[ANNOTATED FORM N-CSR FOR ANNUAL REPORTS]
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED
SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number
|
811-05348
|
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The Thai Fund, Inc.
|
(Exact name of registrant as
specified in charter)
|
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522 Fifth Avenue New York, NY
|
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10036
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(Address of principal executive
offices)
|
|
(Zip code)
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Randy Takian
522 Fifth Avenue New York, New York 10036
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(Name and address of agent for
service)
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Registrants telephone number, including
area code:
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1-800-231-2608
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|
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Date of fiscal year end:
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12/31
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|
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Date of reporting period:
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12/31/09
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|
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Form N-CSR is
to be used by management investment companies to file reports with the
Commission not later than 10 days after the transmission to stockholders of any
report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270-30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure
review, inspection, and policymaking roles.
A registrant
is required to disclose the information specified by Form N-CSR, and the
Commission will make this information public. A registrant is not required to
respond to the collection of information contained in form N-CSR unless the
Form displays a currently valid Office of Management and Budget (OMB) control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington,
DC 20549-0609. The OMB has reviewed this collection of information under the
clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Funds annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
INVESTMENT MANAGEMENT
The Thai Fund, Inc.(TTF)
Morgan
Stanley
Investment
Management Inc.
Investment
Adviser
Annual
Report
December 31, 2009
Overview (unaudited)
Letter to Stockholders
Performance
For
the year ended December 31, 2009, The Thai Fund, Inc. (the Fund)
had total returns of 64.55%, based on net asset value, and 57.23% based on
market value per share (including reinvestment of distributions), compared to
its benchmark, the Securities Exchange of Thailand (SET) Index (the Index),
expressed in U.S. dollars which returned 70.30%. On December 31, 2009, the
closing price of the Funds shares on the New York Stock Exchange was $8.93,
representing a 15.8% discount to the Funds net asset value per share. Past
performance is no guarantee of future results. Please keep in mind that high
double-digit returns are highly unusual and cannot be sustained.
Factors
Affecting Performance
·
Thailands
economy faced dual challenges of global recession and domestic political
uncertainty in 2009. Amid signs of a stabilizing global economy, we believe
Thailand may have seen its worst export and trade numbers in 2009 and hope to
see improvement on the external front in 2010. However, Thailands domestic
issues may offset any positive impact of a stabilizing or recovering global
economy in 2010. Domestic economic revival will depend on the execution of the
announced domestic fiscal stimulus. The fragile political environment is
preventing the domestic economy from enjoying the benefits of the yet-to-be
executed fiscal stimulus and lower interest rates.
·
On the positive
side, government, corporate and personal balance sheets in Thailand are strong.
The countrys banking sector is secure and has ample liquidity, and the Thai
bhat has been resilient. The announced interest rate cuts and fiscal stimulus
should also help the domestic economy.
·
On the political
front, Thailand saw a relatively stable 2009 after the political strife of 2007
and 2008. The current political regime seems to have been given the space and
time to navigate Thailand out of the economic slump. Their success should
further galvanize the position of the ruling party and allow them additional
economic reforms.
·
In our view,
Thailand saw the worst of the economic contraction in 2009. The various fiscal
and monetary stimulus policies should start affecting the economy in 2010.
Other than political stability promoting domestic demand, Thailand does need
exports to improve for the economy to show a sustained recovery into 2010.
·
On a sector
allocation basis, overweight positions in banks and consumer staples added to
relative performance. The Funds underweight positions in telecommunications
and utilities also contributed positively.
·
In terms of
stock selection, overweight positions in a property play, a coal play, a bank
and a conglomerate all added to performance. The Funds underweight positions
in two utilities stocks also benefited performance.
·
Stock selection
detracted from performance. Particularly detrimental were overweight positions
in a media company and in a restaurant, hotel and resort company with high
consumer exposure, and underweight positions in a chemical company and a bank.
2
Overview (unaudited)
Letter to Stockholders
(contd)
·
On a sector
basis, underweight positions in the materials and the food and tobacco sectors
dampened performance, as did the Funds overweights in media and consumer
services.
·
The single
largest detractor from relative performance came from the Funds 5% cash holding.
Management
Strategies
·
From a sector
allocation perspective, the Fund is overweight industrials and consumer
staples, as we believe the domestic economy is likely to perform fairly well
given the weakness in 2009. The Fund is neutral financials and underweight the
oil/gas sector. The underweight in oil and gas is based on company-specific
reasons such as regulatory risk regarding certain operations.
·
The Fund seeks
long-term capital appreciation and integrates top-down sector allocation and
bottom-up stock selection with a growth bias. The team utilizes a rigorous
fundamental research approach that considers dynamics, valuation, and sentiment
and focuses on companies with strong management and solid earnings.
Sincerely,
Randy
Takian
President
and Principal Executive Officer
|
January 2010
|
3
December 31, 2009
Portfolio of Investments
|
|
Shares
|
|
Value
(000)
|
|
THAI INVESTMENT PLAN
|
|
|
|
|
|
COMMON STOCKS (99.4%)
|
|
|
|
|
|
Airlines (1.2%)
|
|
|
|
|
|
Thai Airways International PCL (a)
|
|
3,556,500
|
|
$ 1,975
|
|
Capital Markets (1.7%)
|
|
|
|
|
|
Kim Eng Securities Thailand PCL
|
|
7,835,800
|
|
2,893
|
|
Commercial Banks (22.6%)
|
|
|
|
|
|
Bangkok Bank PCL
|
|
3,178,850
|
|
11,066
|
|
Bank of Ayudhya PCL
|
|
9,953,000
|
|
6,690
|
|
Kasikornbank PCL
|
|
3,108,600
|
|
7,899
|
|
Siam Commercial Bank PCL
|
|
4,756,800
|
|
12,392
|
|
|
|
|
|
38,047
|
|
Construction &
Engineering (4.3%)
|
|
|
|
|
|
Italian-Thai Development PCL (a)
|
|
47,015,500
|
|
4,132
|
|
Sino Thai Engineering & Construction PCL
(a)
|
|
16,797,300
|
|
3,111
|
|
|
|
|
|
7,243
|
|
Construction Materials (3.3%)
|
|
|
|
|
|
Siam Cement PCL
|
|
794,600
|
|
5,578
|
|
Food & Staples Retailing
(7.5%)
|
|
|
|
|
|
CP ALL PCL
|
|
13,487,600
|
|
10,012
|
|
Siam Makro PCL
|
|
1,001,200
|
|
2,623
|
|
|
|
|
|
12,635
|
|
Hotels, Restaurants &
Leisure (2.6%)
|
|
|
|
|
|
Minor International PCL
|
|
12,732,770
|
|
4,298
|
|
Household Durables (0.5%)
|
|
|
|
|
|
Golden Land Property Development PCL (a)
|
|
8,610,300
|
|
858
|
|
Insurance (0.9%)
|
|
|
|
|
|
Bangkok Insurance PCL
|
|
209,965
|
|
1,512
|
|
Marine (3.7%)
|
|
|
|
|
|
Precious Shipping PCL
|
|
4,145,400
|
|
2,339
|
|
Thoresen Thai Agencies PCL
|
|
4,698,760
|
|
3,823
|
|
|
|
|
|
6,162
|
|
Media (5.3%)
|
|
|
|
|
|
BEC World PCL
|
|
4,029,800
|
|
2,964
|
|
Major Cineplex Group PCL
|
|
9,976,450
|
|
2,546
|
|
MCOT PCL
|
|
4,733,000
|
|
3,407
|
|
|
|
|
|
8,917
|
|
Multiline Retail (1.8%)
|
|
|
|
|
|
Big C Supercenter PCL
|
|
2,398,800
|
|
3,054
|
|
Oil, Gas & Consumable
Fuels (25.7%)
|
|
|
|
|
|
Banpu PCL
|
|
699,700
|
|
12,107
|
|
PTT Exploration & Production PCL
|
|
2,870,300
|
|
12,617
|
|
PTT PCL
|
|
2,156,900
|
|
15,858
|
|
Thai Oil PCL
|
|
2,103,000
|
|
2,686
|
|
|
|
|
|
43,268
|
|
Real Estate Management &
Development (14.9%)
|
|
|
|
|
|
Asian Property Development PCL
|
|
39,134,000
|
|
6,760
|
|
Land & Houses PCL
|
|
32,230,100
|
|
6,062
|
|
MBK PCL
|
|
863,300
|
|
1,686
|
|
Quality Houses PCL
|
|
67,196,800
|
|
5,331
|
|
Sansiri PCL
|
|
41,175,300
|
|
5,298
|
|
|
|
|
|
25,137
|
|
Textiles, Apparel &
Luxury Goods (0.0%)
|
|
|
|
|
|
Thai Rung Textile Co., Ltd. (a)(b)(c)(d)
|
|
958
|
|
|
|
Transportation Infrastructure
(1.0%)
|
|
|
|
|
|
Airports of Thailand PCL
|
|
1,455,400
|
|
1,704
|
|
Wireless Telecommunication
Services (2.4%)
|
|
|
|
|
|
Advanced Info Service PCL
|
|
1,571,500
|
|
4,070
|
|
TOTAL COMMON STOCKS
(Cost $133,532)
|
|
|
|
167,351
|
|
SHORT-TERM INVESTMENT (0.7%)
|
|
|
|
|
|
Investment Company (0.7%)
|
|
|
|
|
|
Morgan Stanley Institutional
Liquidity Funds Money Market
Portfolio Institutional Class (e)
(Cost $1,261)
|
|
1,261,183
|
|
1,261
|
|
TOTAL INVESTMENTS (100.1%)
(Cost $134,793)
(f)
|
|
|
|
168,612
|
|
LIABILITIES IN EXCESS OF OTHER
ASSETS (0.1%)
|
|
|
|
(101
|
)
|
NET ASSETS (100%)
|
|
|
|
$168,511
|
|
(a)
Non-income
producing security.
(b)
Security has
been deemed illiquid at December 31, 2009.
(c)
At December 31,
2009, the Fund held a fair valued security, valued at $0, representing 0% of
net assets. This security has been fair valued as determined in good faith
under procedures established by and under the general supervision of the Funds
Directors.
(d)
Restricted
security not registered under the Securities Act of 1933. Acquired 4/89 at a
cost of $49,000. At December 31, 2009, this security had a market value of
less than $500, representing less than 0.05% of net assets.
4
|
The accompanying notes are
an integral part of the financial statements.
|
|
December 31, 2009
Portfolio of Investments
(contd)
(e)
See Note G
within the Notes to Financial Statements regarding investment in Morgan Stanley
Institutional Liquidity Funds Money Market Portfolio Institutional Class.
(f)
The approximate
market value and percentage of total investments, $167,351,000 and 99.3%,
respectively, represent the securities that have been fair valued under the
fair valuation policy for international investments as described in Note A-1
within the Notes to Financial Statements.
Fair Value Measurement Information:
The following is a summary of the inputs used to
value the Funds net assets as of December 31, 2009. (See Note A-6 to the
financial statements for further information regarding fair value measurement.)
Investment
Type
|
|
Level
1
Quoted
prices
(000)
|
|
Level
2
Other
significant
observable
inputs
(000)
|
|
Level
3
Significant
unobservable
inputs
(000)
|
|
Total
(000)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stocks
|
|
|
|
|
|
|
|
|
|
|
|
|
Airlines
|
|
$
|
|
|
$ 1,975
|
|
|
$
|
|
|
$ 1,975
|
|
Capital Markets
|
|
|
|
|
2,893
|
|
|
|
|
|
2,893
|
|
Commercial Banks
|
|
|
|
|
38,047
|
|
|
|
|
|
38,047
|
|
Construction & Engineering
|
|
|
|
|
7,243
|
|
|
|
|
|
7,243
|
|
Construction Materials
|
|
|
|
|
5,578
|
|
|
|
|
|
5,578
|
|
Food & Staples Retailing
|
|
|
|
|
12,635
|
|
|
|
|
|
12,635
|
|
Hotels, Restaurants & Leisure
|
|
|
|
|
4,298
|
|
|
|
|
|
4,298
|
|
Household Durables
|
|
|
|
|
858
|
|
|
|
|
|
858
|
|
Insurance
|
|
|
|
|
1,512
|
|
|
|
|
|
1,512
|
|
Marine
|
|
|
|
|
6,162
|
|
|
|
|
|
6,162
|
|
Media
|
|
|
|
|
8,917
|
|
|
|
|
|
8,917
|
|
Multiline Retail
|
|
|
|
|
3,054
|
|
|
|
|
|
3,054
|
|
Oil, Gas & Consumable Fuels
|
|
|
|
|
43,268
|
|
|
|
|
|
43,268
|
|
Real Estate Management & Development
|
|
|
|
|
25,137
|
|
|
|
|
|
25,137
|
|
Textiles, Apparel & Luxury Goods
|
|
|
|
|
|
|
|
|
**
|
|
|
**
|
Transportation Infrastructure
|
|
|
|
|
1,704
|
|
|
|
|
|
1,704
|
|
Wireless Telecommunication Services
|
|
|
|
|
4,070
|
|
|
|
|
|
4,070
|
|
Total Common Stocks
|
|
|
|
|
167,351
|
|
|
|
**
|
|
167,351
|
|
Short-Term Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Company
|
|
1,261
|
|
|
|
|
|
|
|
|
1,261
|
|
Total Assets
|
|
1,261
|
|
|
167,351
|
|
|
|
**
|
|
168,612
|
|
Total
|
|
$1,261
|
|
|
$167,351
|
|
|
$
|
**
|
|
$168,612
|
|
The following is a reconciliation of investments in
which significant unobservable inputs (Level 3) were used in determining value:
|
|
Common
Stocks
|
|
Balance as of 12/31/08
|
|
$
|
**
|
|
Accrued discounts/premiums
|
|
|
|
|
Realized gain (loss)
|
|
|
|
|
Change in unrealized appreciation (depreciation)
|
|
|
|
|
Net purchases (sales)
|
|
|
|
|
Net transfers in and/or out of Level 3
|
|
|
|
|
Balance as of 12/31/09
|
|
$
|
**
|
|
The amount of total gains (losses) for the period
included in earnings attributable to the change
in unrealized gains (losses) relating to assets
and liabilities still held at Level 3 at 12/31/09.
|
|
$
|
|
|
** Includes
a security which is valued at zero.
|
The accompanying notes are
an integral part of the financial statements.
|
5
|
December 31, 2009
Portfolio of Investments
(contd)
Portfolio
Composition
Classification
|
|
Percentage
of
Total Investments
|
|
Oil, Gas & Consumable Fuels
|
|
25.7
|
%
|
Commercial Banks
|
|
22.6
|
|
Real Estate Management & Development
|
|
14.9
|
|
Food & Staples Retailing
|
|
7.5
|
|
Media
|
|
5.3
|
|
Other*
|
|
23.3
|
|
Short-Term Investment
|
|
|
0.7
|
|
Total Investments
|
|
|
100.0
|
%
|
* Industries
representing less than 5% of total investments.
6
|
The accompanying notes are
an integral part of the financial statements.
|
|
December 31, 2009
Financial Statements
Statement
of Assets and Liabilities
|
|
December 31,
2009
(000)
|
|
Assets:
|
|
|
|
Investments in Securities of Unaffiliated Issuers,
at Value (Cost $133,532)
|
|
$167,351
|
|
Investment in Security of Affiliated Issuer, at
Value (Cost $1,261)
|
|
1,261
|
|
Total Investments in Securities, at Value (Cost
$134,793)
|
|
168,612
|
|
Foreign Currency, at Value (Cost $3,307)
|
|
3,471
|
|
Dividends Receivable
|
|
19
|
|
Receivable from Affiliate
|
|
|
@
|
Other Assets
|
|
3
|
|
Total Assets
|
|
172,105
|
|
Liabilities:
|
|
|
|
Payable For:
|
|
|
|
Dividends Declared
|
|
2,953
|
|
Thai Repatriation Tax
|
|
297
|
|
Investments Purchased
|
|
133
|
|
U.S. Investment Advisory Fees
|
|
96
|
|
Thai Investment Advisory Fees
|
|
57
|
|
Professional Fees
|
|
25
|
|
Custodian Fees
|
|
12
|
|
Administration Fees
|
|
5
|
|
Directors Fees and Expenses
|
|
1
|
|
Other Liabilities
|
|
15
|
|
Total Liabilities
|
|
3,594
|
|
Net Assets
|
|
|
|
Applicable to 15,890,623 Issued and Outstanding
$0.01 Par Value Shares (30,000,000 Shares Authorized)
|
|
$168,511
|
|
Net Asset Value Per Share
|
|
$ 10.60
|
|
Net Assets Consist of:
|
|
|
|
Common Stock
|
|
$ 159
|
|
Paid-in Capital
|
|
140,592
|
|
Distributions in Excess of Net Investment Income
|
|
(2
|
)
|
Accumulated Net Realized Loss
|
|
(6,292
|
)
|
Unrealized Appreciation (Depreciation) on
Investments and Foreign Currency Translations
|
|
34,054
|
|
Net Assets
|
|
$168,511
|
|
@
Amount is less than $500.
|
The accompanying notes are
an integral part of the financial statements.
|
7
|
December 31, 2009
Financial Statements
(contd)
Statement of Operations
|
|
Year
Ended
December 31, 2009
(000)
|
|
Investment Income:
|
|
|
|
Dividends from Securities of Unaffiliated Issuers
|
|
$ 5,219
|
|
Interest from Securities of Unaffiliated Issuers
|
|
15
|
|
Dividends from Security of Affiliated Issuer
|
|
6
|
|
Total Investment Income
|
|
5,240
|
|
Expenses:
|
|
|
|
U.S. Investment Advisory Fees (Note B)
|
|
975
|
|
Thai Repatriation Tax Expense (Note E)
|
|
816
|
|
Thai Investment Advisory Fees (Note B)
|
|
315
|
|
Administration Fees (Note C)
|
|
108
|
|
Custodian Fees (Note D)
|
|
80
|
|
Professional Fees
|
|
70
|
|
Stockholder Reporting Expenses
|
|
33
|
|
Stockholder Servicing Agent Fees
|
|
11
|
|
Directors Fees and Expenses
|
|
4
|
|
Other Expenses
|
|
29
|
|
Total Expenses
|
|
2,441
|
|
Waiver of Administration Fees (Note C)
|
|
(51
|
)
|
Rebate from Morgan Stanley Affiliates (Note G)
|
|
(3
|
)
|
Net Expenses
|
|
2,387
|
|
Net Investment Income
|
|
2,853
|
|
Net Realized Gain (Loss) on:
|
|
|
|
Investments
|
|
(6,145
|
)
|
Foreign Currency Exchange Contracts
|
|
3
|
|
Foreign Currency Transactions
|
|
84
|
|
Net Realized Loss
|
|
(6,058
|
)
|
Change in Unrealized Appreciation
(Depreciation) on:
|
|
|
|
Investments
|
|
69,826
|
|
Foreign Currency Translations
|
|
255
|
|
Change in Unrealized Appreciation
(Depreciation)
|
|
70,081
|
|
Net Realized Loss and Change in
Unrealized Appreciation (Depreciation)
|
|
64,023
|
|
Net Increase in Net Assets
Resulting from Operations
|
|
$66,876
|
|
8
|
The accompanying notes are
an integral part of the financial statements.
|
|
December 31, 2009
Financial Statements
(contd)
Statements of Changes
in Net Assets
|
|
Year
Ended
December 31,
2009
(000)
|
|
Year
Ended
December 31,
2008
(000)
|
|
Increase (Decrease) in Net Assets
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
Net Investment Income
|
|
$ 2,853
|
|
$ 4,399
|
|
Net Realized Gain (Loss)
|
|
(6,058
|
)
|
13,701
|
|
Net Change in Unrealized Appreciation
(Depreciation)
|
|
70,081
|
|
(110,340
|
)
|
Net Increase (Decrease) in Net
Assets Resulting from Operations
|
|
66,876
|
|
(92,240
|
)
|
Distributions from and/or in Excess of:
|
|
|
|
|
|
Net Investment Income
|
|
(3,057
|
)
|
(4,388
|
)
|
Net Realized Gain
|
|
|
|
(2,806
|
)
|
Total Distributions
|
|
(3,057
|
)
|
(7,194
|
)
|
Capital Share Transactions:
|
|
|
|
|
|
Reinvestment of Distributions (0 and 5,052 shares)
|
|
|
|
58
|
|
Net Increase in Net Assets
Resulting from Capital Share Transactions
|
|
|
|
58
|
|
Total Increase (Decrease)
|
|
63,819
|
|
(99,376
|
)
|
Net Assets:
|
|
|
|
|
|
Beginning of Period
|
|
104,692
|
|
204,068
|
|
End of Period (Including
Undistributed (Distributions in Excess of) Net Investment Income of
$(2) and $101)
|
|
$168,511
|
|
$104,692
|
|
|
The accompanying notes are
an integral part of the financial statements.
|
9
|
December 31,
2009
Financial Highlights
Selected Per Share Data and Ratios
|
|
Year
Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
Net Asset Value, Beginning of
Period
|
|
$ 6.59
|
|
$ 12.85
|
|
$ 9.00
|
|
$ 8.32
|
|
$ 8.32
|
|
Net Investment Income
|
|
0.18
|
|
0.28
|
|
0.19
|
|
0.24
|
|
0.23
|
|
Net Realized and Unrealized Gain (Loss) on
Investments
|
|
4.02
|
|
(6.08
|
)
|
3.90
|
|
0.76
|
|
(0.01
|
)
|
Total from Investment Operations
|
|
4.20
|
|
(5.80
|
)
|
4.09
|
|
1.00
|
|
0.22
|
|
Distributions from and/or in excess of:
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income
|
|
(0.19
|
)
|
(0.28
|
)
|
(0.24
|
)
|
(0.26
|
)
|
(0.22
|
)
|
Net Realized Gain
|
|
|
|
(0.18
|
)
|
|
|
|
|
|
|
Total Distributions
|
|
(0.19
|
)
|
(0.46
|
)
|
(0.24
|
)
|
(0.26
|
)
|
(0.22
|
)
|
Dilutive Effect of Shares Issued through Rights
Offering and Offering Costs
|
|
|
|
|
|
|
|
(0.06
|
)
|
|
|
Net Asset Value, End of Period
|
|
$ 10.60
|
|
$ 6.59
|
|
$ 12.85
|
|
$ 9.00
|
|
$ 8.32
|
|
Per Share Market Value, End of
Period
|
|
$ 8.93
|
|
$ 5.81
|
|
$ 13.05
|
|
$ 11.00
|
|
$ 9.49
|
|
TOTAL INVESTMENT RETURN:
|
|
|
|
|
|
|
|
|
|
|
|
Market Value
|
|
57.23
|
%
|
(51.95
|
)%
|
21.02
|
%
|
18.97
|
%
|
8.26
|
%
|
Net Asset Value(1)
|
|
64.55
|
%
|
(44.65
|
)%
|
45.65
|
%
|
11.03
|
%
|
2.10
|
%
|
RATIOS, SUPPLEMENTAL DATA:
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets, End of Period
(Thousands)
|
|
$168,511
|
|
$104,692
|
|
$204,068
|
|
$142,879
|
|
$110,432
|
|
Ratio of Expenses to Average Net Assets(2)
|
|
1.77
|
%+
|
1.57
|
%+
|
1.49
|
%+
|
1.74
|
%
|
1.76
|
%
|
Ratio of Net Investment Income to Average Net
Assets(2)
|
|
2.12
|
%+
|
2.55
|
%+
|
1.76
|
%+
|
2.66
|
%
|
2.79
|
%
|
Ratio of Rebate from Morgan Stanley Affiliates to
Average Net Assets
|
|
0.00
|
%§
|
0.00
|
%§
|
0.00
|
%§
|
N/A
|
|
N/A
|
|
Portfolio Turnover Rate
|
|
17
|
%
|
15
|
%
|
24
|
%
|
43
|
%
|
26
|
%
|
(2) Supplemental Information
on the Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Ratios Before Expenses Waived by Administrator:
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Expenses to Average Net Assets
|
|
1.81
|
%+
|
1.61
|
%+
|
1.53
|
%+
|
1.78
|
%
|
1.79
|
%
|
Ratio of Net Investment Income to Average Net
Assets
|
|
2.08
|
%+
|
2.51
|
%+
|
1.72
|
%+
|
2.62
|
%
|
2.76
|
%
|
(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 stockholders 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.
Per share amount is based on average
shares outstanding.
§ Amount is less than 0.005%
+ The Ratios of Expenses and Net Investment
Income reflect the rebate of certain Fund expenses in connection with the
investments in Morgan Stanley affiliates during the period. The effect of the
rebate on the ratios is disclosed in the above table as Ratio of Rebate from
Morgan Stanley Affiliates to Average Net Assets.
10
|
The accompanying notes are
an integral part of the financial statements.
|
|
December 31, 2009
Notes to Financial
Statements
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 1940 Act). The Funds
investment objective is long-term capital appreciation through investment
primarily in equity securities of companies organized under the laws of the
Kingdom of Thailand. To the extent that the Fund invests in derivative
instruments that the U.S. Adviser believes have economic characteristics
similar to equity securities of companies organized under the laws of the
Kingdom of Thailand, such investments will be counted for purposes of the Funds
policy in the previous sentence. To the extent the Fund makes such investments,
the Fund will be subject to the risks of such derivative instruments as
described herein. 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.
Significant
Accounting Policies:
The following significant accounting policies are in
conformity with U.S. generally accepted accounting principles. Such policies
are consistently followed by the Fund in the preparation of its financial
statements. U.S. generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the consolidated financial statements. Actual results may
differ from those estimates.
1.
Security
Valuation:
Securities listed on a foreign exchange are valued
at their closing price except as noted below. Unlisted securities and listed
securities not traded on the valuation date for which market quotations are
readily available are valued at the mean between the current bid and asked
prices obtained from reputable brokers. Equity securities listed on a U.S.
exchange are valued at the latest quoted sales price on the valuation date.
Equity securities listed or traded on NASDAQ, for which market quotations are
available, are valued at the NASDAQ Official Closing Price. Debt securities
purchased with remaining maturities of 60 days or less are valued at amortized
cost, unless the Board of Directors (the Directors) determine such valuation
does not reflect the securities market value, in which case these securities
will be valued at their fair value as determined by the Directors.
All other securities and
investments for which market values are not readily available, including
restricted securities, and those securities for which it is inappropriate to
determine prices in accordance with the aforementioned procedures, are valued
at fair value as determined in good faith under procedures adopted by the
Directors, although the actual calculations may be done by others. Factors considered
in making this determination may include, but are not limited to, information
obtained by contacting the issuer, analysts, or the appropriate stock exchange
(for exchange-traded securities), analysis of the issuers financial statements
or other available documents and, if necessary, available information
concerning other securities in similar circumstances.
Most foreign markets close
before the New York Stock Exchange (NYSE). Occasionally, developments that
could affect the closing prices of securities and other assets may occur
between the times at which valuations of such securities are determined (that
is, close of the foreign market on which the securities trade) and the close of
business on the NYSE. If these developments are expected to materially affect
the value of the securities, the valuations may be adjusted to reflect the
estimated fair value as of the close of the NYSE, as determined in good faith
under procedures established by the Directors.
2.
Foreign
Currency Translation:
The books and records of the Fund are
maintained in U.S. dollars. Amounts
11
December 31,
2009
Notes to Financial
Statements (contd)
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) on investments in securities 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, 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 Funds 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 Assets and Liabilities. The change in net unrealized currency
gains (losses) on foreign currency translations for the period is reflected in
the Statement of Operations.
A significant portion of the
Funds net assets consist of investments in 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.
Governmental approval for
foreign investments may be required in advance of making an investment under
certain circumstances in some countries, and the extent of foreign investments
in domestic companies may be subject to limitation in other countries. Foreign
ownership limitations also may be imposed by the charters of individual
companies to prevent, among other concerns, violations of foreign investment
limitations. As a result, an additional class of shares (identified as Foreign
in the Portfolio of Investments) may be created and offered for investment. The
local and foreign shares market values may differ. In the absence of
trading of the foreign shares in such markets, the Fund values the foreign
shares at the closing exchange price of the local shares. Such securities, if
any, are identified as fair valued in the Portfolio of Investments.
3.
Derivatives:
The Fund may
use derivative instruments for a variety of purposes, including hedging, risk
management, portfolio management or to earn income. Derivatives are financial
instruments whose value is based on the value of another underlying asset,
interest rate, index or financial instrument. A derivative instrument often has
risks similar to its underlying instrument and may have additional risks,
including imperfect correlation between the value of the derivative and the
underlying instrument, risks of default by the other party to certain
12
December 31,
2009
Notes to Financial
Statements (contd)
transactions, magnification
of losses incurred due to changes in the market value of the securities,
instruments, indices or interest rates to which they relate, and risks that the
transactions may not be liquid. The use of derivatives involves risks that are
different from, and possibly greater than, the risks associated with other
portfolio investments. Derivatives may involve the use of highly specialized
instruments that require investment techniques and risk analyses different from
those associated with other portfolio investments. All of the Funds portfolio
holdings, including derivative instruments, are marked to market each day with
the change in value reflected in unrealized appreciation (depreciation). Upon
disposition, a realized gain or loss is generally recognized.
Certain derivative
transactions may give rise to a form of leverage. Leverage associated with
derivative transactions may cause the Fund to liquidate portfolio positions
when it may not be advantageous to do so to satisfy its obligations or to meet
earmarking or segregation requirements, pursuant to applicable SEC rules and
regulations, or may cause the Fund to be more volatile than if the Fund had not
been leveraged. Although the Investment Adviser and/or Sub-Adviser seek to use
derivatives to further the Funds investment objectives, there is no assurance
that the use of derivatives will achieve this result.
Following is a description of
the derivative instruments and techniques that the Fund may use and their
associated risks:
Foreign
Currency Forward Contracts:
In connection with its
investments in foreign securities, the Fund also may enter into contracts with
banks, brokers or dealers to purchase or sell securities or foreign currencies
at a future date (forward contracts). A foreign currency forward contract is
a negotiated agreement between the contracting parties to exchange a specified
amount of currency at a specified future time at a specified rate. The rate can
be higher or lower than the spot rate between the currencies that are the
subject of the contract. Forward foreign currency contracts may be used to
protect against uncertainty in the level of future foreign currency exchange
rates or to gain or modify exposure to a particular currency. In addition, the
Fund may use cross currency hedging or proxy hedging with respect to currencies
in which the Fund has or expects to have portfolio or currency exposure. Cross
currency hedges involve the sale of one currency against the positive exposure
to a different currency and may be used for hedging purposes or to establish an
active exposure to the exchange rate between any two currencies. A currency
exchange 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 (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. Hedging the Funds currency risks involves the risk of mismatching
the Funds objectives under a currency exchange or futures contract with the
value of securities denominated in a particular currency. Furthermore, such
transactions reduce or preclude the opportunity for gain if the value of the
currency should move in the direction opposite to the position taken. There is
an additional risk to the effect that currency contracts create exposure to
currencies in which the Funds securities are not denominated. Unanticipated
changes in currency prices may result in poorer overall performance for the
Fund than if it had not entered into such contracts.
The Fund adopted the
provisions of FASB ASC 815, Derivatives and Hedging: Overall (ASC 815)
(formerly known as SFAS 161), effective December 31, 2008. ASC 815 is
intended to improve financial reporting about derivative instruments by
requiring enhanced disclosures to enable investors to better understand how and
why the Fund uses derivative instruments, how these derivative
13
December 31,
2009
Notes to Financial
Statements (contd)
instruments are accounted for
and their effects on the Funds financial position and results of operations.
The following table set forth
by primary risk exposure the Funds realized gains (losses) by type of
derivative contract for the year ended December 31, 2009 in accordance
with ASC 815.
Realized Gain (Loss)
|
|
Primary Risk Exposure
|
|
Derivative
Type
|
|
Value
(000)
|
|
Foreign Currency
Contracts Risk
|
|
Foreign
Currency
Exchange Contracts
|
|
$3
|
|
All open derivative positions
at period end are reflected on the Funds Portfolio of Investments and the volume
of these open positions relative to the net assets of the Fund is generally
representative of open positions throughout the reporting period.
4.
Security
Lending:
At a meeting held on September 23-24, 2009, the
Board of Directors authorized the Fund to lend securities to qualified
financial institutions, such as broker-dealers, to earn additional income. As
of December 31, 2009, there were no securities out on loan.
5.
Restricted
Securities:
The Fund may invest in unregistered or otherwise
restricted securities. The term restricted securities refers to securities that
are unregistered or are held by control persons of the issuer and securities
that are subject to contractual restrictions on their resale. As a result,
restricted securities may be more difficult to value and the Fund may have
difficulty disposing of such assets either in a timely manner or for a
reasonable price. In order to dispose of an unregistered security, the Fund,
where it has contractual rights to do so, may have to cause such security to be
registered. A considerable period may elapse between the time the decision is
made to sell the security and the time the security is registered so that the
Fund could sell it. Contractual restrictions on the resale of securities vary
in length and scope and are generally the result of a negotiation between the
issuer and acquirer of the securities. The Fund would, in either case, bear
market risks during that period.
6.
Fair Value
Measurement:
In accordance with FASB ASC 820 Fair Value Measurements
and Disclosure (ASC 820) (formerly known as SFAS 157), fair value is defined
as the price that the Fund would receive to sell an investment or pay to
transfer a liability in a timely transaction with an independent buyer in the
principal market, or in the absence of a principal market the most advantageous
market for the investment or liability. SFAS 157 establishes a three-tier
hierarchy to distinguish between (1) inputs that reflect the assumptions
market participants would use in valuing an asset or liability developed based
on market data obtained from sources independent of the reporting entity
(observable inputs) and (2) inputs that reflect the reporting entitys own
assumptions about the assumptions market participants would use in valuing an
asset or liability developed based on the best information available in the
circumstances (unobservable inputs) and to establish classification of fair
value measurements for disclosure purposes. Various inputs are used in
determining the value of the Funds investments. The inputs are summarized in
the three broad levels listed below.
·
Level 1 quoted
prices in active markets for identical securities
·
Level 2 other
significant observable inputs (including quoted prices for similar investments,
interest rates, prepayment speeds, credit risk, etc.)
·
Level 3
significant unobservable inputs (including the Funds own assumptions in
determining the fair value of investments)
14
December 31,
2009
Notes to Financial
Statements (contd)
The inputs or methodology used
for valuing securities are not necessarily an indication of the risk associated
with investing in those securities.
7.
Other:
Security
transactions are accounted for on the date the securities are purchased or
sold. Realized gains (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 and distributions are recorded on the
ex-dividend date (except certain dividends which may be recorded as soon as the
Fund is informed of such dividends) net of applicable withholding taxes.
B.
Investment
Advisory Fees:
Morgan Stanley Investment Management Inc. (the U.S.
Adviser or MS Investment Management) 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 Funds first $50 million of average
weekly net assets, 0.70% of the Funds next $50 million of average weekly net
assets and 0.50% of the Funds average weekly net assets in excess of $100
million.
MFC Asset Management Public Company Limited (the Thai Adviser)
provides investment advisory services to the Fund under the terms of a
contract. The Thai Adviser is paid a fee computed weekly and payable monthly at
an annual rate of 0.32% of the Funds first $50 million of average weekly net
assets, 0.20% of the Funds next $50 million of average weekly net assets and
0.16% of the Funds average weekly net assets in excess of $100 million.
The U.S. Adviser has entered into a Sub-Advisory Agreement with Morgan
Stanley Investment Management Company (the Sub-Adviser), a wholly-owned
subsidiary of Morgan Stanley. The Sub-Adviser provides the Fund with investment
advisory services subject to the overall supervision of the U.S. Adviser and
the Funds Officers and Directors. The U.S. Adviser pays the Sub-Adviser on a
monthly basis a portion of the net advisory fees the U.S. Adviser receives from
the Fund.
C. Administration
Fees:
MS Investment Management also serves as Administrator to the Fund
pursuant to an Administration Agreement. Under the Administration Agreement,
the administration fee is 0.08% of the Funds average weekly net assets. MS
Investment Management has agreed to limit the administration fee through a
waiver so that it will be no greater than the previous administration fee of
0.02435% of the Funds average weekly net assets plus $24,000 per annum. This
waiver is voluntary and may be terminated at any time. For the year ended December 31,
2009, approximately $51,000 of administration fees were waived pursuant to this
arrangement. Under a sub-administration agreement between the Administrator and
JPMorgan Investor Services Co. (JPMIS), a corporate affiliate of JPMorgan
Chase Bank, N.A., JPMIS provides certain administrative services to the Fund.
For such services, the Administrator pays JPMIS a portion of the fee the
Administrator receives from the Fund. Administration costs (including
out-of-pocket expenses) incurred in the ordinary course of providing services
under the administration agreement, except pricing services and extraordinary
expenses, are covered under the administration fee.
D. Custodian
Fees:
JPMorgan Chase Bank, N.A. (the Custodian) and its affiliates serve as
Custodian for the Funds assets held in the United States. The Custodian holds
cash, securities, and other assets of the Fund as required by the 1940 Act.
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. The Plans assets in Thailand are held by
Kasikornbank Public Company Limited.
The Fund has entered into an arrangement with its Custodian whereby
credits realized on uninvested cash balances were used
15
December 31, 2009
Notes to Financial
Statements (contd)
to
offset a portion of the Funds expenses. If applicable, these custodian credits
are shown as Expense Offset in the Statement of Operations.
E. Federal Income Taxes:
It is the Funds
intention to continue to qualify as a regulated investment company and
distribute all of its taxable income. Accordingly, no provision for Federal
income taxes is required in the financial statements. Dividend income and
distributions to stockholders are recorded on the ex-dividend date.
Distributions
of income from the Plan to the Fund are subject to Thai income tax at a rate of
10% of the distribution amount, which is withheld at the time of distribution.
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.
FASB
ASC 740-10 Income Taxes Overall (formerly known as FIN48) sets forth a
minimum threshold for financial statement recognition of the benefit of a tax
position taken or expected to be taken in a tax return. Management has
concluded there are no significant uncertain tax positions that would require
recognition in the financial statements. If applicable, the Fund recognizes
interest accrued related to unrecognized tax benefits in Interest Expense and
penalties in Other expenses on the Statement of Operations. The Fund files
tax returns with the U.S. Internal Revenue Service, New York and various
states. Generally, each of the tax years in the four year period ended December 31,
2009, remains subject to examination by taxing authorities.
The
tax character of distributions paid may differ from the character of
distributions shown on the Statements of Changes in Net Assets due to
short-term capital gains being treated as ordinary income for tax purposes. The
tax character of distributions paid during fiscal 2009 and 2008 was as follows:
2009 Distributions
Paid From:
(000)
|
|
2008 Distributions
Paid From:
(000)
|
Ordinary
Income
|
|
Long-term
Capital
Gain
|
|
Ordinary
Income
|
|
Long-term
Capital
Gain
|
$3,057
|
|
$
|
|
$
4,388
|
|
$
2,806
|
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 U.S. generally accepted accounting principles. The book/tax
differences are considered either temporary or permanent in nature.
Temporary
differences are generally due to differing book and tax treatments for the
timing of the recognition of gains (losses) on certain investment transactions
and the timing of the deductibility of certain expenses.
Permanent
differences, primarily due to differing treatments of gains (losses) related to
foreign currency transactions and distribution in excess, resulted in the
following reclassifications among the components of net assets at December 31,
2009:
Increase (Decrease)
|
Undistributed
(Distributions in
Excess of)
Net Investment
Income (Loss)
(000)
|
|
Accumulated
Net Realized
Gain (Loss)
(000)
|
|
Paid-in
Capital
(000)
|
$101
|
|
$(87)
|
|
$(14)
|
16
December 31,
2009
Notes
to Financial Statements (contd)
At
December 31, 2009, the Fund had no distributable earnings on a tax basis.
At
December 31, 2009, the U.S. Federal income tax cost basis of investments
was approximately $134,941,000 and, accordingly, net unrealized appreciation
for U.S. Federal income tax purposes was $33,671,000 of which $49,540,000
related to appreciated securities and $15,869,000 related to depreciated
securities.
Net
capital, currency and passive foreign investment company (PFIC) losses
incurred after October 31, and within the taxable year are deemed to arise
on the first day of the Funds next taxable year. For the year ended December 31,
2009, the Fund deferred to January 4, 2010, for U.S. Federal income tax
purposes, capital losses of approximately $115,000.
At
December 31, 2009, the Fund had a capital loss carryforward for U.S.
Federal income tax purposes of approximately $6,029,000 which will expire on December 31,
2017.
To
the extent that capital loss carryforwards are used to offset any future
capital gains realized during the carryforward period as provided by U.S.
Federal income tax regulations, no capital gains tax liability will be incurred
by the Fund for gains realized and not distributed. To the extent that capital
gains are offset, such gains will not be distributed to the stockholders.
F. Contractual Obligations:
The Fund enters
into contracts that contain a variety of indemnifications. The Funds maximum
exposure under these arrangements is unknown. However, the Fund has not had
prior claims or losses pursuant to these contracts and expects the risk of loss
to be remote.
G. Security Transactions and Transactions with
Affiliates:
The Fund invests in the Institutional Class of
the Morgan Stanley Institutional Liquidity Funds Money Market Portfolio (the Liquidity
Funds), an open-end management investment company managed by the Adviser.
Investment Advisory fees paid by the Fund are reduced by an amount equal to its
pro-rata share of advisory and administration fees paid by the Fund due to its
investment in the Liquidity Funds. For the year ended December 31, 2009,
advisory fees paid were reduced by approximately $3,000 relating to the Funds
investment in the Liquidity Funds.
A
summary of the Funds transactions in shares of the Liquidity Funds during the
year ended December 31, 2009 is as follows:
Market
Value
December 31,
2008
(000)
|
|
Purchases
at Cost
(000)
|
|
Sales
Proceeds
(000)
|
|
Dividend
Income
(000)
|
|
Market
Value
December 31,
2009
(000)
|
$942
|
|
$8,738
|
|
$8,419
|
|
$6
|
|
$1,261
|
During
the year ended December 31, 2009, the Fund made purchases and sales
totaling approximately $22,020,000 and $26,016,000, 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.
During
the year ended December 31, 2009, the Fund incurred no brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/dealer.
H. Other:
On June 19, 2007, the
Directors approved a procedure whereby the Fund may, when appropriate, purchase
shares in the open market or in privately negotiated transactions at a price
not above market value or net asset value, whichever is lower at the time of
the purchase. Since the inception of the program, the Fund did not repurchase
any if its shares.
On
December 4, 2009, the Officers of the Fund, pursuant to authority granted
by the Directors, declared a distribution of $0.1858 per share, derived from
net investment income, payable on January 29, 2010 to stockholders of
record on December 24, 2009.
I. Supplemental Proxy Information (unaudited):
On June 17,
2009, an annual meeting of the Funds stockholders
17
December 31,
2009
Notes
to Financial Statements (contd)
was
held for the purpose of voting on the following matter, the results of which
were as follows:
Election
of Directors by all stockholders:
|
|
For
|
|
Withhold
|
|
Michael Bozic
|
|
6,727,057
|
|
4,447,698
|
|
Michael F. Klein
|
|
6,766,024
|
|
4,408,731
|
|
W. Allen Reed
|
|
6,761,568
|
|
4,413,187
|
|
J. Subsequent Events:
In accordance with the
provisions set forth in FASB ASC 855 Subsequent Events (formerly known as
SFAS 165), adopted by the Fund as of June 30, 2009, management has
evaluated the possibility of subsequent events existing in the Funds financial
statements through February 23, 2010.
On
January 8, 2010, the Directors of the Fund approved the conversion for
Fund Accounting, Custody, Fund Administration and Securities Lending services
from JPMorgan Investor Services Co. to State Street Bank and Trust Company. The
conversion is expected to be completed in or about the second quarter of 2010.
Federal Income Tax Information (unaudited)
For
Federal income tax purposes, the following information is furnished with
respect to the Funds earnings for its taxable year ended December 31,
2009.
When
distributed, certain earnings may be subject to a maximum tax rate of 15% as provided
for the Jobs and Growth Tax Relief Reconciliation Act of 2004. The Fund
designated up to a maximum of approximately $3,057,000 as taxable at this lower
rate.
For
non-U.S. residents, the Fund may designate up to a maximum of approximately
$5,000 as qualifying as interest-related dividends.
In
January, the Fund provides tax information to stockholders for the preceding
calendar year.
For More Information About Portfolio Holdings (unaudited)
The
Fund provides a complete schedule of portfolio holdings in its semi-annual and
annual reports within 60 days of the end of the Funds second and fourth fiscal
quarters. The semi-annual reports and the annual reports are filed
electronically with the Securities and Exchange Commission (SEC) on Form N-CSRS
and Form N-CSR, respectively. Morgan Stanley also delivers the semi-annual
and annual reports to Fund stockholders and makes these reports available on
its public website, www.mor-ganstanley.com/im. Each Morgan Stanley fund also
files a complete schedule of portfolio holdings with the SEC for the Funds
first and third fiscal quarters on Form N-Q. Morgan Stanley does not
deliver the reports for the first and third fiscal quarters to stockholders,
nor are the reports posted to the Morgan Stanley public website. You may,
however, obtain the Form N-Q filings (as well as the Form N-CSR and
N-CSRS filings) by accessing the SECs website, www.sec.gov. You may also
review and copy them at the SECs public reference room in Washington, DC.
Information on the operation of the SECs Public Reference Room may be
obtained by calling the SEC toll free at 1-(800) SEC-0330. You can also request
copies of these materials, upon payment of a duplicating fee, by electronic
request at the SECs e-mail address (publicinfo@sec.gov) or by writing the
public reference section of the SEC, Washington, DC 20549-0102.
In
addition to filing a complete schedule of portfolio holdings with the SEC each
fiscal quarter, the Fund makes portfolio holdings information available by
periodically providing the information on its public website,
www.morganstanley.com/im.
The
Fund provides a complete schedule of portfolio holdings on the public website
on a calendar-quarter basis approximately 31 calendar days after the close of
the calendar quarter. The Fund also provides Top 10 holdings information on the
public website approximately 15 business days following the end of each month.
You may obtain copies of the Funds monthly or calendar-quarter website
postings, by calling toll free 1-(800) 231-2608.
18
December 31,
2009
Notes to Financial
Statements (contd)
Proxy Voting Policy and Procedures and Proxy Voting Record
(unaudited)
A
copy of (1) the Funds policies and procedures with respect to the voting
of proxies relating to the Funds portfolio securities; and (2) how the
Fund voted proxies relating to portfolio securities during the most recent
twelve-month period ended June 30, is available without charge, upon
request, by calling toll free 1-(800) 548-7786 or by visiting our website at
www.morganstanley.com/im. This information is also available on the SECs
website at www.sec.gov.
19
December 31,
2009
Report of Independent
Registered Public Accounting Firm
To the Stockholders and Board of Directors of
The Thai Fund, Inc.
We
have audited the accompanying statement of assets and liabilities of The Thai
Fund, Inc. (the Fund), including the portfolio of investments, as of December 31,
2009, and the related statement of operations for the year then ended, the
statements of changes in 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. These financial statements and financial highlights are the
responsibility of the Funds management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Funds internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Funds internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2009, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. We believe that our
audits provide a reasonable basis for our opinion.
In
our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Thai Fund, Inc. at December 31, 2009, the results of its operations
for the year then ended, the changes in its 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 U.S. generally accepted
accounting principles.
Boston,
Massachusetts
February 23, 2010
20
December 31,
2009 (unaudited)
Portfolio Management
The
Fund is managed within the Emerging Markets Equity team. The team consists of
portfolio managers and analysts. Current members of the team jointly and
primarily responsible for the day-to-day management of the Funds portfolio are
James Cheng, a Managing Director of the Sub-Adviser, Munib Madni, an Executive
Director of the Sub-Adviser, and Ruchir Sharma, a Managing Director of the U.S.
Adviser.
Mr. Cheng
has been associated with the Sub-Adviser in an investment management capacity
since July 2006 and began managing the Fund in August 2008. Prior to July 2006,
Mr. Cheng worked in an investment management capacity at Invesco Asia
Limited, Asia Strategic Investment Management Limited and Munich Re Asia
Capital Management. Mr. Munib has been associated with the Sub-Adviser in
an investment management capacity since February 2005 and began managing
the Fund in August 2008. Prior to August 2008, Mr. Munib was
associate director of Australian equities at Aberdeen Asset Management (December 2000
to January 2005). Previously, he was a portfolio manager, Australian
equities, at Equitilink Investment Management (December 1994 to December 2000).
Mr. Sharma has been associated with the U.S. Adviser in an investment
management capacity since 1996 and began managing the Fund in August 2008.
21
December 31,
2009 (unaudited)
Revised Investment Policy
The
Fund has amended and restated its policy on derivatives to permit it to invest
in the derivative investments discussed below.
The
Fund may use derivative instruments for a variety of purposes, including
hedging, risk management, portfolio management or to earn income. Derivatives
are financial instruments whose value is based on the value of another
underlying asset, interest rate, index or financial instrument. A derivative instrument
often has risks similar to its underlying instrument and may have additional
risks, including imperfect correlation between the value of the derivative and
the underlying instrument, risks of default by the other party to certain
transactions, magnification of losses incurred due to changes in the market
value of the securities, instruments, indices or interest rates to which they
relate, and risks that the transactions may not be liquid. The use of
derivatives involves risks that are different from, and possibly greater than,
the risks associated with other portfolio investments. Derivatives may involve
the use of highly specialized instruments that require investment techniques
and risk analyses different from those associated with other portfolio investments.
Certain derivative transactions may give rise to a form of leverage. Leverage
associated with derivative transactions may cause the Fund to liquidate
portfolio positions when it may not be advantageous to do so to satisfy its
obligations or to meet earmarking or segregation requirements, pursuant to
applicable SEC rules and regulations, or may cause the Fund to be more
volatile than if the Fund had not been leveraged. Although the Investment
Adviser and/or Sub-Adviser seek to use derivatives to further the Funds
investment objective, there is no assurance that the use of derivatives will
achieve this result.
Following
is a description of the derivative instruments and techniques that the Fund may
use and their associated risks:
Foreign Currency Forward Contracts.
In connection
with its investments in foreign securities, the Fund also may enter into
contracts with banks, brokers or dealers to purchase or sell securities or
foreign currencies at a future date (forward contracts). A foreign currency
forward contract is a negotiated agreement between the contracting parties to
exchange a specified amount of currency at a specified future time at a
specified rate. The rate can be higher or lower than the spot rate between the
currencies that are the subject of the contract. Forward foreign currency
exchange contracts may be used to protect against uncertainty in the level of
future foreign currency exchange rates or to gain or modify exposure to a
particular currency. In addition, the Fund may use cross currency hedging or
proxy hedging with respect to currencies in which the Fund has or expects to
have portfolio or currency exposure. Cross currency hedges involve the sale of
one currency against the positive exposure to a different currency and may be
used for hedging purposes or to establish an active exposure to the exchange
rate between any two currencies. Hedging the Funds currency risks involves the
risk of mismatching the Funds objectives under a forward or futures contract
with the value of securities denominated in a particular currency. Furthermore,
such transactions reduce or preclude the opportunity for gain if the value of
the currency should move in the direction opposite to the position taken. There
is an additional risk to the effect that currency contracts create exposure to
currencies in which the Funds securities are not denominated. Unanticipated
changes in currency prices may result in poorer overall performance for the
Fund than if it had not entered into such contracts.
22
December 31,
2009 (unaudited)
Dividend Reinvestment and
Cash Purchase Plan
Pursuant
to the Dividend Reinvestment and Cash Purchase Plan (the Plan), each
stockholder will be deemed to have elected, unless Computershare Trust Company,
N.A. (the Plan Agent) is otherwise instructed by the stockholder 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 (Distributions) will be reinvested on the
reinvestment date in full and fractional shares. 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 or, 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 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 Agents fees for the reinvestment of a Distribution will be paid by the
Fund. However, each participants account will be charged a pro rata share of
brokerage commissions incurred on any open market purchases effected on such
participants behalf. A participant will also pay brokerage commissions
incurred on purchases made by voluntary cash payments. Although stockholders 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 stockholders, such as banks, brokers or nominees, that 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
stockholder as representing the total amount registered in the stockholders
name and held for the account of beneficial owners who are participating in the
Plan.
Stockholders
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 stockholders 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.
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, Rhode Island 02940-3078
1-(800) 231-2608
23
December 31,
2009 (unaudited)
U.S. Privacy Policy
An
Important Notice Concerning Our U.S. Privacy Policy
We
are required by federal law to provide you with a copy of our privacy policy (Policy)
annually.
This
Policy applies to current and former individual clients of certain Morgan
Stanley closed-end funds and related companies.
This
Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to individuals
who are either beneficiaries of a trust for which we serve as trustee or
participants in an employee benefit plan administered or advised by us. This
Policy is, however, applicable to individuals who select us to be a custodian
of securities or assets in individual retirement accounts, 401(k) accounts,
529 Educational Savings Accounts, accounts subject to the Uniform Gifts to
Minors Act, or similar accounts. We may amend this Policy at any time, and will
inform you of any changes to this Policy as required by law.
We
Respect Your Privacy
We
appreciate that you have provided us with your personal financial information
and understand your concerns about safeguarding such information. We strive to
maintain the privacy of such information while we help you achieve your
financial objectives. This Policy describes what nonpublic personal information
we collect about you, how we collect it, when we may share it with others, and
how others may use it. It discusses the steps you may take to limit our sharing
of information about you with affiliated Morgan Stanley companies (affiliated
companies). It also discloses how you may limit our affiliates use of shared
information for marketing purposes. Throughout this Policy, we refer to the
nonpublic information that personally identifies you or your accounts as personal
information.
1. What
Personal Information Do We Collect About You?
To
better serve you and manage our business, it is important that we collect and
maintain accurate information about you. We obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our websites and from third parties and other
sources. For example:
·
We collect
information such as your name, address, e-mail address, telephone/fax numbers,
assets, income and investment objectives through application forms you submit
to us.
·
We may obtain
information about account balances, your use of account(s) and the types
of products and services you prefer to receive from us through your dealings
and transactions with us and other sources.
·
We may obtain
information about your creditworthiness and credit history from consumer
reporting agencies.
·
We may collect
background information from and through third-party vendors to verify
representations you have made and to comply with various regulatory
requirements.
24
December 31,
2009 (unaudited)
U.S. Privacy Policy (contd)
·
If you interact
with us through our public and private Web sites, we may collect information
that you provide directly through online communications (such as an e-mail
address). We may also collect information about your Internet service provider,
your domain name, your computers operating system and Web browser, your use of
our Web sites and your product and service preferences, through the use of cookies.
Cookies recognize your computer each time you return to one of our sites, and
help to improve our sites content and personalize your experience on our sites
by, for example, suggesting offerings that may interest you. Please consult the
Terms of Use of these sites for more details on our use of cookies.
2. When
Do We Disclose Personal Information We Collect About You?
To
provide you with the products and services you request, to better serve you, to
manage our business and as otherwise required or permitted by law, we may
disclose personal information we collect about you to other affiliated
companies and to nonaffiliated third parties.
A.
Information We Disclose to Our Affiliated Companies.
In order to
manage your account(s) effectively, including servicing and processing
your transactions, to let you know about products and services offered by us and
affiliated companies, to manage our business, and as otherwise required or
permitted by law, we may disclose personal information about you to other
affiliated companies. Offers for products and services from affiliated
companies are developed under conditions designed to safeguard your personal
information.
B.
Information We Disclose to Third Parties.
We do not disclose personal
information that we collect about you to nonaffiliated third parties except to
enable them to provide marketing services on our behalf, to perform joint
marketing agreements with other financial institutions, and as otherwise
required or permitted by law. For example, some instances where we may disclose
information about you to third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with a nonaffiliated
third party, they are required to limit their use of personal information about
you to the particular purpose for which it was shared and they are not allowed
to share personal information about you with others except to fulfill that
limited purpose or as may be required by law.
3. How
Do We Protect the Security and Confidentiality of Personal Information We
Collect About You?
We
maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal policies
governing the proper handling of client information. Third parties that provide
support or marketing services on our behalf may also receive personal
information about you, and we require them to adhere to confidentiality
standards with respect to such information.
4. How
Can You Limit Our Sharing of Certain Personal Information About You With Our
Affiliated Companies for Eligibility Determination?
We
respect your privacy and offer you choices as to whether we share with our
affiliated companies personal information that was collected to determine your
eligibility for products and services such as credit reports and other
information that you have provided to
25
December 31,
2009 (unaudited)
U.S. Privacy Policy (contd)
us
or that we may obtain from third parties (eligibility information). Please
note that, even if you direct us not to share certain eligibility information
with our affiliated companies, we may still share your personal information,
including eligibility information, with those companies under circumstances
that are permitted under applicable law, such as to process transactions or to
service your account. We may also share certain other types of personal information
with affiliated companies such as your name, address, telephone number,
e-mail address and account number(s), and information about your transactions
and experiences with us.
5. How
Can You Limit the Use of Certain Personal Information About You by our
Affiliated Companies for Marketing?
You
may limit our affiliated companies from using certain personal information
about you that we may share with them for marketing their products or services
to you. This information includes our transactions and other experiences with
you such as your assets and account history. Please note that, even if you
choose to limit our affiliated companies from using certain personal
information about you that we may share with them for marketing their products
and services to you, we may still share such personal information about you
with them, including our transactions and experiences with you, for other
purposes as permitted under applicable law.
6. How
Can You Send Us an Opt-Out Instruction?
If
you wish to limit our sharing of certain personal information about you with
our affiliated companies for eligibility purposes and for our affiliated
companies use in marketing products and services to you as described in this
notice, you may do so by:
·
Calling us at
(800) 231-2608
MondayFriday between 9a.m.
and 6p.m. (EST)
·
Writing to us at
the following address:
Morgan Stanley Closed-End
Privacy Department
Harborside Financial Center, Plaza Two, 3rd Floor
Jersey City, NJ 07311
If
you choose to write to us, your written request should include: your name,
address, telephone number and account number(s) to which the opt-out
applies and should not be sent with any other correspondence. In order to
process your request, we require that the request be provided by you directly
and not through a third party. Once you have informed us about your privacy
preferences, your opt-out preference will remain in effect with respect to this
Policy (as it may be amended) until you notify us otherwise. If you are a joint
account owner, we will accept instructions from any one of you and apply those
instructions to the entire account. Please allow approximately 30 days from our
receipt of your opt-out for your instructions to become effective.
Please
understand that if you opt-out, you and any joint account holders may not
receive certain Morgan Stanley or our affiliated companies products and
services that could help you manage your financial resources and achieve your
investment objectives.
If
you have more than one account with us or our affiliates, you may receive
multiple privacy policies from us, and would need to follow the directions
stated in each particular policy for each account you have with us.
26
December 31,
2009 (unaudited)
U.S. Privacy Policy (contd)
SPECIAL
NOTICE TO RESIDENTS OF VERMONT
This section supplements our Policy with respect to our
individual clients who have a Vermont address and supersedes anything to the
contrary in the above Policy with respect to those clients only.
The
State of Vermont requires financial institutions to obtain your consent prior
to sharing personal information that they collect about you with affiliated
companies and nonaffiliated third parties other than in certain limited
circumstances. Except as permitted by law, we will not share personal
information we collect about you with nonaffiliated third parties or other
affiliated companies unless you provide us with your written consent to share
such information (opt-in).
If
you wish to receive offers for investment products and services offered by or
through other affiliated companies, please notify us in writing at the
following address:
Morgan Stanley Closed-End
Privacy Department
Harborside Financial Center, Plaza Two, 3rd Floor
Jersey City, NJ 07311
Your
authorization should include: your name, address, telephone number and
account number(s) to which the opt-in applies and should not be sent
with any other correspondence. In order to process your authorization, we
require that the authorization be provided by you directly and not through a
third-party.
|
©2010 Morgan Stanley
27
December 31,
2009 (unaudited)
Director and Officer
Information
Independent Directors:
Name,
Age and Address of
Independent Director
|
|
Position(s)
Held with
Registrant
|
|
Length
of
Time
Served*
|
|
Principal
Occupation(s) During Past 5 Years
|
|
Number
of
Portfolios in
Fund
Complex
Overseen
by
Independent
Director**
|
|
Other
Directorships Held by
Independent Directors***
|
Frank L. Bowman (65)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent
Directors
1177 Avenue of the
Americas
New York, NY 10036
|
|
Director
|
|
Since August 2006
|
|
President, Strategic
Decisions, LLC (consulting) (since February 2009); Director or Trustee
of various Retail Funds and Institutional Funds (since August 2006);
Chairperson of the Insurance Sub-Committee of the Compliance and Insurance
Committee (since February 2007); served as President and Chief Executive
Officer of the Nuclear Energy Institute (policy organization) through
November 2008; retired as Admiral, U.S. Navy in January 2005 after
serving over 8 years as Director of the Naval Nuclear Propulsion Program and
Deputy Administrator Naval Reactors in the National Nuclear Security
Administration at the U.S. Department of Energy (1996-2004). Knighted as
Honorary Knight Commander of the Most Excellent Order of the British Empire;
Awarded the Officer de lOrde National du Mérite by the French Government.
|
|
162
|
|
Director of Armed
Services YMCA of the USA; member, BP America External Advisory Council
(energy); member, National Academy of Engineers.
|
|
|
|
|
|
|
|
|
|
|
|
Michael Bozic (68)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036
|
|
Director
|
|
Since April 1994
|
|
Private investor;
Chairperson of the Compliance and Insurance Committee (since
October 2006); Director or Trustee of the Retail Funds (since
April 1994) and Institutional Funds (since July 2003); formerly,
Chairperson of the Insurance Committee (July 2006-September 2006),
Vice Chairman of Kmart Corporation (December 1998-October 2000),
Chairman and Chief Executive Officer of Levitz Furniture Corporation
(November 1995-November 1998) and President and Chief Executive
Officer of Hills Department Stores (May 1991-July 1995); variously
Chairman, Chief Executive Officer, President and Chief Operating Officer
(1987-1991) of the Sears Merchandise Group of Sears Roebuck & Co.
|
|
164
|
|
Director of various
business organizations.
|
28
December 31,
2009 (unaudited)
Director and Officer
Information (contd)
Independent Directors
(contd):
Name,
Age and Address of
Independent Director
|
|
Position(s)
Held with
Registrant
|
|
Length
of
Time
Served*
|
|
Principal
Occupation(s) During Past 5 Years
|
|
Number
of
Portfolios in
Fund
Complex
Overseen
by
Independent
Director**
|
|
Other
Directorships Held by
Independent Directors***
|
Kathleen A. Dennis (56)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036
|
|
Director
|
|
Since August 2006
|
|
President, Cedarwood
Associates (mutual fund and investment management consulting) (since
July 2006); Chairperson of the Money Market and Alternatives
Sub-Committee of the Investment Committee (since October 2006) and
Director or Trustee of various Retail Funds and Institutional Funds (since
August 2006); formerly, Senior Managing Director of Victory Capital
Management (1993-2006).
|
|
162
|
|
Director of various
non-profit organizations.
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Manuel H.
Johnson (60)
c/o Johnson Smick Group, Inc.
888 16th Street, N.W.
Suite 740
Washington, D.C. 20006
|
|
Director
|
|
Since July 1991
|
|
Senior Partner, Johnson
Smick International, Inc. (consulting firm); Chairperson of the
Investment Committee (since October 2006) and Director or Trustee of the
Retail Funds (since July 1991) and Institutional Funds (since
July 2003); Co-Chairman and a founder of the Group of Seven Council
(G7C) (international economic commission); formerly, Chairperson of the Audit
Committee (July 1991-September 2006); Vice Chairman of the Board of
Governors of the Federal Reserve System and Assistant Secretary of the U.S.
Treasury.
|
|
164
|
|
Director of
NVR, Inc. (home construction); Director of Evergreen Energy; Director of
Greenwich Capital Holdings.
|
|
|
|
|
|
|
|
|
|
|
|
Joseph J. Kearns (67)
c/o Kearns & Associates LLC
PMB754
23852 Pacific Coast Highway
Malibu, CA 90265
|
|
Director
|
|
Since August 1994
|
|
President,
Kearns & Associates LLC (investment consulting); Chairperson of the
Audit Committee (since October 2006) and Director or Trustee of the
Retail Funds (since July 2003) and Institutional Funds (since
August 1994); formerly Deputy Chairperson of the Audit Committee
(July 2003-September 2006) and Chairperson of the Audit Committee
of the Institutional Funds (October 2001-July 2003); CFO of the J.
Paul Getty Trust.
|
|
165
|
|
Director of Electro Rent
Corporation (equipment leasing) and The Ford Family Foundation.
|
29
December 31,
2009 (unaudited)
Director and Officer
Information (contd)
Independent Directors
(contd):
Name,
Age and Address of
Independent Director
|
|
Position(s)
Held with
Registrant
|
|
Length
of
Time
Served*
|
|
Principal
Occupation(s) During Past 5 Years
|
|
Number
of
Portfolios in
Fund
Complex
Overseen
by
Independent
Director**
|
|
Other
Directorships Held by
Independent Directors***
|
Michael F. Klein (51)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036
|
|
Director
|
|
Since August 2006
|
|
Chief Operating Officer
and Managing Director, Aetos Capital, LLC (since March 2000) and
Co-President, Aetos Alternatives Management, LLC (since January 2004);
Chairperson of the Fixed Income Sub-Committee of the Investment Committee
(since October 2006) and Director or Trustee of various Retail Funds and
Institutional Funds (since August 2006); formerly, Managing Director,
Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment
Management, President, Morgan Stanley Institutional Funds
(June 1998-March 2000) and Principal, Morgan Stanley & Co.
Inc. and Morgan Stanley Dean Witter Investment Management (August 1997-December 1999).
|
|
162
|
|
Director of certain
investment funds managed or sponsored by Aetos Capital LLC; Director of
Sanitized AG and Sanitized Marketing AG (specialty chemicals).
|
|
|
|
|
|
|
|
|
|
|
|
Michael E. Nugent (73)
c/o Triumph Capital, L.P.
445 Park Avenue
New York, NY 10022
|
|
Chairperson of the Board
and Director
|
|
Chairperson of the
Boards since July 2006 and Director since July 1991
|
|
General Partner, Triumph
Capital, L.P. (private investment partnership); Chairperson of the Boards of
the Retail Funds and Institutional Funds (since July 2006); Director or
Trustee of the Retail Funds (since July 1991) and Institutional Funds
(since July 2001); formerly, Chairperson of the Insurance Committee
(until July 2006).
|
|
164
|
|
None.
|
|
|
|
|
|
|
|
|
|
|
|
W. Allen Reed (62)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036
|
|
Director
|
|
Since August 2006
|
|
Chairperson of the
Equity Sub-Committee of the Investment Committee (since October 2006)
and Director or Trustee of various Retail and Institutional Funds (since
August 2006); formerly, President and CEO of General Motors Asset
Management; Chairman and Chief Executive Officer of the GM Trust Bank and
Corporate Vice President of General Motors Corporation
(July 1994-December 2005).
|
|
162
|
|
Director of
Temple-Inland Industries (packaging and forest products), Director of Legg
Mason, Inc. and Director of the Auburn University Foundation; formerly,
Director of iShares, Inc. (2001-2006).
|
|
|
|
|
|
|
|
|
|
|
|
Fergus Reid (77)
c/o Joe Pietryka, Inc.
85 Charles Coleman Blvd.
Pawling, NY 12564
|
|
Director
|
|
Since June 1992
|
|
Chairman, Joe
Pietryka, Inc.; Chairperson of the Governance Committee and Director or
Trustee of the Retail Funds (since July 2003) and Institutional Funds
(since June 1992).
|
|
165
|
|
Trustee and Director of
certain investment companies in the JPMorgan Funds complex managed by JP
Morgan Investment Management Inc.
|
30
December 31,
2009 (unaudited)
Director and Officer
Information (contd)
Interested Director:
Name,
Age and Address of
Interested Director
|
|
Position(s)
Held with
Registrant
|
|
Term
of
Office
and
Length of
Time
Served*
|
|
Principal
Occupation(s) During Past 5 Years
|
|
Number
of
Portfolios in
Fund
Complex
Overseen
by
Interested
Director**
|
|
Other
Directorships Held by
Interested Director***
|
James F. Higgins (61)
c/o Morgan Stanley Trust
Harborside Financial Center Plaza Two
Jersey City, NJ 07311
|
|
Director
|
|
Since June 2000
|
|
Director or Trustee of
the Retail Funds (since June 2000) and Institutional Funds (since
July 2003); Senior Advisor of Morgan Stanley (since August 2000).
|
|
163
|
|
Director of AXA
Financial, Inc. and The Equitable Life Assurance Society of the United
States (financial services).
|
*
|
This is the earliest
date the Director began serving the Retail Funds or Institutional Funds. Each
Director serves an indefinite term, until his or her successor is elected.
|
**
|
The Fund Complex
includes all funds advised by MS Investment Management that have an
investment advisor that is an affiliated entity of MSIM (including but not
limited to, Morgan Stanley Investment Advisors Inc. (MSIA) and Morgan
Stanley AIP GP LP). The Retail Funds are those funds advised by MSIA. The
Institutional Funds are certain U.S. registered funds advised by MS
Investment Management and Morgan Stanley AIP GP LP.
|
***
|
This includes any
directorships at public companies and registered investment companies held by
the Directors at any time during the past five years.
|
|
For the period
September 26, 2008 through February 5, 2009 W. Allen Reed was an
Interested Director. At all other times covered by this report, Mr. Reed
was an Independent Director.
|
31
December 31,
2009 (unaudited)
Director and Officer
Information (contd)
Executive Officers:
Name,
Age and Address of Executive Officer
|
|
Position(s)
Held with
Registrant
|
|
Term
of Office
and Length of
Time Served*
|
|
Principal
Occupation(s) During Past 5 Years
|
Randy Takian (35)
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
President and Principal
Executive Officer
|
|
Since
September 2008
|
|
President and Principal
Executive Officer (since September 2008) of funds in the Fund Complex;
President and Chief Executive Officer of Morgan Stanley Services Company Inc.
(since September 2008). President of Morgan Stanley Investment Advisors
Inc. (since July 2008). Head of the Retail and Intermediary business
within Morgan Stanley Investment Management (since July 2008). Head of
Liquidity and Bank Trust business (since July 2008) and the Latin
American franchise (since July 2008) at Morgan Stanley Investment
Management. Managing Director, Director and/or Officer of the Adviser and
various entities affiliated with the Adviser. Formerly, Head of Strategy and
Product Development for the Alternatives Group and Senior Loan Investment
Management. Formerly with Bank of America (July 1996-March 2006),
most recently as Head of the Strategy, Mergers and Acquisitions team for
Global Wealth and Investment Management.
|
|
|
|
|
|
|
|
Kevin Klingert (47)
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
Vice President
|
|
Since
June 2008
|
|
Head, Chief Operating
Officer and acting Chief Investment Officer of the Global Fixed Income Group
of the Adviser and Morgan Stanley Investment Advisors Inc. (since
April 2008). Head of Global Liquidity Portfolio Management and co-Head
of Liquidity Credit Research of Morgan Stanley Investment Management (since
December 2007). Managing Director of the Adviser and Morgan Stanley
Investment Advisors Inc. (since December 2007). Previously, Managing
Director on the Management Committee and head of Municipal Portfolio Management
and Liquidity at BlackRock (October 1991 to January 2007).
|
|
|
|
|
|
|
|
Carsten Otto (46)
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
Chief Compliance Officer
|
|
Since
October 2004
|
|
Managing Director and
Global Head of Compliance for Morgan Stanley Investment Management (since
April 2007) and Chief Compliance Officer of the Retail Funds and
Institutional Funds (since October 2004). Formerly, U.S. Director of
Compliance (October 2004-April 2007) and Assistant Secretary and
Assistant General Counsel of the Retail Funds.
|
|
|
|
|
|
|
|
Stefanie V. Chang Yu
(43)
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
Vice President
|
|
Since
December 1997
|
|
Managing Director and
Secretary of the Adviser and various entities affiliated with the Adviser;
Vice President of the Retail Funds (since July 2002) and Institutional
Funds (since December 1997).
|
32
December 31,
2009 (unaudited)
Director and Officer
Information (contd)
Executive Officers (contd):
Name,
Age and Address of Executive Officer
|
|
Position(s)
Held with
Registrant
|
|
Term
of Office
and Length of
Time Served*
|
|
Principal
Occupation(s) During Past 5 Years
|
Mary E. Mullin (42)
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
Secretary
|
|
Since
June 1999
|
|
Executive Director of
the Adviser and various entities affiliated with the Adviser; Secretary of
the Retail Funds (since July 2003) and Institutional Funds (since
June 1999).
|
|
|
|
|
|
|
|
James W. Garrett (41)
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
Treasurer and Chief
Financial Officer
|
|
Treasurer since
February 2002 and Chief Financial Officer since July 2003
|
|
Head of Global Fund
Administration for Morgan Stanley Investment Management; Managing Director of
the Adviser and various entities affiliated with the Adviser; Treasurer and
Chief Financial Officer of the Institutional Funds.
|
|
|
|
|
|
|
|
* This is the earliest date the Officer
began serving the Retail Funds or Institutional Funds. Each Officer serves an
indefinite term, until his or her successor is elected.
In accordance with Section 303A.
12(a) of the New York Stock Exchange Listed Company Manual, the Funds
Annual CEO Certification certifying as to compliance with NYSEs Corporate
Governance Listing Standards was submitted to the Exchange on July 14,
2009.
The Funds Principal
Executive Officer and Principal Financial Officer Certifications required by Section 302
of the Sarbanes-Oxley Act of 2002 were filed with the Funds N-CSR and are
available on the Securities and Exchange Commissions website at www.sec.gov.
33
The Thai Fund, Inc.
Directors
|
|
Michael E. Nugent
|
Kevin Klingert
|
|
Vice
President
|
Frank L. Bowman
|
|
|
Stefanie V. Chang Yu
|
Michael Bozic
|
Vice
President
|
|
|
Kathleen A. Dennis
|
James W. Garrett
|
|
Treasurer
and Chief
|
James F. Higgins
|
Financial
Officer
|
|
|
Dr. Manuel H.
Johnson
|
Carsten Otto
|
|
Chief
Compliance Officer
|
Joseph J. Kearns
|
|
|
Mary E. Mullin
|
Michael F. Klein
|
Secretary
|
|
|
W. Allen Reed
|
|
|
|
Fergus Reid
|
|
|
|
Officers
|
|
Michael E. Nugent
|
|
Chairman
of the Board and
Director
|
|
|
|
Randy Takian
|
|
President
and Principal
|
|
Executive
Officer
|
|
Investment
Adviser and Administrator
Morgan Stanley Investment
Management Inc.
522 Fifth Avenue
New York, New York 10036
Custodian
JPMorgan Chase Bank, N.A.
270 Park Avenue
New York, New York 10017
Stockholder
Servicing Agent
Computershare Trust
Company, N.A.
250 Royall Street
Canton, Massachusetts
02021
Legal
Counsel
Dechert LLP
1095 Avenue of the
Americas
New York, New York 10036
Independent
Registered Public Accounting Firm
Ernst & Young
LLP
200 Clarendon Street
Boston, Massachusetts
02116
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 toll
free 1(800) 231-2608 or visit our website at www.morganstanley.com/im. All
investments involve risks, including the possible loss of principal.
© 2010 Morgan Stanley
CETTFANN
IU10-00472I-Y12/09
Item 2. Code
of Ethics.
(a)
The Fund has
adopted a code of ethics (the Code of Ethics) that applies to its principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of whether
these individuals are employed by the Fund or a third party.
(b)
No information
need be disclosed pursuant to this paragraph.
(c)
Not applicable.
(d)
Not applicable.
(e)
Not applicable.
(f)
(1)
The Funds Code of Ethics is
attached hereto as Exhibit 12 A.
(2)
Not applicable.
(3)
Not applicable.
Item 3. Audit
Committee Financial Expert.
The Funds Board of Trustees has determined that Joseph J. Kearns, an independent Trustee, is an audit committee financial expert serving on its audit committee. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an expert for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification.
Item
4. Principal Accountant Fees and
Services.
(a)(b)(c)(d) and
(g). Based on fees billed for the
periods shown:
2009
|
|
Registrant
|
|
Covered Entities(1)
|
|
Audit Fees
|
|
$
|
53,800
|
|
N/A
|
|
|
|
|
|
|
|
Non-Audit Fees
|
|
|
|
|
|
Audit-Related Fees
|
|
|
|
|
|
Tax Fees
|
|
$
|
3,380
|
(3)
|
$
|
109,924
|
(4)
|
All Other
Fees
|
|
|
|
$
|
208,088
|
(5)
|
Total Non-Audit Fees
|
|
$
|
3,380
|
|
$
|
318,012
|
|
|
|
|
|
|
|
Total
|
|
$
|
57,180
|
|
$
|
318,012
|
|
2008
|
|
Registrant
|
|
Covered Entities(1)
|
|
Audit Fees
|
|
$
|
53,800
|
|
N/A
|
|
|
|
|
|
|
|
Non-Audit Fees
|
|
|
|
|
|
Audit-Related Fees
|
|
|
|
$
|
742,276
|
(2)
|
Tax Fees
|
|
$
|
3,380
|
(3)
|
$
|
99,522
|
(4)
|
All Other Fees
|
|
|
|
$
|
246,887
|
(5)
|
Total Non-Audit Fees
|
|
$
|
3,380
|
|
$
|
1,088,685
|
|
|
|
|
|
|
|
Total
|
|
$
|
57,180
|
|
$
|
1,088,685
|
|
N/A- Not applicable, as not
required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant.
(2) Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities and funds advised by the Adviser or its affiliates, specifically attestation services provided in connection with a SAS 70 Report and advisory consulting work.
(3) Tax Fees represent tax advice and compliance services provided in connection with the review of the Registrants tax returns.
(4) Tax Fees represent tax advice services provided to Covered Entities, including research and identification of PFIC entities.
(5) All Other Fees represent attestation services provided in connection with performance presentation standards and a compliance review project performed
(e)(1) The audit
committees pre-approval policies and procedures are as follows:
APPENDIX A
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND
PROCEDURES
OF THE
MORGAN STANLEY RETAIL AND
INSTITUTIONAL FUNDS
AS ADOPTED AND AMENDED JULY 23,
2004,(1)
1.
Statement of Principles
The Audit Committee of the
Board is required to review and, in its sole discretion, pre-approve all Covered
Services to be provided by the Independent Auditors to the Fund and Covered
Entities in order to assure that services performed by the Independent Auditors
do not impair the auditors independence from the Fund.
The SEC has issued rules specifying
the types of services that an independent auditor may not provide to its audit
client, as well as the audit committees administration of the engagement of
the independent auditor. The SECs rules establish
two different approaches to pre-approving services, which the SEC considers to
be equally valid. Proposed services
either: may be pre-approved without consideration of specific case-by-case
services by the Audit Committee (
general pre-approval
); or require the
specific pre-approval of the Audit Committee or its delegate (
specific
pre-approval
). The Audit Committee
believes that the combination of these two approaches in this Policy will
result in an effective and efficient procedure to pre-approve services
performed by the Independent Auditors.
As set forth in this Policy, unless a type of service has received
general pre-approval, it will require specific pre-approval by the Audit
Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services
exceeding pre-approved cost levels or budgeted amounts will also require
specific pre-approval by the Audit Committee.
The appendices to this
Policy describe the Audit, Audit-related, Tax and All Other services that have
the general pre-approval of the Audit Committee. The term of any general pre-approval is
12 months from the date of pre-approval, unless the Audit Committee
considers and provides a different period and states otherwise. The Audit Committee will annually review and
pre-approve the services that may be provided by the Independent Auditors
without obtaining specific pre-approval from the Audit
(1)
This Audit Committee Audit
and Non-Audit Services Pre-Approval Policy and Procedures (the
Policy
),
adopted as of the date above, supersedes and replaces all prior versions that
may have been adopted from time to time.
Committee. The Audit Committee will add to or subtract
from the list of general pre-approved services from time to time, based on
subsequent determinations.
The purpose of this Policy
is to set forth the policy and procedures by which the Audit Committee intends
to fulfill its responsibilities. It does
not delegate the Audit Committees responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Funds Independent
Auditors have reviewed this Policy and believes that implementation of the
Policy will not adversely affect the Independent Auditors independence.
2.
Delegation
As provided in the Act and
the SECs rules, the Audit Committee may delegate either type of pre-approval
authority to one or more of its members.
The member to whom such authority is delegated must report, for
informational purposes only, any pre-approval decisions to the Audit Committee
at its next scheduled meeting.
3.
Audit Services
The annual Audit services
engagement terms and fees are subject to the specific pre-approval of the Audit
Committee. Audit services include the
annual financial statement audit and other procedures required to be performed
by the Independent Auditors to be able to form an opinion on the Funds
financial statements. These other
procedures include information systems and procedural reviews and testing
performed in order to understand and place reliance on the systems of internal
control, and consultations relating to the audit. The Audit Committee will approve, if
necessary, any changes in terms, conditions and fees resulting from changes in
audit scope, Fund structure or other items.
In addition to the annual
Audit services engagement approved by the Audit Committee, the Audit Committee
may grant general pre-approval to other Audit services, which are those
services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory
audits and services associated with SEC registration statements (on Forms N-1A,
N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC
or other documents issued in connection with securities offerings.
The Audit Committee has
pre-approved the Audit services in Appendix B.1. All other Audit services not listed in
Appendix B.1 must be specifically pre-approved by the Audit Committee (or by
any member of the Audit Committee to which pre-approval has been delegated).
4.
Audit-related Services
Audit-related services are
assurance and related services that are reasonably related to the performance
of the audit or review of the Funds financial statements and, to the extent
they are Covered Services, the Covered Entities or that are traditionally
performed by the Independent Auditors.
Because the Audit Committee believes that the provision of Audit-related
services does not impair the independence of the auditor and is consistent with
the SECs rules on auditor independence, the Audit Committee may grant
general
pre-approval to
Audit-related services. Audit-related
services include, among others, accounting consultations related to accounting,
financial reporting or disclosure matters not classified as Audit services;
assistance with understanding and implementing new accounting and financial
reporting guidance from rulemaking authorities; agreed-upon or expanded audit
procedures related to accounting and/or billing records required to respond to
or comply with financial, accounting or regulatory reporting matters; and
assistance with internal control reporting requirements under Forms N-SAR
and/or N-CSR.
The Audit Committee has
pre-approved the Audit-related services in Appendix B.2. All other Audit-related services not listed
in Appendix B.2 must be specifically pre-approved by the Audit Committee (or by
any member of the Audit Committee to which pre-approval has been delegated).
5.
Tax Services
The Audit Committee believes
that the Independent Auditors can provide Tax services to the Fund and, to the
extent they are Covered Services, the Covered Entities, such as tax compliance,
tax planning and tax advice without impairing the auditors independence, and
the SEC has stated that the Independent Auditors may provide such services.
Pursuant to the preceding
paragraph, the Audit Committee has pre-approved the Tax Services in Appendix
B.3. All Tax services in Appendix B.3
must be specifically pre-approved by the Audit Committee (or by any member of
the Audit Committee to which pre-approval has been delegated).
6.
All Other Services
The Audit Committee
believes, based on the SECs rules prohibiting the Independent Auditors
from providing specific non-audit services, that other types of non-audit
services are permitted. Accordingly, the
Audit Committee believes it may grant general pre-approval to those permissible
non-audit services classified as All Other services that it believes are
routine and recurring services, would not impair the independence of the
auditor and are consistent with the SECs rules on auditor independence.
The Audit Committee has
pre-approved the All Other services in Appendix B.4. Permissible All Other services not listed in
Appendix B.4 must be specifically pre-approved by the Audit Committee (or by
any member of the Audit Committee to which pre-approval has been delegated).
7.
Pre-Approval Fee Levels or
Budgeted Amounts
Pre-approval fee levels or
budgeted amounts for all services to be provided by the Independent Auditors
will be established annually by the Audit Committee. Any proposed services exceeding these levels
or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall
relationship of fees for audit and non-audit services in determining whether to
pre-approve any such services.
8.
Procedures
All requests or applications
for services to be provided by the Independent Auditors that do not require
specific approval by the Audit Committee will be submitted to the Funds Chief
Financial Officer and must include a detailed description of the services to be
rendered. The Funds Chief Financial
Officer will determine whether such services are included within the list of
services that have received the general pre-approval of the Audit
Committee. The Audit Committee will be
informed on a timely basis of any such services rendered by the Independent
Auditors. Requests or applications to
provide services that require specific approval by the Audit Committee will be
submitted to the Audit Committee by both the Independent Auditors and the Funds
Chief Financial Officer, and must include a joint statement as to whether, in
their view, the request or application is consistent with the SECs rules on
auditor independence.
The Audit Committee has
designated the Funds Chief Financial Officer to monitor the performance of all
services provided by the Independent Auditors and to determine whether such
services are in compliance with this Policy.
The Funds Chief Financial Officer will report to the Audit Committee on
a periodic basis on the results of its monitoring. Both the Funds Chief Financial Officer and
management will immediately report to the chairman of the Audit Committee any
breach of this Policy that comes to the attention of the Funds Chief Financial
Officer or any member of management.
9.
Additional Requirements
The Audit Committee has
determined to take additional measures on an annual basis to meet its
responsibility to oversee the work of the Independent Auditors and to assure
the auditors independence from the Fund, such as reviewing a formal written
statement from the Independent Auditors delineating all relationships between
the Independent Auditors and the Fund, consistent with Independence Standards
Board No. 1, and discussing with the Independent Auditors its methods and
procedures for ensuring independence.
10.
Covered Entities
Covered Entities include the
Funds investment adviser(s) and any entity controlling, controlled by or
under common control with the Funds investment adviser(s) that provides
ongoing services to the Fund(s).
Beginning with non-audit service contracts entered into on or after May 6,
2003, the Funds audit committee must pre-approve non-audit services provided
not only to the Fund but also to the Covered Entities if the engagements relate
directly to the operations and financial reporting of the Fund. This list of Covered Entities would include:
Morgan Stanley Retail Funds
Morgan Stanley Investment Advisors Inc.
Morgan Stanley & Co. Incorporated
Morgan Stanley DW Inc.
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust
Management Co., Limited
Morgan Stanley Investment Management Company
Van Kampen Asset Management
Morgan Stanley Services Company, Inc.
Morgan Stanley Distributors Inc.
Morgan Stanley Trust FSB
Morgan Stanley Institutional Funds
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Advisors Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust
Management Co., Limited
Morgan Stanley Investment Management Company
Morgan Stanley & Co. Incorporated
Morgan Stanley Distribution, Inc.
Morgan Stanley AIP GP LP
Morgan Stanley Alternative Investment Partners LP
(e)(2)
Beginning with non-audit service contracts entered into on or after May 6,
2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committees pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees
has considered whether the provision of services other than audit services
performed by the auditors to the Registrant and Covered Entities is compatible
with maintaining the auditors independence in performing audit services.
Item
5. Audit Committee of Listed Registrants.
(a) The
Fund has a separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act whose members
are: Joseph Kearns, Michael Nugent and Allen Reed.
(b) Not
applicable.
Item
6. Schedule of Investments
(a) Refer
to Item 1.
(b) Not
applicable.
Item
7. Disclosure of Proxy Voting Policies
and Procedures for Closed-End Management Investment Companies.
February 27,
2009
MORGAN STANLEY INVESTMENT MANAGEMENT
PROXY VOTING POLICY AND
PROCEDURES
I.
POLICY
STATEMENT
Morgan
Stanley Investment Managements (MSIM) policy and procedures for voting
proxies (Policy) with respect to securities held in the accounts of clients
applies to those MSIM entities that provide discretionary investment management
services and for which an MSIM entity has authority to vote proxies. This Policy is reviewed and updated as
necessary to address new and evolving proxy voting issues and standards.
The
MSIM entities covered by this Policy currently include the following: Morgan
Stanley Investment Advisors Inc., Morgan Stanley AIP GP LP, Morgan Stanley
Investment Management Inc., Morgan Stanley Investment Management Limited,
Morgan Stanley Investment Management Company, Morgan Stanley Asset &
Investment Trust Management Co., Limited, Morgan Stanley Investment Management
Private Limited, Van Kampen Asset Management, and Van Kampen Advisors Inc.
(each an MSIM Affiliate and collectively referred to as the MSIM Affiliates
or as we below).
Each
MSIM Affiliate will use its best efforts to vote proxies as part of its authority
to manage, acquire and dispose of account assets. With respect to the MSIM
registered management investment companies (Van Kampen, Institutional and
Advisor Fundscollectively referred to herein as the MSIM Funds), each MSIM
Affiliate will vote proxies under this Policy pursuant to authority granted
under its applicable investment advisory agreement or, in the absence of such
authority, as authorized by the Board of Directors/Trustees of the MSIM Funds.
An MSIM Affiliate will not vote proxies if the named fiduciary for an ERISA
account has reserved the authority for itself, or in the case of an account not
governed by ERISA, the investment management or investment advisory agreement
does not authorize the MSIM Affiliate to vote proxies. MSIM Affiliates will vote proxies in a
prudent and diligent manner and in the best interests of clients, including
beneficiaries of and participants in a clients benefit plan(s) for which
the MSIM Affiliates manage assets, consistent with the objective of maximizing
long-term investment returns (Client Proxy Standard). In certain situations, a client or its
fiduciary may provide an MSIM Affiliate with a proxy voting policy. In these situations, the MSIM Affiliate will
comply with the clients policy.
Proxy
Research Services
- RiskMetrics Group ISS Governance Services (ISS)
and Glass Lewis (together with other proxy research providers as we may retain
from time to time, the Research Providers) are independent advisers that
specialize in providing a variety of fiduciary-level proxy-related services to
institutional investment managers, plan sponsors, custodians, consultants, and
other institutional investors. The
services provided include in-depth research, global issuer analysis, and voting
recommendations. While we may review and utilize the recommendations of the
Research Providers in making proxy voting decisions, we are in no way obligated
to follow such
recommendations.
In addition to research, ISS provides vote execution, reporting, and
recordkeeping services.
Voting Proxies for Certain Non-U.S. Companies
- Voting
proxies of companies located in some jurisdictions, particularly emerging
markets, may involve several problems that can restrict or prevent the ability
to vote such proxies or entail significant costs. These problems include, but are not limited
to: (i) proxy statements and
ballots being written in a language other than English; (ii) untimely
and/or inadequate notice of shareholder meetings; (iii) restrictions on
the ability of holders outside the issuers jurisdiction of organization to
exercise votes; (iv) requirements to vote proxies in person; (v) the
imposition of restrictions on the sale of the securities for a period of time
in proximity to the shareholder meeting; and (vi) requirements to provide
local agents with power of attorney to facilitate our voting instructions. As a result, we vote clients non-U.S.
proxies on a best efforts basis only, after weighing the costs and benefits of
voting such proxies, consistent with the Client Proxy Standard. ISS has been retained to provide assistance
in connection with voting non-U.S. proxies.
II.
GENERAL
PROXY VOTING GUIDELINES
To promote consistency in
voting proxies on behalf of its clients, we follow this Policy (subject to any
exception set forth herein). The Policy
addresses a broad range of issues, and provides general voting parameters on
proposals that arise most frequently.
However, details of specific proposals vary, and those details affect
particular voting decisions, as do factors specific to a given company.
Pursuant to the procedures set forth herein, we may vote in a manner that is
not in accordance with the following general guidelines, provided the vote is
approved by the Proxy Review Committee (see Section III for description)
and is consistent with the Client Proxy Standard. Morgan Stanley AIP GP LP will follow the
procedures as described in Appendix A.
We endeavor to integrate
governance and proxy voting policy with investment goals, using the vote to
encourage portfolio companies to enhance long-term shareholder value and to
provide a high standard of transparency such that equity markets can value
corporate assets appropriately.
We seek to follow the Client
Proxy Standard for each client. At times, this may result in split votes, for
example when different clients have varying economic interests in the outcome
of a particular voting matter (such as a case in which varied ownership
interests in two companies involved in a merger result in different stakes in
the outcome). We also may split votes at
times based on differing views of portfolio managers.
We may abstain on matters
for which disclosure is inadequate.
A.
Routine
Matters.
We
generally support r
outine management proposals. The following are examples of routine
management proposals:
·
Approval of financial statements and auditor reports
if delivered with an unqualified auditors opinion.
·
General updating/corrective amendments to the
charter, articles of association or bylaws, unless we believe that such
amendments would diminish shareholder rights.
·
Most proposals related to the conduct of the annual
meeting, with the following exceptions.
We generally oppose proposals that relate to the transaction of such
other business which may come before the meeting, and open-ended requests for adjournment. However, where management
specifically states the reason for requesting an adjournment and the requested
adjournment would facilitate passage of a proposal that would otherwise be
supported under this Policy (i.e. an uncontested corporate transaction), the
adjournment request will be supported.
We generally support shareholder proposals
advocating confidential voting procedures and independent tabulation of voting
results.
B.
Board
of Directors.
1.
Election of directors
: Votes on
board nominees can involve balancing a variety of considerations. In balancing
various factors in uncontested elections, we may take into consideration
whether the company has a majority voting policy in place that we believe makes
the director vote more meaningful. In the absence of a proxy contest, we
generally support the boards nominees for director except as follows:
a.
We consider withholding
support from or voting against interested directors if the companys board does
not meet market standards for director independence, or if otherwise we believe
board independence is insufficient. We
refer to prevalent market standards as promulgated by a stock exchange or other
authority within a given market (e.g., New York Stock Exchange or Nasdaq rules for
most U.S. companies, and The Combined Code on Corporate Governance in the
United Kingdom). Thus, for an NYSE company with no controlling shareholder, we
would expect that at a minimum a majority of directors should be independent as
defined by NYSE. Where we view market
standards as inadequate, we may withhold votes based on stronger independence
standards. Market standards notwithstanding, we generally do not view long
board tenure alone as a basis to classify a director as non-independent,
although lack of board turnover and fresh perspective can be a negative factor
in voting on directors.
i.
At a company with a
shareholder or group that controls the company by virtue of a majority economic
interest in the company, we have a reduced expectation for board independence,
although we believe the presence of independent directors can be helpful,
particularly in staffing the audit committee, and at times we may
withhold support from or vote against a nominee on the view the board or its
committees are not sufficiently independent.
ii.
We consider withholding
support from or voting against a nominee if he or she is affiliated with a
major shareholder that has representation on a board disproportionate to its
economic interest.
b.
Depending on market
standards, we consider withholding support from or voting against a nominee who
is interested and who is standing for election as a member of the companys
compensation, nominating or audit committee.
c.
We consider withholding
support from or voting against a nominee if we believe a direct conflict exists
between the interests of the nominee and the public shareholders, including
failure to meet fiduciary standards of care and/or loyalty. We may oppose directors where we conclude
that actions of directors are unlawful, unethical or negligent. We consider opposing individual board members
or an entire slate if we believe the board is entrenched and/or dealing
inadequately with performance problems, and/or acting with insufficient
independence between the board and management.
d.
We consider withholding
support from or voting against a nominee standing for election if the board has
not taken action to implement generally accepted governance practices for which
there is a bright line test. For
example, in the context of the U.S. market, failure to eliminate a dead hand or
slow hand poison pill would be seen as a basis for opposing one or more
incumbent nominees.
e.
In markets that encourage
designated audit committee financial experts, we consider voting against
members of an audit committee if no members are designated as such. We also may not support the audit committee
members if the company has faced financial reporting issues and/or does not put
the auditor up for ratification by shareholders.
f.
We believe investors should
have the ability to vote on individual nominees, and may abstain or vote
against a slate of nominees where we are not given the opportunity to vote on
individual nominees.
g.
We consider withholding support
from or voting against a nominee who has failed to attend at least 75% of the
nominees board and board committee meetings within a given year without a
reasonable excuse. We also consider opposing nominees if the company does not
meet market standards for disclosure on attendance.
h.
We consider withholding
support from or voting against a nominee who appears overcommitted,
particularly through service on an excessive number of boards. Market
expectations are incorporated into this analysis; for U.S. boards, we generally
oppose election of a nominee who serves on more than six public company boards
(excluding investment companies).
2.
Discharge of directors
duties
: In markets where an annual discharge of directors responsibility is
a routine agenda item, we generally support such discharge. However, we
may vote against discharge or abstain from voting where there are serious
findings of fraud or other unethical behavior for which the individual bears
responsibility. The annual discharge of responsibility represents shareholder
approval of actions taken by the board during the year and may make future
shareholder action against the board difficult to pursue.
3.
Board independence:
We generally support U.S. shareholder
proposals requiring that a certain percentage (up to 66
2
/
3
%) of the companys board members be independent
directors, and promoting all-independent audit, compensation and
nominating/governance committees.
4.
Board diversity:
We consider on a case-by-case basis
shareholder proposals urging diversity of board membership with respect to
social, religious or ethnic group.
5.
Majority voting:
We generally support proposals requesting or
requiring majority voting policies in election of directors, so long as there
is a carve-out for plurality voting in the case of contested elections.
6.
Proxy access:
We consider on a case-by-case basis
shareholder proposals to provide procedures for inclusion of shareholder
nominees in company proxy statements.
7.
Proposals to elect all
directors annually:
We generally
support proposals to elect all directors annually at public companies (to declassify
the Board of Directors) where such action is supported by the board, and
otherwise consider the issue on a case-by-case basis based in part on overall
takeover defenses at a company.
8.
Cumulative voting:
We generally support proposals to eliminate
cumulative voting in the U.S. market context. (Cumulative voting provides that
shareholders may concentrate their votes for one or a handful of candidates, a
system that can enable a minority bloc to place representation on a
board.) U.S. proposals to establish
cumulative voting in the election of directors generally will not be supported.
9.
Separation of Chairman and
CEO positions:
We vote on
shareholder proposals to separate the Chairman and CEO positions and/or to
appoint a non-executive Chairman based in part on prevailing practice in
particular markets, since the
context for such a practice varies. In many non-U.S. markets, we view separation
of the roles as a market standard practice, and support division of the roles
in that context.
10.
Director retirement age and
term limits:
Proposals
recommending set director retirement ages or director term limits are voted on
a case-by-case basis.
11.
Proposals to limit directors
liability and/or broaden indemnification of officers and directors.
Generally, we will support such proposals provided that an individual is
eligible only if he or she has not acted in bad faith, gross negligence or reckless
disregard of their duties.
C.
Statutory
auditor boards.
The statutory auditor board, which is separate from
the main board of directors, plays a role in corporate governance in several
markets. These boards are elected by shareholders to provide assurance on
compliance with legal and accounting standards and the companys articles of
association. We generally vote for statutory auditor nominees if they meet
independence standards. In markets that require disclosure on attendance by
internal statutory auditors, however, we consider voting against nominees for
these positions who failed to attend at least 75% of meetings in the previous
year. We also consider opposing nominees if the company does not meet market
standards for disclosure on attendance.
D.
Corporate
transactions and proxy fights.
We examine
proposals relating to mergers, acquisitions and other special corporate
transactions (i.e., takeovers, spin-offs, sales of assets, reorganizations,
restructurings and recapitalizations) on a case-by-case basis in the interests
of each fund or other account. Proposals
for mergers or other significant transactions that are friendly and approved by
the Research Providers usually are supported if there is no portfolio manager
objection. We also analyze proxy
contests on a case-by-case basis.
E.
Changes
in capital structure.
1.
We generally support the
following:
·
Management and shareholder
proposals aimed at eliminating unequal voting rights, assuming fair economic
treatment of classes of shares we hold.
·
Management
proposals to increase the authorization of existing classes of common stock (or
securities convertible into common stock) if: (i) a clear business purpose
is stated that we can support and the number of shares requested is reasonable
in relation to the purpose for which authorization is requested; and/or (ii) the
authorization does not exceed 100% of shares currently authorized and at least
30% of the total new authorization will be outstanding. (We consider proposals
that do not meet these criteria on a case-by-case basis.)
·
Management
proposals to create a new class of preferred stock or for issuances of
preferred stock up to 50% of issued capital, unless we have concerns about use
of the authority for anti-takeover purposes.
·
Management
proposals to authorize share repurchase plans, except in some cases in which we
believe there are insufficient protections against use of an authorization for
anti-takeover purposes.
·
Management proposals to
reduce the number of authorized shares of common or preferred stock, or to
eliminate classes of preferred stock.
·
Management proposals to
effect stock splits.
·
Management proposals to effect reverse stock splits
if management proportionately reduces the authorized share amount set forth in
the corporate charter. Reverse stock splits
that do not adjust proportionately to the authorized share amount generally
will be approved if the resulting increase in authorized shares coincides with
the proxy guidelines set forth above for common stock increases.
·
Management dividend payout
proposals, except where we perceive company payouts to shareholders as
inadequate.
2.
We generally oppose the
following (notwithstanding management support):
·
Proposals to add classes of stock that would
substantially dilute the voting interests of existing shareholders.
·
Proposals to increase the authorized or issued
number of shares of existing classes of stock that are unreasonably dilutive,
particularly if there are no preemptive rights for existing shareholders.
However, depending on market practices, we consider voting for proposals giving
general authorization for issuance of shares not subject to pre-emptive rights
if the authority is limited.
·
Proposals that authorize share issuance at a
discount to market rates, except where authority for such issuance is de
minimis, or if there is a special situation that we believe justifies such
authorization (as may be the case, for example, at a company under severe
stress and risk of bankruptcy).
·
Proposals relating to changes in capitalization by
100% or more.
We
consider on a case-by-case basis shareholder proposals to increase dividend
payout ratios, in light of market practice and perceived market weaknesses, as
well as individual
company
payout history and current circumstances.
For example, currently we perceive low payouts to shareholders as a
concern at some Japanese companies, but may deem a low payout ratio as
appropriate for a growth company making good use of its cash, notwithstanding
the broader market concern.
F.
Takeover
Defenses and Shareholder Rights.
1.
Shareholder rights plans:
We generally support proposals to require
shareholder approval or ratification of shareholder rights plans (poison
pills). In voting on rights plans or
similar takeover defenses, we consider on a case-by-case basis whether the
company has demonstrated a need for the defense in the context of promoting
long-term share value; whether provisions of the defense are in line with
generally accepted governance principles in the market (and specifically the presence
of an adequate qualified offer provision that would exempt offers meeting
certain conditions from the pill); and the specific context if the proposal is
made in the midst of a takeover bid or contest for control.
2.
Supermajority voting
requirements:
We generally oppose requirements for supermajority
votes to amend the charter or bylaws, unless the provisions protect minority
shareholders where there is a large shareholder. In line with this view, in the absence of a
large shareholder we support reasonable shareholder proposals to limit such
supermajority voting requirements.
3.
Shareholder rights to call
meetings:
We consider
proposals to enhance shareholder rights to call meetings on a case-by-case
basis.
4.
Reincorporation:
We consider
management and shareholder proposals to reincorporate to a different
jurisdiction on a case-by-case basis. We
oppose such proposals if we believe the main purpose is to take advantage of
laws or judicial precedents that reduce shareholder rights.
5.
Anti-greenmail provisions:
Proposals
relating to the adoption of anti-greenmail provisions will be supported,
provided that the proposal: (i) defines greenmail; (ii) prohibits
buyback offers to large block holders (holders of at least 1% of the
outstanding shares and in certain cases, a greater amount, as determined by the
Proxy Review Committee) not made to all shareholders or not approved by
disinterested shareholders; and (iii) contains no anti-takeover measures
or other provisions restricting the rights of shareholders.
6.
Bundled proposals:
We may consider opposing or abstaining on
proposals if disparate issues are bundled and presented for a single vote.
G.
Auditors.
We generally support
management proposals for selection or ratification of independent auditors. However, we may consider opposing such
proposals with reference to incumbent audit firms if the company has suffered
from serious accounting irregularities and we believe rotation of the audit
firm is appropriate, or if fees
paid
to the auditor for non-audit-related services are excessive. Generally, to determine if non-audit fees are
excessive, a 50% test will be applied (i.e., non-audit-related fees should be
less than 50% of the total fees paid to the auditor). We generally vote against
proposals to indemnify auditors.
H.
Executive
and Director Remuneration.
1.
We generally support the
following:
·
Proposals for employee
equity compensation plans and other employee ownership plans, provided that our
research does not indicate that approval of the plan would be against
shareholder interest. Such approval may
be against shareholder interest if it authorizes excessive dilution and
shareholder cost, particularly in the context of high usage (run rate) of
equity compensation in the recent past; or if there are objectionable plan
design and provisions.
·
Proposals relating to fees
to outside directors, provided the amounts are not excessive relative to other
companies in the country or industry, and provided that the structure is
appropriate within the market context.
While stock-based compensation to outside directors is positive if
moderate and appropriately structured, we are wary of significant stock option
awards or other performance-based awards for outside directors, as well as
provisions that could result in significant forfeiture of value on a directors
decision to resign from a board (such forfeiture can undercut director
independence).
·
Proposals for employee stock
purchase plans that permit discounts up to 15%, but only for grants that are
part of a broad-based employee plan, including all non-executive employees.
·
Proposals for the establishment
of employee retirement and severance plans, provided that our research does not
indicate that approval of the plan would be against shareholder interest.
2.
We generally oppose
retirement plans and bonuses for non-executive directors and independent
statutory auditors.
3.
Shareholder proposals
requiring shareholder approval of all severance agreements will not be
supported, but proposals that require shareholder approval for agreements in
excess of three times the annual compensation (salary and bonus) generally will
be supported. We generally oppose shareholder proposals that would establish
arbitrary caps on pay. We consider on a
case-by-case basis shareholder proposals that seek to limit Supplemental Executive
Retirement Plans (SERPs), but support such proposals where we consider SERPs to
be excessive.
4.
Shareholder proposals
advocating stronger and/or particular pay-for-performance models will be
evaluated on a case-by-case basis, with consideration of the merits of the
individual proposal within the context of the particular company and its labor
markets, and the companys current and past practices. While we generally support emphasis on
long-term components of senior executive pay and strong linkage of pay to
performance, we consider whether a proposal may be overly prescriptive, and the
impact of the proposal, if implemented as written, on recruitment and
retention.
5.
We consider shareholder
proposals for U.K.-style advisory votes on pay on a case-by-case basis.
6.
We generally support
proposals advocating reasonable senior executive and director stock ownership
guidelines and holding requirements for shares gained in executive equity
compensation programs.
7.
We generally support
shareholder proposals for reasonable claw-back provisions that provide for
company recovery of senior executive bonuses to the extent they were based on
achieving financial benchmarks that were not actually met in light of
subsequent restatements.
8.
Management proposals
effectively to re-price stock options are considered on a case-by-case
basis. Considerations include the
companys reasons and justifications for a re-pricing, the companys
competitive position, whether senior executives and outside directors are
excluded, potential cost to shareholders, whether the re-pricing or share
exchange is on a value-for-value basis, and whether vesting requirements are
extended.
I.
Social,
Political and Environmental Issues.
We consider
proposals relating to social, political and environmental issues on a case-by-case
basis to determine likely financial impacts on shareholder value, balancing
concerns on reputational and other risks that may be raised in a proposal
against costs of implementation. We may abstain from voting on proposals that
do not have a readily determinable financial impact on shareholder value. While
we support proposals that we believe will enhance useful disclosure, we
generally vote against proposals requesting reports that we believe are
duplicative, related to matters not material to the business, or that would
impose unnecessary or excessive costs. We believe that certain social and
environmental shareholder proposals may intrude excessively on management
prerogatives, which can lead us to oppose them.
J.
Fund of
Funds
.
Certain
Funds advised by an MSIM Affiliate invest only in other MSIM Funds. If an underlying fund has a shareholder
meeting, in order to avoid any potential conflict of interest, such proposals
will be voted in the same proportion as the votes of the other shareholders of
the underlying fund, unless otherwise determined by the Proxy Review Committee.
III.
ADMINISTRATION
OF POLICY
The MSIM Proxy Review
Committee (the Committee) has overall responsibility for the Policy. The Committee, which is appointed by MSIMs
Chief Investment Officer of Global Equities (CIO) or senior officer, consists
of senior investment professionals who represent the different investment
disciplines and geographic locations of the firm, and is chaired by the
director of the Corporate Governance Team (CGT). Because proxy voting is an investment
responsibility and impacts shareholder value, and because of their knowledge of
companies and markets, portfolio managers and other members of investment staff
play a key role in proxy voting, although the Committee has final authority
over proxy votes.
The CGT Director is responsible
for identifying issues that require Committee deliberation or ratification. The
CGT, working with advice of investment teams and the Committee, is responsible
for voting on routine items and on matters that can be addressed in line with
these Policy guidelines. The CGT has
responsibility for voting case-by-case where guidelines and precedent provide
adequate guidance.
The Committee will
periodically review and have the authority to amend, as necessary, the Policy
and establish and direct voting positions consistent with the Client Proxy
Standard.
CGT
and members of the Committee may take into account Research Providers
recommendations and research as well as any other relevant information they may
request or receive, including portfolio manager and/or analyst comments and
research, as applicable. Generally, proxies related to securities held in
accounts that are managed pursuant to quantitative, index or index-like
strategies (Index Strategies) will be voted in the same manner as those held
in actively managed accounts, unless economic interests of the accounts
differ. Because accounts managed using Index Strategies are passively
managed accounts, research from portfolio managers and/or analysts related to
securities held in these accounts may not be available. If the
affected securities are held only in accounts that are managed pursuant to
Index Strategies, and the proxy relates to a matter that is not described in
this Policy, the CGT will consider all available information from the Research
Providers, and to the extent that the holdings are significant, from the
portfolio managers and/or analysts.
A.
Committee
Procedures
The
Committee meets at least annually to review and consider changes to the Policy.
The Committee will appoint a subcommittee (the Subcommittee) to meet as
needed between Committee meetings to address any outstanding issues relating to
the Policy or its implementation.
The
Subcommittee will meet on an ad hoc basis to (among other functions): (1) monitor
and ratify split voting (i.e., allowing certain shares of the same issuer
that are the
subject
of the same proxy solicitation and held by one or more MSIM portfolios to be
voted differently than other shares) and/or override voting (i.e., voting all
MSIM portfolio shares in a manner contrary to the Policy); (2) review and
approve upcoming votes, as appropriate, for matters as requested by CGT.
The
Committee reserves the right to review voting decisions at any time and to make
voting decisions as necessary to ensure the independence and integrity of the
votes. The Committee or the Subcommittee are provided with reports on at least
a monthly basis detailing specific key votes cast by CGT.
B.
Material
Conflicts of Interest
In
addition to the procedures discussed above, if the CGT Director determines that
an issue raises a material conflict of interest, the CGT Director will request
a special committee to review, and recommend a course of action with respect
to, the conflict(s) in question (Special Committee).
A potential material
conflict of interest could exist in the following situations, among others:
1.
The issuer soliciting the
vote is a client of MSIM or an affiliate of MSIM and the vote is on a matter
that materially affects the issuer.
2.
The proxy relates to Morgan
Stanley common stock or any other security issued by Morgan Stanley or its
affiliates except if echo voting is used, as with MSIM Funds, as described
herein.
3.
Morgan Stanley has a
material pecuniary interest in the matter submitted for a vote (e.g., acting as
a financial advisor to a party to a merger or acquisition for which Morgan
Stanley will be paid a success fee if completed).
If the CGT Director
determines that an issue raises a potential material conflict of interest,
depending on the facts and circumstances, the issue will be addressed as
follows:
1.
If the matter relates to a
topic that is discussed in this Policy, the proposal will be voted as per the
Policy.
2.
If the matter is not
discussed in this Policy or the Policy indicates that the issue is to be
decided case-by-case, the proposal will be voted in a manner consistent with
the Research Providers, provided that all the Research Providers have the same
recommendation, no portfolio manager objects to that vote, and the vote is consistent
with MSIMs Client Proxy Standard.
3.
If the Research Providers
recommendations differ, the CGT Director will refer the matter to the
Subcommittee or a Special Committee to vote on the proposal, as appropriate.
The
Special Committee shall be comprised of the CGT Director, the Chief Compliance
Officer or his/her designee, a senior portfolio manager (if practicable, one
who is a member of the Proxy Review Committee) designated by the Proxy Review
Committee, and MSIMs relevant Chief Investment Officer or his/her designee,
and any other persons deemed necessary by the CGT Director. The CGT Director
may request non-voting participation by MSIMs General Counsel or his/her
designee. In addition to the research
provided by Research Providers, the Special Committee may request analysis from
MSIM Affiliate investment professionals and outside sources to the extent it
deems appropriate.
C.
Proxy
Voting Reporting
The
CGT will document in writing all Committee, Subcommittee and Special
Committee decisions and actions, which
documentation will be maintained by the CGT for a period of at least six
years. To the extent these decisions
relate to a security held by an MSIM Fund, the CGT will report the decisions to
each applicable Board of Trustees/Directors of those Funds at each Boards next
regularly scheduled Board meeting. The report will contain information
concerning decisions made during the most recently ended calendar quarter
immediately preceding the Board meeting.
MSIM will promptly provide a
copy of this Policy to any client requesting it. MSIM will also, upon client
request, promptly provide a report indicating how each proxy was voted with
respect to securities held in that clients account.
MSIMs Legal Department is
responsible for filing an annual Form N-PX on behalf of each MSIM Fund for
which such filing is required, indicating how all proxies were voted with
respect to such Funds holdings.
APPENDIX
A
The
following procedures apply to accounts managed by Morgan Stanley AIP GP LP (AIP).
Generally,
AIP will follow the guidelines set forth in Section II of MSIMs Proxy
Voting Policy and Procedures. To the
extent that such guidelines do not provide specific direction, or AIP
determines that consistent with the Client Proxy Standard, the guidelines
should not be followed, the Proxy Review Committee has delegated the voting
authority to vote securities held by accounts managed by AIP to the Liquid
Markets investment team and the Private Markets investment team of AIP. A summary of
decisions
made by the investment teams will be made available to the Proxy Review
Committee for its information at the next scheduled meeting of the Proxy Review
Committee.
In
certain cases, AIP may determine to abstain from determining (or recommending)
how a proxy should be voted (and therefore abstain from voting such proxy or
recommending how such proxy should be voted), such as where the expected cost
of giving due consideration to the proxy does not justify the potential
benefits to the affected account(s) that might result from adopting or
rejecting (as the case may be) the measure in question.
Waiver
of Voting Rights
For
regulatory reasons, AIP may either 1) invest in a class of securities of an
underlying fund (the Fund) that does not provide for voting rights; or 2)
waive 100% of its voting rights with respect to the following:
1.
Any rights with respect to
the removal or replacement of a director, general partner, managing member or
other person acting in a similar capacity for or on behalf of the Fund (each
individually a Designated Person, and collectively, the Designated Persons),
which may include, but are not limited to, voting on the election or removal of
a Designated Person in the event of such Designated Persons death, disability,
insolvency, bankruptcy, incapacity, or other event requiring a vote of interest
holders of the Fund to remove or replace a Designated Person; and
2.
Any rights in connection
with a determination to renew, dissolve, liquidate, or otherwise terminate or
continue the Fund, which may include, but are not limited to, voting on the
renewal, dissolution, liquidation, termination or continuance of the Fund upon
the occurrence of an event described in the Funds organizational documents;
provided
,
however
, that, if the Funds organizational documents require the
consent of the Funds general partner or manager, as the case may be, for any
such termination or continuation of the Fund to be effective,
then AIP may exercise
its voting rights with respect to such matter.
APPENDIX B
The
following procedures apply to the portion of the Van Kampen Dynamic Credit
Opportunities Fund (VK Fund) sub advised by Avenue Europe International
Management, L.P. (Avenue). (
The portion of the VK Fund managed solely by Van Kampen
Asset Management will continue to be subject to MSIMs Policy.)
1.
Generally
: With respect to Avenues portion of the VK
Fund, the Board of Trustees of the VK Fund will retain sole authority and
responsibility for proxy voting.
The Advisers involvement in the voting process of
Avenues portion
of the VK Fund is a purely
administrative function, and serves to execute and deliver the proxy voting
decisions made by the VK Fund Board in connection with the Avenue portion of
the VK Fund, which may, from time to time, include related administrative tasks
such as receiving proxies, following up on missing proxies, and collecting data
related to proxies. As such, the Adviser
shall not be deemed to have voting power or shared voting power with Avenue
with respect to Avenues portion of the Fund.
2.
Voting Guidelines
: All proxies, with respect to
Avenues portion of the VK Fund, will be considered by the VK Fund Board or
such subcommittee as the VK Fund Board may designate from time to time for
determination and voting approval. The
VK Board or its subcommittee will timely communicate to MSIMs Corporate
Governance Group its proxy voting decisions, so that among other things the
votes will be effected consistent with the VK Boards authority.
3.
Administration
: The VK Board or its subcommittee will meet on
an adhoc basis as may be required from time to time to review proxies that
require its review and determination.
The VK Board or its subcommittee will document in writing all of its
decisions and actions which will be maintained by the VK Fund, or its
designee(s), for a period of at least 6 years.
If a subcommittee is designated, a summary of decisions made by such
subcommittee will be made available to the full VK Board for its information at
its next scheduled respective meetings.
Item
8. Portfolio Managers of Closed-End Management Investment Companies
FUND MANAGEMENT
The Fund is managed by members of the Emerging Markets Equity team. The team consists of portfolio managers and analysts. Current members of the team jointly and primarily responsible for the day-to-day management of the Funds portfolio are James Cheng, a Managing Director of the Sub-Adviser, Munib Madni, an Executive Director of the Sub-Adviser, and Ruchir Sharma, a Managing Director of the Adviser. Mr. Cheng has been associated with the Sub-Adviser in an investment management capacity since July 2006 and joined the team managing the Fund in August 2008. Prior to July 2006, Mr. Cheng worked in an investment management capacity at Invesco Asia Limited, Asia Strategic Investment Management Limited and Munich Re Asia Capital Management. Mr. Madni has been associated with the Sub-Adviser in an investment management capacity since February 2005 and joined the team managing the Fund in August 2008. Mr. Sharma has been associated with the Adviser in an investment management capacity since 1996 and joined the team managing the Fund in August 2008.
The composition of the team may change without notice from time to time.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGER
The following information is as of December 31, 2009:
Mr. Cheng managed 13 registered investment companies with a total of approximately $6.7 billion in assets; eight pooled investment vehicles other than registered investment companies with a total of approximately $4.4 billion in assets; and 32 other accounts with a total of approximately $11.6 billion in assets. Of these other accounts, six accounts with a total of approximately $2.2 billion in assets had performance based fees.
Mr. Madni managed nine registered investment companies with a total of approximately $4.9 billion in assets; seven pooled investment vehicles other than registered investment companies with a total of approximately $4.2 billion in assets; and 32 other accounts with a total of approximately $11.8 billion in assets. Of these other accounts, six accounts with a total of approximately $2.4 billion in assets had performance based fees.
Mr. Sharma managed 11 registered investment companies with a total of approximately $5.5 billion in assets; seven pooled investment vehicles other than registered investment companies with a total of approximately $3.8 billion in assets; and 22 other accounts with a total of approximately $4.8 billion in assets. Of these other accounts, four accounts with a total of approximately $1.6 billion in assets, had performance based fees.
Because the portfolio
managers manages assets for other investment companies, pooled investment
vehicles, and/or other accounts (including institutional clients, pension plans
and certain high net worth individuals), there may be an incentive to favor one
client over another resulting in conflicts of interest. For instance, the
Adviser may receive fees from certain accounts that are higher than the fee it
receives from the Fund, or it may receive a performance-based fee on certain
accounts. In those instances, the portfolio manager may have an incentive to
favor the higher and/or performance-based fee accounts over the Fund. In addition, a conflict of interest could
exist to the extent the Adviser has proprietary investments in certain
accounts, where portfolio managers have personal investments in certain
accounts or when certain accounts are investment options in the Advisers
employee benefits and/or deferred compensation plans. The portfolio manager may have an incentive
to favor these accounts over others. If
the Adviser manages accounts that engage in short sales of securities of the
type in which the Fund invests, the Adviser could be seen as harming the
performance of the Fund for the benefit of the accounts engaged in short sales
if the short sales cause the market value of the securities to fall. The Adviser has adopted trade allocation and
other policies and procedures that it believes are reasonably designed to address
these and other conflicts of interest.
PORTFOLIO MANAGERS COMPENSATION STRUCTURE
Portfolio managers
receive a combination of base compensation and discretionary compensation,
comprised of a cash bonus and several deferred compensation programs described
below. The methodology used to determine portfolio manager compensation is
applied across all accounts managed by the portfolio manager.
BASE SALARY COMPENSATION.
Generally, portfolio managers receive base salary compensation based on the
level of their position with the Adviser.
DISCRETIONARY
COMPENSATION. In addition to base compensation, portfolio managers may receive
discretionary compensation.
Discretionary
compensation can include:
·
Cash
Bonus;
·
Morgan Stanleys Long-Term Incentive Compensation Program awards a mandatory
program that defers a portion of discretionary year-end compensation into
restricted stock units or other awards based on Morgan Stanley common stock
that are subject to vesting and other conditions;
·
Investment Management Alignment Plan
(IMAP) awards a mandatory program that defers a portion of
discretionary year-end compensation and notionally invests it in designated
funds advised by the Adviser or its affiliates. The award is subject to vesting
and other conditions. Portfolio managers must notionally invest a minimum of
25% to a maximum of 100% of their IMAP deferral account into a combination of
the designated open-end funds they manage that are included in the IMAP Fund
menu. For 2008 awards, a clawback provision was implemented that could be
triggered if the individual engages in conduct detrimental to the Advisor or
its affiliates. For 2009 awards, the
provision was further strengthened to allow the Firm to clawback compensation
if the Firm realizes losses on certain trading positions, investments or
holdings.
·
Voluntary Deferred Compensation Plans voluntary programs that permit certain
employees to elect to defer a portion of their discretionary year-end
compensation or notionally invest the deferred amount across a range of
designated investment funds, including funds advised by the Adviser or its
affiliates.
Several factors determine
discretionary compensation, which can vary by portfolio management team and
circumstances. In order of relative importance, these factors include:
·
Investment performance. A portfolio managers compensation is linked to the
pre-tax investment performance of the funds/accounts managed by the portfolio
manager. Investment performance is calculated for one-, three- ,five- and
ten-year periods measured against an appropriate securities market index (or
indices) for the funds/accounts managed by the portfolio manager. Other funds/accounts managed by the same
portfolio manager may be measured against this same index and same rankings or
ratings, if appropriate, or against other indices and other rankings or ratings
that are deemed more appropriate given the size and/or style of such
funds/accounts as set forth in such funds/accounts disclosure materials and
guidelines. The assets managed by the portfolio manager in funds, pooled
investment vehicles and other accounts are described in Other Accounts Managed
by the Portfolio Manager above. Generally, the greatest weight is placed on
the three- and five-year periods.
·
Revenues generated by the investment companies, pooled investment vehicles and
other accounts managed by the portfolio manager.
·
Contribution to the business objectives of the Adviser.
·
The
dollar amount of assets managed by the portfolio manager.
·
Market
compensation survey research by independent third parties.
·
Other qualitative factors, such as contributions to client objectives.
·
Performance of Morgan Stanley and Morgan Stanley Investment Management Inc.,
and the overall performance of the investment team(s) of which the
portfolio manager is a member.
SECURITIES OWNERSHIP OF PORTFOLIO MANAGERS
As of December 31, 2009, the portfolio managers did not own any shares
of the Fund.
Item
9. Closed-End Fund Repurchases
None.
Item
10. Submission of Matters to a Vote of Security Holders
Not
applicable.
Item
11. Controls and Procedures
(a)
The Funds principal executive officer and principal financial officer have
concluded that the Funds disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules and forms,
based upon such officers evaluation of these controls and procedures as of a
date within 90 days of the filing date of the report.
(b)
There were no changes in the registrants internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrants internal control over financial reporting.
Item 12. Exhibits
(a) The Code of Ethics for Principal Executive
and Senior Financial Officers is attached hereto.
(b) A
separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
(Registrant)
|
The
Thai Fund, Inc.
|
|
|
|
By:
|
/s/
|
Randy
Takian
|
|
Name:
|
Randy
Takian
|
Title:
|
Principal
Executive Officer
|
Date:
|
February
18, 2010
|
|
|
|
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
By:
|
/s/
|
Randy
Takian
|
|
Name:
|
Randy
Takian
|
Title:
|
Principal
Executive Officer
|
Date:
|
February
18, 2010
|
By:
|
/s/
|
James
W. Garrett
|
|
Name:
|
James
W. Garrett
|
Title:
|
Principal
Financial Officer
|
Date:
|
February
18, 2010
|
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