The Thai Capital Fund, Inc.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-06062
THE THAI CAPITAL FUND, INC.
(Exact name of registrant as specified in charter)
c/o Daiwa Securities Trust Company
One Evertrust Plaza, 9th Floor
Jersey City, New Jersey 07302-3051
(Address of principal executive offices) (Zip code)
c/o Daiwa Securities Trust Company
One Evertrust Plaza, 9th Floor
Jersey City, New Jersey 07302-3051
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 915-3054
DATE OF FISCAL YEAR END: December 31
DATE OF REPORTING PERIOD: December 31, 2005
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Item 1. Reports to Stockholders.
GENERAL INFORMATION (unaudited)
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 SCB 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 American Stock Exchange ("AMEX"). The
Fund understands that its shares may trade periodically on certain exchanges
other than the AMEX, but the Fund has not listed its shares on those other
exchanges and does not encourage trading on those exchanges.
The Fund's AMEX trading symbol is "TF". 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 visiting www.daiwast.com or calling (800) 933-3440 or (201)
915-3020. Also, the Fund's website includes a monthly market review, a list of
the Fund's top ten industries and holdings, its proxy voting policies and
procedures, its code of ethics and its audit committee charter.
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that are used by the Fund's
Investment Manager to vote proxies relating to the Fund's portfolio securities
is available (1) without charge, upon request, by calling (201) 915-3054; (2) by
visiting www.daiwast.com; and (3) as an exhibit to the Fund's annual report on
Form N-CSR which is available on the website of the Securities and Exchange
Commission (the "Commission") at www.sec.gov. Information regarding how the
Investment Manager votes these proxies is now available by calling the same
number and available on the Commission's website. The Fund has filed its report
on Form N-PX covering the Fund's proxy voting record for the 12-month period
ended June 30, 2005.
QUARTERLY PORTFOLIO OF INVESTMENTS
A Portfolio of Investments will be filed as of the end of the first and
third quarter of each fiscal year on Form N-Q and will be available on the
Commission's website at www.sec.gov and the Fund's web site at www.daiwast.com.
Additionally, the Portfolio of Investments may be reviewed and copied at the
Commission's Public Reference Room in Washington D.C. Information on the
operation of the Public Reference Room may be obtained by calling (800)
SEC-0330. The quarterly Portfolio of Investments will be made available without
charge, upon request, by calling (201) 915-3054.
INQUIRIES
All general inquiries and requests for information should be directed to
the Fund at (201) 915-3054. 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, NJ 07302-3051
For specific information about your registered share account, please
contact American Stock Transfer & Trust Company (the "Plan Agent") at the
address shown below.
CERTIFICATIONS
The Fund's chief executive officer has certified to the AMEX that, as of
July 26, 2005, he was not aware of any violation by the Fund of applicable AMEX
corporate governance listing standards. The Fund also has included the
certifications of the Fund's chief executive officer and chief financial officer
required by Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 in the
Fund's Form N-CSR filed with the Commission for the period of this report.
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 American Stock Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
Telephone: (866) 669-9905; (718) 921-8124
www.amstock.com
A brief summary of the material aspects of the Plan follows:
WHO CAN PARTICIPATE IN THE PLAN? If you wish to participate and your shares
are held in your name, no action is required on your part, as you are
automatically enrolled by the Plan Agent. However, if your shares are held in
the name of a brokerage firm, bank or nominee, you should instruct your nominee
to participate in the Plan on your behalf. If your nominee is unable to
participate in the Plan for you, you should request that your shares be
registered in your name, so that you may participate directly in the Plan.
Please contact the Plan Agent if you would like more information about how to
change your registration so that you may participate in the Plan.
MAY I WITHDRAW FROM THE PLAN? If your shares are held in your own name and
you wish to receive all dividends and capital gain distributions in cash rather
than in shares, you may withdraw from the Plan without penalty at any time by
contacting the Plan Agent. If your shares are held in nominee name, you should
be able to withdraw from the Plan without penalty at any time by sending written
notice to your nominee. If you withdraw, you will receive a share certificate
for all full shares or, if you wish, the Plan Agent will sell your shares and
send you the proceeds, after the deduction of brokerage commissions. The Plan
Agent will convert any fractional shares to cash at the then-current market
price and send to you a check for the proceeds.
HOW ARE THE DIVIDENDS AND DISTRIBUTIONS REINVESTED? If the market price of
the Fund's shares on the payment date should equal or exceed their net asset
value per share, the Fund will issue new shares to you at the higher of net
asset value or 95% of the then-current market price. If the market price is
lower than net asset value per share, the Fund will issue new shares to you at
the market price. If the dividends or distributions are declared and payable as
cash only, you will receive shares purchased for you by the Plan Agent on the
AMEX or otherwise on the open market to the extent available.
IS THERE A COST TO PARTICIPATE? There are no Plan charges or brokerage
charges for shares issued directly by the Fund. However, each participant will
pay a pro rata portion of brokerage commissions for shares purchased on the AMEX
or on the open market by the Plan Agent.
WHAT ARE THE TAX IMPLICATIONS? The automatic reinvestment of dividends and
distributions does not relieve you of any income tax which may be payable (or
required to be withheld) on such dividends and distributions. In addition, the
Plan Agent will reinvest dividends for foreign participants and for any
participants subject to federal backup withholding after the deduction of the
amounts required to be withheld.
Please note that, if you participate in the Plan through a brokerage
account, you may not be able to continue as a participant if you transfer those
shares to another broker. Contact your broker or nominee or the Plan Agent to
ascertain what is the best arrangement for you to participate in the Plan.
SHAREHOLDER LETTER (unaudited)
January 31, 2006
Dear Shareholders:
The management of The Thai Capital Fund, Inc. (the "Fund") would like to
take this opportunity to update its shareholders about the Thai economy, the
activities of the Stock Exchange of Thailand ("SET") and the Fund's performance
for the year ended December 31, 2005.
THAI ECONOMIC REVIEW AND OUTLOOK
The Thai economy expanded by 5.3% year-on-year ("YoY") in the third quarter
of 2005, beating the consensus growth forecast of 4.7%. As we anticipated, most
of the impetus came from an improved net export position, which swung back to a
positive 4.3% after a negative contribution in the first half of 2005. This
reflected a strong rise in exports coupled with a decline in import growth.
Consumption grew by 4.5%, underlining the resilience of Thai consumers amid
rising inflation. Investment was the only disappointing component, with growth
slowing to 7.8% from 14.3% in the second quarter of 2005. Inventory levels have
been considerably depleted (down by US$1 billion), which suggests that another
cycle of re-stocking may be near.
In the first nine months of 2005, the Thai economy grew by 4.4% YoY. If our
updated forecast of 5.3% growth for the fourth quarter of 2005 (the same as in
the third quarter of 2005) proves correct, Gross Domestic Product ("GDP") growth
would come in at about 4.6% for 2005. This is slightly above our earlier
estimate of a 4.5% increase. Consumption growth is expected to remain stable at
4.6% (consumption growth also averaged 4.6% during the first nine months of
2005). Normally, government spending would slow from the third to fourth quarter
(we expected 8.5% growth from 15% in the third quarter of 2005). Investment
growth should remain above the double-digit level at 11.9%, while the external
account position should continue to improve.
The Bank of Thailand ("BOT") has raised its policy interest rate by 275
basis points since the second half of 2004, almost matching the 325 basis point
interest rate hikes by the U.S. Federal Reserve. This increased policy interest
rate was in response to an upsurge in inflationary pressure, with the headline
inflation rate almost doubling to around 6.0% as energy costs surged. Core
inflation also rose from 0.5% to 2.4% over the six quarters. For fiscal year
2006, a more moderate rise in core inflation is anticipated with economic growth
to strengthen. However, inflation remains a risk and rates may need to be raised
again, although we expect a rise of just 50 basis points next year compared with
the 200 basis point rise in 2005. Our view suggests that headline inflation
should fall back to about 3.0% by the end of 2006, bringing real interest rates
back to a positive level.
Political tension has eased somewhat since His Majesty the King's speech on
December 4, 2005. But with the government's popularity flagging, political
stability remains a concern. Most of the promised infrastructure projects have
not materialized, with delays and cut backs in investment on the much-touted
mega-projects. Hence, the approval rating for the second-term Thaksin government
is down, particularly in Bangkok. Nonetheless, his party retains an absolute
majority in the Lower House and talk of possible defections by Members of
Parliament to other parties is premature at this point.
Our analyst team forecast for GDP, 4.4% for 2005 and 4.8% for 2006, was
revised up from 4.1% and 4.4%, respectively. Recently, the BOT increased its
forecast for 2006 to 4.5-5.5% from 4.0-5.0%.
THAI STOCK MARKET OVERVIEW & Outlook
In the second half of 2005, the SET Index moved sideways in a wide range
from 675.50 at the end of June to 713.73 at the end of December, increasing
38.23 points or 5.66%. Among major sectors, the banking sector was the best
performer, increasing 11.35%, followed by communication up 8.75% and the energy
sector up 5.75%. The property sector was in line with the market, increasing
5.34%. The poor performers were the construction material sector, stagnant at
0.69%, and the finance sector, at minus 1.89%. The worst was the chemical
sector, down 9.62%. In terms of the small-cap sector, the mining and health care
service sectors were the two best performers, up 40.08% and 37.35%,
respectively, while the worst was the machinery sector, down 39.90%.
CLOSE/PRICE
SET STOCK EXCHANGE OF THAI INDEX PRICE 744.54
Range 7/4/05 to 12/30/05 THB
Period: D Daily HI 725.64 ON 9/22/05
Market: M mid/trd AVG 689.12
LOW 638.31 ON 7/7/05
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DATE PRICE VOLUME
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12/30 713.73 2.70BLN
12/29 710.22 2.18BLN
12/28 705.29 1.99BLN
12/27 706.47 1.84BLN
12/26 701.37 2.46BLN
12/23 698.95 3.05BLN
12/22 696.41 2.48BLN
12/21 698.43 3.26BLN
12/20 698.68 3.39BLN
12/19 691.28 2.57BLN
12/16 691.17 3.20BLN
12/15 690.49 5.11BLN
12/14 694.72 3.19BLN
12/13 693.48 2.77BLN
12/12
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DATE PRICE VOLUME
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12/9 697.74 2.75BLN
12/8 692.58 2.13BLN
12/7 694.87 3.06BLN
12/6 679.16 2.57BLN
12/5
12/2 659.91 1.69BLN
12/1 660.95 1.79BLN
11/30 667.75 1.45BLN
11/29 669.90 1.88BLN
11/28 666.69 1.50BLN
11/25 669.89 1.05BLN
11/24 669.76 1.14BLN
11/23 669.18 2.23BLN
11/22 674.25 1.52BLN
11/21 672.06 1.25BLN
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DATE PRICE VOLUME
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11/18 676.41 1.71BLN
11/17 672.63 1.60BLN
11/16 675.31 1.64BLN
11/15 681.58 2.31BLN
11/14 683.41 2.04BLN
11/11 690.45 1.67BLN
11/10 694.44 1.83BLN
11/9 696.85 1.36BLN
11/8 695.60 1.60BLN
11/7 700.75 1.42BLN
11/4 706.23 1.78BLN
11/3 704.79 2.18BLN
11/2 699.88 1.88BLN
11/1 693.27 1.51BLN
10/31 682.62 749MLN
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DATE PRICE VOLUME
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10/28 682.25 1.08BLN
10/27 685.29 1.25BLN
10/26 685.04 1.35BLN
10/25 676.84 1.42BLN
10/24
10/21 686.21 1.41BLN
10/20 681.92 1.60BLN
10/19 684.07 1.49BLN
10/18 695.18 1.46BLN
10/17 696.28 1.42BLN
10/14 700.02 1.13BLN
10/13 704.32 1.22BLN
10/12 709.20 1.43BLN
10/11 709.13 1.43BLN
10/10 707.05 1.43BLN
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--------------------------------------
DATE PRICE VOLUME
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10/07 708.98 1.20BLN
10/06 710.79 1.64BLN
10/05 717.17 2.05BLN
10/04 714.90 1.62BLN
10/03 717.42 1.56BLN
9/30 723.23 1.89BLN
9/29 722.83 2.06BLN
9/28 723.20 2.11BLN
9/27 724.24 2.30BLN
9/26 721.28 2.02BLN
9/23 725.31 2.37BLN
9/22 H725.64 2.09BLN
9/21 721.16 2.25BLN
9/20 723.16 2.15BLN
9/19 708.98 2.02BLN
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DATE PRICE VOLUME
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9/16 708.26 2.76BLN
9/15 711.20 3.02BLN
9/14 717.77 3.87BLN
9/13 710.31 2.91BLN
9/12 712.80 2.42BLN
9/9 712.78 3.65BLN
9/8 715.08 3.18BLN
9/7 708.50 2.28BLN
9/6 705.46 2.25BLN
9/5 707.94 2.60BLN
9/2 709.97 2.77BLN
9/1 710.28 2.67BLN
8/31 697.85 1.67BLN
8/30 692.86 1.63BLN
8/29 691.33 1.93BLN
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--------------------------------------
DATE PRICE VOLUME
--------------------------------------
8/26 695.89 1.62BLN
8/25 692.14 2.27BLN
8/24 695.67 2.04BLN
8/23 690.39 2.54BLN
8/22 690.77 1.82BLN
8/19 680.83 1.75BLN
8/18 672.02 1.72BLN
8/17 667.49 1.34BLN
8/16 667.18 1.65BLN
8/15 675.52 1.73BLN
8/12
8/11 681.95 1.59BLN
8/10 684.59 1.50BLN
8/9 681.54 1.55BLN
8/8 686.32 1.43BLN
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--------------------------------------
DATE PRICE VOLUME
--------------------------------------
8/5 686.01 1.84BLN
8/4 684.57 3.13BLN
8/3 687.94 2.50BLN
8/2 683.16 2.09BLN
8/1 674.99 1.31BLN
7/29 675.67 1.52BLN
7/28 670.09 2.18BLN
7/27 665.72 1.62BLN
7/26 656.91 1.37BLN
7/25 659.64 1.31BLN
7/22
7/21 648.92 1.27BLN
7/20 650.04 1.60BLN
7/19 648.67 1.57BLN
7/18 652.67 1.72BLN
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--------------------------------------
DATE PRICE VOLUME
--------------------------------------
7/15 655.46 3.45BLN
7/14 661.45 2.27BLN
7/13 658.37 1.87BLN
7/12 648.98 1.76BLN
7/11 640.82 1.82BLN
7/8 643.31 1.78BLN
7/7 L638.31 2.47BLN
7/6 659.91 1.80BLN
7/5 663.52 1.84BLN
7/4 669.78 2.07BLN
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[GRAPHIC OMITTED]
Source: Bloomberg
Actually, the SET Index moved from the lowest point of the year around 640
and had a high at 725, mainly the result of the energy sector, especially oil
related stocks such as PTT and PTTEP moving with the high global oil price. Oil
related stocks retreated with the decline in crude oil prices. In December, the
SET was liquidity driven, as were other regional markets, by the expected
revaluation of the Chinese Yuan and the expected weaker U.S. dollar. Thus,
liquidity drove the SET Index from the end of November to close at 713.73 by the
end of December. In short, the eleven-month market performance was almost a zero
return, but the entire year return for 2005 was made in the December movement
alone.
We are growing increasingly confident that the Thai stock market will
perform well in the year ahead. This confidence is justified by impressive
economic growth despite continuing high oil prices and rising interest rates.
Market consensus economic growth for 2006 is about 5.0 - 5.5%, which is quite
achievable given the recovery in the agricultural and tourism industries and the
continuing strong growth in the export manufacturing sector. In our view, there
will be an average decline in earnings-per-share ("EPS") in 2006 of 3.6%, and
8.5% if the banking sector is excluded. The anticipated decline in EPS is
because the banking sector will begin to pay full corporate income taxes and the
energy, petrochemical and shipping industries should see a reduction in earnings
after abnormally high profits in 2005.
The banking sector's operating performance continues to improve with steady
loan growth, the ability to boost non-interest income and gradual reduction in
non-performing loans. Meanwhile the energy, petrochemical and shipping
industries have used their windfall profits gleaned over the last two years to
retire debt or finance expansion. Their balance sheets and their earnings
prospects have changed substantially since the start of 2005. We are also
becoming much more positive on telecom stocks given anticipation of progress in
telecom sector reforms in 2006, as well as the potential value of new 3G
licenses. In other sectors, we see companies showing signs of coping with
greater cost pressure with earnings being maintained by increasing sales and the
ability to reduce debt and other overhead costs.
Due to these positive factors, we are projecting that the SET Index could
reach 800 within the first half of 2006 and 850 by the year end, from 713.73 at
the end of 2005. We also expect market volatility in a wide range as usual. At
the 800 level, the Thai stock market would still be on a relatively low average
market price-earnings ratio ("PER") of 10.8 times.
PERFORMANCE EVALUATION
As of December 31, 2005, the Fund had net assets of US$28.0 million,
representing a net asset value per share of US$8.92. Of this amount, Thai equity
securities accounted for 90.65% and the remainder was in cash and bank deposits.
Of the total net assets, 23.43% was invested in the energy sector, 16.90%
in the banking sector, 15.21% in the communication sector, 8.97% in the
construction material sector, 4.77% in the property development sector and 3.27%
in the transportation sector. The majority of the remainder was invested in
printing and publishing, entertainment, finance and automotive sectors.
For the second half of 2005, portfolio performance was 7.24% compared to
the SET Index's 5.66%, which was 1.58% above the market. Generally, the
portfolio has a beta around 1.15 times the benchmark and the cash position
ranges around 5.0 to 9.0% of net assets. Since our market view for the first
half of 2006 is a sideways range of 780-820, our strategy is to hold the current
position and then reduce high beta and small-cap stocks at the upper band of the
range and switch those positions to low beta stocks. The energy sector will
still be the favorite sector among the domestic sectors such as banking and
communications. We will avoid cyclical stocks such as petrochemical, commodity
and shipping related stocks in order to reduce portfolio volatility.
PORTFOLIO MANAGEMENT
Effective March 1, 2005, Mr. Vijchu Chantatab replaced Mr. Thanakorn
Phanphruk as the Fund's portfolio manager. SCB Asset Management Co., Ltd. has
employed Mr. Chantatab as an equity fund manager since March 2005. Previously,
Mr. Chantatab was a senior fund manager for BoA Asset Management Company Limited
and a fund manager at JP Morgan (Thailand) Securities Limited.
Finally, the Fund's management would like to express its sincere thanks to
all shareholders for their continued support and participation.
Sincerely,
/s/ Ikuo Mori
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IKUO MORI
Chairman of the Board
Portfolio of Investments
December 31, 2005
THAI COMMON STOCKS AND WARRANTS--90.65%
COMMON STOCKS--89.31%
Shares Value
----------------------------------------------------------------- -- -----------
Agribusiness--1.24%
2,338,000 Charoen Pokphan Foods Public Co., Ltd................. $ 348,455
Automotive--1.59%
248,700 Interhides Public Co., Ltd.*......................... 102,691
100,000 Thai Rung Union Car Co., Ltd.......................... 13,682
93,800 Thai Stanley Electric Public Co., Ltd................. 330,018
-----------
446,391
-----------
Banks--16.90%
767,300 Bangkok Bank Public Co., Ltd.......................... 1,968,460
1,727,000 Bank of Ayudhya Public Co.,Ltd........................ 628,710
380,000 Kasikornbank Public Co., Ltd.......................... 649,911
3,394,800 Krung Thai Bank Public Co., Ltd....................... 912,387
658,000 Siam City Bank Public Co., Ltd........................ 390,665
205,500 TISCO Bank Public Co., Ltd............................ 139,331
419,700 TMB Bank Public Co. Ltd*.............................. 44,094
-----------
4,733,558
-----------
Building Materials--8.97%
421,300 The Siam Cement Public Co., Ltd....................... 2,511,617
-----------
Commerce--1.16
304,600 BIG C Supercenter Public Co., Ltd..................... 230,709
Shares Value
----------------------------------------------------------------- -- -----------
55,500 Siam Makro Public Co., Ltd. .......................... $ 94,243
-----------
324,952
-----------
Communication--15.21%
756,900 Advanced Info Service Public Co., Ltd................ 1,997,259
1,427,100 Samart Corporation Public Co., Ltd................... 282,430
1,564,500 Shin Corporations Public Co., Ltd.................... 1,615,007
836,400 Shin Satellite Public Co., Ltd....................... 304,490
795,500 TT&T Public Co. Ltd.*................................ 59,475
-----------
4,258,661
-----------
Electronic Components--0.91%
224,900 Hana Microelectronic Public Co., Ltd................. 145,615
700,000 KCE Electronics Public Co. Ltd....................... 108,603
-----------
254,218
-----------
Energy--23.43%
205,400 Electricity Generating Public Co., Ltd............... 406,497
171,200 PTT Exploration and Production Public Co., Ltd....... 1,974,321
596,000 PTT Public Co., Ltd.................................. 3,290,991
605,200 Ratchaburi Electricity Generating Holding Public
Co., Ltd............................................. 606,254
183,000 Thai Oil Public Co., Ltd............................. 283,921
-----------
6,561,984
-----------
7
Portfolio of Investments (continued)
December 31, 2005
COMMON STOCKS (continued)
Shares Value
----------------------------------------------------------------- -- -----------
Entertainment & Recreation--2.81%
2,210,800 ITV Public Co., Ltd*.................................. $ 594,175
26,200 MCOT Public Co., Ltd.................................. 18,244
272,777 United Broadcasting Corporation Public Co., Ltd.*..... 174,948
-----------
787,367
-----------
Finance & Securities--2.28%
4,327,000 Asia Plus Securities Public Co., Ltd.................. $ 496,886
257,100 Bualuang Securities Public Co., Ltd................... 81,662
90,500 Kim Eng Securities Thailand Public Co., Ltd........... 58,596
-----------
637,144
-----------
Household Goods--0.30%
102,700 Modernform Group Public Co., Ltd........................ 85,314
-----------
Mining--1.04%
683,800 Padaeng Industry Public Co., Ltd........................ 292,374
-----------
Petrochemicals--1.30%
143,900 PTT Chemical Public Co., Ltd.*........................... 284,785
108,000 The Aromatics (Thailand) Public Co., Ltd................. 77,843
-----------
362,628
-----------
Printing & Publishing--2.98%
3,451,579 Amarin Printing and Publishing Public Co., Ltd......... 834,882
-----------
Property Development--3.88%
840,000 Amata Corporation Public Co., Ltd....................... 295,538
Shares Value
----------------------------------------------------------------- -- -----------
1,536,000 Asian Property DevelopmentPublic Co., Ltd.............. $ 128,348
423,100 Italian-Thai Development Public Co., Ltd............... 2,440,000
2,440,000 Prinsiri Public Co., Ltd............................... 141,886
1,104,000 Sammakorn Public Co., Ltd.............................. 72,829
705,000 SinoThai Engineering & Construction Public Co., Ltd.... 211,868
156,700 Ticon Industrial Connection Public Co., Ltd............ 47,858
2,733,400 TRC Construction Public Co., Ltd.*..................... 103,516
-----------
1,087,127
-----------
Rehabilitation--1.09%
1,540,600 Thai Petrochemical Industry Public Co., Ltd.*.......... 304,893
-----------
Retail Food--0.95%
70,000 S&P Syndicate Public Co., Ltd.......................... 38,893
138,000 Serm Suk Public Co., Ltd............................... 70,132
126,300 Thai Union Frozen Products Public Co., Ltd............. 94,119
235,000 The Vegetable Oil Public Co., Ltd...................... 64,881
-----------
267,271
-----------
Transportation--3.27%
571,200 Bangkok Expressway Public Co., Ltd...................... 297,262
8
Portfolio of Investments (concluded)
December 31, 2005
COMMON STOCKS (concluded)
Shares Value
----------------------------------------------------------------- -- -----------
Transportation (concluded)
319,900 Precious Shipping Public Co., Ltd....................... $ 248,159
208,900 Regional Container Lines Public Co., Ltd................ 139,084
369,500 Thoresen Thai Agencies Public Co., Ltd.................. 230,211
-----------
914,716
-----------
Total Common Stocks(Cost--$15,687,289)............................ 25,013,552
-----------
WARRANTS--1.34%
Finance & Securities--0.38%
1,442,250 Asia Plus Securities Public Co., Ltd., expires 9/30/08* 107,124
-----------
Household Goods--0.00%
10,270 Modernform Group Public Co., Ltd., expires 12/1/07* 753
-----------
Property Development--0.89%
1,331,400 Land & House Public Co., Ltd., expires 9/2/08*......... 230,961
165,850 SinoThai Engineering & Construction Public Co.,
Ltd., expires 4/18/08*................................. 19,126
-----------
250,087
-----------
Shares Value
----------------------------------------------------------------- -- -----------
Utilities--0.07%
796,960 Eastern Water Resources Development & Management
Public Co., Ltd., expires 11/28/07*..................... $ 19,277
-----------
Total Warrants (Cost--$13,003).................................... 377,241
-----------
Total Thai Common and Warrants (Cost--$15,700,292)................ 25,30,793
-----------
SHORT-TERM INVESTMENTS--0.11%
Principal
Amount
(000)
---------
U.S. DOLLAR TIME DEPOSIT--0.11%
$30 Bank of New York, 0.05%, due 1/3/06 (Cost--$29,695) 29,695
-----------
Total Investments--90.76% (Cost--$15,729,987)..................... 25,420,488
Other assets less liabilities--9.24%.............................. 2,588,218
NET ASSETS (Applicable to 3,139,500 shares of capital stock
outstanding; equivalent to $8.92 per share)--100.00%........ $28,008,706
-----------
-----------
---------------------
* Non-income producing securities.
EQUITY TEN LARGEST EQUITY CLASSIFICATIONS HELD POSITIONS HELD December 31, 2005
December 31, 2005
Industry Percent of Net Assests
Energy..................................................... 23.43%
Banks...................................................... 16.90
Communication.............................................. 15.21
Building Materials......................................... 8.97
Property Development**..................................... 4.77
Transportation............................................. 3.27
Printing & Publishing...................................... 2.98
Entertainment & Recreation................................. 2.81
Finance & Securities**..................................... 2.61
Automotive................................................. 1.59
Petrochemicals............................................. 1.30
Agribusiness............................................... 1.24
Commerce................................................... 1.16
Rehabilitation............................................. 1.09
Mining..................................................... 1.04
Retail Food................................................ 0.95
Electronic Components...................................... 0.91
Household Goods**.......................................... 0.30
Utilities**................................................ 0.07
PTT Public Co., Ltd........................................ 11,75
The Siam Cement Public Co. Ltd............................. 8.97
Advanced Info Service Public Co., Ltd...................... 7.13
PTT Exploratio and Production Public Co., Ltd............. 7.05
Bangkok Bank Public Co., Ltd............................... 7.03
Shin Corporation Public Co., Ltd........................... 5.77
Krung Tahi Bank Public Co, Ltd............................. 3.26
Amarin Printing and Publishing Public Co., Ltd............. 2.98
Kasikornbank Public Co. Ltd................................ 2.32
Bank of Ayudhya Public Co., Ltd............................ 2.24
---------------------
** Includes the value of warrants
Statement of Assets and Liabilities
December 31, 2005
-------------------------------------------------------------------------------
Assets
Investment in securities, at value (cost--$15,729,987)....... $ 25,420,488
Cash denominated in foreign currency (cost--$3,123,758)...... 3,141,023
Interest receivable.......................................... 2
Prepaid expenses............................................. 6,219
---------------
Total assets.................................................. 28,567,732
---------------
Liabilities
Payable for securities purchased.............................. 148,269
Dividend payable.............................................. 298,252
Accrued Thai tax provision.................................... 33,111
Payable for management fees................................... 16,424
Payable for advisory fees..................................... 4,655
Payable to other affiliates................................... 10,052
Accrued expenses and other liabilities........................ 48,263
---------------
Total liabilities........................................... 559,026
---------------
Net Assets
Capital stock, $0.01 par value per share; total 100,000,000
shares authorized; 3,139,500 shares issued and outstanding.. 31,395
Paid-in capital in excess of par value........................ 57,782,193
Accumulated net investment loss............................... (14,570)
Accumulated net realized loss on investments and foreign
currency transactions....................................... (39,498,167)
Net unrealized appreciation on investments and other assets
and liabilities denominated in foreign currency............. 9,707,855
---------------
Net assets applicable to shares outstanding................... $ 28,008,706
---------------
---------------
Net Asset Value Per Share.................................. $ 8.92
See accompanying notes to financial statements
Statement of Operations
For the Year Ended December 31, 2005
--------------------------------------------------------------------------------
Investment income:
Dividends..................................................... $ 1,088,588
Interest...................................................... 9,482
--------------
Total investment income..................................... 1,098,070
--------------
Expenses:
Investment management fee..................................... 167,015
Investment advisory fee....................................... 166,846
Administration fee and expenses............................... 163,546
Legal fees and expenses....................................... 93,036
Audit and tax services........................................ 74,510
Reports and notices to shareholders........................... 64,163
Custodian fees and expenses................................... 34,622
Directors' fees and expenses.................................. 25,837
Insurance expense............................................. 13,612
Transfer agency fee and expenses.............................. 8,772
Other......................................................... 33,177
--------------
Total expenses before expense waivers....................... 845,136
--------------
Less waiver of:
Administration fee.......................................... (50,000)
Investment advisory fee..................................... (111,231)
--------------
Net expenses.............................................. 683,905
Net investment income before taxes.............................. 414,165
Provision for Thai tax applicable to net investment income.... 34,554
--------------
Net investment income........................................... 379,611
--------------
Realized and unrealized gains from investment activities
and foreign currency transactions:
Net realized gains on investments............................. 3,400,967
Net realized foreign currency transaction losses............. (140,011)
Net change in unrealized appreciation (depreciation)
on equity investments......................................... (3,207,905)
Net change in unrealized appreciation (depreciation)
on translation of short-term investments and other assets
and liabilities denominated in foreign currency............... (13,385)
--------------
Net realized and unrealized gains from investment activities
and foreign currency transactions............................... 39,666
--------------
Net increase in net assets resulting from operations............ $ 419,277
==============
See accompanying notes to financial statements
Statement of Changes in Net Assets
For the Years Ended
December 31,
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2005 2004
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Increase (decrease) in net assets from operations:
Net investment income............................... $ 379,611 $ 167,018
Net realized gain (loss) on:
Investments...................................... 3,400,967 326,411
Foreign currency transactions.................... (140,011) 4,627
Net change in unrealized appreciation (depreciation) on:
Investments in equity securities.................. (3,207,905) (2,697,284)
Translation of short-term investments and other
assets and liabilities denominated in
foreign currency.................................. (13,385) 1,318
----------- -----------
Net increase (decrease) in net assets resulting
from operations..................................... 419,277 (2,197,910)
----------- -----------
Dividends and distributions to shareholders from:
Net investment income............................... (298,252) (125,577)
----------- -----------
From capital stock transactions:
Sale of capital stock resulting from
reinvestment of dividends........................... 676 1,101
----------- -----------
Net increase (decrease) in net assets............... 121,701 (2,322,386)
Net assets:
Beginning of year................................... 27,887,005 30,209,391
----------- -----------
End of year (including undistributed net investment
income of $44,082 for 2004)......................... $28,008,706 $27,887,005
----------- -----------
----------- -----------
Statement of Changes in Net Assets
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 SCB 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 in the United States of America for
investment companies. Such policies are consistently followed by the Fund in the
preparation of its financial statements. The preparation of its financial
statements in accordance with generally accepted accounting principles in the
United States of America 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
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 Investment 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, except that there is currently no provision
required for the component of the net increase in net assets relating to capital
gains, if any, because the Fund intends to utilize its U.S. tax loss
carryforward available to offset any such gains. Remittances for the payment of
expenses are not subject to a Thai withholding tax.
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
Notes to Financial Statements (continued)
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 tax purposes are reported as distributions of paid-in-capital.
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 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
recorded on the trade date (the date upon which the order to buy or sell is
executed). Realized and unrealized gains and losses from security and foreign
currency transactions are calculated on the identified cost basis. Dividend
income and corporate actions are recorded on the ex-date, except for certain
dividends and corporate actions involving foreign securities which may be
recorded after the ex-date, 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
average net assets. At December 31, 2005, the Fund owed the Manager $16,424. 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 year
ended December 31, 2005, no such out-of-pocket expenses were paid to the
Manager.
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. During the year
ended December 31, 2005, no such out-of-pocket expenses were paid to the
Adviser. The Adviser has voluntarily decreased its fee to 0.20% of the Fund's
average net assets for the fiscal year ended December 31, 2005. At December 31,
2005, the Fund owed the Adviser $4,655, net of waivers.
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
Notes to Financial Statements (continued)
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 ended December 31, 2005. In addition, as permitted by the Administration
Agreement, the Fund reimburses DSTC for its out-of-pocket expenses related to
the Fund. During the year ended December 31, 2005, expenses of $5,379 were paid
to the Administrator, representing reimbursement to the Administrator of costs
relating to the attendance by its employees at meetings of the Fund's 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 year ended December 31, 2005, DSTC earned
$5,995, as compensation for its custodial services to the Fund.
At December 31, 2005, the Fund owed $8,333, $1,167 and $552 to DSTC for
administration, compliance and custodian fees, respectively, which is reported
separately as payable to other affiliates on the Statement of Assets and
Liabilities.
The Fund paid or accrued $92,760 for the year ended December 31, 2005 for
legal services in conjunction with the Fund's ongoing operations provided by the
Fund's law firm, Clifford Chance US LLP, of which the Fund's Assistant Secretary
is a partner.
Investments in Securities and Federal Income Tax Matters
During the year ended December 31, 2005, the Fund made purchases of
$17,906,393 and sales of $19,058,474 of investment securities, excluding
short-term investments. The aggregate cost of investments at December 31, 2005
for federal income tax purposes was $15,703,723. At December 31, 2005, net
unrealized appreciation, excluding short-term securities aggregated $9,687,070
of which $10,366,459 related to appreciated securities and $679,389 related to
depreciated securities.
Distributions to shareholders, which are determined in accordance with
federal income tax regulations, and which may differ from generally accepted
accounting principles, are recorded on the ex-dividend date. In order to present
undistributed net investment income (loss) and accumulated net realized gains
(losses) in the Statement of Assets and Liabilities in a way that more closely
represents their tax character, certain adjustments have been made to paid-in
capital in excess of par value, undistributed net investment income and
accumulated net realized loss on investments.
For the year ended December 31, 2005, the adjustments were to decrease net
investment income by $140,011 and decrease accumulated net realized loss on
investments by $3,852,005 and decrease capital by $3,711,994 primarily related
to the reclassification of realized foreign currency losses and capital loss
carryforwards. Net investment income, net realized losses and net assets were
not affected by this change.
The tax character of the distributions paid during the fiscal year ended
December 31, 2005 and December 31, 2004 was the same for financial statement and
tax purposes.
Notes to Financial Statements (concluded)
At December 31, 2005, the Fund had a remaining capital loss carryover of
$39,494,735, of which $24,330,001 expires in the year 2006, $6,364,433 expires
in the year 2007, $5,797,861 expires in the year 2008, $2,320,539 expires in the
year 2009 and $681,901 expires in the year 2010 available to offset future net
capital gains.
During the current year, the Fund utilized capital loss carryforwards of
$3,404,398 and $3,711,994 capital loss carryforwards expired.
For tax purposes, realized currency losses subsequent to October 31, 2005
may be deferred and treated as occurring on the first day of the following
fiscal year. At December 31, 2005, the Fund deferred realized currency losses of
$6,912.
Concentration of Risk
The Fund's investments in Thailand involve certain considerations 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.
The economic difficulties experienced in Thailand have had an impact on the
banking industry. All of the Fund's investments are held in Thailand through a
subcustodial arrangement with Bangkok Bank Public Company Limited (the
"subcustodian") and the Fund's securities in turn are being held by the Thailand
Securities Depository Company in book-entry form. In the event of failure of the
subcustodian, legal counsel has informed the Fund that the Fund would be able to
recover all of its securities held by the subcustodian. The Fund's ability to
enter into investment transactions pertaining to such securities may be
effectively restricted for the period of time required to resolve the Fund's
claim to recover such securities.
Capital Stock
There are 100,000,000 shares of $0.01 par value common stock authorized.
During the year ended December 31, 2005, 72 shares were issued as a result of
the reinvestment of dividends paid to those shareholders electing to reinvest
dividends. Of the 3,139,500 shares outstanding at December 31, 2005, Daiwa
Securities America Inc., a lead underwriter of the Fund and an affiliate of both
the Adviser and DSTC, owns 8,763 shares.
Subsequent Event
On December 19, 2005, a dividend was declared by the Board. The
distribution of $0.095 per share was paid on January 19, 2006, to shareholders
of record at December 30, 2005. The ex-dividend date was December 28, 2005.
Financial Highlights
Selected data for a share of capital stock outstanding during each year is
presented below:
For the Years Ended December 31,
2005 2004 2003 2002+ 2001+
-------- -------- -------- -------- --------
Net asset value, beginning of year.................... $ 8.88 $ 9.62 $ 4.34 $ 3.42 $ 3.36
-------- -------- -------- -------- --------
Net investment income (loss).......................... 0.12* 0.05* 0.03* (0.09) (0.16)*
Net realized and unrealized gains (losses) on
investments and foreign currency transactions........ 0.01 (0.75) 5.31 1.01 0.22*
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value resulting
from operations...................................... 0.13 (0.70) 5.34 0.92 0.06
-------- -------- -------- -------- --------
Less: dividends and distributions to shareholders
Net investment income................................ (0.09)** (0.04) (0.06) -- --
-------- -------- -------- -------- --------
Net asset value, end of year.......................... $ 8.92 $ 8.88 $ 9.62 $ 4.34 $ 3.42
======== ======== ======== ======== ========
Per share market value, end of year................... $ 8.99 $ 8.49 $ 9.25 $ 3.97 $ 2.80
======== ======== ======== ======== ========
Total investment return:
Based on market price at beginning and end of year,
assuming reinvestment of dividends................. 6.89 % (7.40)% 134.56 % 41.79 % (13.85)%
Based on net asset value at beginning and end of year,
assuming reinvestment of dividends................. 1.40 % (6.89)% 123.09 % 26.90 % 1.79 %
Ratios and supplemental data:
Net assets, end of year (in millions)............... $28.0 $27.9 $30.2 $13.6 $10.7
Ratios to average net assets of:
Expenses, excluding Thai taxes applicable to net
investment income................................ 2.46 % 2.26 % 2.63 % 4.29 % 5.98 %
Expenses, including Thai taxes applicable to net
investment income ............................... 2.58 % 2.32 % 2.74 % 4.29 % 6.43 %
Expenses, excluding waiver of Administration and
Advisory fee applicable to net investment income. 3.04 % 2.85 % 3.31 % 4.98 % 7.09 %
Expenses, including waiver of Administration and
Advisory fee applicable to net investment income. 2.46 % 2.26 % 2.63 % 4.29 % 6.43 %
Net investment income (loss)...................... 1.36 % 0.63 % 0.62 % (2.20)% (4.77)%
Portfolio turnover.................................... 70.01 % 11.21 % 11.86 % 14.62 % 20.85 %
-------------------
+ Per share values are adjusted to reflect the one-for-two reverse stock split
effective August 5, 2002.
* After provision for Thai taxes.
**Actual dividend equals $0.095 per share.
-------------------
Report of Independent Registered Public Accounting Firm
To the Shareholders and
Board of Directors of
The Thai Capital Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Thai Capital Fund, Inc. (the
"Fund") at December 31, 2005, 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 accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with 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 are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2005 by correspondence with the custodians and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 17, 2006
Tax Information (unaudited)
The Fund is required by Subchapter M of the Internal Revenue Code of 1986,
as amended, to advise you within 60 days of the Fund's fiscal year end (December
31, 2005) as to the federal tax status of distributions totaling $0.04 per share
received by you during such fiscal year.
Accordingly, the Fund is hereby advising you that on December 19, 2005 the
Board of Directors of the Fund declared a total distribution of $0.095 per
share, all of which resulted from net investment income. The dividend was paid
on January 19, 2006 to shares of record at the close of business on December 30,
2005. The entire amount of this distribution is reportable as 2005 income.
There is no foreign tax deduction or credit available to shareholders for
calendar year 2005.
Shareholders are strongly advised to consult their own tax advisors with
respect to the tax consequences of their investment in the Fund.
Information Concerning Directors and Officers (unaudited)
The following table sets forth information concerning each of the Directors
and Officers of the Fund. The Directors of the Fund will serve for terms
expiring on the date of subsequent Annual Meetings of Stockholders in the year
2007 for Class I Directors, 2008 for Class II Directors and 2006 for Class III
Directors, or until their successors are duly elected and qualified.
Number of
Funds in
Principal Occupation Fund
or Employment During Complex
Past Five Years and Director or for Which
Name (Age) and Address of Directorships in Publicly Officer of Director
Directors/Officers Held Companies Fund Since Serves(1)
------------------------------------------------------------------------------------------------------------------------------------
Directors
Austin C. Dowling (73) Retired; Director, The Japan Equity Fund, Inc., since 1992; Class II 3
672 Medford Leas Director, The Singapore Fund, Inc., since 2000. Director since
Medford, NJ 08055 1990
Martin J. Gruber (68) Professor of Finance, Leonard N. Stern School of Business, New Class I Director 3
229 South Irving Street York University,since 1965; Director, The Japan Equity Fund, since 2000
Ridgewood, NJ 07450 Inc., since 1992; Director, TheSingapore Fund, Inc., since 2000;
Trustee, Scudder New York Mutual Funds,since 1992; Trustee,
C.R.E.F., from 2001 to 2005 and Chairman fromDecember 2003 to
2005; Trustee, T.I.A.A., from 1996 to 2000; Director,
NationalBureau of Economic Research, since August, 2005.
David G. Harmer (62) Public Services Department Director, City of Ogden, since Class I Director 3
4337 Bobwhite Court February 2005;Executive Director, Department of Community and since 2000
Ogden, UT 84403 Economic Development forthe State of Utah, from May 2002 to
January 2005; Chairman, 2K2 HostingCorporation, from April 2001
to April 2002; President, Jetway Systems, a divisionof FMC
Corporation, from 1997 until 2001; Director, The Japan Equity
Fund,Inc., since 1997; Director, The Singapore Fund, Inc., since
1996.
* Ikuo Mori (56) Chairman and CEO, Daiwa Securities America Inc., since 2001;
Daiwa Securities America Inc. Executive Officer, Daiwa Securities Group Inc., since 2001; Chairman of 2
Financial Square President and COO, Daiwa Securities America Inc., from 1996 to the Board and
32 Old Slip 2001; Chairman of the Board, The Singapore Fund, Inc., since Class III
New York, NY 10005 2001. Director since
2001
Oren G. Shaffer (63) Vice Chairman and Chief Financial Officer, Qwest Class II 3
1801 California Street Communications International Inc., since July 2002; Executive Vice Director since
Denver, CO 80202 President and Chief Financial Officer, Ameritech Corporation, from 2000
1994 to 2000; Director, The Japan EquityFund, Inc., since 2000;
Director, The Singapore Fund, Inc., since 1997.
Information Concerning Directors and Officers (unaudited) (concluded)
Number of
Funds in
Principal Occupation Fund
or Employment During Complex
Past Five Years and Director or for Which
Name (Age) and Address of Directorships in Publicly Officer of Director
Directors/Officers Held Companies Fund Since Serves(1)
------------------------------------------------------------------------------------------------------------------------------------
Officers
John J. O'Keefe (46) Vice President and Treasurer, The Japan Equity Fund, Inc. and The Vice President --
One Evertrust Plaza Singapore Fund, Inc., since 2000; Vice President, Fund Accounting and Treasurer
Jersey City, NJ 07302-3051 Department of Daiwa Securities Trust Company since 2000. of the Fund
since 2000
Yuko Uchida (27) Secretary, The Singapore Fund, Inc. and The Japan Equity Fund, Secretary of the --
One Evertrust Plaza Inc., since 2004; Client Reporting Department of Daiwa Securities Fund since 2004
Jersey City, NJ 07302-3051 Trust Company, since 2002.
Anthony Cambria (51) Chief Compliance Officer, The Singapore Fund, Inc. and The Japan Chief --
One Evertrust Plaza Equity Fund, Inc., since 2004; Director and Executive Vice Compliance
Jersey City, NJ 07302-3051 President, Daiwa Securities Trust Company, since 1999. Officer of the
Fund since
2004
Leonard B. Mackey, Jr. (54) Partner in the law firm of Clifford Chance US LLP, since 1983; Assistant --
31 West 52nd Street Assistant Secretary, The Singapore Fund, Inc. and The Japan Secretary of the
New York, NY 10019-6131 Equity Fund, Inc., since 2004. Fund since 2004
--------------------
1 "Fund Complex" includes the Fund, The Japan Equity Fund, Inc., The
Singapore Fund, Inc. and other investment companies advised by SCB Asset
Management Co., Ltd., Daiwa SB Investments (H.K.) Ltd., DBS Asset
Management (United States) Pte. Ltd., Daiwa SB Investments (Singapore)
Ltd., Daiwa SB Investments (USA) Ltd., Daiwa SB Investments Ltd. or their
respective affiliates.
* Directors so noted are deemed by the Fund's counsel to be "interested
persons" (as defined in the U.S. Investment Company Act of 1940, as
amended). Mr. Mori is deemed an interested person of the Fund because of
his affiliation with Daiwa Securities America Inc., an affiliate of the
Fund's investment adviser, Daiwa SB Investments (H.K.) Ltd.
(This page has been left blank intentionally.)
BOARD OF DIRECTORS
Ikuo Mori, Chairman
Austin C. Dowling
Martin J. Gruber
David G. Harmer
Oren G. Shaffer
--------------------------------------------------------------------------------
OFFICERS
John J. O'Keefe
Vice President and Treasurer
Yuko Uchida
Secretary
Anthony Cambria
Chief Compliance Officer
Leonard B. Mackey, Jr.
Assistant Secretary
--------------------------------------------------------------------------------
ADDRESS OF THE FUND
c/o Daiwa Securities Trust Company One Evertrust Plaza, 9th Floor Jersey City,
NJ 07302-3051
--------------------------------------------------------------------------------
INVESTMENT MANAGER
SCB 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
American Stock Transfer & Trust Company
LEGAL COUNSEL
Clifford Chance US LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 men-tioned in the report.
Annual Report
December 31, 2005
The Thai Capital
Fund, Inc.
Item 2. Code of Ethics.
(a) The registrant has adopted a code of ethics (the "Code of Ethics") that
applies to the registrant's principal executive officer and principal
financial and accounting officer. A copy of the registrant's Code of Ethics
is attached hereto as Exhibit 12(a).
(b) No information need be disclosed pursuant to this paragraph.
(c) The registrant has not amended the Code of Ethics during the period covered
by the shareholder report presented in Item 1 hereto.
(d) The registrant has not granted a waiver or an implicit waiver from a
provision of the Code of Ethics.
(e) Not applicable.
(f) (1) The Code of Ethics is attached hereto as Exhibit 12(a).
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The registrant's board of directors has determined that the registrant has
at least one audit committee financial expert serving on its audit committee.
The audit committee financial expert is Oren G. Shaffer who is "independent" for
purposes of this item.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2005
Registrant Covered Entities(1)
Audit Fees................. $55,000 N/A
Non-Audit Fees
Audit-Related Fees.... $5,849 -
Tax Fees.............. (2) $7,000 -
All Other Fees........ - -
Total Non-Audit Fees....... $7,000 -
Total...................... $67,849 -
2004
Registrant Covered Entities(1)
Audit Fees................. $56,440 N/A
Non-Audit Fees
Audit-Related Fees.... - -
Tax Fees.............. (2) -
$6,600 -
All Other Fees........ - -
Total Non-Audit Fees....... $6,600 -
Total...................... $63,040 -
---------------------
N/A- Not applicable, as not required by Item 4.
(1) "Covered Entities" include the registrant's investment adviser (excluding
any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and any
entity controlling, controlled by or under common control with the
registrant's adviser that provides ongoing services to the registrant.
(2) Tax Fees represent fees received for tax compliance services provided to
the registrant, including the review of tax returns.
---------------------
(e) (1) Before the registrant's principal accountant is engaged to render
audit or non-audit services to the registrant and non-audit services
to the registrant's investment adviser and its affiliates, each
engagement is approved by the registrant's audit committee.
(e) (2) 100% of the services described in each of (b) through (d) of this Item
4 were approved by the registrant's audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) See table above.
(h) The registrant's audit committee of the board of directors has considered
whether the provision of non-audit services that were rendered to Covered
Entities that were not pre-approved pursuant to paragraph (C)(7)(ii) of
Rule 2-01 of Regulation S-X is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
The registrant has a separately-designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Exchange Act. The
members of the audit committee are as follows: Austin C. Dowling, Martin J.
Gruber, David G. Harmer and Oren G. Shaffer.
Item 6. Schedule of Investments.
A Schedule of Investments is included as part of the report to shareholders
filed under Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
The registrant has delegated to its investment adviser the voting of
proxies relating to the registrant's portfolio securities. The registrant's
policies and procedures and those used by the investment adviser to determine
how to vote proxies relating to the registrant's portfolio securities, including
the procedures used when a vote presents a conflict of interest involving the
investment adviser or any of its affiliates, are contained in the investment
adviser's Proxy Voting Guidelines, which are attached hereto as Exhibit 12(c).
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Vijchu Chanatab is currently responsible for the day-to-day management of
the Fund. He has been managing the Fund since March 2005. SCB Asset Management
Co., Ltd., the Fund's investment manager, has employed Mr. Chantatab as an
equity fund manager since March 2005. Prior to that time, Mr. Chantatab was a
senior fund manager for BoA Asset Management Company Limited and a fund manager
at JP Morgan (Thailand) Securities Limited.
Other Accounts Managed by the Portfolio Managers. As of February 28, 2006,
Mr. Chanatab managed 11 mutual funds with a total of $130.8 million in assets;
no pooled investment vehicles other than mutual funds; and no other accounts.
Because Mr. Chanatab manages assets for other investment companies, there
may be an incentive to favor one client over another resulting in conflicts of
interest. For instance, Mr. Chanatab may receive fees from certain funds that
are higher than the fee it receives from the Fund. In those instances, Mr.
Chanatab may have an incentive to favor the higher fee accounts over the Fund.
SCB Asset Management Co., Ltd. has adopted trade allocation and other policies
and procedures that it believes are reasonably designed to address these and
other conflicts of interest.
Securities Ownership of Portfolio Managers. As of February 28, 2006, Mr.
Chanatab did not beneficially owned any securities in the Fund.
Portfolio Manager Compensation Structure. Mr. Chanatab receives a
combination of base compensation and discretionary compensation, comprising 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 Mr. Chanatab.
Compensation. Generally, Mr. Chanatab receives base salary compensation
based on the level of his position with the investment manager. In addition to
base compensation, Mr. Chanatab may receive discretionary compensation.
Discretionary compensation is comprised of a cash bonus, which is not directly
calculated from fund performance, but based on KPI, which evaluates fund
performance, competency, involvement in product development and compliancy. The
bonus is not directly calculated from fund performance, contribution to the
business objectives of the investment manager, the dollar amount of assets under
management, client contribution or any market compensation contributions.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders
may recommend nominees to the registrant's board of directors.
Item 11. Controls and Procedures.
(a) The registrant's principal executive and principal financial officer have
concluded that the registrant's disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date
within 90 days of the filing date of this Form N-CSR based on their
evaluation of these controls and procedures required by Rule 30a-3(b) under
the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under
the 1934 Act (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d))) that occurred during the registrant's second fiscal quarter
that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a) Code of Ethics for Principal Executive and Senior Financial Officers.
(b) Certifications required by Rule 30a-2(a) of the Investment Company Act of
1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002 are
attached hereto.
(c) Proxy Voting Guidelines for the registrant and its adviser.
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.
The Thai Capital Fund, Inc.
By \s\ John J. O'Keefe
-----------------------------------------------
John J. O'Keefe, Vice President & Treasurer
Date: February 28, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By \s\ John J. O'Keefe
-----------------------------------------------
John J. O'Keefe, Vice President & Treasurer
Date: February 28, 2006
By \s\ Ikuo Mori
-----------------------------------------------
Ikuo Mori, Chairman
Date: February 28, 2006
EXHIBIT 12 (a)
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL
OFFICERS
I. This Code of Ethics (the "Code") for The Thai Capital Fund, Inc., The
Singapore Fund, Inc. and The Japan Equity Fund, Inc. (each a "Fund" and
collectively the "Funds") applies to each Fund's President and Treasurer
(or persons performing similar functions) ("Covered Officers") for the
purpose of promoting:
o honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
o full, fair, accurate, timely and understandable disclosure in reports
and documents that a Fund files with, or submits to, the Securities
and Exchange Commission ("SEC") and in other public communications
made by a Fund;
o compliance with applicable laws and governmental rules and
regulations;
o prompt internal reporting of violations of the Code to an appropriate
person or persons identified in the Code; and
o accountability for adherence to the Code.
Each Covered Officer should adhere to a high standard of business ethics
and should be sensitive to situations that may give rise to actual as well as
apparent conflicts of interest. A Fund will expect all Covered Officers to
comply at all times with the principles in this Code. A violation of this Code
by an employee is grounds for disciplinary action up to and including discharge
and possible legal prosecution. Any question about the application of the Code
should be referred to the Audit Committee of the Fund's Board of Directors ( the
"Audit Committee").
II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of
Interest
OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private
interest interferes with the interests of, or his service to, a Fund. For
example, a conflict of interest would arise if a Covered Officer, or a member of
his family, receives improper personal benefits as a result of his position with
a Fund.
Certain conflicts of interest arise out of the relationships between
Covered Officers and a Fund and already are subject to conflict of interest
provisions in the Investment Company Act of 1940 (the "Investment Company Act")
and the Investment Advisers Act of 1940 (the "Investment Advisers Act"). For
example, Covered Officers may not individually engage in certain transactions
(such as the purchase or sale of securities or other property) with a Fund
because of their status as "affiliated persons" of a Fund. The compliance
programs and procedures of a Fund and the Fund's Investment Manager and
Investment Adviser are designed to prevent, or identify and correct, violations
of these provisions. Certain conflicts of interest also arise out of the
personal securities trading activities of the Covered Officers and the
possibility that they may use information regarding a Fund's securities trading
activities for their personal benefit. Each Fund's Code of Ethics under Rule
17j-1 under the Investment Company Act is designed to address these conflicts of
interest. This Code does not, and is not intended to, replace these programs and
procedures or a Fund's Rule 17j-1 Code of Ethics, and this Code's provisions
should be viewed as being additional and supplemental to such programs,
procedures and code.
Although typically not presenting an opportunity for improper personal
benefit, conflicts arise from, or as a result of, the contractual relationship
between a Fund and its Investment Adviser or Investment Manager of which the
Covered Officers are also officers or employees. As a result, this Code
recognizes that the Covered Officers will, in the normal course of their duties
(whether formally for a Fund or for its Investment Adviser or Investment
Manager, or for all parties), be involved in establishing policies and
implementing decisions that will have different effects on the Investment
Adviser or Investment Manager and a Fund. The participation of the Covered
Officers in such activities is inherent in the contractual relationship between
a Fund and its Investment Adviser or Investment Manager and is consistent with
the performance by the Covered Officers of their duties as officers of a Fund.
Thus, if performed in conformity with the provisions of the Investment Company
Act and the Investment Advisers Act, such activities will be deemed to have been
handled ethically. In addition, it is recognized by a Fund's Board of Directors
(the "Board") that the Covered Officers may also be officers or employees of one
or more other investment companies covered by other codes.
Each Covered Officer must not:
o use his personal influence or personal relationships improperly to
influence investment decisions or financial reporting by a Fund
whereby the Covered Officer would benefit personally to the detriment
of a Fund;
o cause a Fund to take action, or fail to take action, for the
individual personal benefit of the Covered Officer rather than the
benefit of the Fund; and
o use material non-public knowledge of portfolio transactions made or
contemplated for, or actions proposed to be taken by, a Fund to trade
personally or cause others to trade personally in contemplation of the
market effect of such transactions.
Each Covered Officer must, at the time of signing this Code, report all
material business affiliations outside a Fund and must update the report
annually.
Covered Officers should avoid situations which involve the appearance of,
or potential for, conflicts of interest. Examples of these situations include:
o accepting directly or indirectly, anything of value, including gifts
and gratuities in excess of $100 per year from any person or entity
with which a Fund has current or prospective business dealings, not
including occasional meals or tickets to theatre or sporting events or
other similar entertainment, provided it is business-related,
reasonable in cost, appropriate as to time and place and not so
frequent as to raise any question of impropriety;
o any ownership interest in, or any consulting or employment
relationship with, any of a Fund's service providers, other than its
Investment Adviser or Investment Manager or any affiliated person
thereof; and
o a direct or indirect financial interest in commissions, transaction
charges or spreads paid by a Fund for effecting portfolio transactions
or for selling or redeeming shares other than an interest arising from
the Covered Officer's employment, such as compensation or equity
ownership.
In situations involving a Covered Officer which involve the appearance of,
or the potential for, conflicts of interest, but where the Covered Officer
believes that no significant conflict of interest exist, the Covered Officer
must obtain prior written approval from the Audit Committee before becoming
involved in that situation. No such approval shall be considered a waiver of
this Code.
III. Disclosure and Compliance
o Each Covered Officer should familiarize himself with the
disclosure and compliance requirements generally applicable to a
Fund;
o Each Covered Officer should not knowingly misrepresent, or cause
others to misrepresent, facts about a Fund to others, whether
within or outside a Fund, including to a Fund's directors and
auditors, or to governmental regulators and self-regulatory
organizations;
o Each Covered Officer should, to the extent appropriate within his
area of responsibility, consult with other officers and employees
of a Fund and its Investment Adviser or Investment Manager with
the goal of promoting full, fair, accurate, timely and
understandable disclosure in the reports and documents a Fund
files with, or submits to, the SEC and in other public
communications made by a Fund; and
o It is the responsibility of each Covered Officer to promote
compliance with the standards and restrictions imposed by
applicable laws, rules and regulations.
IV. Reporting and Accountability
Each Covered Officer must:
o upon adoption of the Code or (thereafter as applicable, upon
becoming a Covered Officer), affirm in writing to the Board that
he has received, read and understands the Code;
o annually thereafter affirm to the Board that he has complied with
the requirements of the Code;
o not retaliate against any other Covered Officer or any employee
of a Fund or their affiliated persons for reports of potential
violations that are made in good faith; and
o notify the Audit Committee promptly if he knows of any violation
of this Code. Failure to do so is itself a violation of this
Code.
The Audit Committee is responsible for applying this Code to specific
situations in which questions are presented under it and has the authority to
interpret this Code in any particular situation. Any waivers sought by a Covered
Officer must be considered by the Audit Committee.
A copy of this Code shall be delivered to each employee of a Fund and each
employee of its Investment Adviser and Investment Manager annually together with
a memorandum requesting that any violations of the Code be communicated
immediately to the Audit Committee.
Each Fund will follow these procedures in investigating and enforcing this
Code:
o the Audit Committee will take all appropriate action to
investigate any potential violations reported to it;
o if, after such investigation, the Audit Committee believes that
no violation has occurred, the Audit Committee is not required to
take any further action;
o if the Audit Committee determines that a violation has occurred,
it will consider appropriate action, which may include review of,
and appropriate modifications to, applicable policies and
procedures; notification to appropriate personnel of the
Investment Adviser or its board; or a recommendation to dismiss
the Covered Officer;
o the Audit Committee will be responsible for granting waivers of
this Code, as appropriate; and
o any changes to or waivers of this Code will, to the extent
required, be disclosed as provided by SEC rules.
V. Changes To or Waivers of the Code
No change to or waiver of any provision of this Code will be effective
until a Fund discloses the nature of any amendment to, or waiver from, a
provision of the Code in its Form N-CSR, or on its website within five business
days following the date of the amendment or waiver if this method of disclosure
has been established in its Form N-CSR and made available on its website for
twelve months. Any waiver of provisions of this Code will be reported in filings
with the SEC and otherwise reported to a Fund's stockholders to the full extent
required by the rules of the SEC and by any applicable rules of any securities
exchange on which a Fund's securities are listed.
VI. Other Policies and Procedures
This Code shall be the sole code of ethics adopted by each Fund for
purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and
forms applicable to registered investment companies thereunder. Insofar as other
policies or procedures of a Fund or its Investment Adviser, Investment Manager
or other service providers govern or purport to govern the behavior or
activities of the Covered Officers who are subject to this Code, they are
superseded by this Code to the extent that they conflict with the provisions of
this Code.
VII. Amendments
Any amendments to this Code must be approved or ratified by a majority vote
of the Audit Committee and the Board, including a majority of directors who are
not interested persons as defined in the Investment Company Act.
VIII. Confidentiality
All reports and records prepared or maintained pursuant to this Code will
be considered confidential and shall be maintained and protected accordingly.
Except as otherwise required by law or this Code, such matters shall not be
disclosed to anyone other than the Audit Committee, the Board, the Fund and its
counsel and its Investment Adviser and Investment Manager and their respective
counsel.
IX. Internal Use
The Code is intended solely for the internal use by a Fund and does not
constitute an admission, by or on behalf of a Fund, as to any fact, circumstance
or legal conclusion.
I have read and understand the terms of the Code. I recognize the
responsibilities and obligations incurred by me as a result of my being subject
to the Code. I hereby agree to abide by the Code.
-------------------------
Date:_____________________
EXHIBIT 12 (b)
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John J. O'Keefe, certify that:
1. I have reviewed this report on Form N-CSR of The Thai Capital Fund, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations, changes in net
assets, and cash flows (if the financial statements are required to include
a statement of cash flows) of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Rule 30a-2(c) under the Investment Company Act of 1940) and internal
control over financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of a date
within 90 days prior to the filing date of this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's 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
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or
operation of internal control which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize, and
report financial information; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting.
Date: February 28, 2006
\s\ John J. O'Keefe
-----------------------------------------------------
John J. O'Keefe, Vice President & Treasurer
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ikuo Mori, certify that:
1. I have reviewed this report on Form N-CSR of The Thai Capital Fund, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations, changes in net
assets, and cash flows (if the financial statements are required to include
a statement of cash flows) of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Rule 30a-2(c) under the Investment Company Act of 1940) and internal
control over financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of a date
within 90 days prior to the filing date of this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's 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
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or
operation of internal control which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize, and
report financial information; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting.
Date: February 28, 2006
By \s\ Ikuo Mori
--------------------------------------------
Ikuo Mori, Chairman
CERTIFICATION
PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, the Vice President & Treasurer of The Thai Capital Fund,
Inc. (the "Fund"), with respect to the Form N-CSR for the period ended December
31, 2005 as filed with the Securities and Exchange Commission, hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
1. such Form N-CSR fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. the information contained in such Form N-CSR fairly presents, in all
material respects, the financial condition and results of operations of the
Funds.
Dated: February 28, 2006
\s\ John J. O'Keefe
-----------------------------------------------------
John J. O'Keefe, Vice President & Treasurer
This certification is being furnished solely pursuant to 18 U.S.C. Section
1350 and is not being filed as part of the Report or as a separate disclosure
document.
CERTIFICATION
PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, the Chairman of The Thai Capital Fund, Inc. (the "Fund"),
with respect to the Form N-CSR for the period ended April 30, 2005 as filed with
the Securities and Exchange Commission, hereby certifies, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
1. such Form N-CSR fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in such Form N-CSR fairly presents, in all
material respects, the financial condition and results of operations
of the Funds.
Dated: February 28, 2006
\s\ Ikuo Mori
----------------------------------------------------
Ikuo Mori, Chairman
This certification is being furnished solely pursuant to 18 U.S.C.
Section 1350 and is not being filed as part of the Report or as a separate
disclosure document.
EXHIBIT 12 (c)
The Thai Capital Fund, Inc.
Proxy Voting Policy and Procedures
The Board of Directors of The Thai Capital Fund, Inc. (the "Fund") hereby adopts
the following policy and procedures with respect to voting proxies relating to
Fund securities managed by SCB Asset Management. (the "Investment Manager").
I. Policy
It is the policy of the Board of Directors of the Fund (the "Board") to delegate
the responsibility for voting proxies relating to securities held by the Fund to
the Investment Manager as part of the Investment Manager's general management of
the Fund's assets, subject to the Board's continuing oversight. The Board of
Directors of the Fund hereby delegates such responsibility to the Investment
Manager, and directs the Investment Manager to vote proxies relating to Fund
portfolio securities managed by the Investment Manager consistent with the
duties and procedures set forth below. The Investment Manager may retain one or
more vendors to review, monitor and recommend how to vote proxies in a manner
consistent with the duties and procedures set forth below, to ensure such
proxies are voted on a timely basis and to provide reporting and/or record
retention services in connection with proxy voting for the Fund.
II. Fiduciary Duty
The right to vote a proxy with respect to securities held by the Fund is an
asset of the Fund. The Investment Manager, to which authority to vote on behalf
of the Fund is delegated, acts as a fiduciary of the Fund and must vote proxies
in a manner consistent with the best interest of the Fund and its shareholders.
In discharging this fiduciary duty, the Investment Manager must maintain and
adhere to its policies and procedures for addressing conflicts of interest and
must vote in a manner substantially consistent with its policies, procedures and
guidelines, as presented to the Board.
III. Procedures
The following are the procedures adopted by the Board for the administration of
this policy.
A. Review of Investment Manager's Proxy Voting Procedures. The Investment
Manager shall present to the Board their policies, procedures and other
guidelines for voting proxies at least annually, and must notify the Board
promptly of material changes to any of these documents, including changes
to policies addressing conflicts of interest.
B. Voting Record Reporting. The Investment Manager shall provide the voting
record information necessary for the completion and filing of Form N-PX to
the Fund at least annually. Such voting record information shall be in a
form acceptable to the Fund and shall be provided at such time(s) as are
required for the timely filing of Form N-PX and at such additional time(s)
as the Fund and the Investment Manager may agree from time to time. With
respect to those proxies that the Investment Manager has identified as
involving a conflict of interest(1), the Investment Manager shall submit a
separate report indicating the nature of the conflict of interest and how
that conflict was resolved with respect to the voting of the proxy.
C. Record Retention. The Investment Manager shall maintain such records
with respect to the voting of proxies as may be required by the Investment
Advisers Act of 1940 and the rules promulgated thereunder or by the
Investment Company Act of 1940 and the rules promulgated thereunder.
D. Conflicts of Interest. Any actual or potential conflicts of interest
between the Investment Manager and the Fund's shareholders arising from the
proxy voting process will be addressed by the Investment Manager and the
Investment Manager's application of its proxy voting procedures pursuant to
the delegation of proxy voting responsibilities to the Investment Manager.
In the event that the Investment Manager notifies the officer(s) of the
Fund that a conflict of interest cannot be resolved under the Investment
Manager's Proxy Voting Procedures, such officer(s) are responsible for
notifying the Chairman of the Board of the Fund of the irreconcilable
conflict of interest and assisting the Chairman with any actions he
determines are necessary.
IV. Revocation
The delegation by the Board of the authority to vote proxies relating to
securities of the Fund is entirely voluntary and may be revoked by the Board, in
whole or in part, at any time.
V. Annual Filing
The Fund shall file an annual report of each proxy voted with respect to
securities of the Fund during the twelve-month period ended June 30 on Form N-PX
not later than August 31 of each year.(2)
VI. Disclosures
A. The Fund shall include in its annual report filed on Form N-CSR:
1. a description of this policy and of the policies and procedures
used by the Fund and the Investment Manager to determine how to vote
proxies relating to portfolio securities or copies of such policies
and procedures; and
2. a statement disclosing that a description of the policies and
procedures used by or on behalf of the Fund to determine how to vote
proxies relating to securities of the Fund is available without
charge, upon request, by calling the Fund's toll-free telephone
number; through a specified Internet address, if applicable; and on
the SEC's website; and
3. a statement disclosing that information regarding how the Fund
voted proxies relating to Fund securities during the most recent
12-month period ended June 30 is available without charge, upon
request, by calling the Fund's toll-free telephone number; or through
a specified Internet address; or both; and on the SEC's website.
VII. Review of Policy
The Board shall review from time to time this policy to determine its
sufficiency and shall make and approve any changes that it deems necessary from
time to time.
Adopted:
Proxy voting policy for SCB Asset Management Co., Ltd.
Statement of Policies and Procedures for
Voting Proxies
INTRODUCTION
As a registered investment adviser, SCB Asset Management Co., Ltd.
("SCBAM," "we" or "us") has a fiduciary duty to act solely in the best interests
of our clients. As part of this duty, we recognize that we must exercise voting
rights in the best interests of our clients.
SCBAM recognizes the importance of good corporate governance in ensuring
that management and boards of directors fulfill their obligations to
shareholders. As part of our investment process, we take into account the
attitudes of management and boards of directors on corporate governance issues
when deciding whether to invest in a company.
SCBAM is a global investment manager, and invests significantly in emerging
markets. It should be noted that protection for shareholders may vary
significantly from jurisdiction to jurisdiction, and in some cases may be
substantially less than in the U.S. or developed countries.
This statement is intended to comply with Rule 206(4)-6 of the Investment
Advisers Act of 1940. It sets forth the policy and procedures of SCBAM for
voting proxies for our clients, including investment companies registered under
the Investment Company Act of 1940.
PROXY VOTING POLICIES
It is the general policy of SCBAM to support management of the companies in
which it invests and will cast votes in accordance with management's proposals.
However, SCBAM reserves the right to depart from this policy in order to avoid
voting decisions that we believe may be contrary to our clients' best interests.
Elections of Directors: In many instances, election of directors is a
routine voting issue. Unless there is a proxy fight for seats on the Board or we
determine that there are other compelling reasons for withholding votes for
directors, we will vote in favor of the management proposed slate of directors.
That said, we believe that directors have a duty to respond to shareholder
actions that have received significant shareholder support. We may withhold
votes for directors that fail to act on key issues such as failure to implement
proposals to declassify boards, failure to implement a majority vote
requirement, failure to submit a rights plan to a shareholder vote and failure
to act on tender offers where a majority of shareholders have tendered their
shares.
Appointment of Auditors: The selection of an independent accountant to
audit a company's financial statements is generally a routine business matter.
SCBAM believes that management remains in the best position to choose the
accounting firm and will generally support management's recommendation.
Changes in Capital Structure: Changes in a company's charter, articles of
incorporation or by-laws are often technical and administrative in nature.
Absent a compelling reason to the contrary, SCBAM will cast its votes in
accordance with the company's management on such proposals. However, we will
review and analyze on a case-by-case basis any non-routine proposals that are
likely to affect the structure and operation of the company or have a material
economic effect on the company.
Corporate Restructurings, Mergers and Acquisitions: SCBAM believes proxy
votes dealing with corporate reorganizations are an extension of the investment
decision and will take account of our investment process policy in deciding how
to vote.
Corporate Governance: SCBAM recognizes the importance of good corporate
governance in ensuring that management and the board of directors fulfill their
obligations to the shareholders. We generally favor proposals promoting
transparency and accountability within a company.
Social and Corporate Responsibility: SCBAM recognizes the importance of
supporting sound and responsible policies in relation to social, political and
environmental issues. However, in the interests of shareholders, we reserve the
right to vote against proposals that are unduly burdensome or result in
unnecessary and excessive costs to the company. We may abstain from voting on
social proposals that do not have a readily determinable financial impact on
shareholder value.
Executive Compensation: SCBAM believes that company management and the
compensation committee of the board of directors should, within reason, be given
latitude to determine the types and mix of compensation and benefit awards
offered. Whether proposed by a shareholder or management, we will review
proposals relating to executive compensation plans and, if deemed excessive, may
vote against the proposals.
PROXY VOTING PROCEDURES
Proxy voting
Our portfolio management team is responsible for the coordination of
SCBAM's proxy voting. They liaise with the Product managers and/or the Proxy
voting committee to ascertain how SCBAM will vote. They will then instruct the
relevant Custodians. The portfolio management team is also responsible for
ensuring that full and adequate records of proxy voting are kept.
The Product managers will implement the Proxy voting policies by
instructing proxy voting in accordance with the general principles contained
herein.
Proxy Voting Committee
We have formed a Proxy Voting Committee to regularly review our general
proxy policies and consider specific proxy voting matters as and when deemed
necessary. Members of the committees include senior investment personnel and
representatives of the Legal & Compliance Department. The committee may also
evaluate proxies where we face a material conflict of interest (as discussed
below).
Conflicts of Interest
SCBAM recognizes that there is a potential conflict of interest when we
vote a proxy solicited by an issuer with whom we have any material business or
personal relationship that may affect how we vote on the issuer's proxy. We
believe that oversight by the proxy voting committee ensures that proxies are
voted with only our clients' best interests in mind. In order to avoid any
perceived conflict of interests, the following procedures have been established
for use when we encounter a potential conflict.
a. The portfolio management team will refer to the Legal and compliance
team any proxy votes that are issued by existing clients or where
SCBAM holds a significant voting percentage of the company. The Legal
and compliance team will make the initial determination about whether
a material conflict of interest exists based on the facts and
circumstances of each particular situation.
b. If our proposed vote is consistent with our stated proxy voting
policy, no further review is necessary.
c. If our proposed vote is contrary to our stated proxy voting policy but
is also contrary to management's recommendation, no further review is
necessary.
d. If our proposed vote is contrary to our stated proxy voting policy and
is consistent with management's recommendation, the proposal is
escalated to the proxy committee for final review and determination.
Proxies of Certain Non-U.S. Issuers
Proxy voting in certain countries requires "share blocking." That is,
shareholders wishing to vote their proxies must deposit their shares shortly
before the date of the meeting (usually one-week) with a designated depositary.
During this blocking period, shares that will be voted at the meeting cannot be
sold until the meeting has taken place and the shares are returned to the
clients' custodian banks. SCBAM may determine that the value of exercising the
vote does not outweigh the detriment of not being able to transact in the shares
during this period. Accordingly, if share blocking is required we may abstain
from voting those shares. In such a situation we would have determined that the
cost of voting exceeds the expected benefit to the client.
PROXY VOTING RECORD
Clients may obtain information on how SCBAM voted with respect to their
proxies by contacting our Client services team at SCB Asset Management Co.,
Ltd., 130-132 Sindhorn Tower 3 Bldg., 23rd Floor, Wireless Road, Phatumwam,
Bangkok 10330, Thailand, Tel No. 66-2263-2800 ext. 2222, Fax No. 66-2263-4001 or
email www.marketing@scbam.com.
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(1) As it is used in this document, the term "conflict of interest" refers to a
situation in which the Investment Manager or affiliated persons of the
Investment Manager have a financial interest in a matter presented by a
proxy other than the obligation they incur as Investment Manager to the
Fund which could potentially compromise the Investment Manager's
independence of judgment and action with respect to the voting of the
proxy.
(2) The Fund must file its first report on Form N-PX not later than August 31,
2004, for the twelve-month period beginning July 1, 2003, and ending June
30, 2004.