<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
THE FUND
The Thai Capital Fund, Inc. (the "Fund") is a non-diversified, closed-end
management investment company. The Fund seeks long-term capital appreciation
through investment primarily in equity securities of Thai companies. The Fund's
investments in Thailand are made through a wholly-owned Investment Plan
established under an agreement between The Mutual Fund Public Company Limited
(the "Manager") and the Fund. The Fund's investments through the Investment Plan
are managed by the Manager. Daiwa SB Investments (H.K.) Ltd. (formerly, Daiwa
International Capital Management (H.K.) Ltd.) provides the Manager with advice
regarding investments by the Investment Plan and manages the Fund's assets held
outside the Investment Plan.
SHAREHOLDER INFORMATION
The Fund's shares are listed on the New York Stock Exchange ("NYSE") and the
Osaka Securities Exchange ("OSE"). The Fund understands that its shares may
trade periodically on certain exchanges other than the NYSE or the OSE, but the
Fund has not listed its shares on those other exchanges and does not encourage
trading on those exchanges.
The Fund's NYSE trading symbol is "TC". Weekly comparative net asset value
(NAV) and market price information about the Fund is published each Monday in
THE WALL STREET JOURNAL, each Sunday in THE NEW YORK TIMES, and each Saturday in
BARRON'S, and also in many other newspapers. The Fund's weekly NAV is also
available by calling (800) 933-3440 or (201) 915-3020.
INQUIRIES
All general inquiries and requests for information should be directed to the
Fund at (800) 426-5523 or (781) 575-2000. All written inquiries should be
directed to the Fund at the following address:
The Thai Capital Fund, Inc.
c/o Daiwa Securities Trust Company
One Evertrust Plaza, 9th Floor
Jersey City, New Jersey 07302
For specific information about your share account, please contact State
Street Bank and Trust Company (the "Plan Agent") at the address shown below.
DIVIDEND REINVESTMENT PLAN
A Dividend Reinvestment Plan (the "Plan") is available to provide
Shareholders with automatic reinvestment of dividends and capital gain
distributions in additional Fund shares. A brochure fully describing the Plan's
terms and conditions is available from the Plan Agent at the following address:
The Thai Capital Fund, Inc.
c/o State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Telephone: (800) 426-5523
(781) 575-2000
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
August 4, 1999
DEAR SHAREHOLDERS:
The management of the Thai Capital Fund, Inc. (the "Fund") would like to
take this opportunity to inform its shareholders about the Thai economy, the
activities of the Stock Exchange of Thailand ("SET"), and the Fund's performance
for the first six months ended June 30, 1999.
A REVIEW OF THE THAI ECONOMY
The main economic indicators are signaling that the Thai economy already
passed its lowest point during the first and second quarter of this year and is
gradually recovering, driven by a sharp rise in Thai government spending and a
revival of consumption. Exports also improved in the second quarter of this
year, although growth is expected to be moderate. Investment continues to be
sluggish while the general price level is expected to be stable.
Consumer confidence has been improving, as evidenced by a 21% increase in
car sales during the first six months of this year and an improvement in
consumer goods imports that registered a slight drop of 1.7% for the period
January through April against a drop of 27.8% in 1998. The Thai government's
stimulus package, augmented by Baht 53 billion in loans from the Miyazawa Plan
and the World Bank, accelerated public spending, a series of tax cuts, low
interest rates and a rebound in the stock market, should fuel continuing
increases in consumer spending in the second half of this year.
However, large excess capacity in the manufacturing sector and little growth
in new bank lending will keep private investments in the doldrums despite the
pursuit of a low-interest rate policy by the Thai authorities. Government
investment, on the other hand, should pick up in the second half of the year as
disbursement of Thailand's stimulus package gets underway. On the whole,
aggregate public and private sector investment will continue to shrink, albeit
at a slower pace in 1999 as compared to a precipitous decrease of as much as
40.7 percent in 1998.
Exports showed signs of improvement in the second quarter, having registered
negative growth in the first quarter. For the first half of this year, exports
increased 0.89% year on year, while imports grew by 8.2%. However, there are
positive signs on the import side as the increase was mainly attributed to
imports of raw materials and intermediate products. The stronger import growth,
while exports remain modest, will result in a smaller current account surplus in
1999, although this should not be a cause for concern as foreign exchange
reserves rose to US$ 31.4 billion by June 25, 1999, with forward obligations
amounting to US$ 3.4 billion.
Although bank deposit and loan rates fell dramatically in the past year to
historically low levels and the financial system is currently awash with
liquidity, Thai banks continue to be wary of extending new loans due to the
overhang of non-performing loans ("NPLs") in their portfolios and their resolve
to retain current ownership.
Going forward, the Thai government's financial sector rehabilitation
measures, including debt restructuring, recapitalizations and enactment of
economic reform laws, should eventually start to bear fruit and lead to an
expansion in bank lending, which would help to put the economy back on track.
Further falls in interest rates, although possible in the short term, will be
limited by rising interest rates in the U.S. Despite the fact that an economic
turnaround in the second half of 1999 is anticipated, the Fund's management
believes that the
2
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
recovery in Thailand will be a slow and quite fragile process. A number of
issues remain to be resolved before the economy can regain its normal health,
especially the performance of the export sectors, debt restructuring, and reform
of real estate sectors.
THE FIRST HALF OF 1999 STOCK MARKET OVERVIEW
Notwithstanding market volatility, the performance of the Thai stock market
during the first half of this year was quite impressive. As of June 30, 1999,
the SET Index closed at 521.77 points, up 47% in U.S. Dollar terms from the 1998
year-end close of 355.81 points. The spectacular hike in the SET Index was
driven largely by liquidity and was mainly dominated by retail investors.
Positive factors that supported the rally included the passage of key economic
bills, a low interest rate environment, the Thai government's fiscal stimulus
scheme, improving economic indicators, the upgrade of the ratings outlook for
five local banks to "stable" from "negative" by Moody's, and the impressive
progress of debt restructuring.
Looking ahead, the Thai stock market should be on a rising trend, given
improving macro-economic fundamentals. However, being in the first stage of
recovery, the stock market is expected to be relatively volatile as most listed
companies will not be able to generate positive earnings until at least the year
2000. News of declining NPLs and the ongoing progress of debt restructuring and
corporate reforms are expected to be key market drivers going forward.
Meanwhile, factors that could potentially create market volatility include the
fact that the economy, though improving, remains relatively fragile. A series of
cash calls would also be one of the negative factors affecting the market.
External factors, such as inflation risk in the U.S. and the currency risk in
China, will continue to concern investors. All in all, despite the fact that the
Thai market could be volatile as a result of the foregoing concerns, improvement
in both the regional and domestic economies will provide some upside potential
for the SET Index in the longer term.
THE FUND'S PERFORMANCE AND STRATEGY
As of June 30, 1999, the net asset value of the Fund was US$ 4.08 per share,
as compared to US$ 3.12 on December 31, 1998. The Fund's total investment return
for the first six months of 1999 was 30.77%, against a 47.13% increase in the
SET Index in U.S. Dollar terms. The underperformance was attributed to the
Fund's overweighed position in defensive large market capitalization companies
that lagged behind the market. As the Fund's management believes that market
volatility is expected to persist throughout the year, the Fund may continue to
adopt a rather defensive investment strategy.
Assuming that all dividends paid to shareholders were reinvested, the Fund's
net asset value per share would have outperformed the SET Index by 22.20% in
U.S. Dollar terms since its inception on May 30, 1990.
The Fund intends to be overweight in the building, communication,
entertainment, securities, and property sectors, to take a neutral position in
the energy sector, and to selectively invest in banking stocks.
THE YEAR 2000 ISSUE
The Fund continues to review the current status of its exposure to the Year
2000 computer issue. The Fund does not own or directly use any computers in
conducting its business. Instead it relies on various service providers to
conduct its business and its service providers may use or depend on computers to
provide services to the Fund. Like other investment companies and financial and
business organizations, the Fund could be adversely affected if the computer
systems used by the Fund's service providers do not properly address this
problem prior to January 1, 2000.
3
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
The Fund's Board of Directors has adopted a Year 2000 plan which involves:
(1) collecting information regarding the Year 2000 preparations of its service
providers through a questionnaire prepared and distributed by the Fund's
management, (2) assessing the information provided by the service providers, and
(3) if necessary, adopting measures to replace service providers who fail to
indicate that they will become Year 2000 compliant on a timely basis. The Fund
had been advised by each of its service providers that it has adopted a Year
2000 plan, completed an internal assessment of its computer systems, and begun
implementation of procedures to bring its mission-critical systems into Year
2000 compliance. The Fund has been informed that substantially all of its
service providers will be compliant by the end of July 1999. Based on this
information, management of the Fund does not anticipate that the transition to
the 21st Century will have any material impact on the Fund's operations;
however, management of the Fund will continue to monitor the situation. In
addition, however, no assurance can be given that the Fund's service providers
have anticipated every step necessary to avoid any adverse effect on the Fund
attributable to the Year 2000 problem. The Year 2000 problem could also have a
negative impact on the companies in which the Fund invests, and this could have
negative impact on the Fund's investment returns.
PORTFOLIO MANAGEMENT
Mrs. Rinrada Settaleela has been the Fund's portfolio manager since March 2,
1999, replacing Mrs. Charintorn Vongspootorn who resigned from her
responsibilities for the day-to-day management of the Fund's portfolio. The
Mutual Fund Public Company Limited ("MFC"), the Fund's current Investment
Manager, has employed Mrs. Rinrada for 11 years, her most recent position being
assistant fund manager. Her current title is Senior Executive Vice President of
MFC.
At its quarterly meeting held on March 4, 1999, the Board of Directors
approved the selection of Thai Farmers Asset Management Co., Ltd. ("TFAM") as
the new Investment Manager of the Fund, replacing MFC. It is anticipated that
TFAM will commence serving as the Fund's Investment Manager by no later than the
middle of September 1999. TFAM's continuing service as Investment Manager of the
Fund will be subject to approval by the stockholders of the Fund at the Annual
Meeting scheduled for September 17, 1999.
TFAM is one of the largest asset management companies in Thailand, with over
US$ 1.9 billion of assets under management, including 21 mutual funds with over
US$ 1.7 billion of assets. TFAM was organized in 1992, and its principal
shareholder is Thai Farmers Bank PLC, one of the largest commercial banks in
Thailand.
Finally, the Fund's management would like to express its sincere thanks to
all shareholders for their continued support and participation.
<TABLE>
<S> <C>
Sincerely yours,
/s/ Masayasu Ohi /s/ Daniel F. Barry
MASAYASU OHI DANIEL F. BARRY
CHAIRMAN OF THE BOARD ACTING PRESIDENT
</TABLE>
4
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
- -------------------------------------------
THAI COMMON AND PREFERRED STOCKS--89.25%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
BANKS--21.27%
1,301,800 Bangkok Bank Public Co., Ltd.*..... $ 2,844,673
536,400 The Siam Commercial Bank Public
Co., Ltd. Preferred (Foreign)*+... 764,434
917,200 The Thai Farmers Bank Public Co.,
Ltd.*............................. 1,842,417
------------
5,451,524
------------
BUILDING MATERIALS--11.50%
69,600 The Siam Cement Public Co.,
Ltd.*............................. 1,307,397
351,566 The Siam City Cement Public Co.,
Ltd.*............................. 1,355,150
204,000 Tipco Asphalt Public Co., Ltd.*.... 285,187
------------
2,947,734
------------
CHEMICALS--1.18%
466,000 Thai Petrochemical Industry Public
Co., Ltd.......................... 303,591
------------
COMMERCE--1.26%
195,900 Berli Jucker Public Co., Ltd....... 281,840
90,000 Big C Supercenter Public Co.,
Ltd............................... 42,143
------------
323,983
------------
COMMUNICATION--15.75%
188,850 Advanced Information Service Public
Co., Ltd.*........................ 1,824,984
205,800 Shin Corporations Public Company
Ltd. (Foreign)*+.................. 910,595
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
373,000 Shinawatra Satellite Public Co.,
Ltd.*............................. $ 346,786
792,100 TelecomAsia Corp. Public Co.,
Ltd.*............................. 752,558
220,000 United Communication Industry
Public Co., Ltd................... 203,046
------------
4,037,969
------------
ELECTRONIC COMPONENTS--0.00%
100,000 Thai Precision Manufacturing
Company Ltd.*++................... 27
------------
ENERGY--7.06%
270,100 Banpu Public Co., Ltd.*............ 395,923
198,800 Electricity Generating Public Co.,
Ltd.*............................. 288,710
115,200 PTT Exploration and Production
Public Co., Ltd.*................. 875,594
375,800 The Cogeneration Public Co.,
Ltd.*............................. 249,928
------------
1,810,155
------------
ENTERTAINMENT & RECREATION--5.24%
181,000 BEC World Public Co., Ltd.......... 1,120,226
282,777 United Broadcasting Corporation
Public Co., Ltd.*................. 222,605
------------
1,342,831
------------
FINANCE & SECURITIES--10.53%
287,300 ABN Amro Asia Securities Public
Co., Ltd.*........................ 1,021,643
</TABLE>
5
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
THAI COMMON AND PREFERRED STOCKS (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
FINANCE & SECURITIES (CONCLUDED)
280,000 Capital Nomura Securities Public
Co., Ltd.......................... $ 858,872
1,453,800 National Finance Public Co.,
Ltd............................... 818,870
------------
2,699,385
------------
FOOD, BEVERAGE, TOBACCO--1.52%
140,900 The Pizza Public Co., Ltd.......... 390,125
------------
MISCELLANEOUS--1.64%
340,100 Eastern Water Resources Development
& Management PCL.................. 420,059
------------
PRINTING & PUBLISHING--2.04%
327,900 Amarin Printing Group Public Co.,
Ltd............................... 284,828
475,100 Nation Multimedia Group Public Co.,
Ltd.*............................. 238,588
------------
523,416
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
PROPERTY DEVELOPMENT--6.07%
183,800 Central Pattana Public Co.,
Ltd.*............................. $ 209,550
297,550 Ch. Karnchang Public Co., Ltd.*.... 411,929
453,300 Land and House Public Co., Ltd.
(Foreign)*+....................... 633,702
574,300 Sansiri Public Co., Ltd............ 300,097
------------
1,555,278
------------
TRANSPORTATION--3.05%
736,300 Bangkok Expressway Public Co., Ltd.
(Foreign)*+....................... 484,684
157,100 Thai Airways International Public
Co., Ltd.......................... 296,383
------------
781,067
------------
VEHICLES & PARTS--1.14%
312,000 Thai Storage Battery Public Co.,
Ltd.*............................. 292,190
------------
Total Thai Common and
Preferred Stocks
(Cost--$24,187,900).......................... 22,879,334
------------
</TABLE>
6
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONCLUDED)
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
- -------------------------------------------
SHORT-TERM INVESTMENTS--11.24%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
- ---------- ------------
<C> <S> <C>
THAI BAHT SAVINGS ACCOUNTS--9.31%
319 Bangkok Bank Ltd., 0.50% (Payable
on Demand)........................ $ 8,670
2 Bank Credit Agricole Indosuez Ltd.,
1.00% (Payable on Demand)......... 59
87,600 Citibank N.A. Gold, 1.50% (Payable
on Demand)........................ 2,377,909
------------
2,386,638
------------
U.S. DOLLAR TIME DEPOSIT--0.14%
36 Bank of New York, 2.70% due
7/1/99............................ 36,144
------------
U.S. TREASURY BILL--1.79%
460 U.S. Treasury Bill, 4.36% due
7/9/99............................ 459,580
------------
Total Short-Term Investments
(Cost--$2,888,953)........................... 2,882,362
------------
Total Investments--100.49%
(Cost--$27,076,853).......................... 25,761,696
Liabilities in excess of other assets--
(0.49)%...................................... (126,419)
------------
NET ASSETS (Applicable to 6,278,588 shares of
capital stock outstanding; equivalent to
$4.08 per share)--100.00%.................... $ 25,635,277
------------
------------
</TABLE>
- ------------------------
+ Foreign shares of the above issues are those held by non-Thai residents.
Ownership of such shares is generally limited and subject to a premium to
local shares (those held by residents of Thailand).
++ Unlisted security. This unlisted security has been valued in good faith in
such a manner as prescribed by the Board of Directors.
* Non-income producing securities.
- -------------------------------------------
TEN LARGEST EQUITY
CLASSIFICATIONS HELD
JUNE 30, 1999 (UNAUDITED)
- -------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY NET ASSETS
- ----------------------------------- ----------
<S> <C>
Banks**............................ 21.27%
Communication...................... 15.75
Building Materials................. 11.50
Finance & Securities............... 10.53
Energy............................. 7.06
Property Development............... 6.07
Entertainment & Recreation......... 5.24
Transportation..................... 3.05
Printing & Publishing.............. 2.04
Miscellaneous...................... 1.64
- ------------------------
**Includes the value of preferred stock.
</TABLE>
- -------------------------------------------
TEN LARGEST COMMON STOCK
POSITIONS HELD
JUNE 30, 1999 (UNAUDITED)
- -------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
ISSUE NET ASSETS
- ----------------------------------- ----------
<S> <C>
Bangkok Bank Public Co., Ltd....... 11.10%
The Thai Farmers Bank Public Co.,
Ltd................................ 7.19
Advanced Information Service
Public Co., Ltd.................. 7.12
The Siam City Cement Public Co.,
Ltd................................ 5.29
The Siam Cement Public Co., Ltd.... 5.10
BEC World Public Co., Ltd.......... 4.37
ABN Amro Asia Securities
Public Co., Ltd.................. 3.99
Shin Corporations Public Company
Ltd. (Foreign)................... 3.55
PTT Exploration and Production
Public Co., Ltd.................. 3.42
Capital Nomura Securities
Public Co., Ltd.................. 3.35
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value
(cost--$27,076,853)....................... $ 25,761,696
Receivable for securities sold............. 462,043
Interest receivable........................ 8,697
Prepaid expenses........................... 39,739
-------------
Total assets............................. 26,272,175
-------------
LIABILITIES
Payable for securities purchased........... 464,174
Accrued expenses and other liabilities..... 172,724
-------------
Total liabilities........................ 636,898
-------------
NET ASSETS
Capital stock, $0.01 par value per share;
total 100,000,000 shares authorized;
6,278,588 shares issued and outstanding... 62,786
Paid-in capital in excess of par value..... 63,641,505
Accumulated net investment loss............ (195,753)
Accumulated net realized loss on
investments and foreign currency
transactions.............................. (36,553,903)
Net unrealized depreciation on investments
and other assets and liabilities
denominated in foreign currency........... (1,319,358)
-------------
Net assets applicable to shares
outstanding............................. $ 25,635,277
-------------
-------------
NET ASSET VALUE PER SHARE............ $ 4.08
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends.................................. $ 151,726
Interest................................... 35,170
------------
Total investment income.................. 186,896
------------
EXPENSES:
Administration fee......................... 75,000
Investment advisory fee.................... 63,636
Investment management fee.................. 62,929
Legal fees and expenses.................... 50,004
Directors' fees and expenses............... 37,433
Osaka Securities Exchange fees and
expenses.................................. 36,269
Audit and tax services..................... 22,810
Reports and notices to shareholders........ 22,335
Custodian fees and expenses................ 16,692
Insurance expense.......................... 15,624
Transfer agency fee and expenses........... 11,901
Other...................................... 14,228
------------
Total expenses........................... 428,861
------------
Net investment loss before waivers........... (241,965)
Waiver of:
Administration fee....................... (25,000)
Investment advisory fee.................. (21,212)
------------
Net investment loss after waivers............ (195,753)
------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM
INVESTMENT ACTIVITIES
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized losses on investments......... (2,787,927)
Net realized foreign currency transaction
losses.................................... (12,379)
Net change in unrealized appreciation
(depreciation) on equity investments...... 9,124,218
Net change in unrealized appreciation
(depreciation) on translation of
short-term investments and other assets
and liabilities denominated in foreign
currency.................................. (58,519)
------------
Net realized and unrealized gains from
investment activities and foreign currency
transactions................................ 6,265,393
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. $ 6,069,640
------------
------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED FOR THE YEAR
JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
-------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment loss........................ $ (195,753) $ (309,823)
Net realized loss on:
Investments.............................. (2,787,927) (15,967,602)
Foreign currency transactions............ (12,379) (456,408)
Net change in unrealized appreciation
(depreciation) on:
Investments in equity securities......... 9,124,218 17,302,809
Translation of short-term investments and
other assets and liabilities denominated
in foreign currency..................... (58,519) 895,485
-------------- ------------------
Net increase in net assets resulting from
operations................................ 6,069,640 1,464,461
NET ASSETS:
Beginning of period........................ 19,565,637 18,101,176
-------------- ------------------
End of period (including accumulated net
investment loss of $195,753 and $0,
respectively)............................. $ 25,635,277 $ 19,565,637
-------------- ------------------
-------------- ------------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Thai Capital Fund, Inc. (the "Fund") was incorporated in Maryland on
March 14, 1990 and commenced operations on May 30, 1990. It is registered with
the U.S. Securities and Exchange Commission as a non-diversified, closed-end
management investment company.
The Fund makes its investments in Thailand through a wholly-owned Investment
Plan pursuant to a contract with The Mutual Fund Public Company Limited (the
"Manager"). The accompanying financial statements are prepared on a consolidated
basis and present the financial position and results of operations of the
Investment Plan and the Fund.
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of financial
statements. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts and disclosures in the financial statements.
Actual reported results could differ from those estimates.
VALUATION OF INVESTMENTS--Securities listed on the Securities Exchange of
the Thailand for which market quotations are readily available are valued at the
last sales price prior to the time of determination, or, if there were no sales
on such date, at the mean between the last current bid and ask prices.
Securities that are traded over-the-counter, if bid and asked quotations are
available, are valued at the mean between the current bid and asked prices. In
instances where quotations are not readily available or where the price
determined is deemed not to represent fair market value, fair value is
determined in good faith in such manner as the Board of Directors (the "Board")
may prescribe. Short-term investments having a maturity of sixty days or less
are valued at amortized cost, which approximates market value.
TAX STATUS--It is the Fund's intention to continue to qualify as a regulated
investment company and distribute substantially all of its taxable income.
Accordingly, no provision for U.S. Federal income or excise taxes is required in
the financial statements.
Remittances from the Investment Plan to the Fund are subject to a Thai
withholding tax of 10% and such remittances are required by Thai law to be
derived only from the Plan's net income and net realized gains on the sale of
securities. The Fund records a provision for such taxes based upon the
Investment Plan's overall net increase in net assets resulting from operations
determined by reference to the Baht.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--The Fund records dividends and
distributions payable to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations, which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income and net realized gains. To the
extent they exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in capital.
11
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION--The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the market value of investment
securities and other assets and liabilities stated in foreign currency are
translated at the exchange rate prevailing at the valuation date; and (2)
purchases, sales, income and expenses are translated at the rate of exchange
prevailing on the respective dates of such transactions. The resulting exchange
gains and losses are included in the Statement of Operations. The Fund does not
generally isolate the effect of fluctuations in foreign exchange rates from the
effect of fluctuations in the market price of securities.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Securities transactions are
accounted for on the trade date (the date upon which the order to buy or sell is
executed). Costs used in determining realized gains and losses on the sale of
investments are those of specific securities sold. Dividend income and corporate
actions are recorded generally on the ex-date, except for certain dividends and
corporate actions involving foreign securities which may be recorded after the
ex-date, but recorded as soon as the Fund acquires information regarding such
dividends or corporate actions. Interest income is recorded on an accrual basis.
INVESTMENT MANAGER AND INVESTMENT ADVISER
The Manager acts as the investment manager of the Investment Plan pursuant
to the Investment Contract. The Manager makes the investment management
decisions relating to the Fund's assets held through the Investment Plan. For
its management services, the Manager receives a fee, which accrues weekly and is
payable monthly in Baht, at an annual rate of 0.60% of the Investment Plan's net
assets. At June 30, 1999, the Fund owed the Manager $13,437. In addition, as
permitted by the Investment Contract, the Fund reimburses the Manager for its
out-of-pocket expenses related to the Fund. During the six months ended June 30,
1999, there were no such expenses incurred.
Under the International Investment Advisory Agreement, Daiwa SB Investments
(H.K.) Limited (formerly, Daiwa International Capital Management (H.K.) Limited)
(the "Adviser") provides general and specific investment advice to the Manager
with respect to the Fund's assets held through the Investment Plan, but the
Manager makes the ultimate decisions regarding investments. In addition, the
Adviser manages the Fund's assets held outside the Investment Plan. The Fund
pays to the Adviser a fee,which accrues weekly and is payable monthly in U.S.
Dollars, at an annual rate equal to 0.60% of the Fund's average net assets.
Effective on January 1, 1999, the Adviser has voluntarily decreased its fee to
0.40% of the Fund's average net assets for the year ending December 31, 1999. At
June 30, 1999 the Fund owed the Adviser $23,176, net of waivers.
A director and officer of the Fund is also an officer of the Manager.
ADMINISTRATOR AND CUSTODIAN AND OTHER RELATED PARTIES
DSTC provides certain administrative services to the Fund. For such
services, the Fund pays DSTC a monthly fee at an annual rate of 0.20% of the
Fund's average weekly net assets, with a minimum annual fee of $150,000. DSTC
has voluntarily decreased its minimum annual administration fee to $100,000 for
the year 1999. In addition, as permitted by the Administration Agreement, the
Fund reimburses DSTC for its out-of-pocket expenses related to the Fund.
However, for the six months ended June 30, 1999, there were no such expenses
incurred by the Administrator.
12
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
- --------------------------------------------------------------------------------
DSTC also acts as custodian for the Fund's U.S. assets. As compensation for
its services as custodian, DSTC receives a monthly fee and reimbursement of
out-of-pocket expenses. During the six months ended June 30, 1999, DSTC earned
$4,047 as compensation for its custodial services to the Fund.
At June 30, 1999, the Fund owed $8,333 and $661 to DSTC for administration
and custodian fees, respectively.
The Fund paid or accrued $50,004 during the six months ended June 30, 1999
for legal services in conjunction with the Fund's ongoing operations to a law
firm of which the Fund's Assistant Secretary is a partner.
INVESTMENTS IN SECURITIES AND FEDERAL INCOME TAX MATTERS
During the six months ended June 30, 1999, the Fund made purchases of
$8,504,970 and sales of $8,166,205 of investment securities, excluding temporary
cash investments. The aggregate cost of investments at June 30, 1999 for Federal
income tax purposes was $24,449,226, excluding $2,888,953 of short-term
investments. At June 30, 1999, net unrealized depreciation for Federal income
tax purposes aggregated $1,569,892 of which $6,109,378 related to appreciated
securities and $7,679,270 related to depreciated securities.
At December 31, 1998, the Fund had a capital loss carryover of $32,385,255,
of which $8,055,254 expires in the year 2005 and $24,330,001 expires in the year
2006, available to offset future net capital gains.
CONCENTRATION OF RISK
The Fund's investments in Thailand involve certain consideration and risks
not typically associated with domestic investments as a result of, among others,
the possibility of future economic and political developments and the level of
government supervision and regulation of securities markets.
At June 30, 1999, the Fund had had approximately 9% of its net assets
invested in short-term cash instruments of financial institutions located in
Thailand. The Fund deposits monies with institutions which the Manager believes
to be of high credit worthiness, with low risk of loss of principal or interest.
The currency transactions of the Fund and the Investment Plan are subject to
Thai foreign exchange control regulations. Remittances from the Plan require the
approval of the Exchange Control Officer of the Bank of Thailand. There can be
no assurance that approval of remittances from the Plan will be granted in a
timely fashion or at all.
CAPITAL STOCK
There are 100,000,000 shares of $0.01 par value common stock authorized.
Of the 6,278,588 shares outstanding at June 30, 1999, Daiwa Securities
America Inc., a lead underwriter of the Fund and an affiliate of both the
Adviser and DSTC, owned 14,311 shares.
13
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding during each period is
presented below:
<TABLE>
<CAPTION>
FOR THE
SIX
MONTHS
ENDED
JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
1999 --------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 3.12 $ 2.88 $ 9.61 $ 17.52 $ 20.11 $ 23.81
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss)*........................ (0.03) (0.05) 0.07 0.02 (0.06) (0.02)
Net realized and unrealized gains (losses) on
investments and foreign currency transactions*...... 0.99 0.29 (6.80) (4.58) (0.51) (3.03)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value resulting
from operations..................................... 0.96 0.24 (6.73) (4.56) (0.57) (3.05)
---------- ---------- ---------- ---------- ---------- ----------
Less: dividends and distributions to shareholders
Amounts in excess of net investment income......... -- -- -- -- -- (0.07)
Net realized gains on investments and foreign
currency transactions............................. -- -- -- (3.35) (2.00) (0.50)
Amounts in excess of net realized gains............ -- -- -- -- -- (0.08)
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and distributions to
shareholders.................................... -- -- -- (3.35) (2.00) (0.65)
---------- ---------- ---------- ---------- ---------- ----------
Dilutive effect of dividend reinvestment............. -- -- -- -- (0.02) --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period....................... $ 4.08 $ 3.12 $ 2.88 $ 9.61 $ 17.52 $ 20.11
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Per share market value, end of period................ $ 6.625 $ 3.813 $ 3.750 $ 10.000 $ 15.750 $ 16.625
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Total investment return:
Based on market price at beginning and end of
period, assuming reinvestment of dividends........ 73.77% 1.67% (62.50)% (21.03)% 8.53% (24.44)%
Based on net asset value at beginning and end of
period, assuming reinvestment of dividends........ 30.77% 8.33% (70.03)% (31.78)% (0.19)% (12.66)%
Ratios and supplemental data:
Net assets, end of period (in millions)............ $ 25.6 $ 19.6 $ 18.1 $ 60.1 $108.8 $124.1
Ratios to average net assets of:
Expenses, excluding Thai taxes applicable to net
investment income............................... 4.01%** 3.83% 2.78% 2.11%+ 2.17%+ 1.99%
Expenses, including Thai taxes applicable to net
investment income............................... 4.01%** 3.83% 3.16% 2.26%+ 2.29%+ 2.12%
Expenses excluding fee waivers................... 4.01%** 4.09% -- -- -- --
Expenses including fee waivers................... 3.58%** 3.83% -- -- -- --
Expenses, excluding fee waivers and Thai taxes
applicable to net investment income............. 4.01%** -- -- -- -- --
Expenses, including fee waivers and Thai taxes
applicable to net investment income............. 3.58%** -- -- -- -- --
Net investment income (loss)..................... (1.83)%** (1.64)% 1.15% 0.15% (0.33)% (0.08)%
Portfolio turnover................................. 42.90% 38.91% 40.61% 33.36% 29.90% 44.47%
</TABLE>
- --------------------------
* After provision for any applicable Thai taxes.
** Annualized.
+ Ratios for the years ended December 31, 1996 and 1995 include certain
costs incurred in connection with the proposed rights offering which
have been expensed by the Fund. If such expenses had not been
included, the ratios would have been 2.07% and 2.22% for the year
ended December 31, 1996, and 2.03% and 2.14%, for the year ended
December 31, 1995.
14
<PAGE>
- ----------------------------------------
BOARD OF DIRECTORS
Masayasu Ohi, CHAIRMAN
Austin C. Dowling
Robert F. Gurnee
Alfred C. Morley
Virabongsa Ramangkura
- --------------------------------------------
OFFICERS
Daniel F. Barry
ACTING PRESIDENT AND SECRETARY
Sean J. Peters
TREASURER
John A. Koopman
ASSISTANT TREASURER
Laurence E. Cranch
ASSISTANT SECRETARY
Judy Runrun Tu
ASSISTANT SECRETARY
- --------------------------------------------
ADDRESS OF THE FUND
c/o Daiwa Securities Trust Company
One Evertrust Plaza, 9th Floor
Jersey City, New Jersey 07302
- --------------------------------------------
INVESTMENT MANAGER
The Mutual Fund Public Company Limited
INVESTMENT ADVISER
Daiwa SB Investments (H.K.) Ltd.
(formerly, Daiwa International Capital
Management (H.K.) Ltd.)
ADMINISTRATOR
Daiwa Securities Trust Company
CUSTODIANS
Bangkok Bank Public Company, Ltd.
(Thai Custodian)
Daiwa Securities Trust Company
(U.S. Custodian)
TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
LEGAL COUNSEL
Rogers & Wells LLP
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
- --------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that from time to time the Fund may purchase shares of its
common stock in the open market at prevailing market prices.
This report is sent to shareholders of the Fund for their information. It is not
a prospectus, circular or representation intended for use in the purchase or
sale of shares of the Fund or of any securities mentioned in the report.
The financial information included herein is taken from the records of the Fund
without examination by independent accountants who do not express an opinion
thereon.
SEMI-ANNUAL REPORT
JUNE 30, 1999
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[LOGO]
THE THAI CAPITAL
FUND, INC.
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