UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
N-CSR
CERTIFIED
SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT
INVESTMENT COMPANIES
Investment
Company Act file number: 811-05617
Taiwan
Greater China Fund
(Exact
name of registrant as specified in charter)
Bank
Tower, Room 1001
205 Dun
Hua North Road
Taipei
105, Taiwan
Republic
of China
(Address
of principal executive offices) (Zip
code)
Brown
Brothers Harriman
40 Water
Street, P. O. 962047,
Boston,
MA 02196-2047
(Name and
address of agent for service)
Registrant’s
telephone number, including area code: 1-617-742-1818
Date of
fiscal year end: December
31
Date of
reporting period: December
31, 2004
ITEM 1.
REPORTS TO STOCKHOLDERS.
TAIWAN
GREATER CHINA FUND
www.taiwangreaterchinafund.com
Taiwan
Office:
Room
1001, 205 DunHua North Road
Taipei,
Taiwan, Republic of China
Tel:
886-2-2715-2988
Fax:
886-2-2715-3166
Officers
and Trustees:
David N.
Laux, Chairman and Trustee
Steven R.
Champion, President and Chief Executive Officer
Edward B.
Collins, Trustee and Audit Committee Member
Frederick
C. Copeland, Jr., Trustee and Audit Committee Member
Robert P.
Parker, Trustee and Audit Committee Member
Cheryl
Chang, Chief Financial Officer, Treasurer and Secretary
Administrator
& Custodian:
Brown
Brothers Harriman & Co.
40 Water
Street
Boston,
MA 02109
U.S.A.
Tel:
(617) 742-1818
Transfer
Agent,
Paying
and Plan Agent:
EquiServe
Trust Company, N.A.
P.O. Box
43011
Providence,
RI 02940-3011
U.S.A.
Telephone:
1-800-426-5523
Investor
Relations & Communications:
Citigate
Financial Intelligence
111 River
Street, Suite 1001
Hoboken,
NJ 07030 U.S.A.
Telephone:
(201) 499-3500
U.S.
Legal Counsel:
Bingham
McCutchen LLP
150
Federal Street
Boston,
MA 02110-1726
U.S.A.
Tel:
(617) 951-8000
For
information on the Fund, including the NAV,
please
call toll free 1-800-343-9567.
LOGO:
Taiwan Greater China Fund
Annual
Report
December
31, 2004
DEAR
STOCKHOLDERS
During
2004, the Fund undertook a major transformation, beginning on January 2 when it
began trading on the New York Stock Exchange as Taiwan Greater China Fund
(Ticker: “TFC”). This recognized the Board of Trustees’ new strategy of
investing primarily in Taiwan Stock Exchange listed companies which derive or
which are expected to derive a substantial portion of their revenues by
exporting to or operating in mainland China. The Fund also underwent a
reorganization of its status in Taiwan where it cancelled its longstanding
investment contract with International Investment Trust Company and ceased to be
regulated as a fund managed by a local Securities Investment Trust Enterprise.
Under its new structure, the Fund is self-managed and regulated in Taiwan as a
Foreign Institutional Investor. The Fund received cash from the old fund during
the last week in February, reinvested the proceeds over the next few trading
days, and was substantially reinvested in accordance with the new investment
strategy on March 1. The transition was seamless, and the Fund began anew with a
unique, tightly focused investment strategy.
The
economic logic for the Fund’s strategic redirection is compelling. The rapid
growth of China is one of the great economic success stories of recent history,
and Taiwan-based companies are playing an important role in this process as they
shift their manufacturing operations to the mainland. Although the statistics
remain somewhat imprecise, Taiwan companies’ direct investment into mainland
China has been estimated to approximate $100 billion. Approximately, one million
citizens of Taiwan are living in China, and the mainland has become Taiwan’s
largest export market, which also accounts for most of the growth in the
island’s exports. Taiwan invested companies account for approximately 15% of
total Chinese exports, with levels as high as 60-70% of total exports in
information technology hardware.
We
believe that Taiwan-listed companies offer a uniquely attractive way to invest
in China’s economic boom and that businessmen from Taiwan are in many ways the
most adaptable and successful investors in the mainland. Additionally, we
believe that Taiwan-based companies generally benefit from superior governance
and transparency when compared to their mainland-based competitors. We also
believe that the regulatory and legal systems governing the operations of Taiwan
companies provide a superior risk control mechanism when compared with local
companies operating in China.
As we
began implementing our new investment strategy, we had three related goals, all
focused on increasing shareholder value: improving investment performance,
controlling expenses, and eliminating or narrowing TFC’s discount to its net
asset value. We believe that we made great progress in all these areas during
the last year.
During
the first two months of 2004, prior to the refocusing and reinvestment of the
Fund, the trend of underperformance relative to the Taiwan Stock Exchange Index
(“TAIEX”) continued. During this period, TFC’s share price underperformed the
TAIEX by 13.85 percentage points on both a price appreciation and total return
basis, and the Fund’s net asset value lagged the index by 9.21 percentage points
on the same basis.
This
situation changed dramatically following the implementation of the new strategy
and the change to self-management. During the period from March 1 to year-end,
TFC’s share price declined 1.41% on a price appreciation basis and 1.18% on a
total return basis which compares favorably to declines of 8.03% and 5.73%,
respectively, in the Taiwan China Strategy
1
Index
(“TCSI”). Likewise, the Fund’s net asset value after expenses outperformed the
TCSI by 3.41 percentage points on a price appreciation basis and 1.32 percentage
points on a total return basis. The TCSI was developed by the Fund in
cooperation with MSCI and is calculated by MSCI. It is available on our website,
www.taiwangreaterchinafund.com.
TFC’s
share price also outperformed the TAIEX during the March 1 to December 31 period
by 5.30 percentage points on a price appreciation basis and by 3.37 percentage
points on a total return basis. The Fund’s net asset value after expenses
outperformed the TAIEX by 2.09 percentage points on a price appreciation basis
and by 0.13 percentage points on a total return basis. All returns are on a US
dollar basis. These strong returns are even more positive when one adds back the
2.31% in expenses incurred in the year’s final ten months to isolate pure
investment return.
We view
ourselves as long-term investors and under most circumstances make no effort to
time the market or to trade aggressively in the short-term. The 137% turnover
ratio shown in the annual report should be looked at in the context of the Fund
being required to liquidate its entire portfolio as a part of our legal
restructuring in Taiwan and to reinvest it in accordance with our new strategy.
We tilt the Fund toward value stocks, and at year-end 2004, using MSCI data, it
had a weighted average price-earnings ratio of 11.2, a weighted average
price-book ratio of 2.1, and a weighted average dividend yield of
3.3%.
The
Fund’s expense ratio in 2004 was 2.79%, and we are taking aggressive steps to
reduce this figure. Approximately, 29% of last year’s total expense was in the
category of legal expenses, and we have taken steps to reduce this expense in
2005. Many routine legal tasks which had previously been handled by external
counsel will now be provided more economically by our new administrator and
custodian, Brown Brothers Harriman. We also hope to avoid some of the
significant expenses associated with our need to respond to activist
shareholders during the past few years. We have budgeted for a major reduction
in the expense ratio for 2005, and we will keep you informed on our progress in
this area along the way.
During
2004, the Fund’s average discount to net asset value was 9.99%, a sharp
reduction from previous years and the lowest average discount for the Fund since
1996. The Fund tendered for one-third of its shares at 99% of net asset value in
September, 2004 and also commenced a share buy-back program for up to 10% of
total shares outstanding. To date, the Fund has repurchased 318,000 shares at an
average price of $4.69 and an average discount of 8.2%. From year-end 2004 to
the date of this letter, the Fund’s discount has averaged 8.2%.
We
believe that the Fund’s focus on shareholder value, its unique investment
strategy, and its improved performance are beginning to be recognized by the
market. We will continue to focus our attention on providing value through
investment performance, reduced expenses, and close attention to our
discount.
Respectfully
submitted,
Steven R.
Champion President and
Chief
Executive Officer
February
15, 2005
2
Portfolio
Highlights
SCHEDULE
OF INVESTMENTS BY INDUSTRY AS OF DECEMBER 31, 2004
Industry
Diversification
Percent
of |
Industry U.S.
$ Value Net
Assets |
Computer
Systems & Hardware |
22,706,730 |
19.50% |
Semiconductors |
16,138,715 |
13.86 |
Plastics |
14,035,071 |
12.05 |
Steel
& Other Metals |
10,059,536 |
8.64 |
Computer
Peripherals/ODM |
9,988,456 |
8.58 |
Flat
Panel Displays |
9,831,222 |
8.44 |
Other
- Non-Technology |
5,265,230 |
4.52 |
Transportation |
4,207,577 |
3.61 |
Electronics
Components |
4,128,776 |
3.54 |
Automobile |
3,424,359 |
2.94 |
Electrical
& Machinery |
3,121,687 |
2.68 |
Cement |
2,677,127 |
2.30 |
Foods |
2,390,911 |
2.05 |
Communications
Equipment |
2,345,166 |
2.01 |
Rubber |
1,789,646 |
1.54 |
Textiles |
695,035 |
0.60 |
Glass,
Paper & Pulp |
679,070 |
0.58 |
Chemicals |
577,599 |
0.50 |
Retailing |
534,813 |
0.46 |
Electronics
- General |
516,205 |
0.44 |
Other
Assets in Excess of Liability |
1,014,831 |
0.87 |
Short
Term Investments |
338,875 |
0.29 |
Net
Assets |
$116,466,637 |
100.00 |
3
TAIWAN
GREATER CHINA FUND
Consolidated
Schedule of Investments / December 31, 2004
COMMON
STOCKS —
98.84% |
|
|
|
%
of |
Market
Value |
Automobile
— 2.94% |
|
|
|
Net
Assets |
U.S.
Dollars |
|
1,071,000 |
shs. |
China
Motor Corp. |
1.16% |
$
1,354,435 |
|
181,528 |
|
Tong
Yang Industry Co., Ltd. |
0.24% |
279,948 |
|
302,000 |
|
TYC
Brother Industrial Co., Ltd. |
0.25% |
292,395 |
|
1,286,885 |
|
Yulon
Motor Co., Ltd. |
1.29% |
1,497,581 |
|
|
|
|
|
3,424,359 |
Cement
— 2.30% |
|
|
|
|
|
|
1,912,090 |
|
Asia
Cement Corporation |
1.16% |
1,350,768 |
|
2,012,290 |
|
Taiwan
Cement Corp. |
1.14% |
1,326,359 |
|
|
|
|
|
2,677,127 |
Chemicals
— 0.50% |
|
|
|
|
|
|
844,000 |
|
Eternal
Chemical Co., Ltd. |
0.50% |
577,599 |
|
|
|
|
|
|
Communications
Equipment — 2.01% |
|
|
|
|
|
|
947,748 |
|
D-Link
Corp. |
0.95% |
1,105,908 |
|
527,450 |
|
Zyxel
Communicationns Corp. |
1.06% |
1,239,258 |
|
|
|
|
|
2,345,166 |
Computer
Systems & Hardware —
19.50% |
|
|
|
|
|
|
781,286 |
|
Acer
Inc. |
1.11% |
1,293,581 |
|
117,166 |
|
Advantech
Co., Ltd.. |
0.25% |
284,523 |
|
2,161,000 |
|
Asustek
Computer Inc. |
4.95% |
5,758,850 |
|
1,076,284 |
|
Compal
Electronics Inc. |
0.92% |
1,075,996 |
|
751,600 |
|
Elitegroup
Computer Systems Co., Ltd. |
0.44% |
516,735 |
|
201,950 |
|
Giga-Byte
Technology Co., Ltd. |
0.21% |
244,568 |
|
2,535,417 |
|
Hon
Hai Precision Industry Co., Ltd. |
10.09% |
11,754,145 |
|
800,550 |
|
Inventec
Corp. |
0.35% |
409,004 |
|
761,743 |
|
Quanta
Computer Inc. |
1.18% |
1,369,328 |
|
|
|
|
|
22,706,730 |
Electrical
& Machinery — 2.68% |
|
|
|
|
|
|
861,000 |
|
Teco
Electric & Machinery Co., Ltd. |
0.24% |
279,682 |
|
5,209,000 |
* |
Walsin
Lihwa Corp. |
2.44% |
2,842,005 |
|
|
|
|
|
3,121,687 |
Electronic
Components — 3.54% |
|
|
|
|
|
|
199,000 |
|
Career
Technology (MFG.) Co., Ltd. |
0.24% |
285,554 |
|
89,800 |
|
Catcher
Technology Co., Ltd. |
0.25% |
295,949 |
|
447,150 |
|
Delta
Electronics Inc. |
0.68% |
789,706 |
|
108,400 |
|
Largan
Precision Co., Ltd. |
0.52% |
605,100 |
|
109,909 |
|
Merry
Electronics Co., Ltd. |
0.23% |
263,434 |
|
230,347 |
|
Tripod
Technology Corp. |
0.28% |
331,989 |
|
755,996 |
|
Wus
Printed Circuit Co., Ltd. |
0.30% |
350,478 |
|
3,356,000 |
* |
Yageo
Corp. |
1.04% |
1,206,566 |
|
|
|
|
|
4,128,776 |
Electronics
— 0.44% |
|
|
|
|
|
|
349,000 |
|
Synnex
Technology International Corp. |
0.44% |
516,205 |
|
|
|
|
|
|
Flat-Panel
Displays — 8.44% |
|
|
|
|
|
|
3,912,000 |
shs. |
AU
Optronics Corp. |
4.86% |
5,662,860 |
|
1,375,913 |
|
Chi
Mei Optoelectronics Corp. |
1.59% |
1,857,202 |
|
3,897,000 |
* |
Chunghwa
Picture Tubes, Ltd. |
1.52% |
1,769,772 |
|
918,000 |
* |
Quanta
Display Inc. |
0.47% |
541,388 |
|
|
|
|
|
9,831,222 |
Food
— 2.05% |
|
|
|
|
|
|
4,567,000 |
|
Uni-President
Enterprise Corp. |
2.05% |
2,390,911 |
|
|
|
|
|
|
Glass,
Paper & Pulp — 0.58% |
|
|
|
|
|
|
409,160 |
|
Taiwan
Glass Ind. Corporation. |
0.33% |
387,114 |
|
529,000 |
|
Yuen
Foong Yu Paper Manufacturing Co., Ltd. |
0.25% |
291,956 |
|
|
|
|
|
679,070 |
ODM--
Peripherals — 8.58% |
|
|
|
|
|
|
3,451,700 |
|
BenQ
Corp. |
3.41% |
3,973,289 |
|
1,067,000 |
|
CMC
Magnetics Corp. |
0.47% |
551,865 |
|
3,350,300 |
|
Lite-on
Technology Corp. |
3.08% |
3,581,852 |
|
598,200 |
|
Premier
Image Technology Corp. |
0.51% |
590,493 |
|
3,469,009 |
|
Ritek
Inc. |
1.11% |
1,290,957 |
|
|
|
|
|
9,988,456 |
Plastics
— 12.05% |
|
|
|
|
|
|
2,916,320 |
|
Formosa
Chemicals & Fiber Corp. |
4.78% |
5,564,355 |
|
2,074,980 |
|
Formosa
Plastics Corp. |
3.06% |
3,566,438 |
|
2,671,920 |
|
Nan
Ya Plastics Corp. |
3.52% |
4,095,284 |
|
1,060,000 |
|
Taiwan
Styrene Monomer Corp. |
0.69% |
808,994 |
|
|
|
|
|
14,035,071 |
Retailing
— 0.46% |
|
|
|
|
|
|
332,512 |
|
President
Chain Store Corp. |
0.46% |
534,813 |
|
|
|
|
|
|
Rubber
— 1.54% |
|
|
|
|
|
|
1,401,160 |
|
Cheng
Shin Rubber Ind. Co., Ltd |
1.54% |
1,789,646 |
|
|
|
|
|
|
Semiconductors
—
13.86% |
|
|
|
|
|
|
1,402,314 |
* |
Advanced
Semiconductor Engineering, Inc. |
0.91% |
1,061,404 |
|
86,000 |
|
MediaTek
Inc. |
0.51% |
585,837 |
|
100,400 |
|
Novatek
Microelectronics Corp. |
0.30% |
351,464 |
|
707,100 |
|
Siliconware
Precision Industries Co., Ltd. |
0.50% |
584,260 |
|
181,600 |
|
Sunplus
Technology Co., Ltd. |
0.22% |
255,432 |
|
5,311,614 |
|
Taiwan
Semiconductor Manufacturing Co., Ltd. |
7.26% |
8,459,451 |
|
7,487,640 |
* |
United
Microelectronics Corp. |
4.16% |
4,840,867 |
|
|
|
|
|
16,138,715 |
Steel
& Other Metals — 8.64% |
|
|
|
|
|
|
7,430,260 |
|
China
Steel Corp. |
7.20% |
8,389,022 |
|
2,235,000 |
|
Yieh
Phui Enterprise Co., Ltd. |
1.44% |
1,670,514 |
|
|
|
|
|
10,059,536 |
Textiles
— 0.60% |
|
|
|
|
|
|
864,256 |
|
Far
Eastern Textile Ltd. |
0.60% |
695,035 |
|
|
|
|
|
|
Transportation
— 3.61% |
|
|
|
|
|
|
791,600 |
|
China
Airlines Ltd. |
0.39% |
451,865 |
|
727,602 |
* |
Eva
Airways Corp. |
0.31% |
357,967 |
|
1,247,620 |
|
Evergreen
Marine Corp. (Taiwan) Ltd. |
1.08% |
1,263,024 |
|
461,150 |
|
Wan
Hai Lines Ltd. |
0.41% |
481,387 |
|
1,713,227 |
|
Yang
Ming Marine Transport Corp. |
1.42% |
1,653,334 |
|
|
|
|
|
4,207,577 |
Other
— 4.52% |
|
|
|
|
|
|
1,029,000 |
shs. |
Giant
Manufacturing Co., Ltd. |
1.52% |
1,768,627 |
|
643,000 |
|
Great
China Metal Industry Co., Ltd. |
0.38% |
440,043 |
|
166,480 |
|
Nien
Made Enterprise Co., Ltd. |
0.22% |
262,516 |
|
2,499,326 |
|
Pou
Chen Corp. |
1.91% |
2,222,779 |
|
298,000 |
|
Taiwan
Fu Hsing Industrial Co., Ltd. |
0.28% |
325,175 |
|
271,887 |
|
Taiwan
Hon Chuan Enterprise Co., Ltd. |
0.21% |
246,090 |
|
|
|
|
|
5,265,230 |
|
|
|
|
|
|
TOTAL
COMMON STOCK (COST $120,507,085) |
|
|
|
|
115,112,931 |
|
|
|
|
|
|
SHORT-TERM
SECURITIES —
0.29% |
|
|
|
|
|
Time
Deposit —
0.29% |
|
|
|
|
|
Bank
of America (London), 1.600%, Due 12/03/05 |
|
|
|
0.29% |
338,875
|
|
|
|
|
|
|
TOTAL
INVESTMENTS IN SECURITIES AT MARKET VALUE |
|
|
|
99.13% |
115,451,806 |
(COST
$120,845,960) |
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS (LESS LIABILITIES) |
|
|
|
0.87% |
1,014,831 |
|
|
|
|
|
|
NET
ASSETS |
|
|
|
100.00% |
$
116,466,637 |
*
Non-income producing: these stocks did not pay a cash dividend during the
year.
See
accompanying notes to consolidated financial statements.
6
TAIWAN
GREATER CHINA FUND
Consolidated
Statement of Assets and Liabilities
December
31, 2004 (Expressed in U.S. Dollars)
Assets |
|
|
|
|
|
Investments
in securities at market value (Note 2B, 2C, 3 and 6): |
|
|
|
Common
stocks (cost ──
$120,507,085) |
$
115,112,931 |
|
Short-term
securities (cost ─
$338,875) |
338,875
|
|
Total
investments in securities at market value (cost ─
$120,845,960) |
115,451,806
|
|
|
|
Cash |
|
356,516
|
Foreign
Cash ($892,469) |
|
916,489
|
Receivable
for sale of investments |
|
453,940
|
Office
equipment (Note 2D) |
|
28,484
|
Prepaid
expenses and other assets |
|
66,296
|
|
Total
assets |
117,273,531
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Accrued
employee salaries and bonus |
|
317,975
|
Professional
fees payable |
|
150,563
|
Payable
for fund shares repurchased |
|
115,192
|
Administration
fee payable (Note 4) |
|
66,737
|
Custodian
fee payable (Note 5) |
|
28,130
|
Accrued
Republic of China taxes (Note 2H) |
|
1,095
|
Other
accrued expense |
|
127,202
|
|
Total
liabilities |
806,894
|
|
|
|
Net
assets |
|
$
116,466,637 |
|
|
|
|
|
|
Components
of net assets |
|
|
|
|
|
Par
value of shares of beneficial interest (Note 7) |
|
216,870
|
Additional
paid-in capital (Note 7) |
|
228,972,331
|
Accumulated
net investment income |
|
36,194,899
|
Accumulated
realized loss on investments |
|
(110,482,624) |
Unrealized
depreciation on investments (Note 6) |
|
(5,394,154) |
Cumulative
translation adjustment (Note 2F) |
|
(33,040,685) |
|
|
|
Net
assets |
|
$
116,466,637 |
|
|
|
|
|
|
Net
asset value per share (21,687,018 shares issued and outstanding, par value
$0.01) |
|
$5.37
|
|
|
|
See
accompanying notes to consolidated financial statements.
7
TAIWAN
GREATER CHINA FUND
Consolidated
Statement of Operations
For the
Year Ended December 31, 2004 (Expressed in U.S. Dollars)
Investment
income (Note 2C) |
|
|
|
|
Dividends |
|
$
4,999,694 |
|
Interest |
|
24,787
|
|
Other |
|
54,328
|
|
|
|
5,078,809 |
|
|
|
|
Republic
of China taxes (Note 2H) |
|
|
1,407,654
|
|
|
|
|
|
|
|
3,671,155
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
Management
fee (Note 4) |
|
346,141
|
|
Portfolio
management expenses |
|
|
|
|
Personnel
expenses |
857,230
|
|
|
Travel
expenses |
101,473
|
|
|
Research
expenses |
71,429
|
|
|
Rental
expenses |
25,670
|
|
|
Other
expenses |
97,837
|
|
|
|
|
Legal
fees and expenses |
|
|
1,176,960
|
Administrative
fee (Note 4) |
|
|
368,067
|
Shareholder
communication expenses |
|
|
260,491
|
Trustee
fees and expenses (Note 8) |
|
|
227,932
|
Custodian
fee (Note 5) |
|
|
200,552
|
Audit
fee |
|
|
146,625
|
Insurance
expenses |
|
|
83,275
|
Other
expenses |
|
|
96,242
|
|
|
|
|
|
|
|
4,059,924
|
|
|
|
|
Net
investment loss |
|
|
(388,769) |
|
|
|
|
Net
realized and unrealized gain (loss) on investments and foreign currencies
(Note 2E, 2J and 6) |
|
|
|
|
Net
realized gain on: |
|
|
|
|
investments
(excluding short term investments) |
15,672,129
|
|
|
foreign
currency transactions |
48,283
|
|
|
cumulative
effect of a change in accounting principle |
(1,823,027) |
|
|
net
realized gain on investments and foreign currency
transactions |
13,897,385
|
|
|
|
|
|
Net
changes in unrealized appreciation / depreciation on: |
|
|
|
|
investments |
(22,597,331) |
|
|
translation
of assets and liabilities in foreign currencies |
7,678,828
|
|
|
cumulative
effect of a change in accounting principle |
1,823,027
|
|
|
|
|
|
Net
realized and unrealized gain from investments and foreign
currencies |
|
801,909
|
|
|
|
|
|
Net
increase in net assets resulting from operations |
|
$
413,140 |
See
accompanying notes to consolidated financial statements.
8
TAIWAN
GREATER CHINA FUND
Consolidated
Statement of Changes in Net Assets
For the
Years Ended December 31, 2004 and 2003 (Expressed in U.S. Dollars)
|
|
|
2004 |
2003 |
Net
increase/decrease in net assets resulting from
operations |
|
|
|
|
|
Net
investment loss |
|
$
(388,769) |
(673,737) |
|
Net
realized gain / loss on investments and foreign currency transactions |
|
13,897,385 |
(11,991,683) |
|
|
|
|
|
|
Unrealized
appreciation / depreciation on investments (including the
effect of a change in accounting principlr) (Note
2J) |
|
(20,774,304) |
|
|
|
|
|
|
|
Unrealized
appreciation / depreciation on translation of assets
and liabilities in foreign currencies |
|
7,678,828
|
3,561,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in net assets resulting from operations |
|
413,140
|
26,826,848
|
|
|
|
|
|
|
Distribution
to shareholders |
|
(326,989) |
(1,961,939) |
|
|
|
|
|
|
Capital
share transactions: |
|
|
|
|
|
Cost
of tender offer (Note 7B) |
(50,901,403) |
-
|
|
|
Cost
of shares repurchased (Note 7A) |
(518,737) |
-
|
|
|
|
|
|
|
Net
assets, beginning of period |
|
167,800,626
|
142,935,717
|
|
|
|
|
|
|
Net
assets, end of period |
|
$116,466,637
|
167,800,626
|
See
accompanying notes to consolidated financial statements.
9
TAIWAN
GREATER CHINA FUND
Consolidated
Financial Highlights
(Expressed
in U.S. Dollars)
|
|
|
|
Years
Ended December 31, |
|
|
|
|
2004 |
2003 |
2002 |
2001 |
2000 |
|
|
|
|
|
|
|
|
|
Per
share operating performances: |
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of year |
|
|
5.13
|
4.37
|
5.40
|
5.78
|
10.23
|
|
Net
investment loss |
|
|
(0.01) |
(0.02) |
(0.06) |
(0.05) |
(0.11) |
|
Net
realized and unrealized gain / loss on
investments (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized and unrealized
appreciation
/ depreciation on
translation of foreign currencies (a) |
|
|
0.26 |
0.11 |
0.05 |
(0.39) |
(0.41) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
from investment operations |
0.01
|
0.82
|
(1.03) |
(0.38) |
(4.08) |
|
|
|
|
|
|
|
|
|
Distributions
to Shareholders from: |
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.01) |
(0.06) |
— |
— |
— |
|
Net
realized gain on investments |
|
|
— |
— |
— |
— |
(0.37) |
|
|
|
Total
distributions* |
(0.01) |
(0.06) |
— |
— |
(0.37) |
|
|
|
|
|
|
|
|
|
Capital
Stock Transactions: |
|
|
|
|
|
|
|
|
|
Share
Tender offer/Repurchase |
|
|
0.24
|
— |
— |
— |
— |
|
|
|
|
|
|
|
|
|
Net
asset value, end of year |
|
|
|
5.37
|
5.13
|
4.37
|
5.40
|
5.78
|
|
|
|
|
|
|
|
|
|
Per
share market price, end of year |
|
|
|
4.90
|
4.75
|
4.05
|
4.75
|
4.56
|
|
|
|
|
|
|
|
|
|
Total
investment return (%): |
|
|
|
|
|
|
|
|
|
Based
on Trust's market price |
|
|
3.42
|
18.79
|
(14.74) |
4.17
|
(41.71) |
|
Based
on Trust's net asset value |
|
|
4.94
|
18.75
|
(19.07) |
(6.57) |
(39.94) |
|
U.S.
$ return of Taiwan stock exchange index |
|
|
11.69
|
35.32
|
(19.03) |
10.16
|
(46.62) |
|
|
|
|
|
|
|
|
|
Ratios
and supplemental data: |
|
|
|
|
|
|
|
|
|
Net
assets, end of year (in thousands) |
|
|
116,467
|
167,801
|
142,936
|
176,526
|
188,939
|
|
Ratio
of expenses to average net assets (%) |
|
|
2.79 |
2.57
|
2.19
|
2.01
|
1.67
|
|
Ratio
of net investment loss to average net assets (%) |
|
|
(0.27) |
(0.44) |
(1.23) |
(1.01) |
(1.09) |
|
Portfolio
turnover ratio (%) |
|
|
137
|
78
|
107
|
173
|
165
|
* See
Note 2G for information concerning the Trust’s distribution policy.
(a)
Cumulative effect of change in accounting principle resulted in a $0.06
reduction in realized gain/loss on investments and foreign currency transactions
and a $0.06 increase in unrealized appreciation/depreciation on investments and
foreign currency translation.
See
accompanying notes to consolidated financial statements.
10
TAIWAN
GREATER CHINA FUND
Notes to
Consolidated Financial Statements / December 31, 2004 (Expressed in U.S.
Dollars)
Note 1 —
Organization and Acquisition of The Taiwan (R.O.C.) Fund
The
Taiwan Greater China Fund (the “Trust”, formerly known as The R.O.C. Taiwan
Fund) is a Massachusetts business trust formed in July 1988 and registered with
the U.S. Securities and Exchange Commission as a diversified, closed-end
management investment company under the Investment Company Act of 1940. The
Trust changed its name from The R.O.C. Taiwan Fund to the Taiwan Greater China
Fund on December 29, 2003. The change took effect on the New York Stock Exchange
on January 2, 2004.
The Trust
was formed in connection with the reorganization (the “Reorganization”) of The
Taiwan (R.O.C.) Fund (the “Fund”). The Fund, which commenced operations in
October 1983, was established under the laws of the Republic of China as an
open-end contractual investment fund pursuant to an investment contract between
International Investment Trust Company Limited (“IIT”) and the Central Trust of
China, as custodian. Pursuant to the Reorganization, which was completed in May
1989, the Trust acquired the entire beneficial interest in the assets
constituting the Fund. On February 23, 2004, the investment contract was
terminated and substantially all of the assets held in the Fund were transferred
to the direct account of the Trust. The Trust thereupon converted to internal
management and now directly invests in Taiwan as a Foreign Institutional
Investor (“FINI”). The Fund was subsequently liquidated.
As
required by the Trust’s Declaration of Trust, if the Trust’s shares trade on the
market at an average discount to Net Asset Value (“NAV”) of more than 10% in any
consecutive 12-week period after the most recent vote by the Trust’s
shareholders, the Trust must submit to the shareholders for a vote at its next
annual meeting a binding resolution that the Trust be converted from a
closed-end to an open-end investment company. Because the Trust’s shares traded
at an average discount to NAV of more than 10% for the period from September 7,
2004 to November 26, 2004, the Trust’s shareholders will be asked to consider
the conversion of the Trust to an open-end investment company at the 2005 annual
meeting. The affirmative vote of a majority of the Trust’s outstanding shares is
required to approve such a conversion.
Note 2 —
Summary of Significant Accounting Policies
A — Basis
of presentation and principles of consolidation— The accompanying consolidated
financial statements of the Trust have been prepared in accordance with U.S.
generally accepted accounting principles. The consolidated financial statements
include the accounts of the Fund (operation ended February 22, 2004). All
significant inter-company transactions and balances have been eliminated in
consolidation.
B —
Valuation of investments — Common stocks represent securities that are traded on
the Taiwan Stock Exchange or the Taiwan over-the-counter market. Securities
traded on a principal securities exchange are valued at the closing price on
such exchange. Short-term investments are valued at amortized cost, which
approximates fair value. Under this method, the difference between the cost of
each security and its value at maturity is accrued into income on a
straight-line basis over the days to maturity. When price movements are
constrained by collars imposed by Republic of China regulations and when market
quotations are not otherwise readily available, securities are valued at fair
value as determined in good faith under the procedures established by and under
the supervision of the Trust’s Trustees.
C —
Security transactions and investment income —Security transactions are recorded
on the date the transactions are entered into (the trade date). Dividend income
is recorded on the ex-dividend date, and interest income is recorded on an
accrual basis as it is earned.
D —
Office equipment — Office equipment is stated at cost less accumulated
depreciation. Depreciation is applied from the month such assets were placed
into service, using the straight-line method over the respective useful lives of
such assets.
E —
Realized gains and losses — For federal income tax purposes and financial
reporting purposes, realized gains and losses on securities transactions are
determined using the first-in, first-out method and the specific identification
method, respectively. For the fiscal year ended December 31, 2004, the Trust
utilized $7,902,568 of capital loss carryover with a total capital loss
carryover of $109,550,145 remaining. This capital loss carryover may be used to
offset any future capital gains generated by the Trust, and, if unused,
$81,239,188 of such loss will expire on December 31, 2009, $16,589,494 of such
loss will expire
on
December
11
TAIWAN
GREATER CHINA FUND
Notes to
Consolidated Financial Statements / December 31, 2004 (Expressed in U.S.
Dollars)
31, 2010
and $11,721,463 of such loss will expire on December 31, 2011.
Post
October losses represent losses realized on investment transactions from
November 1, 2004 through December 31, 2004. In accordance with federal income
tax regulations, the Trust expects to elect to defer capital losses of $932,479
and currency losses of $635,744 and treat them as arising in the following
fiscal year.
F —
Foreign currency translation — Substantially all of the Trust’s income is
earned, and its expenses are partially paid in New Taiwan Dollars (“NT$”). The
cost and market value of securities, currency holdings, and other assets and
liabilities that are denominated in NT$ are reported in the accompanying
consolidated financial statements after translation into United States Dollars
based on the closing market rate for United States Dollars in Taiwan at the end
of the period. At December 31, 2004, that rate was approximately NT$31.7085 to
$1.00. Investment income and expenses are translated at the average exchange
rate for the period. Currency translation gains or losses are reported as a
separate component of changes in net assets resulting from
operations.
The Trust
does not separately record that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments.
G —
Distributions to shareholders — It is the Trust’s policy to distribute all
ordinary income and net capital gains calculated in accordance with U.S. federal
income tax regulations. Such calculations may differ from those based on U.S.
generally accepted accounting principles. In order to reconcile such
differences, accumulated net investment income was increased by $34,599,489,
accumulated net realized loss on investments was increased by $8,229,402, and
additional paid in capital was decreased by $26,370,087 to reflect the impact of
such differences in accordance with U.S. generally accepted accounting
principles. Permanent book to tax differences primarily relate to the treatment
of the Trust’s gains from the disposition of passive foreign investment company
shares as well as the nondeductibility of net operating losses for U.S federal
income tax purposes. Temporary book to tax differences are primarily due to
differing treatments for certain foreign currency losses.
The Trust
declared a dividend of $0.01 a share, payable on July 30, 2004, to shareholders
of record on July 12, 2004 (ex-date July 8, 2004). Such dividend of $326,989
represents the undistributed net investment income totaling $299,668 as of
December 31, 2003.
The tax
characteristics of dividends and distributions paid during the years ended
December 31, 2004 and 2003 were as follows:
|
2004 |
|
2003 |
Ordinary
income |
$326,989 |
|
1,961,939 |
Long-term
capital gain |
- |
|
- |
|
$326.989 |
|
1,961,939 |
As of
December 31, 2004 the components of distributable earnings / (accumulated
losses) on a tax basis were as follows:
Undistributed
net investment income |
$
- |
Accumulated
capital and other losses |
(109,550,144) |
Unrealized
appreciation (depreciation) |
(5,394,154) |
|
$(114,944,298) |
H — Taxes
— The Trust intends to continue to elect and to continue to qualify as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the “Code”). If the Trust complies with all of the applicable requirements of
the Code, it will not be subject to U.S. federal income and excise taxes
provided that it distributes all of its investment company taxable income and
net capital gains to its shareholders.
The
Republic of China (“R.O.C.”) levies a tax at the rate of 20% on cash dividends
and interest received by the Trust on investments in R.O.C. securities. In
addition, a 20% tax is levied based on par value of stock dividends (except
those which have resulted from capitalization of capital surplus) received by
the Trust. For the twelve months ended December 31, 2004, total par value of
stock dividends received was $2,047,510.
Realized
gains on securities transactions are not subject to income tax in the R.O.C.;
instead, a securities transaction tax of 0.3% of the market value of stocks sold
or transferred, and 0.1% of the market value of bonds and beneficial
certificates sold or transferred, is levied. Proceeds from sales of investments
are net of securities transaction tax of $724,836 paid for the twelve months
ended December 31, 2004.
I — Use
of estimates — The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts
12
TAIWAN
GREATER CHINA FUND
Notes to
Consolidated Financial Statements / December 31, 2004 (Expressed in U.S.
Dollars)
reported
in the consolidated financial statements, consolidated financial highlights and
accompanying notes. Actual results could differ from those estimates.
J —
Change in accounting policy for measurement of the cost basis of investments—
During the year the Trust changed from use of the average-cost method of
measuring the cost of investments for financial statement reporting to the
specific identification method which enables the Trust to more closely align the
measure of cost used for both financial reporting and tax reporting. This change
has been evaluated by the Trust as a change in application of an accounting
principle which, pursuant to accounting requirements under U.S. generally
accepted accounting principles, should be applied retroactively to all financial
statement periods presented if the effect of change is deemed to be material to
those financial statements. The effect of adopting this change was to reduce
reported realized gains for the year ended December 31, 2004 by $1,823,027 with
an offsetting increase in the net change in unrealized
appreciation/depreciation. The impact of adopting this change in application of
accounting principle was not material to the reported cost of net investments as
of December 31, 2003. This change has no impact on the Trust’s valuation of
investments described in Note 2(B).
Note 3 —
Investment Considerations
Because
the Trust concentrates its investments in publicly traded equity and debt
securities issued by R.O.C. corporations, its portfolio involves considerations
not typically associated with investing in U.S. securities. In addition, the
Trust is more susceptible to factors adversely affecting the R.O.C. economy than
a fund not concentrated in these issuers to the same extent. Since the Trust’s
investment securities are primarily denominated in New Taiwan Dollars, changes
in the relationship of the New Taiwan Dollar to the U.S. Dollar may also
significantly affect the value of the investments and the earnings of the
Trust.
Note 4 —
Investment and Administrative Management
A — As
described in Note 1, the Trust’s investment management agreement with IIT (the
“Investment Contract”) was terminated on February 23, 2004, and the Trust was
converted to internal management. Before the termination of the Investment
Contract, the Trust paid IIT a fee in NT$, which was accrued daily and paid
monthly in arrears, at the annual rate of 1.35% of the net asset value (“NAV”)
with respect to Trust assets held in Taiwan under the Investment Contract up to
NT$6 billion, 1.15% of such NAV equal to or in excess of NT$6 billion up to NT$8
billion, 0.95% of such NAV equal to or in excess of NT$8 billion up to NT$10
billion and 0.75% of such NAV equal to or in excess of NT$10
billion.
B — Upon
the termination of the Investment Contract, the Trust entered into an
administrative services agreement with IIT. Pursuant to this agreement, IIT
provided clerical, accounting, tax, regulatory compliance and other
administrative services to the Trust. The Trust paid IIT a fee for these
services, from February 23, 2004 to September 30, 2004, in NT$ at an annual rate
of 0.15% of the Trust’s average daily NAV.
C — As of
October 1, 2004, Brown Brothers Harriman & Co. (“BBH”) provides
administrative and accounting services for the Trust, including maintaining
certain books and records of the Trust, and preparing certain reports and other
documents required by federal and/or state laws and regulations. The Trust pays
BBH a monthly fee for these services at an annual rate of 0.06% of the NAV of
the Trust’s assets up to $200 million, 0.05% of such NAV equal to or in excess
of $200 million up to $400 million and 0.04% of such NAV equal to or in excess
of $400 million.
Note 5 —
Custodian
Prior to
October 1, 2004, the Central Trust of China (“CTC”) served as custodian of the
assets of the Trust held in the R.O.C. From February 23, 2004 to September 30,
2004, the Trust paid CTC a monthly fee in NT$ at the annual rate of 0.13% of the
NAV of the Trust’s assets up to NT$6 billion, 0.12% of such NAV equal to or in
excess of NT$6 billion up to NT$8 billion, 0.11% of such NAV equal to or in
excess of NT$8 billion up to NT$10 billion and 0.10% of such NAV equal to or in
excess of NT$10 billion. Before February 22, 2004, pursuant to the Investment
Contract, the Trust paid CTC a monthly fee at the annual rate of 0.15% of the
NAV with respect to Trust assets held in Taiwan under the Investment Contract up
to NT$6 billion, 0.13% of such NAV equal to or in excess of NT$6 billion up to
NT$8 billion, 0.11% of such NAV equal to or in excess of NT$8 billion up to
NT$10 billion and 0.09% of such NAV equal to or in excess of NT$10 billion,
subject to a minimum annual fee of NT$2.4 million.
As of
October 1, 2004, BBH serves as custodian of the assets of the Trust. The Trust
pays BBH a monthly fee for securities in the Taiwan market at an annual rate of
0.15% of the NAV of the Trust’s assets up to $200 million, 0.13% of such NAV
equal to or in excess of $200
13
TAIWAN
GREATER CHINA FUND
Notes to
Consolidated Financial Statements / December 31, 2004 (Expressed in U.S.
Dollars)
million
up to $400 million and 0.11% of such NAV equal to or in excess of $400 million.
The total payment to BBH for administrative and custodial services is subject to
a minimum annual fee of $200,000.
Note 6 —
Investments in Securities
Purchases
and proceeds from sales of securities, excluding short-term investments, for the
twelve months ended December 31, 2004, included approximately $191,060,693 for
stock purchases and approximately $240,658,515 for stock sales, respectively. At
December 31, 2004, the cost of investments, excluding short-term investments,
for U.S. federal income tax purposes was $120,507,085. At December 31, 2004, the
unrealized depreciation of $5,394,154 for financial reporting purposes consisted
of $7,639,217 of gross unrealized appreciation and $13,033,371 of gross
unrealized depreciation.
Note 7 —
Shares of Beneficial Interest A — The Trust’s Declaration of Trust permits the
trustees to issue an unlimited number of shares of beneficial interest or
additional classes of other securities. The shares have a par value of $0.01,
and no other classes of securities are outstanding at present. The Trust has a
repurchase program which allows for the repurchase of up to 10% of the
outstanding shares. The share repurchase program commenced on November 1,
2004.
In
connection with the share repurchase program, the Board of Trustees has
authorized management to repurchase Trust shares in one or more block
transactions provided that no block exceeds 500,000 shares on any day, no more
than 1,000,000 shares in total are repurchased in block transactions, and that
such share repurchases are made on the New York Stock Exchange and in compliance
with the safe harbor provided by Rule 10b-18 under the Securities Exchange Act
of 1934. This does not increase the overall repurchase authorization and the
Trust will continue to make non-block share repurchases under its share
repurchase program.
During
the year ended December 31, 2004, the Trust repurchased 112,300 shares at an
average price of $4.57. The weighted average discount per share between the
repurchase cost and the net asset value applicable to such shares at the date of
repurchase was 9.28%. At December 31, 2004, 21,687,018 shares were
outstanding.
B — In
September 2004, the Trust accepted 10,899,658 shares for payment at a price of
$4.67 per share in accordance with its tender offer for up to that number.
Pursuant to the tender offer, the purchase price was equal to 99% of the Trust’s
net asset value per share determined as of the conclusion of the tender offer.
The purchased shares constituted approximately one-third of the Trust’s
previously outstanding shares.
Note 8 —
Trustee Fees and Expenses
The
amount shown is comprised of trustee fees and expenses, which included spousal
travel expenses through the meeting of the Board of Trustees held in February
2004 but not, by decision of the Board of Trustees, thereafter. Aggregate
trustee remuneration for the twelve months ended December 31, 2004 was
$122,279.
Tax
Footnote Disclosure - Foreign Tax Credit Pass-Through Disclosure
(Unaudited)
The Trust
paid foreign taxes of $1,407,654 and recognized foreign source income of
$5,078,010 during its fiscal year ended December 31, 2004. Pursuant to Section
853 of the Internal Revenue Code of 1986, as amended, the Trust designated such
amounts as having been paid in connection with dividends distributed from
investment company taxable income during its fiscal year ended December 31,
2004.
The Trust
and its predecessors, The Taiwan (R.O.C.) Fund and The R.O.C. Taiwan Fund, have
been certified as distributing funds by the Board of Inland Revenue of the
United Kingdom for the period from their inception to December 31, 2003. The
Trust intends to apply for such status for succeeding accounting
periods.
Steven R.
Champion has been the President, Chief Executive Officer and portfolio manager
of the Trust since February 2004. He was Executive Vice President of the Bank of
Hawaii from 2001-2003 and Chief Investment Officer of Aetna International from
1997-2001. Mr. Champion also previously served as the portfolio manager of The
Taiwan (R.O.C) Fund, predecessor to the Trust, from 1987 to 1989, and President
and portfolio manager of the Trust from 1989 to 1992. Other positions he has
held include Vice Chairman of the Bank of San Francisco, Chief International
Investment Officer at the Bank of America, and Vice President and Country
Manager in
14
TAIWAN
GREATER CHINA FUND
Notes to
Consolidated Financial Statements / December 31, 2004 (Expressed in U.S.
Dollars)
Taiwan
for Continental Illinois National Bank.
Proxy
Voting Policy
The
Trust’s policy with regard to voting stocks held in its portfolio is to vote in
accordance with the recommendations of Institutional Shareholder Services, Inc.
(“ISS”) unless the Trust’s portfolio manager recommends to the contrary, in
which event the decision as to how to vote will be made by the Executive
Committee of the Trust’s Board of Trustees. A summary of the voting policies
followed by ISS may be found on the Trust’s website,
http://www.taiwangreaterchinafund.com, and a more detailed description of those
policies is available on the website of the Securities and Exchange Commission
(the “SEC”), http://www.sec.gov. In addition, information regarding how the
Trust voted proxies relating to its portfolio securities during the 12-month
period ended June 30, 2004 is available on the Trust’s website and on the SEC’s
website.
Portfolio
Holdings
The Trust
provides a complete list of its Portfolio Holdings in its report to shareholders
four times each year, at each quarter end. For the second and fourth quarters,
the list of portfolio holdings appears in the Trust’s semi-annual and annual
reports to shareholders. For the first and third quarters (beginning with the
third quarter report of September 30, 2004), the list of portfolio holdings
appears in its quarterly reports to shareholders. These reports are available on
the Trust’s website. The Trust also files the list for the first and third
quarters with the Securities and Exchange Commission on Form N-Q, which can be
looked up on the SEC’s website at www.sec.gov. Form N-Q may also be reviewed and
copied at the SEC’s Public Reference Room in Washington, DC. To find out more
about this public service, call the SEC at 1-800-SEC-0330.
15
KPMG
Letterhead
Report of
Independent Registered Public Accounting Firm
Trustees
and Shareholders of
Taiwan
Greater China Fund
We have
audited the accompanying consolidated statement of assets and liabilities of the
Taiwan Greater China Fund, a Massachusetts business trust (the “Trust”),
including the consolidated schedule of investments, as of December 31, 2004, and
the related consolidated statement of operations for the year then ended, the
consolidated statements of changes in net assets for each of the years in the
two-year period then ended, and the consolidated financial highlights for each
of the years in the five-year period then ended. These consolidated financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial highlights based on our audits.
We
conducted our audits in accordance with 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
consolidated financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements and
financial highlights. Our procedures included physical inspection or
confirmation of securities owned as of December 31, 2004, by correspondence with
the Trust’s custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements and consolidated financial
highlights referred to above present fairly, in all material respects, the
financial position of the Taiwan Greater China Fund as of December 31, 2004, 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 the U.S.
generally accepted accounting principles.
/s./ KPMG
Certified Public Accountants
Taipei,
Taiwan
January
20, 2005
16
THIS PAGE
INTENTIONALLY LEFT BLANK
17
Information
Concerning Trustees and Officers
Name
(Age) and
Address |
Position(s)
Held
with the
Trust |
Term
of Office and
Length
of Time
Served |
|
Non-Interested
Trustees |
Edward
B. Collins (62)
China
Vest Inc.
160
Sansome Street, 18th
Floor,
San Francisco
California
94104 U.S.A. |
Trustee |
Trustee
since 2000 and until the 2006 Annual Meeting of Shareholders or the
special meeting in lieu thereof |
Frederick
C. Copeland, Jr. (63)
125
LaSalle Road, Suite 304
West
Hartford
Connecticut
06107 U.S.A. |
Trustee |
Trustee
since May 2004 and until the 2005 Annual Meeting of Shareholders or the
special meeting in
lieu thereof |
David
N. Laux (77)
2560
N. 23rd Road
Arlington,
Virginia 22207
U.S.A. |
Trustee
and
Chairman |
Trustee
since 1992 and until the 2007 Annual Meeting of Shareholders or the
special meeting in lieu thereof;
Chairman
since July 2004 |
Robert
P. Parker (63)
Parker
Price Venture Capital, Inc.
101
California Street, Suite 2830
San
Francisco, California 94111
U.S.A. |
Trustee |
Trustee
since 1998 and until the 2005 Annual Meeting of Shareholders or the
special meeting in lieu thereof;
and
Chairman from February- July 2004 |
Non-Trustee
Officers |
|
|
Steven
R. Champion (59)
Bank
Tower Room 1001
205
Dun Hua North Road
Taipei,
Taiwan, R.O.C. |
President,
Chief
Executive
Officer
and
Portfolio
Manager |
Since
February 2004 |
Cheryl
Chang (40)
Bank
Tower Room 1001
205
Dun Hua North Road
Taipei,
Taiwan, R.O.C. |
Secretary,
Treasurer
and
Chief
Financial
Officer |
Since
June 2004 |
The
Trust’s Statement of Additional Information (“SAI”) includes additional
information about the Trustees.
The SAI is available, without charge, upon request. If you would like to request
a copy of the SAI, you may do so by calling the following toll-free number:
1-800-343-9567.
18
Principal
Occupation(s)
During
the Past
Five
Years |
Other
Directorships
Held
by
Director |
|
|
Managing
Director, ChinaVest Group
(venture
capital investment), since prior to 2000
|
None |
Principal,
Deer Ridge Associates, LLC
(financial
consulting), since 2001;
President,
Chief Executive Officer and Chief Operating Officer,
Aetna
International, from prior to 2000 to
2001;
Executive Vice President, Aetna, Inc.
from
prior to 2000 to 2001 |
Far
East National Bank
Since
September 2004 |
President,
US-Taiwan Business Forum, since 2000
|
None |
Chairman,
Parker Price Venture Capital, Inc.
(formerly
known as Allegro Capital, Inc.),
since
prior to 2000 |
None |
|
|
Executive
Vice President, Bank of Hawaii,
2001-2003;
Chief Investment Officer, Aetna International,
from
prior to 2000 to 2001 |
None |
Senior
Manager, KPMG (Taipei Office),
from
prior to 2000 to 2004; Assurances and
Advisory
Unit of International Practice Group,
KPMG
(Taipei Office), 2000-2004 |
None |
19
ITEM 2.
CODE OF ETHICS.
As of the
end of the period covered by this report, the registrant has adopted a code of
ethics applicable to its principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing
similar functions. A copy of this code of ethics is filed as an exhibit to this
report. No substantive amendments were adopted and no waivers were granted with
respect to this code of ethics during the period covered by this report.
ITEM 3.
AUDIT COMMITTEE FINANCIAL EXPERT.
The
registrant's Board of Trustees has determined that Edward B. Collins qualifies
as an audit committee financial expert serving on its audit committee based upon
his having earned an MBA in International Business and Finance as well as his
experience (i) analyzing and evaluating financial statements as the managing
director of a venture capital fund, (ii) reviewing bond portfolios, loan
portfolios and establishing reserves as the director of a bank and (iii) working
in the credit department of various financial institutions. Mr. Collins is
independent for purposes of this Item 3.
ITEM 4.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
-----------------------------------------------------------------------
(a) AUDIT
FEES:
-----------------------------------------------------------------------
REGISTRANT INVESTMENT
ADVISOR
-----------------------------------------------------------------------
FY
2003 $53,500 $0
-----------------------------------------------------------------------
FY
2004 $64,595 $0
-----------------------------------------------------------------------
(b)
AUDIT-RELATED FEES:
-----------------------------------------------------------------------
REGISTRANT
INVESTMENT ADVISOR
FY
2003 $0 $0
-----------------------------------------------------------------------
FY
2004 $0 $0
-----------------------------------------------------------------------
NATURE OF
THE AUDIT-RELATED FEES: N/A
-----------------------------------------------------------------------
(c) TAX
FEES
-----------------------------------------------------------------------
REGISTRANT
INVESTMENT ADVISOR
-----------------------------------------------------------------------
FY
2003 $50,000 $0
-----------------------------------------------------------------------
FY
2004 $41,600 $0
-----------------------------------------------------------------------
NATURE OF
TAX FEES: The fees incurred by the registrant related to the
preparation
of the registrant's federal income and excise tax returns and the provision of
tax advice and planning services.
-----------------------------------------------------------------------
(d) ALL
OTHER FEES
-----------------------------------------------------------------------
REGISTRANT INVESTMENT
ADVISOR
-----------------------------------------------------------------------
FY
2003 $9,127 $0
-----------------------------------------------------------------------
FY
2004 $10,017 $0
-----------------------------------------------------------------------
NATURE OF
ALL OTHER FEES: The fees incurred by the registrant in FY 2003 related to
the
preparation of an application for distributing fund status in the United Kingdom
and research and preparation of a memorandum of advice concerning the tax
implications in the Republic of China of the registrant's becoming an internally
managed investment company. The fees
incurred by the registrant in FY 2004 related to the preparation of an
application for distributing fund status in the United Kingdom and research and
preparation of a memorandum of advice concerning the tax implications in the
Republic of China of the registrant's becoming an internally managed investment
company.
(e)(1)
AUDIT COMMITTEE'S PRE-APPROVAL POLICIES AND PROCEDURES
In
accordance with paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation S-X, the audit
committee of the registrant's board of trustees approves the engagement of the
registrant's accountants before such accountants are engaged to render audit or
non-audit services. Prior to February 23, 2004, pursuant to paragraph (c)(7)(ii)
of Rule 2-01 of Regulation S-X, the registrant's audit committee also
pre-approved its independent accountants' engagements for non-audit services
with the registrant's investment adviser, its parent company, and any entity
controlled by, or under common control with the investment adviser that provided
ongoing services to the registrant, if such engagement related directly to the
operations and financial reporting of the registrant.
(e)(2)
PERCENTAGE OF NON-AUDIT SERVICES APPROVED BY THE AUDIT COMMITTEE
All
services described in each of paragraphs (b) through (d) of this Item 4 were
pre-approved before the engagement by the registrant's audit committee pursuant
to paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation S-X. Consequently, none of
such services were required to be approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not
applicable.
(g)
AGGREGATE NON-AUDIT FEES BILLED BY THE REGISTRANT'S PRINCIPAL ACCOUNTANT FOR
SERVICES RENDERED TO THE REGISTRANT AND THE REGISTRANT'S INVESTMENT
ADVISER:
-----------------------------------------------------------------------
REGISTRANT INVESTMENT
ADVISOR
-----------------------------------------------------------------------
FY
2003 $59,127 $0
-----------------------------------------------------------------------
FY
2004 $51,617 $0
-----------------------------------------------------------------------
(h) The
registrant’s audit committee to the board of trustees has considered whether the
provision of non-audit services that were rendered to the investment advisor
(prior to February 23, 2004) that were not pre-approved pursuant to paragraph
(c) (7) (11) of Rule 2-01 of Regulation S-X is compatible with maintaining the
principal accountant’s independence.
The fees
paid by the registrant's investment adviser to the registrant's principal
accountant that are listed in sub-item (g) of this Item 4 related solely to
applications for distributing fund status on behalf of other, non-U.S. funds
managed by the registrant's investment adviser, and hence were not fees that in
any way relate to the operations and financial reporting of the registrant.
Therefore, such fees were not fees subject to approval pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X and were not submitted
for
pre-approval
by the registrant's audit committee.
ITEM 5.
AUDIT COMMITTEE OF LISTED REGISTRANTS.
The
registrant has a separately designated standing audit committee, which was
established in accordance with Section 3(a)(58)(A) of the Securities Exchange
Act of 1934, as amended.
The
members of the registrant's audit committee are: Edward B. Collins,
chairman,
Robert P. Parker and Frederick C. Copeland, Jr.
Messrs
Pedro-Pabb Kuczynski and David N. Laux were members of the Audit Committee until
February 2004. Mr. Hammond-Chambers was a member of the Audit Committee until
April 2004.
ITEM 6. 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's policy with regard to voting stocks held in its portfolio is to
vote in accordance with the recommendations of Institutional Shareholder
Services, Inc. ("ISS") unless the registrant's chief executive officer
recommends to the contrary, in which event the decision as to how to vote will
be made by the Executive Committee of the registrant's Board of Trustees. The
policies and procedures used by the investment advisor to determine how to vote
proxies relating to the registrant’s portfolio securities prior to February 23,
2004, including the procedures used when a vote presents a conflict of interest
involving the investment advisor of any of its affiliates, are contained in the
summary of ISS's proxy voting guidelines attached hereto as an exhibit to this
report.
ITEM 8.
Portfolio Managers of Closed-End Management Investment Companies.
8(1)
Steven R. Champion has been President, Chief Executive Officer and portfolio
manager of the Trust since February 2004. He was Executive Vice President of the
Bank of Hawaii from 2001-2003 and Chief Investment Officer of Aetna
International from 1997-2001. Mr. Champion also previously served as the
portfolio manager of The Taiwan (R.O.C.) Fund, and predecessor to the Trust,
from 1987 to 1989, and President and portfolio manager of the Trust from 1989 to
1992. Other positions he has held include Vice Chairman of the Bank of San
Francisco, Chief International Investment Officer at the Bank of America, and
Vice President and Country Manager in Taiwan for Continental Illinois National
Bank.
8(2) Not
applicable
8(3)
As of
December 31, 2004, Mr. Champion received a salary pursuant to an employment
agreement he has entered into with the Fund. The salary is a fixed amount and is
not based on the Fund's performance over a certain time period or the value of
the assets held in the Fund's portfolio. In addition, Mr. Champion is eligible
to receive a bonus for the year ended as of December 31, 2004. Such bonus will
be calculated based on the performance of the Fund and various other quantative
and qualitative factors, as determined by the Compensation Committee of the
Board of Trustees.
8(4) As
of December 31, 2004, Mr. Champion beneficially owned shares in the registrant
with a market value between $10,001 - $50,000.
ITEM 9.
PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANIES AND
AFFILIATED PURCHASERS.
REGISTRANT
PURCHASES OF EQUITY SECURITIES
Period |
(a)
Total
Number of Shares (or Units) Purchased |
(b)
Average
Price Paid per Share (or Unit) |
(c)
Total
Number of Shares (or Units) Purchased as Part of Publicly Announced Plans
or Programs |
(d)
Maximum
Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be
Purchased Under the Plans or Programs |
September
1
to
September
30 |
10,899,658(a) |
4.67 |
10,899,658 |
0
(a) |
October
1
to
October
31 |
|
|
|
|
November
1
to
November
30 |
59,900(b) |
4.47 |
59,900 |
2,120,032(c) |
December
1
to
December
31 |
52,400(b) |
4.68 |
52,400 |
2,067,632(c) |
(a) |
Tender
offer repurchase |
(b) |
Open
Market repurchase |
(c) |
Fund
may repurchase up to 2,179,932 shares under its repurchase program
commenced November 1, 2004. |
ITEM 10.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not
applicable.
ITEM 11.
CONTROLS AND PROCEDURES.
(a) The
registrant's principal executive officer 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) are
effective as of a date within 90 days of the filing date of this report based on
their
evaluation
of such disclosure controls and procedures as required by Rule 30a-3(b) under
the Investment Company Act of 1940, as amended and Rule 13a-15(b) under the
Securities Exchange Act of 1934, as amended.
(b) There
were no changes in the registrant's internal controls over financial reporting
(as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as
amended) that occurred during the registrant's second fiscal half-year that have
materially affected, or are reasonably likely to materially affect, such
internal controls.
ITEM 12.
EXHIBITS.
(a)(1)
CODE OF ETHICS REQUIRED BY ITEM 2 OF FORM N-CSR:
See
Exhibit 99.CodeEth attached hereto.
(b)(2)
CERTIFICATIONS REQUIRED BY RULE 30A-2(A) UNDER THE INVESTMENT COMPANY ACT OF
1940:
See
Exhibit 99.Cert attached hereto.
(b)
CERTIFICATIONS REQUIRED BY RULE 30A-2(B) UNDER THE INVESTMENT COMPANY ACT OF
1940 AND RULE 13A-14(B) UNDER THE SECURITIES EXCHANGE ACT OF 1934:
See
Exhibit 99.906Cert attached hereto.
(c) PROXY
VOTING GUIDELINES REQUIRED BY ITEM 7 OF FORM N-CSR:
See
Exhibit 99.PorxyPol attached hereto.
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.
Taiwan
Greater China Fund
By: /s/
Steven R. Champion
----------------------------------
Name:
Steven R. Champion
Title:
President and Chief Executive Officer
Date:
February 28, 2005
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/
Steven R. Champion
----------------------------------
Name:
Steven R. Champion
Title:
President and Chief Executive Officer
By: /s/
Cheryl Chang
----------------------------------
Name:
Cheryl Chang
Title:
Chief Financial Officer
Date:
February 28, 2005