a
total return, based on net asset value per share, of 50.26% compared to 32.41%
for the U.S. dollar adjusted Securities Exchange of Thailand (SET) Index (the
"Index"). For the period from the Fund's commencement of operations on February
16, 1988 through December 31, 1999, the Fund's total return, based on net asset
value per share, was 14.05% compared to -3.03% for the Index. On December 31,
1999, the closing price of the Fund's shares on the New York Stock Exchange was
$7 13/16, representing a 36.8% premium to the Fund's net asset value per share.
The Thai stock market enjoyed its second straight year of positive returns,
following four straight years of declines, with recovery seen for certain
segments of the economy, corporate debt restructuring having started to
materialize and the level of non-performing loans trending lower in the second
half. The Fund outperformed the Index as it focused on companies with aggressive
restructuring and global alliance initiatives, including Siam City Cement and
the Shinawatra Group companies. We also benefited from an overweight position in
Delta Electronics, which has capitalized on the growing trend in the outsourcing
of electronic components. The Fund was underweight banks, the largest sector in
the Index, with overweight only in those banks like Siam Commercial Bank which
had undertaken restructuring initiatives.
The Thai economy is estimated to have grown by 4.0% to 4.5% in 1999 based on
robust exports and strong manufacturing output. Since the first half, economic
recovery was largely underpinned by a revival in exports buttressed by a
recovery in intra-Asia trade and continued demand from OECD countries. Export
growth contributed to a sizeable current account surplus estimated to be $12
billion or an estimated 9% of GDP in 1999. However, since the second half of
1999, there have been increasing signs that domestic growth is underway with
private consumption and fixed investments on a healthy rebound. Evidence shows
that pockets of the economy have started to see a credible pick-up, especially
in large ticket items, including automobiles and cellular handsets. Non-durable
consumer product sales have also picked-up. Benefits from tax cuts and stimulus
packages also led to a turnaround in domestic consumption. However, excess
capacity still persists, with capacity utilization for the manufacturing sector
estimated to be remaining well below 70%.
Despite the turnaround in the economy, the government's capacity to fund its
fiscal deficit, one of the key variables which fueled domestic consumption in
1999, is dissipating. The large portion of non-performing loans of Thailand's
banking assets has put pressure on the government's balance sheet. In
particular, the bad loan problems and mismanagement of Krung Thai Bank (KTB), a
government controlled bank and the largest Index constituent, remains a key
concern for financial sector restructuring. Nonetheless, the non-performing loan
ratio for the overall financial sector has fallen to an estimated 40% at the end
of 1999, peaking at 47% in May, thanks to the debt restructuring program set out
by the Corporate Debt Restructuring Advisory Committee (CDRAC) of the Bank of
Thailand. Although the number of filed cases having cleared under the CDRAC
program is still a small portion of total non- performing loans, as more than
70% of the filed cases have declared the delinquent borrower bankrupt, borrowers
have started to take creditors more seriously. The continued decline in the
non-performing loan ratio for the financial sector allows the banks' balance
sheets to improve as provisions are written back which, in turn, improves the
prospects for loan growth. Several major corporate restructuring cases were
successful in 1999 including that of TPI Polene and TelecomAsia.
To promote corporate debt restructuring and provide an environment for bank
re-capitalization, the Bank of Thailand had maintained a loose monetary policy
throughout most of 1999. Thai banks, with large non-performing loan portfolios,
need low rates to limit the carrying cost of bad loans. Meanwhile, a large
number of debt restructurings involve extended loan maturities and fixed
interest rates at low levels for the next several years making it necessary for
a low interest rate environment. As rates were driven below those of the U.S.
since May, downward pressure on the baht emerged in September. The government
responded by tightening regulations to limit offshore baht borrowing to 50
million baht. With inflation rates remaining low, it is unlikely that a loose
monetary policy would underpin the baht.
The government has made efforts to open up industries to foreign competition as
part of its liberalization efforts. In particular, in the banking sector, four
of the thirteen commercial banks are now majority owned by foreign banks. A few
standalone domestic banks, such as Siam Commercial Bank, through assistance from
international consulting companies, have overhauled their senior management,
improved their operations through aggressive corporate debt restructuring and
made significant write-offs. Foreign strategic investors were also active in
non-financial sectors, including Singapore Telecom's stake in Advanced Info
Services and China Light & Power's stake in EGCOMP. However, despite increased
foreign direct investment flow into Thailand, there was net capital account
outflow stemming from repayment of external borrowings.
Senate elections are expected in March 2000 and parliamentary elections in
October 2000. The opposition
2
<PAGE>
party, since the second half, has become more vocal and has positioned itself to
take some of the credit for a turnaround in the economy. Thus, the ruling party
continues to promote popular economic policies, such as the CDRAC program, tax
incentives and a low interest rate environment in order to counter this.
However, delayed privatization programs are unlikely to occur until the
formation of a new government.
Economic prospects for 2000 appear encouraging with domestic recovery and
improved export performance continuing under a low interest rate regime. The
non-performing loan ratio of the financial sector should continue to decline
with more transparent bankruptcy guidelines and private asset management
companies becoming more active. Still, risk remains that some of the
restructured loans could turn back into non-performing loans. Cash calls will
continue to remain an overhang with banks and in particular, banks in need of
re-capitalization.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
January 2000
THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED.
- --------------------------------------------------------------------------------
DAILY NET ASSET AND MARKET VALUES, AS WELL AS MONTHLY PORTFOLIO INFORMATION FOR
THE FUND, ARE AVAILABLE ON OUR WEBSITE AT
www.msdw.com/institutional/investmentmanagement.
EFFECTIVE JANUARY, 2000, TIMOTHY JENSEN NO LONGER SERVES AS A MANAGER OF THE
FUND. ASHUTOSH SINHA, WHO PREVIOUSLY SHARED PRIMARY RESPONSIBILITY WITH MR.
JENSEN, WILL CONTINUE TO HAVE PRIMARY RESPONSIBILITY FOR THE DAY-TO-DAY
MANAGEMENT OF THE FUND.
3
<PAGE>
The Thai Fund, Inc.
Investment Summary as of December 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION
TOTAL RETURN (%)
----------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
---------------------- --------------------- -------------------
ANNUAL ANNUAL ANNUAL
CUMULATIVE AVERAGE CUMULATIVE AVERAGE CUMULATIVE AVERAGE
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
One Year 32.98% 32.98% 50.26% 50.26% 32.41% 32.41%
Five Year -57.47 -15.72 -75.42 -24.47 -76.28 -25.00
Ten Year -47.52 -6.24 -42.43 -5.37 -62.09 -9.24
Since Inception* 56.05 3.82 14.05 1.11 -3.03 -0.26
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share ....... $13.08 $15.41 $20.69 $39.42 $28.30 $24.89 $15.63 $3.81 $3.80 $5.71
Market Value Per Share .......... $16.00 $16.25 $18.75 $36.88 $22.38 $22.38 $16.38 $5.25 $5.88 $7.81
Premium/(Discount) .............. 22.3% 5.5% -9.4% -6.4% -20.9% -10.1% 4.8% 37.8% 54.7% 36.8%
Income Dividends ................ $0.21 $0.21 -- $0.36 $0.35 $0.11 $0.32 $0.11 $0.19 --
Capital Gains Distributions ..... $1.68 $0.47 -- $0.51 $4.62 $3.38 $0.08 $0.12 -- --
Fund Total Return (2) ........... -20.44% 23.08% 34.26% 98.90% -10.40%+ -0.10% -35.93% -75.17% 2.88% 50.26%
Index Total Return (3) .......... -28.60% 15.80% 24.71% 88.40% -17.76% -6.11% -36.25% -75.54% 22.43% 32.41%
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. These percentages are not an indication of the performance of a
shareholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
(3) The U.S. dollar adjusted Securities Exchange of Thailand (SET) Index is a
capitalization weighted index of all stocks traded on the Stock Exchange of
Thailand, including dividends, expressed in U.S. dollars.
* The Fund commenced operations on February 16, 1988.
+ This return does not include the effect of the rights issued in connection
with the Rights Offering.
4
<PAGE>
The Thai Fund, Inc.
Portfolio Summary as of December 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
<TABLE>
<S> <C>
Equity Securities (96.8%)
Short-Term Investments (3.2%)
</TABLE>
- -------------------------------------------------------------------------------
INDUSTRIES
[CHART]
<TABLE>
<S> <C>
Banking (17.9%)
Beverages & Tobacco (4.1%)
Broadcasting & Publishing (4.5%)
Building Materials & Components (18.8%)
Electrical & Electronics (14.1%)
Energy Sources (4.3%)
Food & Household Products (7.5%)
Transportation -- Airlines (2.6%)
Telecommunications (9.4%)
Telecommunications -- Wireless (5.3%)
Other (11.5%)
</TABLE>
- -------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
<S> <C>
1. Siam Cement Co., Ltd. 10.8%
2. Thai Farmers Bank Public Co., Ltd. 9.2
3. Siam City Cement Co., Ltd. 8.0
4. Delta Electronics Public Co., Ltd. 7.2
5. Shinawatra Computer Co., Ltd. 6.9
6. Advanced Information Services Co., Ltd. 5.3
7. Shinawatra Satellite Public Co., Ltd. 5.1
8. Bangkok Bank Public Co., Ltd. 4.9
9. BEC World Co., Ltd. 4.5
10. TelecomAsia Corp. Public Co., Ltd. 4.3
----
66.2%
----
----
</TABLE>
5
<PAGE>
FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS
- ---------
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
THAI INVESTMENT PLAN (99.3%)
- -----------------------------------------------------------------------------------------------
THAI COMMON STOCKS (96.1%)
(Unless otherwise noted)
- -----------------------------------------------------------------------------------------------
AUTOMOBILES (0.3%)
Thai Storage Battery Co., Ltd. 390,600 U.S.$ 223
--------------------
- -----------------------------------------------------------------------------------------------
BANKING (16.9%)
(a)Bangkok Bank Public Co., Ltd. 2,288,750 3,707
Siam Commercial Bank Co., Ltd.
(Foreign) 1,711,900 2,102
Thai Farmers Bank Public Co., Ltd. 6,124,100 6,992
--------------------
12,801
--------------------
- -----------------------------------------------------------------------------------------------
BEVERAGES & TOBACCO (4.1%)
The Serm Suk Co., Ltd. 869,300 3,139
--------------------
- -----------------------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (4.5%)
BEC World Co., Ltd. 480,100 3,391
--------------------
- -----------------------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS (18.8%)
Siam Cement Co., Ltd. 416,500 8,183
Siam City Cement Co., Ltd. 1,271,945 6,045
--------------------
14,228
--------------------
- -----------------------------------------------------------------------------------------------
CHEMICALS (2.2%)
National Petrochemical Co., Ltd. 1,526,300 1,661
--------------------
- -----------------------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS (14.1%)
Delta Electronics Public Co., Ltd. 468,355 5,446
Shinawatra Computer Co., Ltd. 627,300 5,263
--------------------
10,709
--------------------
- -----------------------------------------------------------------------------------------------
ENERGY SOURCES (4.3%)
PTT Exploration & Production Public Co., Ltd. 527,000 3,246
--------------------
- -----------------------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS (7.5%)
Charoen Pokphand Feedmill Co., Ltd. 1,190,948 3,257
(a)Compass East Industry Public Co., Ltd. 348,700 1,111
Thai Union Frozen Products Public Co. Ltd. 380,200 1,332
--------------------
5,700
--------------------
- -----------------------------------------------------------------------------------------------
INSURANCE (1.1%)
Bangkok Insurance Co., Ltd. 248,1 00 U.S.$ 817
--------------------
- -----------------------------------------------------------------------------------------------
REAL ESTATE (0.9%)
Golden Land Property Development Public Co., Ltd. 1,850,000 675
--------------------
- -----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (9.4%)
Shinawatra Satellite Public Co., Ltd. 3,683,775 3,839
TelecomAsia Corp. Public Co., Ltd. 2,534,500 3,280
--------------------
7,119
--------------------
- -----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS WIRELESS (5.3%)
Advanced Information Services Co., Ltd. 335,100 4,004
--------------------
- -----------------------------------------------------------------------------------------------
TEXTILES & APPAREL (1.7%)
Saha-Union Co., Ltd. 1,483,600 482
(a,b)Thai Rung Textile Co., Ltd. 958 --@
Thai Wacoal Co., Ltd. 347,013 774
--------------------
1,256
--------------------
- -----------------------------------------------------------------------------------------------
TRANSPORTATION AIRLINES (2.6%)
(a)Thai Airways International Public Co., Ltd. 1,329,900 1,995
--------------------
- -----------------------------------------------------------------------------------------------
UTILITIES ELECTRICAL & GAS (2.4%)
Electricity Generating Public Co. Ltd. 1,950,800 1,813
--------------------
- -----------------------------------------------------------------------------------------------
TOTAL THAI COMMON STOCKS
(Cost U.S.$65,861) 72,777
--------------------
- -----------------------------------------------------------------------------------------------
<CAPTION>
NO. OF
WARRANTS
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
WARRANTS (1.0%)
- -----------------------------------------------------------------------------------------------
BANKING (1.0%)
(a)Siam Commercial Bank Public Co.,
Ltd., expiring 5/10/02 (Cost
U.S.$--@) 1,687,800 784
--------------------
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (2.2%)
(Interest Bearing Demand Account)
Thai Baht
(Cost U.S.$1,687) THB 64,545 U.S.$ 1,713
--------------------
- -----------------------------------------------------------------------------------------------
TOTAL THAI INVESTMENT PLAN
(cost U.S.$67,548) 75,274
--------------------
- -----------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (1.0%)
- -----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.0%)
Chase Securities, Inc. 2.60%,
dated 12/31/99, due 1/3/00,
to be repurchased at
U.S.$751, collateralized by
U.S.$770 United States
Treasury Note, 6.125%, due
12/31/01, valued at U.S.$768
(Cost U.S.$751) U.S.$ 751 751
--------------------
- -----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(Cost U.S.$68,299) 76,025
--------------------
- -----------------------------------------------------------------------------------------------
OTHER ASSETS (0.0%)
Interest Receivable 4
Other Assets 18 22
-------------- --------------------
- -----------------------------------------------------------------------------------------------
LIABILITIES (-0.3%)
Payable For:
Shareholding Reporting Expenses (52)
Directors' Fees and Expenses (52)
U.S. Investment Advisory Fees (47)
Professional Fees (45)
Thai Investment Advisory Fees (20)
Administrative Fees (14)
Custodian Fees (12)
Bank Overdraft (10)
Other Liabilities (8) (260)
-------------- --------------------
- -----------------------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 13,267,713, issued and
outstanding U.S.$0.01 par value
shares (30,000,000 shares authorized) U.S.$ 75,787
--------------------
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 5.71
--------------------
- -----------------------------------------------------------------------------------------------
AMOUNT
(000)
- -----------------------------------------------------------------------------------------------
AT DECEMBER 31, 1999, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------
Common Stock U.S.$ 132
Capital Surplus 189,371
Accumulated Net Investment Loss (12)
Accumulated Net Realized Loss (121,503)
Unrealized Appreciation on Investments and
Foreign Currency Translations 7,799
- -----------------------------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$ 75,787
--------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
(a) - Non-income producing.
(b) - Security valued at fair value=see Note A-1 to financial statements.
@ - Value is less than U.S.$500.
December 31, 1999 exchange rate--Thai Baht (THB) 37.665 = U.S. $1.00.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
STATEMENT OF OPERATIONS (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends .................................................................................... U.S.$ 694
Interest ..................................................................................... 66
- ---------------------------------------------------------------------------------------------------------------------------
Total Income ............................................................................... 760
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES
U.S. Investment Advisory Fees ................................................................ 517
Thai Investment Advisory Fees ................................................................ 238
Administrative Fees .......................................................................... 138
Shareholder Reporting Expenses ............................................................... 82
Custodian Fees ............................................................................... 50
Professional Fees ............................................................................ 60
Directors' Fees and Expenses ................................................................. 85
Transfer Agent Fees .......................................................................... 23
Other Expenses ............................................................................... 34
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses ............................................................................. 1,227
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment Loss .......................................................................... (467)
- ---------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold ................................................................... (6,439)
Foreign Currency Transactions ................................................................ (56)
- ---------------------------------------------------------------------------------------------------------------------------
Net Realized Loss .......................................................................... (6,495)
- ---------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments .................................................................. 32,331
Appreciation on Foreign Currency Translations ................................................ 15
- ---------------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation ............................................. 32,346
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Realized Loss and Change in Unrealized Appreciation/Depreciation ....................... 25,851
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......................................... U.S.$ 25,384
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Loss ......................................................... U.S.$ (467) U.S.$ (489)
Net Realized Loss ........................................................... (6,495) (82,498)
Change in Unrealized Appreciation/Depreciation .............................. 32,346 84,842
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations ........................ 25,384 1,855
- ---------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income ....................................................... -- (2,433)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions ......................................................... -- (2,433)
- ---------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Reinvestment of Distributions (0 and 129,475 shares, respectively) .......... -- 869
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Capital Share Transactions ........ -- 869
- ---------------------------------------------------------------------------------------------------------------------------
Total Increase .............................................................. 25,384 291
Net Assets:
Beginning of Period ......................................................... 50,403 50,112
- ---------------------------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment loss/undistributed net
investment income of U.S.$(12) and U.S.$0, respectively) .................. U.S.$ 75,787 U.S.$ 50,403
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SELECTED PER SHARE DATA AND ------------------------------------------------------------------------------
RATIOS: 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............... U.S. $3.80 U.S. $3.81 U.S. $15.63 U.S. $24.89 U.S.$ 28.30
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) ....................... (0.03) (0.03) 0.33 0.31 0.38
Net Realized and Unrealized Gain (Loss) on
Investments ...................................... 1.94 0.21 (11.92) (9.15) (0.19)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations ............... 1.91 0.18 (11.59) (8.84) 0.19
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income ............................ -- (0.19) -- -- (0.06)
In Excess of Net Investment Income ............... -- -- (0.11) (0.32) (0.05)
Net Realized Gain ................................ -- -- -- (0.08) (3.23)
In Excess of Net Realized Gain ................... -- -- (0.12) -- (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions ............................ -- (0.19) (0.23) (0.40) (3.49)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Asset Value due to Capital Share
Transactions ..................................... -- -- -- (0.02)+ (0.11)+
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ..................... U.S. $5.71 U.S. $3.80 U.S. $3.81 U.S. $15.63 U.S. $24.89
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD .............. U.S. $7.81 U.S. $5.88 U.S. $5.25 U.S. $16.38 U.S. $22.38
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value ..................................... 32.98% 15.43% (67.35)% (25.33) 13.70%
Net Asset Value (1) .............................. 50.26% 2.88% (75.17)% (35.93) (0.10)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) .............. U.S.$75,787 U.S.$50,403 U.S.$50,112 U.S.$204,209 U.S.$312,965
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets ............ 2.04% 2.32% 1.44% 1.43% 1.30%
Ratio of Expenses Excluding Thai Tax to Average Net
Assets ........................................... N/A N/A N/A 1.19% 1.17%
Ratio of Net Investment Income (Loss) to Average Net
Assets ........................................... (0.78)% (0.97)% 3.14% 1.42% 1.35%
Portfolio Turnover Rate ............................ 50% 78% 22% 24% 26%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Decrease due to shares issued on reinvestment of distributions.
(1) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. This percentage is not an indication of the performance of a
shareholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- ---------
The Thai Fund, Inc. (the "Fund") was incorporated on June 10, 1987 and
is registered as a non-diversified, closed-end management investment company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is long-term capital appreciation through investments primarily in
equity securities. The Fund makes its investments in Thailand through the
Thai Investment Plan (the "Plan") established in conformity with Thai law.
The Fund is the sole unit holder of the Plan. The accompanying financial
statements are prepared on a consolidated basis and present the financial
position and results of operations of the Plan and the Fund.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: In valuing the Fund's assets, all listed securities for
which market quotations are readily available are valued at the last sales
price on the valuation date, or if there was no sale on such date, at the
mean between the current bid and asked prices. Securities which are traded
over-the-counter are valued at the average of the mean of current bid and
asked prices obtained from reputable brokers. Short-term securities which
mature in 60 days or less are valued at amortized cost. All other securities
and assets for which market values are not readily available (including
investments which are subject to limitations as to their sale) are valued at
fair value as determined in good faith under procedures approved by the
Board of Directors, although the actual calculations may be done by others.
2. TAXES: It is the Fund's intention to continue to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial
statements.
Distributions of income from the Plan to the Fund are subject to Thai income
tax which is withheld at a rate of 10% of the local currency gross
distribution amount. All distributions from the Plan to the Fund must be
approved by The Bank of Thailand ("BOT") pursuant to the laws of The Kingdom
of Thailand. For financial statement purposes, the Fund accrues and
allocates the Thai income tax to net investment income, net realized gains
and net unrealized appreciation on the basis of their relative amounts. For
U.S. Federal income tax purposes, the Thai income tax is deducted, when
paid, from net investment income.
3. REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements under
which the Fund lends excess cash and takes possession of securities with an
agreement that the counterparty will repurchase such securities. In
connection with transactions in repurchase agreements, a bank as custodian
for the Fund takes possession of the underlying securities (collateral),
with a market value at least equal to the amount of the repurchase
transaction, including principal and accrued interest. To the extent that
any repurchase transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to determine the adequacy of
the collateral. In the event of default on the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. In the event of default or bankruptcy by the
counterparty to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
4. FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are
maintained in U.S. dollars. Amounts denominated in Thai baht are translated
into U.S. dollars at the mean of the bid and asked prices of such currency
against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities - at the prevailing rate
of exchange on the valuation date;
- investment transactions and investment income - at the prevailing
rate of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rate and market values at the close of the period, the Fund does not isolate
that portion of the results of operations arising as a result of changes in
the foreign exchange rate from the fluctuations arising from changes in the
market prices of the securities held at period end. Similarly, the Fund does
not isolate the effect of changes in the foreign exchange rate from the
fluctuations arising from changes in the market prices of securities sold
during the period. Accordingly, realized and unrealized foreign currency
gains (losses) due to securities transactions are included in the reported
net realized and unrealized gains (losses) on investment transactions and
balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of foreign
currency exchange contracts, dispositions of foreign currency,
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currency gains or losses realized between the trade and settlement dates on
securities transactions, and the difference between the amount of investment
income recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net unrealized currency gains (losses) from
valuing foreign currency denominated assets and liabilities at period end
exchange rates are reflected as a component of unrealized appreciation
(depreciation) on investments and foreign currency translations in the
Statement of Net Assets. The change in net unrealized currency gains
(losses) on foreign currency translations for the period is reflected in the
Statement of Operations.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S. dollar
denominated transactions as a result of, among other factors, the
possibility of lower levels of governmental supervision and regulation of
foreign securities markets and the possibility of political or economic
instability.
The Fund may use derivatives to achieve its investment objectives. The Fund may
engage in transactions in futures contracts on foreign currencies, stock
indices, as well as in options, swaps and structured notes. Consistent with the
Fund's investment objectives and policies, the Fund may use derivatives for
non-hedging as well as hedging purposes.
Following is a description of derivative instruments that the Fund may utilize
and their associated risks:
5. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into foreign
currency exchange contracts generally to attempt to protect securities and
related receivables and payables against changes in future foreign exchange
rates and, in certain situations, to gain exposure to a foreign currency. A
foreign currency exchange contract is an agreement between two parties to
buy or sell currency at a set price on a future date. The market value of
the contract will fluctuate with changes in currency exchange rates. The
contract is marked-to-market daily and the change in market value is
recorded by the Fund as unrealized gain or loss. The Fund records realized
gains or losses when the contract is closed equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed. Risk may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their
contracts and is generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
6. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: The Fund
may make forward commitments to purchase or sell securities. Payment and
delivery for securities which have been purchased or sold on a forward
commitment basis can take place a month or more (not to exceed 120 days)
after the date of the transaction. Additionally, the Fund may purchase
securities on a when-issued or delayed delivery basis. Securities purchased
on a when-issued or delayed delivery basis are purchased for delivery beyond
the normal settlement date at a stated price and yield, and no income
accrues to the Fund on such securities prior to delivery. When the Fund
enters into a purchase transaction on a when-issued or delayed delivery
basis, it either establishes a segregated account in which it maintains
liquid assets in an amount at least equal in value to the Fund's commitments
to purchase such securities or denotes such assets as segregated on the
Fund's records. Purchasing securities on a forward commitment or when-issued
or delayed-delivery basis may involve a risk that the market price at the
time of delivery may be lower than the agreed upon purchase price, in which
case there could be an unrealized loss at the time of delivery.
7. SWAP AGREEMENTS: The Fund may enter into swap agreements to exchange the
return generated by one security, instrument or basket of instruments for
the return generated by another security, instrument or basket of
instruments. The following summarizes swaps which may be entered into by the
Fund:
INTEREST RATE SWAPS: Interest rate swaps involve the exchange of commitments
to pay and receive interest based on a notional principal amount. Net
periodic interest payments to be received or paid are accrued daily and are
recorded in the Statement of Operations as an adjustment to interest income.
Interest rate swaps are marked-to-market daily based upon quotations from
market makers and the change, if any, is recorded as unrealized appreciation
or depreciation in the Statement of Operations.
TOTAL RETURN SWAPS: Total return swaps involve commitments to pay interest
in exchange for a market-linked return based on a notional amount. To the
extent the total return of the security, instrument or basket of instruments
underlying the transaction exceeds or falls short of the offsetting interest
obligation, the Fund will receive a payment from or make a payment to the
counterparty, respectively. Total return swaps are marked-to-market daily
based upon quotations from market makers and the change, if any, is recorded
as unrealized gains or losses in the Statement of Operations. Periodic
payments received or made at the end of each measurement period, but prior
to termination, are recorded as realized gains or losses in the Statement of
Operations.
Realized gains or losses on maturity or termination of interest rate and
total return swaps are presented in
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the Statement of Operations. Because there is no organized market for these
swap agreements, the value reported in the Statement of Net Assets may
differ from that which would be realized in the event the Fund terminated
its position in the agreement. Risks may arise upon entering into these
agreements from the potential inability of the counterparties to meet the
terms of the agreements and are generally limited to the amount of net
interest payments to be received and/or favorable movements in the value of
the underlying security, instrument or basket of instruments, if any, at the
date of default.
Risks also arise from potential losses from adverse market movements, and
such losses could exceed the related amounts shown in the Statement of Net
Assets.
8. STRUCTURED SECURITIES: The Fund may invest in interests in entities
organized and operated solely for the purpose of restructuring the
investment characteristics of sovereign debt obligations. This type of
restructuring involves the deposit with or purchase by an entity of
specified instruments and the issuance by that entity of one or more classes
of securities ("Structured Securities") backed by, or representing interests
in, the underlying instruments. Structured Securities generally will expose
the Fund to credit risks of the underlying instruments as well as of the
issuer of the Structured Security. Structured Securities are typically sold
in private placement transactions with no active trading market. Investments
in Structured Securities may be more volatile than their underlying
instruments, however, any loss is limited to the amount of the original
investment.
9. OVER-THE-COUNTER TRADING: Securities and other derivative instruments that
may be purchased or sold by the Fund are expected to regularly consist of
instruments not traded on an exchange. The risk of nonperformance by the
obligor on such an instrument may be greater, and the ease with which the
Fund can dispose of or enter into closing transactions with respect to such
an instrument may be less, than in the case of an exchange-traded
instrument. In addition, significant disparities may exist between bid and
asked prices for derivative instruments that are not traded on an exchange.
Derivative instruments not traded on exchanges are also not subject to the
same type of government regulation as exchange traded instruments, and many
of the protections afforded to participants in a regulated environment may
not be available in connection with such transactions.
The Fund did not invest in Forward Commitments and When-Issued/Delayed Delivery
Securities, Swap Agreements, Structured Securities or participate in
Over-the-Counter Trading during the year ended December 31, 1999.
10. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Interest
income is recognized on the accrual basis. Dividend income is recorded on
the ex-dividend date (except certain dividends which may be recorded as soon
as the Fund is informed of such dividend) net of applicable withholding
taxes where recovery of such taxes is not reasonably assured. Distributions
to shareholders are recorded on the ex-dividend date.
The amount and character of income and capital gain distributions to be paid
by the Fund are determined in accordance with Federal income tax
regulations, which may differ from generally accepted accounting principles.
The book/tax differences are either considered temporary or permanent in
nature.
Temporary differences are attributable to differing book and tax treatments
for the timing of the recognition of gains and losses on certain investment
transactions and the timing of the deductibility of certain expenses.
Permanent book and tax basis differences may result in reclassifications
among undistributed net investment income (loss), accumulated net realized
gain (loss) and paid in capital.
Adjustments for permanent book-tax differences, if any, are not reflected
in ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. Morgan Stanley Dean Witter Investment Management Inc. (the "U.S. Adviser")
provides investment advisory services to the Fund under the terms of an
Investment Advisory Agreement (the "Agreement"). Under the Agreement, the U.S.
Adviser is paid a fee computed weekly and payable monthly at an annual rate of
0.90% of the Fund's first $50 million of average weekly net assets, 0.70% of the
Fund's next $50 million of average weekly net assets and 0.50% of the Fund's
average weekly net assets in excess of $100 million.
C. The Mutual Fund Public Company Limited (the "Thai Adviser") provides
investment advisory services to the Fund under the terms of a contract. Under
the contract, the Thai Adviser is paid a fee computed weekly and payable monthly
at an annual rate of 0.40% of the Fund's first $50 million of average weekly net
assets, 0.25% of the Fund's next $50 million of average weekly net assets and
0.20% of the Fund's average weekly net assets in excess of $100 million.
D. The Chase Manhattan Bank, through its corporate affiliate Chase Global Funds
Services Company (the "Administrator"), provides administrative services to the
Fund under an Administration Agreement. Under the Ad-
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ministration Agreement, the Administrator is paid a fee computed weekly and
payable monthly at an annual rate of 0.05% of the Fund's average weekly net
assets, plus $100,000 per annum. In addition, the Fund is charged certain
out-of-pocket expenses by the Administrator.
E. The Chase Manhattan Bank, acts as custodian for the Fund's assets held in the
United States. Custody fees are payable monthly based on assets held in custody,
investment purchases and sales activity and account maintenance fees, plus
reimbursement for certain out-of-pocket expenses.
F. During the year ended December 31, 1999, the Fund made purchases and sales
totaling $29,364,000 and $28,820,000, respectively, of investment securities
other than long-term U.S. Government securities and short-term investments.
There were no purchases or sales of long-term U.S. Government securities. At
December 31, 1999, the U.S. Federal income tax cost basis of securities was
$74,875,000 and, accordingly, net unrealized depreciation for U.S. Federal
income tax purposes was $1,314,000, of which $22,177,000 related to appreciated
securities and $23,491,000 related to depreciated securities. At December 31,
1999, the Fund had a capital loss carryforward for U.S. Federal income tax
purposes of approximately $111,623,000 available to offset future gains of which
$23,693,000 will expire on December 31, 2005, $85,158,000 will expire on
December 31, 2006 and $2,772,000 will expire on December 31, 2007. To the extent
that capital gains are offset, such gains will not be distributed to the
shareholders. For the year ended December 31, 1999, the Fund intends to elect to
defer to January 1, 2000, for U.S. Federal income tax purposes, post-October
capital losses of $865,000.
G. A significant portion of the Fund's net assets consist of investments in the
Thai Investment Plan, including Thai equity securities, which may be subject to
greater price volatility, lower liquidity and less diversity than equity
securities of companies based in the United States. In addition, Thai equity
securities may be subject to substantial governmental involvement in the economy
and greater social, economic and political uncertainty.
H. Each Director of the Fund who is not an officer of the Fund or an affiliated
person as defined under the Investment Company Act of 1940, as amended, may
elect to participate in the Directors' Deferred Compensation Plan (the
"Compensation Plan"). Under the Compensation Plan, such Directors may elect to
defer payment of a percentage of their total fees earned as a Director of the
Fund. These deferred portions are treated, based on an election by the Director,
as if they were either invested in the Fund's shares or invested in U.S.
Treasury Bills, as defined under the Compensation Plan. At December 31, 1999 the
deferred fees payable, under the Compensation Plan totaled $52,000 and are
included in Payable for Directors' Fees and Expenses on the Statement of Net
Assets.
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REPORT OF INDEPENDENT ACCOUNTANTS
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To the Shareholders and Board of Directors of
The Thai Fund, Inc.
In our opinion, the accompanying consolidated statement of net assets and the
related consolidated statements of operations and of changes in net assets and
the financial highlights present fairly, in all material respects, the financial
position of The Thai Fund, Inc. (the "Fund") and its subsidiary at December 31,
1999, and the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 1999 by correspondence with the custodians,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
February 18, 2000
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each shareholder will be deemed to have elected, unless Boston Equiserve (the
"Plan Agent") is otherwise instructed by the shareholder in writing, to have all
distributions automatically reinvested in Fund shares. Participants in the Plan
have the option of making additional voluntary cash payments to the Plan Agent,
annually, in any amount from $100 to $3,000, for investment in Fund shares.
Dividend and capital gain distributions will be reinvested on the
reinvestment date. If the market price per share equals or exceeds net asset
value per share on the reinvestment date, the Fund will issue shares to
participants at net asset value. If net asset value is less than 95% of the
market price on the reinvestment date, shares will be issued at 95% of the
market price. If net asset value exceeds the market price on the reinvestment
date, participants will receive shares valued at market price. The Fund may
purchase shares of its Common Stock in the open market in connection with
dividend reinvestment requirements at the discretion of the Board of Directors.
Should the Fund declare a dividend or capital gain distribution payable only in
cash, the Plan Agent will purchase Fund shares for participants in the open
market as agent for the participants.
The Plan Agent's fees for the reinvestment of dividends and distributions
will be paid by the Fund. However, each participant's account will be charged a
pro rata share of brokerage commissions incurred on any open market purchases
effected on such participant's behalf. A participant will also pay brokerage
commissions incurred on purchases made by voluntary cash payments. Although
shareholders in the Plan may receive no cash distributions, participation in the
Plan will not relieve participants of any income tax which may be payable on
such dividends or distributions.
In the case of shareholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Shareholders who do not wish to have distributions automatically reinvested
should notify the Plan Agent in writing. There is no penalty for
non-participation or withdrawal from the Plan, and shareholders who have
previously withdrawn from the Plan may rejoin at any time. Requests for
additional information or any correspondence concerning the Plan should be
directed to the Plan Agent at:
The Thai Fund, Inc.
Boston Equiserve
Dividend Reinvestment and Cash Purchase Plan
P.O. Box 1681
Boston, MA 02105-1681
1-800-730-6001
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