<Page>
SEMI-ANNUAL REPORT
JUNE 30, 2004
[GRAPHIC]
THE THAI CAPITAL
FUND, INC.
<Page>
THE THAI CAPITAL FUND, INC.
GENERAL INFORMATION
THE FUND
The Thai Capital Fund, Inc. (the "Fund") is a non-diversified, closed-end
management investment company. The Fund seeks long-term capital appreciation
through investment primarily in equity securities of Thai companies. The Fund's
investments in Thailand are made through a wholly-owned Investment Plan
established under an agreement between 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
Commencing December 24, 2003, the Fund's shares were 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 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, the proxy voting policies
and procedures, the code of ethics and the audit committee charter.
INQUIRIES
All general inquiries and requests for information should be directed to
the Fund at (800) 426-5523. 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 share account, please contact EquiServe
Trust Company, N.A. (the "Plan Agent") at the address shown below.
DIVIDEND REINVESTMENT PLAN
A Dividend Reinvestment Plan (the "Plan") is available to provide
Shareholders with automatic reinvestment of dividends and capital gain
distributions in additional Fund shares. A brochure fully describing the Plan's
terms and conditions is available from the Plan Agent at the following address:
The Thai Capital Fund, Inc.
c/o EquiServe Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
Telephone: (800) 426-5523
<Page>
July 28, 2004
DEAR SHAREHOLDERS:
The management of 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 six months ended June 30, 2004.
THAILAND ECONOMIC REVIEW
Fundamentally, the economy as a whole in the first quarter of 2004 showed
strong growth momentum, particularly notable in private investment. Quarterly
capacity utilization reached 76.5%, the highest since 1996. The Private
Investment Index rose at an accelerated rate of 19.3% year-on-year ("YoY").
Loans grew at a higher rate than seen in the fourth quarter of 2003. At the same
time, the country's external position remained healthy, both in respect of
exports and the current account, which was in a surplus. Supported by these
factors, first quarter 2004 ("1Q04") Gross Domestic Product ("GDP") growth is
estimated at 6.5%.
The driving force this year will continue to be capital expenditure, which
we see growing in double digits this year. Under girding this growth will be
constructive business spending, a rise in profits ahead of cyclic peaking of
margins and a drop in cost of capital in the presence of a low interest rate
environment. Our expectation of capital expenditure growth is founded on the
fact that many industries are reaching near full capacity. As they approach
capacity, manufacturers will approach banks for credit. As of April, the Private
Investment Index has shown solid cumulative growth of 19.6%.
Thailand's economic imbalances on both the internal and external fronts
during the crisis have been largely restored, with narrowing fiscal deficits,
healthy current account surpluses, recovery of consumption back to pre-crisis
levels, much less excess supply and capacity, and lower corporate debt to
equity. We believe Thailand is ready for the next economic cycle, driven by
investment-led growth.
At the same time, consumer spending (53% of GDP) has been the main pillar
of economic growth for several years and this should continue.
KEY ECONOMIC INDICATORS
<Table>
<Caption>
2002 2003 2004F 4Q03 1Q04
---------------------------------------------------------------------------
GDP YoY% 5.3 6.8 6.5 7.8 6.5
Exports YoY% 5.7 17.4 11.3 23.0 20.9
Imports YoY% 4.5 17.1 15.7 25.2 27.3
Current account balance % of GDP 6.0 5.5 3.2 6.6 n.a.
Budget balance % of GDP -2.4 0.1 -1.5 -2.6 n.a.
Consumer price YoY% 0.6 1.8 2.7 1.6 1.9
Money supply (M2A) YoY% 2.4 5.3 5.7 5.1 7.1
Minimum lending rate % 6.75 5.75 6.25 5.75 5.75
---------------------------------------------------------------------------
</Table>
The economy continued to expand in May, though at a slower pace than
expected, according to the Bank of Thailand's (BoT) monthly economic indicators.
This appeared to be partly the result of higher energy costs and concerns about
an economic slowdown in China. Nonetheless, the external account position
improved notably as the trade and current accounts swung back into surplus.
Monetary indicators such as money supply (M2A) growth and increased lending
suggest continuing stable economic expansion in the periods ahead.
2
<Page>
The Manufacturing Production Index ("MPI") rose by 6.8% YoY in May,
slightly below the rise of 6.9% in the previous month. Processed food production
fell by 17.7% due to a shortage of raw materials and this appeared to be a major
factor behind the overall decline in domestic production. On the plus side,
production of vehicles and electronic components, which together account for 27%
of domestic output, expanded by 25% and 13%, respectively.
Although in aggregate terms manufacturing activity was flat, industrial
capacity utilization (CU) bounced back to 73.3% from 69.1% in April. For the
food industry, utilization was just 37.8%, dragging down the overall utilization
level. For the iron and steel (71.3%), vehicle (86.2%) and petrochemical (88.2%)
industries, capacity utilization stayed at high levels. The average capacity
utilization rate of 73.84% in the first five months of 2004 matched the
pre-crisis average level of 75%.
In May, private investment growth slowed to 14.1% YoY from 18.9% in the
previous month as business sentiment deteriorated on fears of rising production
costs. International oil prices (Brent crude) peaked at US$40.40 per barrel on
May 20, 2004. The Business Sentiment Index (BSI) has fallen for three successive
months from 50.9 points in March to 49.7 in May.
THAILAND'S ECONOMIC OUTLOOK FOR 2004
Although the 6.5% GDP growth rate in 1Q04 was below the consensus forecast
of 7.5%, the economic outlook remains favorable with full-year growth estimated
at 6.5%. The impetus will be provided in the main by private consumption and
fixed capital spending. The key risk factors are soaring energy costs and
security concerns in the south.
Continuing as the major contributor to growth, consumer spending remains
pivotal to growth. Purchasing power was boosted by the average 16% rise in
income in 2003 and the low jobless rate of 2.8% as of 1Q04; productivity grew by
9% in 2003. Solid demand growth in the domestic and export markets implies a
favorable outlook for the job market and consumption. However, please keep in
mind that this year's low level surpasses last year's.
Adding to consumer spending, private investment is on an upward cycle.
Private investment should make a bigger contribution to economic growth in
upcoming quarters. Spare capacity is declining (the capacity utilization rate
stood at 75.6% in 1Q04) and in the presence of a forecast for rising demand
(both domestic and overseas), this implies higher investment expenditures.
Recent increases in imports of capital goods and raw materials support this
view.
On the external front, fears of the impact on Thailand of China's managed
economic slowing continue to be seen. However, even if Thai exports to China as
well as to Thailand's major trading partners in Asia are cut back, the impact on
the second half of 2004 is likely to be only 0.5% of GDP, as a significant
portion of Thai exports (e.g. electronic components) is likely to be
re-exported. Tourism from China adds another 0.6% to GDP. Thus a 20% slowdown
for example, should have negligible impact. Moreover, an expected boost in
government spending at the end of the fiscal year (September) followed by
elections a few months afterward can largely offset the China factor.
In all, Thai economic figures are firm, but growth is slowing. The impact
of the reoccurrence of avian flu should be temporary. The government's
pro-growth strategy contains plans to boost spending as a whole.
3
<Page>
THAI STOCK MARKET OVERVIEW & OUTLOOK
In January, Thailand was one of the worst performing markets in the world,
falling 9.49%, with returns badly affected by the admission that avian influenza
(bird flu) was present in Thailand, giving investors an excuse to sell down.
Avian flu spread to more than twenty of the nation's 76 provinces and
authorities culled 10 million chickens. The government has budgeted to pay Bt1
billion compensation to chicken farmers. Foreign investors continued as net
sellers in January at Bt22 billion vs. net sell of Bt5 billion in December 2003.
Local investors were net purchasers in the market but slowed from net purchases
of Bt7.5 billion in December to Bt4 billion in January. Retail investors posted
net purchases of Bt18 billion.
In the first half of February, the Thai stock market rose, driven in the
main by communications and energy shares, the former on expectation that telecom
reform will take place in the second quarter of 2004 as the National
Telecommunication Committee ("NTC") was scheduled to be set up by the end of
March--something which at the time of this writing has yet to take place; the
latter was based on a surprise cut in oil supplies by OPEC on February 11, 2004.
The SET Index rose 8.05% from the end of January to close at 755.18 on February
13, 2004, with big sell-offs on two days during that period on the back of
uncertainty created by avian flu.
However, in the second half of the month, the Thai market went in the
opposite direction. After the SET Index declined from 755.18 to trade below 700,
it bounced back sharply on a technical rebound on the last trading day to close
at 716.30, an increase of 2.49% month-on-month ("MoM"). A major negative factor
was renewed concern about the spread of avian flu after the Deputy Agriculture
Minister announced that there was one additional red zone area and recurring
breakouts in eight more provinces. Then the market was spooked again by news
that over 200 cattle died in Kalasin province and that avian flu was being found
in pet cats in Nakorn Pathom on February 19, 2004 as well as other negative
factors.
In March, the sell-off in the first three days in the month pushed the SET
Index down 20 points from 716.30 to 696.24, mainly driven by the degrading of
Thailand's weighting from "overweight" to "neutral" by several foreign
investment houses and the shift in weighting to other countries such as Malaysia
and Taiwan. Negative sentiment was further spurred by weakness in energy shares
after the government decided to scrap the share swap deal between The
Electricity Generating Authority of Thailand and Banpu for their respective
stakes in Ratchaburi Electricity and Electricity Generating on March 2, 2004.
The SET Index bounced back to stand above 700 and traded between 700-710
from March 4 to 11, 2004 on the back of several positive news items:
(1) Fitch Ratings raised the outlook on Thailand's long term foreign and
local currency sovereign ratings of BBB and A-minus from stable to
positive.
(2) The National Economic and Social Development Board ("NESDB") released
Thailand's fourth quarter 2003 GDP, revealing growth of 7.8% YoY,
beating market expectations.
(3) The FTSE Group released its Asia (ex-Japan) annual review, with the new
changes becoming effective on March 22, 2004. This resulted in an
increase in Thailand's weighting in All-World Asia Pacific ex-Japan
from 1.52% to 1.80%.
(4) Expectation that the Senate would nominate the seven final members of
the NTC board by the end of June, after the Cabinet was to appoint a
Senate committee to check the background of fourteen NTC candidates;
this was positive to telecommunication shares.
4
<Page>
(5) Dr. Somkid returned as Finance Minister and immediately eased several
market measures on March 11, 2004, including the maintenance of the
fixed commission rate of 0.25% for the next two years, postponement of
the 10% collateral requirement for trading in cash accounts from April
1, 2004 to July 1, 2004 and reversing the plan to prevent net
settlement and margin trading in rehabilitation stocks ahead of the
Thai Securities and Exchange Commission's board approval on the above
mentioned issues on March 17, 2004.
However, the rebound was not sustainable and the Thai market moved down to
trade below 700 for the rest of the month, with a couple days of rebound. The
SET Index closed at 647.30, a decrease of 9.63% MoM. A bomb in Madrid killing
more than 190 people on March 11, 2004 ignited fears of further terrorist
attacks, triggering a sell-off. Rising tension in the Middle East after Israel
assassinated Sheikh Yasin of Hammas, increasing violence in Southern Thailand,
plus gloomy regional market sentiment were added negatives to the Thai market.
In April, foreign investors started the month with a huge buy, bringing the
SET Index up to the month's high of 714 during the Songkran holiday.
Subsequently, regional concerns over China's announcement of a managed slowdown
and unrest in Thailand's far south caused selling pressure from foreigners, who
then ended the month in a flat position. Local retail investors were net sellers
of Bt400 million, the same as the amount of net purchases by local funds.
In May, the SET Index closed at 641.05, down only 1.1% MoM, despite a sharp
10% drop to a low of 580 over the month. Sectors supporting the recovery of the
SET Index included chemicals (+4.4%), energy (+3.8%) and transport (+1.8%). The
weakest were those that are interest-rate sensitive: property declined by 10%.
Market turnover also dropped 18% from Bt22.8 billion/day to Bt18.7 billion/day
even though there were fewer holidays than in April. Foreigners continued to be
net sellers at Bt17.7 billion, whereas local fund net purchases jumped to Bt12.5
billion, a portion contributed by the Vayupak Fund's (government investment in
both listed and non-listed state enterprises, including companies in which the
Ministry of Finance has holdings) buying the market. To date, the Vayupak Fund
has spent Bt5 billion out of a budgeted Bt30 billion. Dampening sentiment on the
fundamental side during the month was the drop in manufacturer confidence to
98.2 points from 106.3 points in March on concerns that surging oil prices will
raise production and transportation costs. The government raised gasoline prices
by as much as 3.5% and is planning to cut the subsidies it pays to refiners and
oil companies. The government also cut its 2004 GDP forecast to 7.1% from 7.9%.
In June, foreign selling was very aggressive, taking the SET Index to the
low 600's; however, the market rebounded nicely to close at 647 and posted a
return of 0.87%. Average daily turnover continued to sink, dropping 13% MoM to
Bt16 billion/day. However, the good news was that for the whole month of June,
foreigners were net buyers--the first time since August 2003 (net buy of Bt670
million). Local funds were heavy net buyers of Bt4.6 billion vs. retail net
sales of Bt5.2 billion. The health sector outperformed the greatest (+17% MoM)
and the chemical (+6.5%) and shipping sectors rebounded sharply after oil prices
began to fall in the second half of the month. Banks (+1.3%) were aided by a
change to the deposit insurance scheme and an investment upgrade by S&P. The SET
Index was dominated by movements in the price of oil, anticipation of a rise in
U.S. interest rates and concerns over China.
After all was said and done, the SET Index closed at 646.64 on June 30,
2004, a drop of 16.26% from December 31, 2003, mostly in 1Q04. On a quarterly
basis, in 1Q04 the SET Index sank 16.16% and in the second quarter of 2004
("2Q04") the drop was only 0.10%. Daily average trading value declined from
Bt28.38 billion in 1Q04 to Bt19.07 billion in 2Q04.
5
<Page>
FUND PERFORMANCE AND STRATEGY
As of June 30, 2004, the Fund consisted of 3,139,428 shares with total net
assets of US$25.3 million, equivalent to a net asset value per share of US$8.07.
Of this amount, Thai equity securities accounted for 92.18%; the remainder was
in cash, bank deposits and promissory notes.
Of the total net assets, 18.22% was invested in the energy sector, 17.02%
in banking, 16.92% in communications, 9.81% in property, 9.34% in building and
5.05% in entertainment and recreation. The remainder was invested in the
printing and publishing, electronic components and vehicles and parts sectors.
For the first half of 2004, in Thai baht terms, the investment plan
portfolio decreased 12.90%, beating the drop in the SET Index of 16.26%,
outperforming the benchmark by 3.36%.
We see the possibility of some upside in the SET Index. Sentiment should
improve after investor nerves regarding interest rates, China and oil prices
settle down. 2Q04 earnings announcements will take center stage and should be
mildly positive for stocks, given that GDP growth in general should remain firm
in the 6.0 to 6.5% range.
Government spending in the remaining three months of the fiscal year should
add to positive sentiment. Watch for surprise announcements about new government
projects.
However, there are risk factors, largely external, e.g., oil prices or
interest rate shocks. Current account surpluses should improve on the back of
better services account earnings. While problems in the South will continue,
increased government vigilance and attention will help ensure that the problem
is contained and confined to the three southern-most provinces.
The market appears to have bottomed in May after pricing in much of the bad
news emanating from the external sector. Currently we see that a rise in
interest rates is not overly concerning and concerns about a hard landing in
China have eased, though oil prices do remain high. We therefore maintain our
view that the SET Index should rebound in the second half of the year. Toward
the end of this year, we prefer re-balancing to add stocks with greater
fundamental support from dividend yield and adding some momentum stocks. The
banking sector appears to be the most favorably positioned, and building
materials, energy and communications are expected to outperform the market.
PORTFOLIO MANAGEMENT
Mr. Cholathee Pornrojnangkool has been the Fund's portfolio manager since
November 12, 2001. SCB Asset Management Co., Ltd. ("SCBAM") has employed Mr.
Pornrojnangkool since 1999, and he is currently a member of SCBAM's Investment
Committee. Previously, Mr. Pornrojnangkool was a private fund manager at SCB
Securities Ltd. He has nine years of investment experience.
Finally, the Fund's management would like to express its sincere thanks to
all shareholders for their continued support and participation.
Sincerely yours,
/s/ Ikuo Mori
IKUO MORI
CHAIRMAN OF THE BOARD
6
<Page>
THE THAI CAPITAL FUND, INC.
PORTFOLIO OF INVESTMENTS
JUNE 30, 2004 (UNAUDITED)
THAI COMMON, WARRANTS AND PREFERRED STOCKS--92.18%
COMMON STOCKS--90.97%
<Table>
<Caption>
SHARES VALUE
- ----------- ------------
BANKS--17.02%
1,097,100 Bangkok Bank Public
Co., Ltd.* $ 2,524,440
776,800 Bank of Ayudhya Public
Co., Ltd.* 237,690
1,115,000 Kasikornbank Public
Co., Ltd.* 1,378,343
1,881,239 Thai Military Bank
Public Co., Ltd. 169,466
------------
4,309,939
------------
BUILDING MATERIALS--9.34%
414,000 The Siam Cement
Public Co., Ltd. 2,351,144
54,000 Tycoons Worldwide Group
Public Co., Ltd. 15,994
------------
2,367,138
------------
CHEMICALS--0.47%
82,000 Thai Olefins
Public Co., Ltd. 116,421
11,130 Vinythai Public
Co., Ltd.* 3,297
------------
119,718
------------
COMMERCE--1.15%
304,600 BIG C Supercenter
Public Co., Ltd. 134,213
56,700 C.P. 7-Eleven
Public Co., Ltd. 85,359
55,500 Siam Makro
Public Co., Ltd. 72,005
------------
291,577
------------
COMMUNICATION--16.92%
964,500 Advanced Info Service
Public Co., Ltd. 2,101,276
1,909,000 Samart Corp.
Public Co., Ltd.* $ 327,111
1,302,600 Shin Corporations
Public Co., Ltd. 1,163,844
687,900 Shin Satellite
Public Co., Ltd. 217,223
100 True Corp.
Public Co., Ltd. 14
394,400 United Communication
Industry Public Co.,
Ltd.* 475,482
------------
4,284,950
------------
ELECTRICAL--0.43%
259,200 Mida Assets Public
Co., Ltd. 107,864
------------
ELECTRONIC COMPONENTS--2.21%
592,500 Hana Microelectronic
Public Co., Ltd. 362,593
700,000 KCE Electronics
Public Co., Ltd. 197,055
------------
559,648
------------
ENERGY--18.22%
100,000 Electricity Generating
Public Co., Ltd. 165,232
342,100 PTT Exploration and
Production Public Co.,
Ltd. 2,244,289
585,000 PTT Public Co., Ltd. 2,205,299
------------
4,614,820
------------
ENTERTAINMENT & RECREATION--5.05%
1,131,000 BEC World Public
Co., Ltd. 498,340
144,200 EGV Entertainment
Public Co., Ltd. 21,356
</Table>
7
<Page>
<Table>
<Caption>
SHARES VALUE
- ----------- ------------
ENTERTAINMENT & RECREATION (CONCLUDED)
135,700 GMM Media
Public Co., Ltd. $ 84,705
1,200,000 ITV Public Co., Ltd.* 467,056
201,700 Major Cineplex Group
Public Co., Ltd. 69,617
282,777 United Broadcasting Corp.
Public Co., Ltd.* 137,057
------------
1,278,131
------------
FINANCE & SECURITIES--1.74%
64,600 ABN Amro Asia Securities
Public Co., Ltd. 144,692
270,000 Siam General Factoring
Public Co., Ltd.* 46,926
348,600 Thitikorn Public Co.,
Ltd.* 69,547
267,600 TISCO Finance
Public Co., Ltd. 178,502
------------
439,667
------------
HOUSEHOLD GOODS--0.30%
102,700 Modernform Group
Public Co., Ltd. 76,676
------------
MINING--0.85%
683,800 Padaeng Industry
Public Co., Ltd.* 215,928
------------
PRINTING & PUBLISHING--3.44%
3,451,579 Amarin Printing Group
Public Co., Ltd. 870,254
------------
PROPERTY DEVELOPMENT--8.89%
761,000 Italian-Thai Development
Public Co., Ltd. 188,147
415,500 Lalin Property Public
Co., Ltd. 67,637
6,478,200 Land and House
Public Co., Ltd. 1,419,281
540,700 Noble Development
Public Co., Ltd. $ 100,591
1,104,000 Sammakorn
Public Co., Ltd. 70,264
1,495,100 Sino Thai Engineering &
Construction
Public Co., Ltd. 406,241
------------
2,252,161
------------
RETAIL FOOD--1.06%
70,000 S&P Syndicate
Public Co., Ltd. 43,695
138,000 Serm Suk Public
Co., Ltd. 81,750
290,900 Thai Union Frozen
Products Public
Co., Ltd. 143,842
------------
269,287
------------
UTILITIES--1.13%
243,100 Eastern Water Resources
Development &
Management
Public Co., Ltd. 285,639
------------
VEHICLES & PARTS--2.75%
482,750 Aapico Hitech
Public Co., Ltd. 354,515
100,000 Thai Rung Union
Car Co., Ltd. 37,697
93,800 Thai Stanley Electric
Public Co., Ltd. 305,383
------------
697,595
------------
Total Common Stocks
(Cost--$12,630,277) 23,040,992
------------
</Table>
8
<Page>
PREFERRED STOCKS--0.29%
<Table>
<Caption>
SHARES VALUE
- ----------- ------------
FINANCE & SECURITIES--0.29%
109,900 TISCO Finance
Public Co., Ltd.*
(Cost--$48,168) $ 72,300
------------
WARRANTS--0.92%
ENTERTAINMENT & RECREATION--0.00%
36,050 EGV Entertainment
Public Co., Ltd.,
expires 2008*+ 926
------------
PROPERTY DEVELOPMENT--0.92%
1,331,400 Land & House
Public Co., Ltd.,
expires 9/2/08* 233,027
------------
Total Warrants
(Cost--$0) 233,953
------------
Total Thai Common, Warrants
and Preferred Stocks
(Cost--$12,678,445) 23,347,245
------------
SHORT-TERM INVESTMENTS--4.44%
<Caption>
PRINCIPAL
AMOUNT
(000)
- ----------
THAI BAHT PROMISSORY NOTES--2.41%
10,000 The Book Club Finance
Public Co., Ltd., 0.75%,
(Payable on Demand) 244,788
15,000 UOB Radanasin Bank
Public Co., Ltd., 0.75%,
(Payable on Demand) 367,183
------------
Total Thai Baht Promissory Notes 611,971
------------
THAI BAHT SAVINGS ACCOUNT--0.77%
2,582 Bank Credit Agricole
Indosuez, 0.50%,
(Payable on Demand) $ 63,205
5,361 Citibank N.A. Gold, 0.55%,
(Payable on Demand) 131,242
------------
Total Thai Baht Savings Account 194,447
------------
U.S. DOLLAR TIME DEPOSIT--1.26%
319 Bank of New York,
0.05%, due 7/1/04 319,247
------------
Total Short-Term Investments
(Cost--$1,124,968) 1,125,665
------------
Total Investments--96.62%
(Cost--$13,803,413) 24,472,910
Other assets less liabilities--3.38% 856,399
------------
NET ASSETS (Applicable to 3,139,428
shares of capital stock outstanding;
equivalent to $8.07 per
share)--100.00% $ 25,329,309
============
</Table>
- ----------
* Non-income producing securities.
+ Unlisted security. This unlisted security has been valued in good faith in
such a manner as prescribed by the Board of Directors.
See accompanying notes to financial statements.
9
<Page>
TEN LARGEST EQUITY
CLASSIFICATIONS HELD
JUNE 30, 2004 (UNAUDITED)
<Table>
<Caption>
PERCENT OF
INDUSTRY NET ASSETS
- -------- ----------
Energy 18.22%
Banks 17.02
Communication 16.92
Property Development** 9.81
Building Materials 9.34
Entertainment & Recreation** 5.05
Printing & Publishing 3.44
Vehicles & Parts 2.75
Electronic Components 2.21
Finance & Securities# 2.03
</Table>
TEN LARGEST EQUITY
POSITIONS HELD
JUNE 30, 2004 (UNAUDITED)
<Table>
<Caption>
PERCENT OF
ISSUE NET ASSETS
- ----- ----------
Bangkok Bank Public Co., Ltd. 9.97%
The Siam Cement Public Co., Ltd. 9.28
PTT Exploration and Production
Public Co., Ltd. 8.86
PTT Public Co., Ltd. 8.71
Advanced Info Service
Public Co., Ltd. 8.30
Land and House Public Co., Ltd.** 6.52
Kasikornbank Public Co., Ltd. 5.44
Shin Corporations Public Co., Ltd. 4.59
Amarin Printing Group
Public Co., Ltd. 3.44
BEC World Public Co., Ltd. 1.97
</Table>
- ----------
** Includes the value of warrants.
# Includes the value of preferred stocks.
10
<Page>
THE THAI CAPITAL FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)
<Table>
ASSETS
Investment in securities, at value (cost--$13,803,413) $ 24,472,910
Cash denominated in foreign currency (cost--$912,755) 908,788
Receivable for securities sold 549,119
Interest receivable 2,499
Prepaid expenses 25,912
-------------
Total assets 25,959,228
-------------
LIABILITIES
Payable for securities purchased 524,061
Accrued Thai tax provision 21,846
Accrued expenses and other liabilities 84,012
-------------
Total liabilities 629,919
-------------
NET ASSETS
Capital stock, $0.01 par value per share; total 100,000,000 shares authorized;
3,139,428 shares issued and outstanding 31,394
Paid-in capital in excess of par value 61,493,513
Accumulated net investment income 194,628
Accumulated net realized loss on investments and foreign currency transactions (47,055,642)
Net unrealized appreciation on investments and other assets and liabilities
denominated in foreign currency 10,665,416
-------------
Net assets applicable to shares outstanding $ 25,329,309
=============
NET ASSET VALUE PER SHARE $ 8.07
=============
</Table>
See accompanying notes to financial statements.
11
<Page>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED)
<Table>
INVESTMENT INCOME:
Dividends $ 509,917
Interest 3,235
-------------
Total investment income 513,152
-------------
EXPENSES:
Investment advisory fee 81,021
Investment management fee 80,556
Administration fee and expenses 76,455
Audit and tax services 28,842
Legal fees and expenses 27,839
Reports and notices to shareholders 19,027
Custodian fees and expenses 17,841
Directors' fees and expenses 11,437
Insurance expense 7,583
Transfer agency fee and expenses 5,968
Other 14,970
-------------
Total expenses 371,539
-------------
NET INVESTMENT INCOME BEFORE WAIVERS AND TAX 141,613
Waiver of:
Administration fee (25,000)
Investment advisory fee (54,014)
Provision for Thai tax applicable to net investment income 24,013
-------------
NET INVESTMENT INCOME AFTER WAIVERS AND TAX 196,614
-------------
REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized losses on investments (90,135)
Net realized losses on foreign currency transactions (27,968)
Net change in unrealized appreciation (depreciation) on equity investments (4,926,890)
Net change in unrealized appreciation (depreciation) on translation of short-term
investments and other assets and liabilities denominated in foreign currency (32,804)
-------------
Net realized and unrealized losses from investment activities and foreign
currency transactions (5,077,797)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (4,881,183)
=============
</Table>
See accompanying notes to financial statements.
12
<Page>
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE SIX
MONTHS
ENDED FOR THE YEAR
JUNE 30, ENDED
2004 DECEMBER 31,
(UNAUDITED) 2003
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 196,614 $ 114,171
Net realized gain (loss) on:
Investments (90,135) 705,016
Foreign currency transactions (27,968) 80,875
Net change in unrealized appreciation (depreciation) on:
Investments in equity securities (4,926,890) 15,864,059
Translation of short-term investments and other assets and liabilities
denominated in foreign currency (32,804) 26,286
------------- ------------
Net increase (decrease) in net assets resulting from operations (4,881,183) 16,790,407
------------- ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (194,636)
------------- ------------
FROM CAPITAL STOCK TRANSACTIONS:
Sale of capital stock resulting from reinvestment of dividends 1,101 --
------------- ------------
Net increase (decrease) in net assets (4,880,082) 16,595,771
NET ASSETS:
Beginning of period 30,209,391 13,613,620
------------- ------------
End of period $ 25,329,309 $ 30,209,391
============= ============
</Table>
See accompanying notes to financial statements.
13
<Page>
THE THAI CAPITAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Thai Capital Fund, Inc. (the "Fund") was incorporated in Maryland on
March 14, 1990 and commenced operations on May 30, 1990. It is registered with
the U.S. Securities and Exchange Commission as a non-diversified, closed-end
management investment company.
The Fund makes its investments in Thailand through a wholly-owned
Investment Plan pursuant to a contract with 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 accounting principles generally accepted 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
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.
14
<Page>
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 June 30, 2004, the Fund owed the Manager $13,257. In
addition, as permitted by the Investment Contract, the Fund reimburses the
Manager for its out-of-pocket expenses related to the Fund. During the six
months ended June 30, 2004, no such 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 six
months ended June 30, 2004, no such 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, 2004. At June 30, 2004, the Fund
owed the Adviser $4,027, 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 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 fiscal year
ended December 31, 2004. In addition, as permitted by the Administration
Agreement, the Fund reimburses DSTC for its out-of-pocket expenses related to
the Fund. During the six months ended June 30, 2004, expenses of $1,455 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.
15
<Page>
DSTC also acts as custodian for the Fund's U.S. assets. As compensation for
its services as custodian, DSTC receives a monthly fee and reimbursement of
out-of-pocket expenses. During the six months ended June 30, 2004, DSTC earned
$3,624 as compensation for its custodial services to the Fund.
At June 30, 2004, the Fund owed $8,333 and $540 to DSTC for administration
and custodian fees, respectively.
The Fund paid or accrued $27,349 for the six months ended June 30, 2004 for
legal services in conjunction with the Fund's ongoing operations provided by the
Fund's law firm, Clifford Chance US LLP.
INVESTMENTS IN SECURITIES AND FEDERAL INCOME TAX MATTERS
During the six months ended June 30, 2004, the Fund made purchases of
$1,568,059 and sales of $2,265,523 of investment securities, excluding
short-term investments. The aggregate cost of investments at June 30, 2004 for
federal income tax purposes was substantially the same as the cost of securities
for financial statement purposes. At June 30, 2004, net unrealized appreciation,
excluding short-term securities, aggregated $10,668,799 of which $12,063,382
related to appreciated securities and $1,394,583 related to depreciated
securities.
At December 31, 2003, the Fund had a remaining capital loss carryover of
$46,937,538, of which $7,442,803 expires in the year 2005, $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.
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 six months ended June 30, 2004, 134 shares were issued as a result of
the reinvestment of dividends paid to those shareholders electing to reinvest
dividends. Of the 3,139,428 shares outstanding at June 30, 2004, Daiwa
Securities America Inc., a lead underwriter of the Fund and an affiliate of both
the Adviser and DSTC, owned 7,251 shares.
16
<Page>
THE THAI CAPITAL FUND, INC.
FINANCIAL HIGHLIGHTS+
Selected data for a share of capital stock outstanding during each period is
presented below:
<Table>
<Caption>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
2004 ------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
------------- -------- -------- --------- --------- --------
Net asset value, beginning of period $ 9.62 $ 4.34 $ 3.42 $ 3.36 $ 7.22 $ 6.24
-------- -------- -------- --------- --------- --------
Net investment income (loss) 0.06* 0.03* (0.09) (0.16)* (0.18)* (0.18)
Net realized and unrealized gains (losses) on
investments and foreign currency transactions (1.61) 5.31 1.01 0.22* (3.68)* 1.16
-------- -------- -------- --------- --------- --------
Net increase (decrease) in net asset value
resulting from operations (1.55) 5.34 0.92 0.06 (3.86) 0.98
-------- -------- -------- --------- --------- --------
Less: dividends and distributions to shareholders
Net investment income -- (0.06) -- -- -- --
-------- -------- -------- --------- --------- --------
Net asset value, end of period $ 8.07 $ 9.62 $ 4.34 $ 3.42 $ 3.36 $ 7.22
======== ======== ======== ========= ========= ========
Per share market value, end of period $ 7.250 $ 9.250 $ 3.970 $ 2.800 $ 3.250 $ 9.750
======== ======== ======== ========= ========= ========
Total investment return:
Based on market price at beginning and
end of period (21.62)% 134.56% 41.79% (13.85)% (66.67)% 27.87%
Based on net asset value at beginning and
end of period (16.11)% 123.09% 26.90% 1.79% (53.46)% 15.71%
Ratios and supplemental data:
Net assets, end of period (in millions) $ 25.3 $ 30.2 $ 13.6 $ 10.7 $ 10.5 $ 22.6
Ratios to average net assets of:
Expenses, excluding Thai taxes applicable to
net investment income 1.93%** 2.63% 4.29% 5.98% 4.73% 3.92%
Expenses, including Thai taxes applicable to
net investment income 2.11%** 2.74% 4.29% 6.43% 5.11% 3.92%
Expenses, excluding waiver of Administration
and Advisory fee applicable to
net investment income 2.51%** 3.31% 4.98% 7.09% 5.66% 4.16%
Expenses, including waiver of Administration
and Advisory fee applicable to
net investment income 1.93%** 2.63% 4.29% 6.43% 5.11% 3.92%
Net investment income (loss) 1.45%** 0.62% (2.20)% (4.77)% (4.03)% (2.78)%
Portfolio turnover 6.23% 11.86% 14.62% 20.85% 45.46% 63.45%
</Table>
- ----------
+ Per share values are adjusted to reflect the one-for-two reverse stock
split effective August 5, 2002.
* After provision for Thai taxes.
** Annualized.
17
<Page>
THE THAI CAPITAL FUND, INC.
RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED)
On June 2, 2004, the Annual Meeting of Stockholders of The Thai Capital
Fund, Inc. (the "Fund") was held and the following matter was voted upon and
passed.
Election of two Class I Directors to the Board of Directors of the Fund to
serve for a term expiring on the date on which the Annual Meeting of
Stockholders is held in the year 2007.
NUMBER OF SHARES/VOTES
<Table>
<Caption>
PROXY AUTHORITY
CLASS I VOTED FOR WITHHELD
---------------- --------- ----------------
David G. Harmer 2,380,724 29,845
Martin J. Gruber 2,380,724 29,845
</Table>
In addition to the Directors re-elected at the Meeting, Austin C. Dowling,
Ikuo Mori and Oren G. Shaffer were the other members of the Board who continued
to serve as Directors of the Fund.
AN IMPORTANT NOTICE CONCERNING OUR PRIVACY POLICY
This Privacy Notice describes the types of non-public information we
collect about you, the ways we safeguard the confidentiality of this information
and when this information may be shared with others. In this Privacy Notice, the
terms "we," "our" and "us" refer to the Fund. The term "you" in this Privacy
Notice refers broadly to all of our individual stockholders (including
prospective and former individual stockholders).
In order to provide you with services, we collect certain non-public
information about you. We obtain this personal information from the following
sources:
- Applications and other forms you submit to us.
- Dealings and transactions with us or others.
We do not disclose any non-public personal information about you to anyone,
except as permitted by law. For instance, so that we may effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose.
We maintain physical, electronic and procedural security measures that
comply with federal standards to safeguard your non-public personal information.
Access to such information is restricted to those agents of the Fund who are
trained in the proper handling of client information and who need to know that
information in order to provide services to stockholders.
18
<Page>
(This page has been left blank intentionally.)
<Page>
BOARD OF DIRECTORS
Ikou 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
Laurence E. Cranch
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
EquiServe Trust Company, N.A.
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 mentioned in the report.
The financial information included herein is taken from the records of the Fund
without examination by the Independent Registered Public Accounting Firm which
does not express an opinion thereon.