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Thai Dev.Cap.Fund (THD)


Friday 30 July, 1999

Thai Dev.Cap.Fund

Interim Results

30 July 1999

   3rd Floor, British American Tower, Dr. Roy's Drive,
                      George Town,
            Grand Cayman, British West Indies

        For the six month period to 31 March 1999

The directors of the Thai Development Capital Fund
Limited announce the results of the Company for the six
month period to, and as at, 31 March 1999.

The Net Asset Value at 31 March 1999 was US$5.799 million
(US$5.395 million at 30 September 1998), an increase of
nearly US$0.4 million, or US$0.23 per share. The Thai
Baht strengthened in the same period by 4.3%, from Baht
39.3 to 37.62 per US$.

The results reflect a stabilisation in the general state
of the Thai economy, although considerable problems
remain to be solved, especially in the financial sector.

In the six month period to 31 March 1999, the Company
made one new short term investment in the Beta Vietnam
Fund Limited, a country fund listed on the Dublin Stock
Exchange, and has disposed of three other investments,
two of them listed. No new investments are envisaged, and
the portfolio is now being managed for its eventual

The directors are planning to change the Company's year
end to 31 March 2000, to make it co-terminous with that
of its majority shareholder.

Further details of the Company are available in the Half
Year report.

Christopher S. Forbes
29 July 1999


The Net Asset Value of the Company at 31 March 1999 was
US$5.8 million, or US$3.31 per share. This represents an
increase of some US$0.4 million since 30 September 1998.
The increase in NAV per share amounted to US$0.24, or
7.8%. Since the provisioning against the portfolio made
in November by the Investment Committee, the NAV has
fluctuated less than 3%. The Thai Baht strengthened over
the same period, from Baht 39.3 to 37.62 per US$, or by

In our review of the year ending 30 September 1998, we
commented that the problems in the banking system were
the biggest factor hampering recovery in the Thai
economy, and the latest period has again been dominated
by such difficulties. Non performing loans ('NPL's')
continued to mount until they exceeded 60% in some
institutions, and averaged over 40% throughout the
financial system. While some of these were colloquially
referred to as 'strategic NPL's', meaning that borrowers
who could afford to pay interest were refusing to do so,
their high level effectively paralysed the system.
Liquidity has been less of a problem than the reluctance
or refusal of banks to lend to the ailing corporate

Recent economic indicators suggest that the recession has
now reached its bottom, and that the economy might
achieve modest positive growth in 1999. A number of
significant and important pieces of legislation have been
passed by Parliament, including the long-awaited
bankruptcy and foreclosure laws, but it will take some
time before the effects of these will be felt.

Restructuring of corporate debt is now occurring, but at
a slow pace, and a considerable backlog remains to be
negotiated. The auction of assets seized from the finance
companies that were closed down last year have largely
been sold off, but generally at disappointingly low
prices, and a final auction is scheduled in August this

The Company's investments have not been unscathed by the
recession, and while modest amounts of new capital have
been invested in a few companies in the existing
portfolio, such follow-up investments have been aimed at
enhancing those companies' competitiveness for the
eventual recovery. The only new investment was a 5.4%
stake in the Beta Vietnam Fund Limited ('BVNF'), a listed
country fund with an investment focus in Vietnam, which
was trading at a discount of over 70% to its stated NAV
at the time of purchase. The Company has been active with
other institutional shareholders in calling for a change
in the composition of BVNF's board, with a view to
reviewing its operating and investment performance, and
the share price has risen since the stake was acquired.
Disposals of some of the Company's listed portfolio were
achieved during the period, with profits being taken on a
substantial of the holding in the PIZZA company.

The Company's diminishing asset base has called into
question the term of its future existence, and the board
will be considering this when it meets later in August.
New investment opportunities will undoubtedly emerge as
the economy picks up again, and the existing portfolio is
now being managed to achieve exits from investments on
terms which should be better than at any time over the
past two years.

The directors are planning to change the Company's year-
end to 31 March, in order that it be co-terminous with
that of the majority shareholder, which means that the
next audited report will be issued for the period ending
31 March 2000.



The optimism now expressed by many regional economists
that Thailand is past the worst of its crisis is echoed
in the more positive note of the Director's report, and
several macro indicators are now pointing to a gradual
resumption of growth in the economy. The International
Finance Corporation has given its seal of approval to the
numerous reforms that have been enacted in, especially,
the financial sector, and the working out of bad loans
out of the banking system is now under way.

While this is encouraging, the reality is that the cost
of the banking crisis has still to be paid for, and the
re-capitalisation of the banks is still incomplete. The
reluctance of banks to lend to indebted corporations, and
the concomitant lack of qualified borrowers, still
imposes a serious drag on any recovery. The level of non
performing loans is still alarmingly high, especially
since they include what are colloquially known as
'strategic NPL's', i.e. loans to clients who can afford
to service their debt, but refuse to do so. The recent
passage of the bankruptcy and foreclosure laws has been a
step in the right direction to better corporate
governance, but having laws on the statute book is
different from having experience in how they should and
can be put into practice.

In the period under review, a number of high profile
strategic investors have entered the market, notably in
the banking and wholesale and retail sectors, and while
an upsurge in merger and acquisition work has been
reported, the transactions actually closed have still
been relatively few in number. In comparison, there have
also been few investments by either regional or locally
based direct equity companies. This is partly because
many of the opportunities have arisen in companies in
need of restructuring and re-capitalisation. In most
cases this involves negotiations with creditor banks to
roll over existing loans and to provide new credits,
therefore progress has been slow.


The stock market has been boosted by the return of
investors, in part because of the low rates of interest
earned on bank deposits, and most analysts believe that
the index is unlikely again to plumb the depths it
reached last year. During the period, TDCF sold its
investment in Phatra Leasing, as well as two thirds of
its holding in The PIZZA Company, realising a profit on
the latter. The investment has so far returned a running
IRR of some 33%, and has clearly been the jewel in a
somewhat tarnished crown. The remaining listed
investments will be sold into the recovery.

Since the return of capital to shareholders last year,
cash reserves have been much lower, but were sufficient
to allow a short term investment to be made in the listed
shares of the Beta Vietnam Fund Limited, which were
bought at a discount of over 70% to their stated net
asset value. Analysis of the company revealed high
operating costs and poor recent performance, and
discussions with other shareholders in BVNF exposed
widespread dissatisfaction with the way it was being run.
TDCF was therefore instrumental in requisitioning an EGM
to replace a majority of the existing board of directors
with a view to making the management more responsive to
shareholders' views, and to look at ways in which value
might be released to shareholders. In the meantime the
share price rose some 55%.

A summary of the main investments is as follows:

Unlisted Investments

Chico-Thai Plantations Public Co. Ltd. (CHICO)
A residual investment from the early days of TDCF's
activities, the company appears to have ceased activities
since 1998 and has closed down its Bangkok office.
Factory operations have reportedly been shut down and
Chico Thai's major creditor, Bangkok Bank, has tried to
foreclose on the company's assets. The management has
disappeared. The Stock Exchange of Thailand has launched
an investigation into the company but has not yet
provided any details about its enquiries.

Economic Management Co., Ltd. (EML)
In December 1998, by means of a new convertible loan from
TDCF, Economic Management Ltd. (EML) completed its
purchase of a Thai company, Siam Natural Resources Co.,
Ltd. (SNR), thereby substantially increasing its local
asset base. SNR owns two prawn farms in eastern Thailand.
Following the purchase the operating business has been
transferred from Professional Aquaculture Management Co.,
Ltd (PAMCO) to SNR. In March 1999, the fourth crop was
stocked at Thammachart Farm. All fifteen ponds were in
production by the middle of June. The harvesting of the
ponds started in late July, resulting in stronger margins
than had previously been obtained. EML plans to expand
its management services to a second farm in February next
year, at a site already located by the management.

Ekarat Engineering PLC Ltd. (EEC)
Transformer demand is still low and intense price
competition continues. Some transformer producers have
been forced out of business. Although surviving, Ekarat
has suffered liquidity problems and has been negotiating
to restructure its debt with its creditors. TDCF re-sent
its buy back notice to Ekarat in December 1998, which
would cost about Bt25mn if fully honoured, which the
company claims it is not in a position to do at the
moment. Management reported that the company recently
bought back 163,000 of its shares from an institutional
investor. TDCF holds its shares at Baht 10.00/sh, but
there is some doubt that the share buy back agreement
could be enforced quickly at the stated price.

Hideaway Group International Ltd. (HGIL)
The Thai companies continue to operate profitably with
product sales a supplement to earnings from the spa. A
new franchise spa was opened in Phuket earlier in the
year, and additional product sales are foreseen. The
subsidiary in the USA, Prai Cosmetics Inc., was able to
sell its products on the Home Shopping Network in both
the USA and Canada, and an agreement has been signed with
a company to take over the assets and product range in
the USA and invest additional money in its promotion,
with HGIL receiving royalty payments in return. The
investment is still maintained in the books at its
written down value, since the volume of royalty payments
is not possible to forecast at this stage.

Rajathanee Hospital (Public) Co. Ltd (RHC)
The hospital went through a downturn in 1998 but still
recorded a modest profit. From 1999 onwards, operating
results should maintain an upward trend. Operations were
expected to stabilise with the revenues from the
Government's Social Health Plan contributing marginal
profit to the hospital. The balance sheet also improved
since the offshore loan was converted into local currency
with the outstanding balance being reduced every month.
The company's operations are therefore in a healthy state
but the valuation is maintained at a 19% discount to
current book value due to the lack of marketability of
the shares. An exit through an IPO market is not possible
in the near term and TDCF is now exploring an opportunity
to sell to an institutional investor.

SDS Thailand Ltd. (SDS)
The company recorded robust sales growth in 1998, up 119%
but despite that still faced serious problems. Sales were
not sufficient to cover its high overhead, cash flow fell
short and the company experienced problems with
management. In late 1998, TDCF hired a consultant
management accountant to strengthen the company's
accounting and reporting ability. He was recruited by
another company after three months, and so in February
1999 TDCF hired a specialist adviser to manage a
turnaround. New key management has been hired but it is
likely to take some time to turn SDS around and the
directors have maintained their full provision against
this investment. Much will depend on the ability of the
company to generate new sales. A new strategic investor
is now being actively sought to help strengthen SDS, and
to provide a means by which TDCF might make an exit from
the investment.

Thai Precision Manufacturing Co. Ltd. (TPM)
The struggle between the shareholders and management at
TPM was recently resolved, with the largest Japanese
shareholder replacing the disputed key management and
taking full control over the board of directors. This
reduced TDCF's opportunity to sell its small stake in TPM
to a related party. Despite that, efforts are being made
to find an appropriate buyer, as it is clear that the
company is not in a position to honour the buy back
agreement at this stage.

Thai Universal Office Products Co. Ltd. (TUOP)
The company was successfully re-capitalised in February
1999, with TDCF, Precision (the New Zealand operating
partner), and the major individual shareholder investing
additional equity into TUOP by way of loan conversion and
new cash injection. The prospects for this investment
have begun to look more encouraging. At the end of 1998
TUOP introduced a homefile product, which is being
exported to the USA. The new product appears to have a
large potential market and the US distributor is offering
TUOP a five- year sales contract. In addition, TUOP
obtained a new client in Europe, thus opening up a new
market for the company and creating significant
opportunities. Current production capacity is expected to
be insufficient in the near future and the need for
further capital investment is anticipated.

Listed Investments

Beta Vietnam Fund Limited (BVNF)
When TDCF first bought the shares, they were trading at a
discount of over 70% to their stated net asset value.
This reflected investors' dissatisfaction with both the
sector and the management. After discussion with several
other shareholders, TDCF was instrumental in arranging an
extraordinary general meeting of the company to try to
change sufficient numbers of the board to enforce a
change in the way the company was being run, and to try
to release value to shareholders, especially the
uncommitted capital. While the vote at the EGM went
against a change of board, the share price has risen from
its recent lows in anticipation of changes to the
company's operating structure. TDCF is unlikely to hold
the shares for the long term.

Noble Development Public Co. Ltd. (NOBLE)
Noble was active in a sector of the housing market which
has a less severe oversupply than other sectors and which
is expected to recover first when the market picks up. As
domestic interest rates have come down, gradual recovery
in the housing sector can be anticipated. Housing prices
excluding residential condominiums seemed to have
stabilised. However, no improvement has been seen now on
actual operating results. Developers still suffer from
sluggish sales and are unable to service their debt.
Meanwhile, the share price of property companies has
improved along with the stock market's upturn since
earlier this year. A foreign investor has expressed an
interest to take significant strategic stake in the
company, and TDCF took advantage of the recent
strengthening of the share price to sell out its stake at
Baht 12.375 per share.

PAE (Thailand) Co. Ltd. (PAE)
PAE was severely affected by the downturn in
construction. The company recorded huge losses in 1997
and 1998. In March 1999, the Stock Exchange of Thailand
suspended PAE as the company had negative shareholder
equity. Share trading was sluggish in the price range of
Bath1-2 before it was suspended. The company is still in
negotiation with a foreign investor that intends to take
a controlling interest. While this would involve heavy
dilution of existing equity holders, the company would
again be able to put up bid bonds for new contract

The Pizza (Public) Co., Ltd. (PIZZA)
Pizza performed satisfactorily during the downturn. It
recorded 1998 sales up 9%, despite net profit excluding
exchange rate loss down by 3% due to tighter margin. From
the first quarter of 1999, Pizza increased its price by
2.8% and this should increase its margins. It also plans
to open an additional 45 or more outlets of its Dairy
Queen in 2H99. Earnings prospects continue to be
encouraging. The share price remained relatively stable
in comparison to the overall strengthening of the market
in the second quarter of 1999. TDCF disposed of 420,000
shares of Pizza in January 1999 for a profit of Bt85 per
share. The remaining holding of 160,000 shares will be
sold into any further rally.

At 31 March 1999
                                                       % of Net
                                    Holding     US$    Assets

Unlisted shares
Economic Management Ltd.               49,000  154,288   2.66%
Hideaway Group International Ltd.   1,038,000        1   0.00%
SDS (Thailand) Ltd.                   490,000        1   0.00%
Prai  Cosmetics Inc.                  100,000    1,000   0.02%
Rajthanee Hospital Public Co. Ltd.  2,040,000  610,129  10.52%
Chico Thai Plantations Ltd.         1,820,000        1   0.00%
Ekarat Engineering Public Co. Ltd.  1,025,000  272,498   4.70%
Thai Universal Office Products Ltd. 1,875,000  559,949   9.65%
                                              ---------  ------
                                             1,597,867  27.55%
                                              ---------  ------

Listed shares
Beta Vietnam Fund Limited             300,000  675,000  11.64%
PAE (Thailand) Public Co. Ltd.        415,000   31,443   0.54%
The Pizza Public Co. Ltd.             160,000  510,435   8.80%
Noble Holding Development
Public Co. Ltd.                       600,000   24,724   0.43% 
                                             ---------  ------
                                             1,241,602  21.41%
                                             ---------  ------
TOTAL LONG TERM INVESTMENTS                  2,839,469  48.96%
                                             ========= ======


Unlisted shares
Economic Management Ltd.Conv. Loan    435,000  435,000   7.50%
Economic Management Ltd.
  Loan Stock 11.98                    149,000  149,000   2.57%
Hideaway Group International Ltd.     150,000  150,000   2.59%
Hideaway Group Conv.Loan Stock 07.98  580,000        1   0.00%
Hideaway Group Conv.Loan Stock 12.98  396,000        1   0.00%
Media Plus Co. Ltd.                   200,000        1   0.00%
Prai Cosmetics Inc. Conv.
  Loan Stock 04.99                    425,000  106,250   1.83%
SDS (Thailand) Ltd. Conv.
  Loan Stock 11.98                    500,000        1   0.00%
SDS (Thailand) Ltd. Conv.
  Loan Stock 02.99                  5,000,000        1   0.00%
Thai Precision Manufacturing
  Co. Ltd.                            160,000        1   0.00%
Thai Universal Conv.
  Loan Stock 12.98                    175,000  175,000   3.02%
                                             ---------  ------
                                             1,015,256  17.51%
                                             ---------  ------
Listed Shares
Sinsubnakorn Public Co. Ltd.         250,000     9,305   0.16%
                                                 -----   -----
                                                 9,305    0.16
                                                 -----   -----
TOTAL SHORT TERM INVESTMENTS                 1,024,561   17.67%
                                             =========  ======

Securities at cost or market value           3,864,030   66.63%
Bank deposits and cash                       2,579,798   44.48%
Other receivables                              122,534    2.11%
Other net liabilities                         -766,903  -13.22%
                                              --------- -------
TOTAL NET ASSETS                             5,799,459  100.00%
                                              ========= =======

NET ASSET VALUE PER SHARE                         3.31

For the period ended 31 March 1999

US$'000                       6 months to 31 March 1999
                            Revenue     Capital    Total

Realised losses                 -       (578)    (578)

Unrealised losses               -         (7)      (7)
                                        -----    -----
                                        (585)     (585)

Exchange Differences            -       1,112    1,112

Dividend Income                 -           -        -
Interest Income               170           -      170
Other Income                    3           -        3
                            -----                -----
                              172                  172

Bank Charges                    1           -        1
Directors' Salary              54           -       54
Directors' Remuneration Fees   15           -       15
Directors' Travel & Meeting 
Expenses                        4           -        4

Auditor's remuneration
- fees for audit services      15           -       15
- other services                -           -        -
Legal fees                      6           -        6
Professional/Advisory fees     16           -       16
Secretarial fee                 3           -        3
Administration fees            15           -       15
Representative Office expenses
                              161           -      161
General & administration 
expenses                        8           -        8
                            -----                -----
                              298                  298
                            -----                -----
BEFORE TAXATION              (128)        527      399

Taxation                   (0.07)           -   (0.07)

Return/(loss) on ordinary
  activities after taxation (128)         527      399
                            =====       =====    =====
Return/(loss) per ordinary
  Share (US$)              (0.07)        0.30     0.23
                            =====       =====    =====

US$'000                       6 months to 31 March 1998
                             Revenue     Capital    Total

Realised losses                 -           -        -

Unrealised losses               -     (1,110)  (1,110)
                                       ------    -----
                                      (1,110)  (1,110)

Exchange Differences            -       (445)    (445)

Dividend Income                 -           -        -
Interest Income               334           -      334
Other Income                   20           -       20
                            -----                -----
                              354                  354

Bank Charges                    2           -        2
Directors' Salary              54           -       54
Directors' Remuneration Fees   15           -       15
Directors' Travel & Meeting 
Expenses                       12           -       12

Auditor's remuneration
- fees for audit services      17           -       17
- other services                -           -        -
Legal fees                      -           -        -
Professional/Advisory fees     10           -       10
Secretarial fee                 -           -        -
Administration fees            26           -       26
Representative Office 
expenses                      114           -      114
General & administration 
expenses                        -           -        -
                            -----                -----
                              249                  249
                            -----                -----
TAXATION                      105      (1,555)  (1,450)

Taxation                      (3)           -      (3)

Return/(loss) on ordinary
  activities after taxation   102           -   (1,453)
                            =====       =====    =====
Return/(loss) per ordinary   0.06      (0.89)   (0.83)
  Share (US$)               =====       =====    =====

US$'000                         Year to 30 September 1998
                              Revenue     Capital    Total

Realised losses                 -           -        -

Unrealised losses               -     (5,827)  (5,827)
                                       ------   ------
                                      (5,827)  (5,827)

Exchange Differences            -       (540)    (540)

Dividend Income                23           -       23
Interest Income               620           -      620
Other Income                   42           -       42
                            -----                -----
                              685                  685

Bank Charges                    2           -        2
Directors' Salary             105           -      105
Directors' Remuneration Fees   24           -       24
Directors' Travel & Meeting 
Expenses                       31           -       31

Auditor's remuneration
- fees for audit services      27           -       27
- other services                5           -        5
Legal fees                      5           -        5
Professional/Advisory fees      -           -        -
Secretarial fee                 -           -        -
Administration fees            50           -       50
Representative Office 
expenses                      316           -      316
General & administration 
expenses                        7           -        7
                            -----                -----
                              572                  572
                            -----                -----
TAXATION                      113      (6,367)  (6,254)

Taxation                      (7)           -      (7)

Return/(loss) on ordinary
  activities after taxation   106      (6,367)  (6,261)
                            =====      ======   ======
Return/(loss) per ordinary   0.06      (3.63)   (3.57)
  Share (US$)               =====      ======   ======

As at 31 March 1999
                       Unaudited as at Audited as at
                         31 March 1999  30 Sept 1998
                               US$'000        US$'000

Investments                      2,839         2,930

Short Term Investments           1,025           607
Debtors                            123            43
Cash at Bank                     2,580         8,935
                                 -----         -----
                                 3,727         9,585

Return of Capital                    -         7,018
Due to Broker                      675             -
Accrued Expenses                    92           102
                                 -----         -----
                                   767         7,120
                                 -----         -----
NET CURRENT EXPENSES             2,960         2,465
                                 -----         -----

NET ASSETS                       5,799         5,395
                                 =====         =====
Share Capital                      175           175
Share Premium                   10,352        10,352
Reserves                       (4,728)       (5,132)
                                ------        ------
SHAREHOLDERS' FUNDS              5,799         5,395
                                ======        ======

SHARE                          US$3.31       US$3.07


1.   The results for the year ended 30 September 1998 are
     abridged and are taken from the full accounts for
     that year which together with an unqualified audit
     report were distributed to shareholders in March

2.   The net asset value per ordinary share is calculated
     based on 1,754,500 ordinary shares in issue at the
     half year end (31 March 1998: 1,754,500) and the
     return/gain per share is calculated on 1,754,500
     shares (31 March 1998: 1,754,500).

3.   The Company has investments in four companies of
     greater than 20% of the investee company's issued
     share capital. Of these three are associated
     undertakings for which it does not equity account,
     and one is an investment in over 50% of the investee
     for which control is intended to be temporary and
     for which it therefore does not consolidate. These
     investments are carried cost or at Director's
     valuation in accordance with the Company's normal
     accounting policies. Dividends from these
     undertakings are taken to income when declared.
     Interest on convertible loans made by the Company is
     recognised on an accruals basis, net of provisions.

4.   No interim dividend was declared out of earnings for
     the six months ended 31 March 1999, nor for the year
     ended 30 September 1998. A partial return of
     original capital was made to investors in October

5.   The taxation represents Thai withholding tax. The
     company is resident in the Cayman Islands for
     taxation purposes, and is exempt from Cayman Island
     tax until the year 2010.

6.   Copies of the half year report are available for
     inspection at the Company's registered address and
     at the registration agent, Bermuda International
     Securities (UK) Ltd. at Austin Friars House, 2-6
     Austin Friars, London E2N 2HE, United Kingdom.


Christopher S. Forbes
D. Graham Lean
Paul H. Smith

Representative Office in Thailand
18th Floor, UBC Building II
591 Sukhumvit Road (Soi 33)
Bangkok 10110
Telephone: 662-261-0241/2
Facsimile : 662-261-0244

Secretary and Registered Office
Bermuda Trust (Cayman) Limited
P.O. Box 513, 3rd Floor, British American Tower
Dr. Roy's Drive, George Town
Grand Cayman
British West Indies

Administrator and Share Registrar
Bank of Bermuda (Cayman) Limited
Represented by Bermuda Trust (Far East) Limited
39/F Edinburgh Tower, The Landmark
Central, Hong Kong

Share Registrar in the United Kingdom
Bermuda International Securities (UK) Ltd.
Austin Friars House
2-6 Austin Friars
London EC2N 2HE
United Kingdom

Warburg Dillon Reed
1 Finsbury Avenue
London EC2M 2PP
United Kingdom


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