<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 Thai Farmers Asset Management Co., Ltd.
(the "Manager") and the Fund. The Fund's investments through the Investment Plan
are managed by the Manager. Daiwa SB Investments (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 that 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 comparitive 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 visiting www.daiwast.com or 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
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.
----------------------------------------------------------------------
July 24, 2000
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 six months ended June 30, 2000.
A REVIEW OF THE THAI ECONOMY
The Thai economy is still expanding into 2000. The GDP growth was 4.2% last
year and 5.2% in the first quarter of this year. Gradual recovery is expected to
continue, on the back of stronger domestic demand, supported by accommodative
monetary and fiscal policies, and healthy exports.
Consumption indicators showed continuing expansion since the third quarter
of 1999 as a result of low interest rates, a fiscal stimulus package and
expanding manufacturing activities. Passenger car and motorcycle sales jumped
77.0% and 64.3% year on year in the first five months of 2000, respectively. In
addition, household electricity consumption rose 4.3% year on year.
Fiscal policy remains in its expansionary mode to attempt to ensure that
economic growth does not lose momentum. In FY2000, the government deficit
(including state enterprises) was targeted at 5.0% of GDP compared to 5.5% in
FY1999. The FY2001 (October 2000 to September 2001) should be the third
consecutive year of fiscal stimulation. In addition, the preliminary budget
deficit for FY2001 is stipulated at Baht 105 billion or equivalent to 1.9% of
GDP, compared to 2.1% of GDP in FY2000. The government expenditures are expected
to be Baht 910 billion, a 5.8% increase from FY2000.
Exports have been growing since second quarter 1999, together with recovery
in the global and regional economy. In the first five months of 2000, Thailand's
exports increased by 22.8% year on year. This was the result of a recovery in
downstream industries and the economy as a whole. Manufacturing production rose
by 7.7%. Sectors recording strong growth for the first five months of 2000 were
automotive (+51.3%), integrated circuit (+49.8%), jewelry (+42.5%), television
(+36.5%), iron & steel production (+24.0%) and compressor (+21.8%).
The Bank of Thailand has maintained its easy monetary stance given the
substantial excess capacity and the low level of inflation. Higher U.S. interest
rates are unlikely to affect local interest rates because of low inflation,
excess domestic liquidity and current account surplus since September 1997.
Prior to the Member of Parliament elections around year-end, investment
activities should slow down. The usual confusion arising from negative news
around the election and uncertainty from possible changes in the coalition
government could also dampen market sentiment. However, in the past, Thai
political changes did not generally lead to radical changes in economic policy.
When the picture becomes clearer after the formation of the new government,
economic activities and the investment climate should improve.
Going forward, the major concern is the pace of debt restructuring of the
Thai financial industry and corporate sector as this would determine longer-term
prospects for the country. At the end of May 2000, non-performing loans were
35.63% of total loans or around Baht 1.9 trillion compared to 38.88% of total
loans at the end of 1999. As private sector restructuring pace is slow,
additional stimulation from the government sector through both fiscal and
monetary policies may be necessary.
2
<PAGE>
THE THAI CAPITAL FUND, INC.
----------------------------------------------------------------------
THE FIRST HALF OF 2000 STOCK MARKET OVERVIEW
As of June 30, 2000, the SET Index closed at 325.69 points, a decrease of
35.24% in U.S. Dollar terms for the first six months of 2000. Average daily
turnover for the first half of the year was Baht 4.69 billion, a 35% decrease
from the same period last year.
The first half of 2000 has proved so far to be a period in which the SET,
along with most regional markets, has taken its main cues from the U.S. stock
market movements, particularly the volatility of NASDAQ. For Thailand, in
addition, the MSCI restatement of Malaysia and increasing weighting of Taiwan
have caused the major foreign fund outflow from the country despite the fact
that macroeconomic indicators have consistently showed signs of improvement
while corporate earnings are still gathering momentum. Also, the election, which
is anticipated to take place in late 2000, has created some concerns to
investors.
For the second half of this year, despite the fact that some share prices
have reached a 19-month low, the Thai stock market will be volatile due to
external factors and political uncertainties near the year-end. Possible U.S.
interest rate increases, the strength of the U.S. economy and the eventual
impact to the U.S. stock market are among external factors that investors seem
to still keep an eye on. Furthermore, smaller weighting of Thailand in the MSCI
Index might continue to deter foreign inflow in the near term, thus, thin trade
volume is expected to be seen for the rest of the year.
In the long term, a clearer uptrend is expected after the peak in the U.S.
interest rate cycle and when the U.S. market stablizes. Improving macroeconomic
indicators as well as corporate earnings momentum would remain the key drivers.
THE FUND'S PERFORMANCE AND STRATEGY
As of June 30, 2000, the net asset value of the Fund was US$2.23 per share,
as compared to US$3.61 on December 31, 1999. The Fund's total investment return
for the first six months of 2000 was a negative 38.23%, against a 35.24%
decrease in the SET Index in U.S. Dollar terms. Thai Farmers Asset Management
Co., Ltd. ("TFAM") started to manage the Fund at the beginning of the year.
Since then, TFAM has been in the process of revising the Fund's portfolio to
improve the Fund's performance. During the past six months, the Fund increased
weightings of chemicals and electronics sectors, selectively invested in
commerce and vehicles and parts sectors, reduced weightings in banking and
building materials sectors, and reduced weightings to zero in finance &
securities and property sectors. As a result of the portfolio revision, for the
past three and one-month periods, the Fund outperformed the SET by 2.43% and
0.24%, respectively.
Assuming that all dividends paid to shareholders were reinvested, the Fund's
net asset value per share would have outperformed the SET Index by 10.63% in
U.S. Dollar terms since its inception on May 31, 1990.
The Fund intends to be overweighted in the chemicals, commerce,
communication, energy, entertainment and printing sectors, to take a neutral
position in the building and materials sector, to be underweighted in banking,
electronics and transportation sectors, and to have zero weighting in finance &
securities and property sectors.
3
<PAGE>
THE THAI CAPITAL FUND, INC.
----------------------------------------------------------------------
PORTFOLIO MANAGEMENT
Ms. Dayana Bunnag and Ms. Sopana Janeborvorn have been the Fund's portfolio
managers since January 1, 2000. Thai Farmers Asset Management Co., Ltd.
("TFAM"), the Fund's current Investment Manager, has employed Ms. Dayana and Ms.
Sopana for 8 1/2 years since the company's inception. Ms. Dayana is currently
the President while Ms. Sopana is First Senior Vice President in charge of the
equity fund management business.
The selection of TFAM as the new Investment Manager of the Fund, replacing
The Mutual Fund Public Company Limited, was approved by the Board of Directors
at its quarterly meeting held on March 4, 1999 and approved by the shareholders
of the Fund at the Annual Meeting held on September 17, 1999.
TFAM is one of the largest asset management companies in Thailand, with over
US$1.9 billion in assets under management, including 24 mutual funds with over
US$1.7 billion in assets. TFAM was established in 1992 and their 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.
Sincerely yours,
/s/ MASAYASU OHI
MASAYASU OHI
CHAIRMAN OF THE BOARD
4
<PAGE>
THE THAI CAPITAL FUND, INC.
----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
THAI COMMON, WARRANTS, AND PREFERRED STOCKS--89.44%
-------------------------------------------
COMMON STOCKS--79.99%
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<C> <S> <C>
BANKS--11.91%
1,304,500 Bangkok Bank Public Co., Ltd.*..... $ 1,017,244
1,246,200 DBS Thai Danu Bank Public Co.,
Ltd.*............................. 235,777
1,979,000 Industrial Finance Corp. of
Thailand*......................... 414,897
------------
1,667,918
------------
BUILDING MATERIALS--10.34%
190,166 Siam City Cement Public Co.,
Ltd.*............................. 675,817
69,600 The Siam Cement Public Co.,
Ltd.*............................. 772,289
------------
1,448,106
------------
CHEMICALS & PLASTICS--4.38%
368,700 National Petrochemical Public Co.,
Ltd............................... 278,084
755,600 Thai Petrochemical Industry Public
Co., Ltd.*........................ 94,661
1,061,735 Vinythai Public Co., Ltd.*......... 241,595
------------
614,340
------------
COMMERCE--3.05%
590,900 BIG C Supercenter Public Co.,
Ltd.*............................. 256,829
143,800 Siam Makro Public Co., Ltd......... 170,959
------------
427,788
------------
COMMUNICATION--28.80%
188,850 Advanced Info Service Public Co.,
Ltd.*............................. 1,772,002
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<C> <S> <C>
200,700 Shin Corp. Public Co., Ltd.*....... $ 974,949
544,450 Shinawatra Satellite Public Co.,
Ltd.*............................. 393,240
843,600 TelecomAsia Corp. Public Co.,
Ltd.*............................. 895,088
------------
4,035,279
------------
ELECTRONIC COMPONENTS--1.47%
9,240 Delta Electronics Thai Public Co.,
Ltd............................... 61,422
19,000 Hana Microelectronic Public Co.,
Ltd............................... 144,761
100,000 Thai Precision Manufacturing Co.,
Ltd.*+............................ 26
------------
206,209
------------
ENERGY--5.28%
241,700 Electricity Generating Public Co.,
Ltd............................... 180,752
115,200 PTT Exploration and Production
Public Co., Ltd................... 559,612
------------
740,364
------------
ENTERTAINMENT & RECREATION--8.60%
181,000 BEC World Public Co., Ltd.......... 1,064,357
282,777 United Broadcasting Corp. Public
Co., Ltd.*........................ 140,981
------------
1,205,338
------------
PRINTING AND PUBLISHING--1.49%
327,900 Amarin Printing Group Public Co.,
Ltd............................... 208,538
------------
</TABLE>
5
<PAGE>
THE THAI CAPITAL FUND, INC.
----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
COMMON STOCKS (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<C> <S> <C>
TRANSPORTATION--2.38%
736,300 Bangkok Expressway Public Co.,
Ltd.*............................. $ 188,250
157,100 Thai Airways International Public
Co., Ltd.*........................ 145,601
------------
333,851
------------
UTILITIES--2.10%
403,100 Eastern Water Resources Development
& Management Public Co., Ltd...... 293,724
------------
VEHICLES & PARTS--0.19%
29,200 Thai Stanley Electric Public Co.,
Ltd............................... 26,130
------------
Total Common Stocks
(Cost--$15,561,029).......................... 11,207,585
------------
</TABLE>
-------------------------------------------
PREFERRED STOCK--7.86%
-------------------------------------------
<TABLE>
<C> <S> <C>
BANKS--7.86%
2,152,800 The Siam Commercial Bank Public
Co., Ltd.*
(Cost--$2,035,766)................ 1,100,816
------------
</TABLE>
-------------------------------------------
WARRANTS--1.59%
-------------------------------------------
<TABLE>
<C> <S> <C>
BANKS--0.55%
623,100 DBS Thai Danu Bank Public Co.,
Ltd.*............................. 38,234
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<C> <S> <C>
323,300 The Siam Commercial Bank Public
Co., Ltd.*........................ $ 38,023
------------
76,257
------------
COMMUNICATION--1.04%
266,400 TelecomAsia Corp. Public Co.,
Ltd.*............................. 145,864
------------
Total Thai Warrants
(Cost--$180,297)............................. 222,121
------------
Total Thai Common, Preferred
Stocks & Warrants
(Cost--$17,777,092).......................... 12,530,522
------------
</TABLE>
-------------------------------------------
SHORT-TERM INVESTMENTS--10.38%
-------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000)
----------
<C> <S> <C>
THAI BAHT SAVINGS ACCOUNTS--7.83%
14,637 Bank Credit Agricole Indosuez Ltd.,
1.00% (Payable on Demand)......... 374,227
14,471 Bank of Asia Public Co., Ltd.,
1.00% (Payable on Demand)......... 369,984
13,809 Citibank N.A. Gold, 1.00% (Payable
on Demand)........................ 353,049
------------
Total Thai Baht Savings Account................ 1,097,260
------------
U.S. DOLLAR TIME DEPOSIT--1.13%
159 Bank of New York, 4.20% due
7/3/00............................ 158,702
------------
</TABLE>
6
<PAGE>
THE THAI CAPITAL FUND, INC.
----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONCLUDED)
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (CONCLUDED)
-------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
---------- ------------
<C> <S> <C>
GOVERNMENT OBLIGATIONS--1.42%
$200 U.S. Treasury Bill, 5.85% due
8/10/00........................... $ 198,706
------------
Total Short-Term Investments
(Cost--$1,473,943)........................... 1,454,668
------------
Total Investments--99.82%
(Cost--$19,251,036).......................... 13,985,190
Other assets less liabilities--0.18%........... 24,857
------------
NET ASSETS (Applicable to 6,278,588 shares of
capital stock outstanding; equivalent to
$2.23 per share)--100.00%.................... $ 14,010,047
============
</TABLE>
------------------------
* Non-income producing security.
+ Unlisted security. All unlisted securities have been valued in good faith
in such a manner as prescribed by the Board of Directors.
-------------------------------------------
TEN LARGEST EQUITY
CLASSIFICATIONS HELD
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY NET ASSETS
-------- ----------
<S> <C>
Communication#..................... 29.84%
Banks**#........................... 20.32
Building Materials................. 10.34
Entertainment & Recreation......... 8.60
Energy............................. 5.28
Chemicals & Plastics............... 4.38
Commerce........................... 3.05
Transportation..................... 2.38
Utilities.......................... 2.10
Printing and Publishing............ 1.49
-----------------------------------------------
**Includes the value of preferred stock.
#Includes the value of warrants.
</TABLE>
-------------------------------------------
TEN LARGEST EQUITY
POSITIONS HELD
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
ISSUE NET ASSETS
----- ----------
<S> <C>
Advanced Info Service Public Co.,
Ltd.............................. 12.65%
The Siam Commercial Bank Public
Co., Ltd.--Preferred............. 7.86
BEC World Public Co., Ltd.......... 7.60
TelecomAsia Corp. Public Co.,
Ltd................................ 7.43
Bangkok Bank Public Co., Ltd....... 7.26
Shin Corp. Public Co., Ltd......... 6.96
The Siam Cement Public Co., Ltd.... 5.51
Siam City Cement Public Co.,
Ltd................................ 4.82
PTT Exploration and Production
Public Co., Ltd.................. 3.99
Industrial Finance Corp. of
Thailand........................... 2.96
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
THE THAI CAPITAL FUND, INC.
----------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value
(cost--$19,251,036)....................... $13,985,190
Cash denominated in foreign currency
(cost--$62)............................... 62
Receivable for securities sold............. 121,018
Interest receivable........................ 3,435
Prepaid expenses........................... 63,023
-----------
Total assets............................. 14,172,728
-----------
LIABILITIES
Accrued expenses and other liabilities..... 162,681
-----------
NET ASSETS
Capital stock, $0.01 par value per share;
total shares authorized; 6,278,588 shares
issued and outstanding.................... 62,786
Paid-in capital in excess of par value..... 63,009,342
Accumulated net investment loss............ (252,246)
Accumulated net realized loss on
investments and foreign currency
transactions.............................. (43,543,955)
Net unrealized depreciation on investments
and other assets and liabilities
denominated in foreign currency........... (5,265,880)
-----------
Net assets applicable to shares
outstanding............................. $14,010,047
===========
NET ASSET VALUE PER SHARE............ $ 2.23
===========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
THE THAI CAPITAL FUND, INC.
----------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends.................................. $ 118,624
Interest................................... 13,279
-----------
Total investment income.................. 131,903
-----------
EXPENSES:
Administration fee and expenses............ 77,571
Investment management fee and expenses..... 56,096
Investment advisory fee.................... 51,940
Osaka Securities Exchange fees and
expenses.................................. 44,590
Legal fees and expenses.................... 34,382
Reports and notices to shareholders........ 30,938
Audit and tax services..................... 26,848
Directors' fees and expenses............... 25,906
Custodian fees and expenses................ 16,393
Insurance expense.......................... 15,279
Transfer agency fee and expenses........... 9,127
Other...................................... 11,382
-----------
Total expenses........................... 400,452
-----------
NET INVESTMENT LOSS BEFORE WAIVERS AND TAX... (268,549)
Waiver of:
Administration fee....................... 25,000
Investment advisory fee.................. 17,314
Provision for applicable Thai tax.......... (26,011)
-----------
NET INVESTMENT LOSS AFTER WAIVERS AND TAX.... (252,246)
REALIZED AND UNREALIZED GAINS (LOSSES) FROM
INVESTMENT ACTIVITIES AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized losses on investments......... (1,746,865)
Net realized foreign currency transaction
gains..................................... 312
Net change in unrealized appreciation
(depreciation) on equity investments...... (6,636,807)
Net change in unrealized appreciation
(depreciation) on translation of
short-term investments and other assets
and liabilities denominatedin foreign
currency.................................. (1,808)
-----------
Net realized and unrealized losses from
investment activities and foreign currency
transactions................................ (8,385,168)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. $(8,637,414)
===========
</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, 2000 ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment loss........................ $ (252,246) $ (582,457)
Net realized gain (loss) on:
Investments.............................. (1,746,865) (8,043,805)
Foreign currency transactions............ 312 (49,705)
Net change in unrealized appreciation
(depreciation) on:
Investments in equity securities......... (6,636,807) 11,764,551
Translation of short-term investments and
other assets and liabilities denominated
in foreign currency..................... (1,808) (6,760)
----------- -----------
Net increase (decrease) in net assets
resulting from operations................. (8,637,414) 3,081,824
----------- -----------
NET ASSETS:
Beginning of period........................ 22,647,461 19,565,637
----------- -----------
End of period.............................. $14,010,047 $22,647,461
=========== ===========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
THE THAI CAPITAL FUND, INC.
----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
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 Thai Farmers Asset Management Co., Ltd. (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--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
11
<PAGE>
THE THAI CAPITAL FUND, INC.
----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
the extent they exceed net investment income and net realized capital gains for
tax purposes, they are reported as distributions of paid-in capital. The
temporary book/tax differences are primarily related to wash sale loss deferrals
and a post-October capital loss deferral.
FOREIGN CURRENCY TRANSLATION--The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities and other assets and liabilities stated in foreign
currency are translated at the exchange rate prevailing at the end of the
period; 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, 2000, the Fund owed the Manager $8,182. 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,
2000, expenses of $5,378 were paid to the Manager, representing reimbursement to
the Manager of costs relating to the attendance by its employees at meetings of
the Fund's Board.
Under the International Investment Advisory Agreement, Daiwa SB Investments
(H.K.) Ltd. (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. In
addition, as permitted by the Advisory Agreement, the Fund reimburses the
Adviser for its out-of-pocket expenses related to the Fund. However, for the six
months ended June 30, 2000, there were no out-of-pocket expenses incurred by the
Adviser. Effective January 1, 2000, the Adviser has voluntarily decreased its
fee to 0.40% of the Fund's average net assets for the year ending December 31,
2000. At June 30, 2000, the Fund owed the Adviser $4,734, net of waivers.
12
<PAGE>
THE THAI CAPITAL FUND, INC.
----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
ADMINISTRATOR AND CUSTODIAN AND OTHER RELATED PARTIES
Daiwa Securities Trust Company ("DSTC"), an affiliate of the Adviser,
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 ending
December 31, 2000. In addition, as permitted by the Administration Agreement,
the Fund reimburses DSTC for its out-of-pocket expenses related to the Fund.
During the six months ended June 30, 2000, expenses of $2,571 were paid to DSTC,
representing reimbursement to DSTC of costs relating to the attendance by its
employees at meetings of the Funds Board.
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, 2000, DSTC earned
$3,809, as compensation for its custodial services to the Fund.
At June 30, 2000, the Fund owed $8,333 and $507 to DSTC for administration
and custodian fees, respectively.
The Fund paid or accrued $34,382 for the six months ended June 30, 2000 for
legal services in conjunction with the Fund's ongoing operations to the Fund's
law firm, Clifford Chance Rogers & Wells LLP, 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, 2000, the Fund made purchases of
$4,109,311 and sales of $4,719,906 of investment securities, excluding temporary
cash investments. The aggregate cost of investments at June 30, 2000 for Federal
income tax purposes was $18,476,140, excluding $1,473,943 of short-term
investments. At June 30, 2000, net unrealized depreciation for Federal income
tax purposes aggregated $5,945,618 of which $1,459,478 related to appreciated
securities and $7,405,096 related to depreciated securities.
At December 31, 1999, the Fund had a capital loss carryover of $38,749,688,
of which $8,055,254 expires in the year 2005, $24,330,001 expires in the year
2006, and $6,364,433 expires in the year 2007 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.
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.
13
<PAGE>
THE THAI CAPITAL FUND, INC.
----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
--------------------------------------------------------------------------------
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, 2000, Daiwa Securities America
Inc., a lead underwriter of the Fund and an affiliate of both the Adviser and
DSTC, owned 14,460 shares.
--------------------------------------------------------------------------------
RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED)
------------------------------------------------------------
On June 8, 2000, the Annual Meeting of Stockholders of The Thai Capital
Fund, Inc. (the "Fund") was held and the following matters were voted upon and
passed.
(1) Election of one Class I Director, one Class II Director and three Class
III Directors to the Board of Directors of the Fund, to serve for terms expiring
on the date on which the Annual Meeting of Stockholders is held in the year 2001
for Class I Directors, 2002 for Class II Directors and 2003 for Class III
Directors, or until their successors are elected and qualified.
NUMBER OF SHARES/VOTES
----------------------
<TABLE>
<CAPTION>
PROXY AUTHORITY
CLASS I VOTED FOR WITHHELD
--------------------- --------- ---------------
<S> <C> <C>
David G. Harmer 4,721,515 153,879
<CAPTION>
CLASS II
---------------------
<S> <C> <C>
Oren G. Shaffer 4,772,401 152,990
<CAPTION>
CLASS III
---------------------
<S> <C> <C>
Martin J. Gruber 4,709,176 166,215
Alfred C. Morley 4,719,718 155,673
Masayasu Ohi 3,422,519 1,452,872
</TABLE>
In addition to the five Directors elected or re-elected at the Meeting,
Austin C. Dowling, Robert F. Gurnee* and Virabongsa Ramangkura were the other
members of the Board who continued to serve as Directors of the Fund.
(2) To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the Fund for its fiscal year ending December 31, 2000.
NUMBER OF SHARES/VOTES
----------------------
<TABLE>
<CAPTION>
VOTED FOR VOTED AGAINST WITHHELD
--------------------- ------------- ---------
<S> <C> <C>
4,779,788 82,817 12,786
</TABLE>
------------------------
*Mr. Gurnee passed away in July, 2000.
14
<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,
2000 --------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
------------ ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 3.61 $ 3.12 $ 2.88 $ 9.61 $ 17.52 $ 20.11
-------- ------- ------- -------- -------- --------
Net investment income (loss).................... (0.04)* (0.09) (0.05) 0.07* 0.02* (0.06)*
Net realized and unrealized gains (losses) on
investments and foreign
currency transactions.......................... (1.34)* 0.58 0.29 (6.80)* (4.58)* (0.51)*
-------- ------- ------- -------- -------- --------
Net increase (decrease) in net asset value
resulting from operations...................... (1.38) 0.49 0.24 (6.73) (4.56) (0.57)
-------- ------- ------- -------- -------- --------
Less: dividends and distributions to
shareholders
Net realized gains on investments and foreign
currency transactions........................ -- -- -- -- (3.35) (2.00)
-------- ------- ------- -------- -------- --------
Dilutive effect of dividend reinvestment........ -- -- -- -- -- (0.02)
-------- ------- ------- -------- -------- --------
Net asset value, end of period.................. $ 2.23 $ 3.61 $ 3.12 $ 2.88 $ 9.61 $ 17.52
======== ======= ======= ======== ======== ========
Per share market value, end of period........... $ 3.313 $ 4.875 $ 3.813 $ 3.750 $ 10.000 $ 15.750
======== ======= ======= ======== ======== ========
Total investment return:
Based on market price at beginning and end of
period, assuming reinvestment
of dividends................................. (32.05)% 27.87% 1.67% (62.50)% (21.03)% 8.53%
Based on net asset value at beginning and end
of period, assuming reinvestment
of dividends................................. (38.23)% 15.71% 8.33% (70.03)% (31.78)% (0.19)%
Ratios and supplemental data:
Net assets, end of period (in millions) $14.0 $22.6 $19.6 $18.1 $60.1 $108.8
Ratios to average net assets of:
Expenses, excluding Thai taxes applicable to
net investment income...................... 4.16%** 3.92% 3.83% 2.78% 2.11%+ 2.17%+
Expenses, including Thai taxes applicable to
net investment income...................... 4.47%** 3.92% 3.83% 3.16% 2.26%+ 2.29%+
Expenses excluding waiver of Administration
fee applicable to net investment income.... 4.66%** 4.16% 4.09% -- -- --
Expenses including waiver of Administration
fee applicable to net investment income.... 4.45%** 3.92% 3.83% -- -- --
Net investment income (loss)*............... (2.93)%** (2.78)% (1.64)% 1.15% 0.15% (0.33)%
Portfolio turnover.............................. 25.16% 63.45% 38.91% 40.61% 33.36% 29.90%
</TABLE>
---------------------------------------------------------------------------
* After Provision for Thai taxes.
** Annualized.
+ Ratios for the years ended December 31, 1996 and 1995 include certain
cost 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%, respectively,
for the year ended December 31, 1996, and 2.03% and 2.14%,
respectively, for the year ended December 31,1995.
15
<PAGE>
-----------------------------------------
BOARD OF DIRECTORS
Masayasu Ohi, CHAIRMAN
Austin C. Dowling
Martin J. Gruber
David G. Harmer
Alfred C. Morley
Virabongsa Ramangkura
Oren G. Shaffer
----------------------------------------------
OFFICERS
John J. O'Keefe
VICE PRESIDENT & TREASURER
Judy Runrun Tu
SECRETARY
Laurence E. Cranch
ASSISTANT SECRETARY
----------------------------------------------
ADDRESS OF THE FUND
c/o Daiwa Securities Trust Company
One Evertrust Plaza, 9th Floor
Jersey City, New Jersey 07302
----------------------------------------------
INVESTMENT MANAGER
Thai Farmers Asset Management Co., Ltd.
INVESTMENT ADVISER
Daiwa SB Investments (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
Clifford Chance 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, 2000
-------------------------
[LOGO]
THE THAI CAPITAL
FUND, INC.
------------------
