TFC 6-30-06 N-CSR
<?xml:namespace prefix = o ns =
"urn:schemas-microsoft-com:office:office" />
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: June
30, 2006
[Missing
Graphic Reference]
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
Frederick
C. Copeland, Jr., Vice Chairman and
Trustee
Steven
R.
Champion, President, Chief Executive
Officer
and Portfolio Manager
Tsung-Ming
Chung, Trustee and Audit Committee
Member
Edward
B.
Collins, 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:
American
Stock Transfer & Trust Company
59
Maiden
Lane - Plaza Level
New
York,
NY 10038
U.S.A.
Telephone:
1-866-624-4110
Investor
Relations & Communications:
The
Altman Group, Inc.
60
East
42nd Street, Suite 405
New
York,
NY 10165
Telephone:
(212) 681-9600
U.S.
Legal Counsel:
Clifford
Chance U.S. LLP
31
West
52nd Street
New
York,
NY 10019-6131
U.S.A.
Tel:
(212) 878-8000
For
information on the Fund, including the NAV, please call toll free
1-800-343-9567.
Dear
Stockholders
The
Taiwan stock market experienced increased volatility during the second quarter
of 2006. After rising to a peak of 7476 on May 9, a 33.0% increase from its
late
October lows, the Taiwan Stock Exchange Index (TAIEX) fell 16.1% to its second
quarter low on June 9 and closed the period at 6704. This was somewhat milder
than the corrections in several other emerging markets which experienced sharper
declines from their May peaks to June troughs, such as Russia (32.1%), India
(30.6%), and Brazil (23.8%).
Index
returns were mixed during the second quarter and for the first six months of
2006 as follows:
|
Second
Quarter
|
First
Half
|
Taiwan
China Strategy Index*
|
-0.74%
|
1.82%
|
Taiwan
Stock Exchange Index
|
2.28%
|
4.47%
|
MSCI
Taiwan Index
|
0.74%
|
3.38%
|
Fund
Performance
For
the
second quarter and the first half of 2006, respectively, the Taiwan Greater
China Fund’s stock price fell 1.94% and rose by 4.91% while its net asset value
return was -1.16% and 1.53% for the same periods. The Fund’s net asset value
total return is after unaudited expenses of approximately 0.77% during the
second quarter and 1.37% during the first half.
The
Fund’s discount to net asset value averaged 6.14% during the first half,
compared to 8.18%, 10.52%, and 10.42% for the preceding three years,
respectively. The lowest closing discount during the first half was 1.64% on
February 1, and the highest closing discount was 8.99% on January 20.
The
Fund’s mean and median daily trading volumes on the New York Stock Exchange
during the first half were 38,182 shares and 27,900 shares, respectively,
compared to 30,231 shares and 16,400 shares the full year in 2005.
The
Fund’s net asset value performance remains highly correlated with the
performance of both the TAIEX and the MSCI Taiwan Index with an R2
of 0.92
and 0.96, respectively, since the inception of the Fund’s China-focused strategy
in early 2004.** The Fund’s beta relative to the TAIEX is 1.09, and it is 0.99
relative to the MSCI Taiwan Index. The Fund continues to produce attractive
alphas, defined as excess returns which cannot be explained by the Fund’s risk
level, of 0.09 and 0.07 per week compared to the TAIEX and the MSCI Taiwan
Index, respectively.
Performance
Attribution
Taiwan
Greater China Fund has recently contracted with MSCI Barra*** to provide
attribution data on the Fund’s performance from its Aegis Performance Analyst.
Highlights from this data will be included in our quarterly and semi-annual
reports in order to assist our shareholders in understanding key factors which
drive our performance.
For
the
12 months ended June 30, 2006, the NT$ gross return for the MSCI Taiwan Index
amounted to 12.22%, while the NT$ return for the Taiwan Greater China Fund
portfolio was 15.19%, indicating that 2.97 percentage points of return or 20%
of
the total return can be traced to the active management of the Fund. Of that
amount, slightly greater than 50% can be attributed to Industry Selection.
Slightly
over 28% of the Fund’s excess return over the last year can be traced to asset
selection or stock picking. Lastly, nearly 19% of our return emanated from
exposure to various other style factors, such as size, momentum, value, growth,
foreign exposure and yield. Our excess exposure to shares with strong positive
momentum and to shares with lower capitalization than the overall MSCI Taiwan
Index contributed positively to our performance, while our heavier exposure
to
value shares actually detracted from our performance against the MSCI Taiwan
Index.
Portfolio
Valuation Measures
The
recent declines in the Taiwan market we believe make the valuation measures
of
the Fund’s portfolio even more attractive. As of June 30, the Fund’s portfolio
was composed of companies with a weighted average price-earnings ratio of 13.4,
a weighted average price-book ratio of 2.7, a weighted average return on equity
of 18.0%, and a weighted average cash dividend yield of 4.1%.
Taiwan
China Relations
Taiwan
continued to extend the scope of economic interaction with China during the
second quarter. At the end of April, it eased restrictions on investments in
China by semiconductor packaging and testing firms as well as flat-panel display
makers. Taiwan companies will now be allowed to make investments in the less
sophisticated aspects of chip packaging and testing and in small flat panels
of
the size used in mobile phones. The last time Taiwan eased mainland investment
regulations was in 2002 to permit limited investment in semiconductor
manufacturing in China.
Taiwan
also received much encouragement in May and June from its allies that such
action should be broadened. First came Deputy U.S. Trade Representative Karan
Bhatia, the highest ranking American official to visit Taiwan in six years.
He
urged Taiwan to act decisively on investment and trade ties with China or risk
losing economic competitiveness. Necessary steps include lifting restrictions
on
transfer of commercial technology, imports of certain goods from the mainland,
cross-strait travel and direct transportation links. In quick succession, the
American Chamber of Commerce in Taipei and the chairman of the American
Institute in Taiwan, a quasi-diplomatic organization with a Taipei office that
functions as the unofficial U.S. embassy, made the same points.
In
mid-June Taiwan and China took an important step forward in opening up normal
transportation links with an agreement to allow as many as 168 non-stop charter
passenger flights annually during four major public holidays. This extends
arrangements made in each of the last two years for such flights during Chinese
New Year. Direct charter cargo flights would also be permitted for the first
time. The cargo flights will be limited to carrying only equipment and
components for use by factories in China established by Taiwan companies and
are
to be approved on a case-by-case basis. In addition, emergency medical flights
would be allowed on the same basis. The two sides also pledged further
cooperation in the coming months.
The
government restriction limiting a Taiwan-listed company’s China investments to a
maximum of 40% of its net worth is becoming a problem for some firms which
have
made aggressive commitments to mainland China. Some Taiwan companies have
separately listed some or all of their China operations on the Hong Kong Stock
Exchange so that they are not subject to this restriction. Prominent examples
of
this trend include Foxconn International Holdings, the cell phone manufacturing
subsidiary of Hon Hai Precision, and Yue Yuen Industrial Holdings, a subsidiary
of Pou Chen Corp., which is the world’s largest manufacturer of sports shoes.
Several other prominent Taiwan companies with significant operations in China
are considering similar actions. In recognition of this trend, Standard &
Poor’s and Polaris Financial Group, a Taipei-based securities firm, have
launched a “T-Share” index to track Taiwan related companies listed in Hong
Kong.
Share
Repurchase
The
Fund
announced on July 7 that
it
had completed the repurchase of shares in connection with the semi-annual
repurchase offer which expired on June 16. The repurchase price was $5.84 (98%
of the June 30 net asset value per share). Approximately 60.7% of total shares
outstanding were submitted for repurchase with approximately 8.2% of those
shares repurchased by the Fund.
Fund
management will continue to focus on generating shareholder value and providing
a smart way to invest in the Chinese economy through dynamic Taiwan
companies.
Yours
truly,
Steven
R.
Champion
President,
CEO and Portfolio Manager
July
18,
2006
*
Source:
MSCI. This information is for internal use only and may not be redistributed
or
used in connection with creating or offering any securities, financial products
or indices. Neither MSCI nor any other third party involved in or related to
compiling, computing or creating the MSCI data (the “MSCI Parties”) makes any
express or implied warranties or representations with respect to such data
(or
the results to be obtained by the use thereof), and the MSCI Parties hereby
expressly disclaim all warranties of originality, accuracy, completeness,
merchantability or fitness for a particular purpose with respect to such data.
Without limiting any of the foregoing, in no event shall any of the MSCI Parties
have any liability for any direct, indirect, special, punitive, consequential
or
any other damages (including lost profits) even if notified of the possibility
of such damages.
The
Taiwan China Strategy Index is a custom index calculated by MSCI for, and as
requested by, Taiwan Greater China Fund. To calculate this Index MSCI starts
with the MSCI Taiwan Index and then excludes those securities selected by Taiwan
Greater China Fund on a quarterly basis based on Taiwan Greater China Fund’s
screening criteria. MSCI has no role in developing, reviewing or approving
Taiwan Greater China Fund’s investing criteria or the list of companies excluded
from the MSCI Taiwan Index by Taiwan Greater China Fund to create the Taiwan
China Strategy Index.
** R2
is a
measure of the correlation between the dependent and independent variables
in a
regression analysis. In this report, it measures the extent to which the Fund’s
movements can be explained by movements in a benchmark index. The measurement
ranges from 0 to 1, where 1 indicates that all movements of the Fund can be
explained by movements in the index.
***
‘Barra, Inc. analytics and data (www.barra.com)
were
used in the preparation of this report. Copyright 2005 BARRA, INC. All rights
reserved.’ This information may only be used for your internal use, may not be
reproduced or redisseminated in any form. This information is provided on an
“as
is” basis and the use of this information assumes the entire risk of any use it
may make or permit to be made of this information. Neither Barra, any of its
affiliates or any other person involved in or related to compiling, computing
or
creating this information makes any express or limited warranties or
representations with respect to such information or the results to be obtained
by the use thereof, and Barra, its affiliates and each such other person hereby
expressly disclaim all warranties (including, without limitation, all warranties
of originality, accuracy, completeness, timeliness, non-infringement,
merchantability and fitness for a particular purpose) with respect to this
information. Without limiting any of the foregoing, in no event shall Barra,
any
of its affiliates or any other person involved in or related to compiling,
computing or creating this information have any liability for any direct,
indirect, special, incidental, punitive, consequential or any other damages
(including, without limitation, lost profits) even if notified of, or if it
might otherwise have anticipated, the possibility of such damages.
TAIWAN
GREATER CHINA FUND
|
Portfolio
Highlights
|
SCHEDULE
OF INVESTMENTS BY INDUSTRY AS OF June 30, 2006
(Unaudited)
|
|
Industry
Diversification
|
|
Percent
of
|
|
Industry
|
|
|
|
U.S.
$ Value
|
|
Net
Assets
|
|
Computer
Systems & Hardware
|
|
|
|
20,307,431
|
|
20.17%
|
|
Semiconductors
|
|
|
|
16,680,965
|
|
16.57
|
|
Electronic
Components
|
|
|
|
12,332,373
|
|
12.25
|
|
Computer
Peripherals/ODM
|
|
|
|
10,345,343
|
|
10.28
|
|
Flat-Panel
Displays
|
|
|
|
10,038,650
|
|
9.97
|
|
Plastics
|
|
|
|
9,780,359
|
|
9.71
|
|
Steel
|
|
|
|
6,019,287
|
|
5.98
|
|
Other
|
|
|
|
5,642,784
|
|
5.60
|
|
Transportation
|
|
|
|
2,648,354
|
|
2.63
|
|
Cement
|
|
|
|
2,335,316
|
|
2.32
|
|
Food
|
|
|
|
1,880,494
|
|
1.87
|
|
Communications
Equipment
|
|
|
|
1,475,466
|
|
1.46
|
|
Automobile
|
|
|
|
1,363,014
|
|
1.35
|
|
Electrical
& Machinery
|
|
|
|
1,335,746
|
|
1.33
|
|
Rubber
|
|
|
|
1,255,023
|
|
1.25
|
|
Chemicals
|
|
|
|
1,114,225
|
|
1.11
|
|
Textiles
|
|
|
|
644,052
|
|
0.64
|
|
Glass,
Paper & Pulp
|
|
|
|
485,014
|
|
0.48
|
|
Retailing
|
|
|
|
450,886
|
|
0.45
|
|
Short
Term Securities
|
|
|
|
17,661
|
|
0.02
|
|
Liabilities,
Net of Other Assets
|
|
|
|
(5,479,537)
|
|
(5.44)
|
|
Net
Assets
|
|
|
|
$100,672,906
|
|
100.00
|
|
|
|
|
|
|
|
|
|
TAIWAN
GREATER CHINA FUND
|
Schedule
of Investments (Unaudited) / June 30, 2006
|
|
|
COMMON
STOCK —
105.42%
|
%
of
|
|
U.S.
Dollar
|
Automobile
— 1.35%
|
Net
Assets
|
|
Value
|
|
360,030
|
shs.
|
China
Motor Corp.
|
0.36
|
|
$
361,571
|
|
91,000
|
|
Hotai
Motor Co., Ltd.
|
0.21
|
|
210,899
|
|
152,528
|
|
Tong
Yang Industry Co., Ltd.
|
0.14
|
|
143,754
|
|
285,960
|
|
TYC
Brother Industrial Co., Ltd.
|
0.19
|
|
194,401
|
|
122,000
|
|
Yulon
Nissan Motor Co., Ltd.
|
0.45
|
|
452,389
|
|
|
1,363,014
|
Cement
— 2.32%
|
|
|
|
|
1,363,297
|
|
Asia
Cement Corporation
|
1.02
|
|
1,023,689
|
|
1,783,454
|
|
Taiwan
Cement Corp.
|
1.30
|
|
1,311,627
|
|
|
2,335,316
|
Chemicals
— 1.11%
|
|
|
|
745,000
|
*
|
Eternal
Chemical Co., Ltd.
|
1.11
|
|
1,114,225
|
|
Communications
Equipment — 1.46%
|
|
|
|
|
704,522
|
|
D-Link
Corp.
|
0.76
|
|
768,494
|
|
431,673
|
|
Zyxel
Communications Corp.
|
0.70
|
|
706,972
|
|
|
1,475,466
|
Computer
Peripherals/ODM — 10.28%
|
|
|
|
|
2,665,337
|
*
|
BenQ
Corp.
|
1.65
|
|
1,655,463
|
|
86,400
|
|
High
Tech Computer Corp.
|
2.36
|
|
2,376,157
|
|
3,051,006
|
|
Lite-on
Technology Corp.
|
4.49
|
|
4,520,672
|
|
1,060,000
|
|
Mitac
International Corp.
|
1.01
|
|
1,013,766
|
|
519,976
|
|
Premier
Image Technology Corp.
|
0.77
|
|
779,285
|
|
|
10,345,343
|
Computer
Systems & Hardware —
20.17%
|
|
|
|
699,162
|
|
Acer
Inc.
|
1.22
|
|
1,229,310
|
|
103,578
|
|
Advantech
Co., Ltd.
|
0.30
|
|
297,021
|
|
1,960,600
|
|
Asustek
Computer Inc.
|
4.78
|
|
4,816,455
|
|
945,364
|
|
Compal
Electronics Inc.
|
0.90
|
|
902,670
|
|
1,938,602
|
|
Hon
Hai Precision Industry Co., Ltd.
|
11.90
|
|
11,980,916
|
|
675,380
|
|
Quanta
Computer Inc.
|
1.07
|
|
1,081,059
|
|
|
20,307,431
|
Electrical
& Machinery — 1.33%
|
|
|
|
3,109,837
|
|
Walsin
Lihwa Corp.
|
1.33
|
|
1,335,746
|
|
|
|
Electronic
Components — 12.25%
|
|
|
|
133,725
|
|
Catcher
Technology Co., Ltd.
|
1.41
|
|
1,417,353
|
|
416,186
|
|
Delta
Electronics Inc.
|
1.17
|
|
1,183,170
|
|
531,600
|
|
Foxconn
Technology Co., Ltd.
|
4.24
|
|
4,271,001
|
|
96,470
|
|
Largan
Precision Co., Ltd.
|
2.05
|
|
2,065,841
|
|
91,909
|
|
Merry
Electronics Co., Ltd.
|
0.28
|
|
280,031
|
|
221,000
|
|
Radiant
Opto-Electronics Corp.
|
0.36
|
|
357,162
|
|
234,616
|
|
Tripod
Technology Corp.
|
0.79
|
|
797,483
|
|
1,230,000
|
|
Wintek
Corp.
|
1.12
|
|
1,123,140
|
|
2,419,000
|
*
|
Yageo
Corp.
|
0.83
|
|
837,192
|
|
|
12,332,373
|
|
|
|
See
accompanying notes to financial statements and independent accountants’
review report.
|
|
|
TAIWAN
GREATER CHINA FUND
|
Schedule
of Investments (continued) (Unaudited) / June 30,
2006
|
|
|
|
%
of
|
|
U.S.
Dollar
|
Flat-Panel
Displays — 9.97%
|
Net
Assets
|
|
Value
|
|
4,517,260
|
shs.
|
AU
Optronics Corp.
|
6.34
|
|
$
6,379,148
|
|
2,283,322
|
|
Chi
Mei Optoelectronics Corp.
|
2.52
|
|
2,536,515
|
|
3,557,951
|
|
Chunghwa
Picture Tubes, Ltd.
|
0.81
|
|
814,685
|
|
817,795
|
|
Quanta
Display Inc.
|
0.30
|
|
308,302
|
|
|
10,038,650
|
Food
— 1.87%
|
|
|
2,158,000
|
|
Uni-President
Enterprise Corp.
|
1.87
|
|
1,880,494
|
|
|
|
Glass,
Paper & Pulp — 0.48%
|
|
|
|
380,476
|
*
|
Taiwan
Glass Ind. Corp.
|
0.30
|
|
298,629
|
|
471,225
|
|
Yuen
Foong Yu Paper Manufacturing Co., Ltd.
|
0.18
|
|
186,385
|
|
|
485,014
|
Plastics
— 9.71%
|
|
|
|
3,048,252
|
|
Formosa
Chemicals & Fiber Corp.
|
4.68
|
|
4,709,689
|
|
1,728,198
|
*
|
Formosa
Plastics Corp.
|
2.60
|
|
2,622,083
|
|
1,659,475
|
|
Nan
Ya Plastics Corp.
|
2.43
|
|
2,448,587
|
|
|
9,780,359
|
Retailing
— 0.45%
|
|
|
|
205,512
|
|
President
Chain Store Corp.
|
0.45
|
|
450,886
|
|
|
|
Rubber
— 1.25%
|
|
|
|
1,432,608
|
|
Cheng
Shin Rubber Ind. Co., Ltd.
|
1.25
|
|
1,255,023
|
|
|
|
Semiconductors
—
16.57%
|
|
|
|
1,245,304
|
|
Advanced
Semiconductor Engineering, Inc.
|
1.22
|
|
1,231,393
|
|
227,000
|
|
MediaTek
Inc.
|
2.09
|
|
2,104,352
|
|
133,007
|
|
Novatek
Microelectronics Corp.
|
0.64
|
|
645,276
|
|
762,000
|
|
Powerchip
Semiconductor Corp.
|
0.50
|
|
500,363
|
|
644,959
|
|
Siliconware
Precision Industries Co., Ltd.
|
0.79
|
|
793,207
|
|
4,358,746
|
|
Taiwan
Semiconductor Manufacturing Co., Ltd.
|
7.81
|
|
7,865,852
|
|
5,906,011
|
|
United
Microelectronics Corp.
|
3.52
|
|
3,540,522
|
|
|
16,680,965
|
Steel
— 5.98%
|
|
|
|
6,068,323
|
|
China
Steel Corp.
|
5.98
|
|
6,019,287
|
|
|
|
Textiles
— 0.64%
|
|
|
|
787,996
|
|
Far
Eastern Textile Ltd.
|
0.64
|
|
644,052
|
|
|
|
Transportation
— 2.63%
|
|
|
|
733,947
|
|
China
Airlines Ltd.
|
0.35
|
|
349,266
|
|
673,471
|
|
Eva
Airways Corp.
|
0.29
|
|
287,190
|
|
1,158,380
|
|
Evergreen
Marine Corp. (Taiwan) Ltd.
|
0.80
|
|
808,967
|
|
428,248
|
|
Wan
Hai Lines Ltd.
|
0.29
|
|
295,102
|
|
1,447,227
|
|
Yang
Ming Marine Transport Corp.
|
0.90
|
|
907,829
|
|
|
2,648,354
|
|
|
See
accompanying notes to financial statements and independent accountants’
review report.
|
TAIWAN
GREATER CHINA FUND
|
Schedule
of Investments (continued) (Unaudited) / June 30,
2006
|
|
|
|
%
of
|
|
U.S.
Dollar
|
Other
— 5.60%
|
Net
Assets
|
|
Value
|
|
869,000
|
shs.
|
Giant
Manufacturing Co., Ltd.
|
1.40
|
|
$
1,407,092
|
|
176,000
|
|
Johnson
Health Tech Co., Ltd.
|
0.95
|
|
962,625
|
|
336,000
|
|
Merida
Industry Co., Ltd.
|
0.23
|
|
231,534
|
|
421,864
|
|
Nien
Made Enterprise Co., Ltd.
|
0.47
|
|
474,510
|
|
2,321,193
|
|
Pou
Chen Corp.
|
2.03
|
|
2,044,219
|
|
464,800
|
|
Taiwan
Fu Hsing Industrial Co., Ltd.
|
0.52
|
|
522,804
|
|
|
5,642,784
|
|
|
|
TOTAL
COMMON STOCK (COST $94,692,905)
|
|
106,134,782
|
|
|
|
SHORT-TERM
SECURITIES —
0.02%
|
|
|
Time
Deposit —
0.02%
|
|
|
Brown
Brothers Harriman (Grand Cayman), 4.60%, Due 07/03/06
|
0.02
|
|
17,661
|
|
|
|
|
TOTAL
INVESTMENTS IN SECURITIES AT FAIR VALUE
|
105.44
|
|
106,152,443
|
(COST
$94,710,566)
|
|
|
|
|
|
|
|
LIABILITIES
(NET OF OTHER ASSETS)
|
(5.44)
|
|
(5,479,537)
|
|
|
|
|
NET
ASSETS
|
100.00
|
|
$100,672,906
|
|
|
|
*
Non-income producing: These stocks did not pay a cash dividend during
the
past year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial statements and independent accountants’
review report.
|
TAIWAN
GREATER CHINA FUND
|
Statement
of Assets and Liabilities
|
June
30, 2006 (Unaudited) (Expressed in U.S. Dollars)
|
|
Assets
|
|
Investments
in securities at fair value (Notes 2B, 2C, 3 and 6):
|
|
Common
Stock (cost —
$94,692,905)
|
$
106,134,782
|
|
Short-term
securities (cost —
$17,661)
|
17,661
|
|
|
Total
investment in securities at fair value (cost —
$94,710,566)
|
106,152,443
|
Cash
|
195
|
Foreign
cash (cost —
$31,272)
|
31,272
|
Receivable
for dividends
|
346,221
|
Office
equipment (Note 2D)
|
21,125
|
Prepaid
expenses and other assets
|
22,134
|
|
|
Total
assets
|
106,573,390
|
|
Liabilities
|
|
Payable
for fund shares repurchased
|
5,188,828
|
Accrued
employee salaries and bonus
|
275,000
|
Professional
fees payable
|
137,203
|
Shareholder
communication fees payable
|
112,573
|
Trustee
fees and expense payable
|
66,777
|
Custodian
fee payable (Note 5)
|
40,975
|
Administration
fee payable (Note 4)
|
33,040
|
Other
accrued expenses
|
46,088
|
|
|
Total
liabilities
|
5,900,484
|
|
|
Net
assets
|
$
100,672,906
|
|
Components
of net assets
|
|
Par
value of shares of beneficial interest (Note 7)
|
$
168,815
|
Additional
paid-in capital (Note 7)
|
199,261,727
|
Accumulated
net investment income
|
39,524,586
|
Accumulated
net realized loss on investments and foreign currency
transactions.
|
(112,585,775)
|
Unrealized
net appreciation on investments (Note 6)
|
11,441,877
|
Cumulative
translation adjustment (Note 2F)
|
|
(37,138,324)
|
|
|
Net
assets
|
$
100,672,906
|
|
|
Net
asset value per share (16,881,479 shares issued and outstanding,
par value
$0.01)
|
$5.96
|
|
|
|
See
accompanying notes to financial statements and independent accountants’
review report.
|
TAIWAN
GREATER CHINA FUND
|
Statement
of Operations
|
For
the Six Months Ended June 30, 2006 (Unaudited) (Expressed in U.S.
Dollars)
|
|
Investment
income (Note 2C)
|
|
|
Dividends
|
$
429,888
|
|
Interest
|
9,151
|
|
439,039
|
|
|
Republic
of China taxes (Note 2H)
|
(91,288)
|
|
|
|
347,751
|
|
Expenses
|
|
Portfolio
management expenses:
|
|
|
|
Personnel
expenses
|
687,400
|
|
|
Research
expenses
|
83,833
|
|
|
Rental
expenses
|
29,686
|
|
|
Travel
expenses
|
14,842
|
|
|
Other
expenses
|
12,378
|
|
|
Shareholder
communication expenses
|
190,576
|
|
Trustee
fees and expenses
|
93,758
|
|
Custodian
fee (Note 5)
|
80,259
|
|
Legal
fees and expenses
|
74,391
|
|
Audit
and tax fee
|
56,169
|
|
Administrative
fee (Note 4)
|
45,614
|
|
Insurance
expenses
|
40,092
|
|
Other
expenses
|
74,789
|
|
|
1,483,787
|
|
|
Net
investment loss
|
(1,136,036)
|
|
Net
realized and unrealized gain (loss) on investments and foreign currencies
(Notes 2E and 6)
|
|
Net
realized gain on:
|
|
|
|
investments
(excluding short-term securities)
|
2,016,012
|
|
|
foreign
currency transactions
|
129,692
|
|
|
Net
realized gain on investments and foreign currency
transactions
|
2,145,704
|
|
|
Net
changes in unrealized appreciation / depreciation on:
|
|
|
|
investments
|
(534,386)
|
|
|
translation
of assets and liabilities in foreign currencies
|
1,022,646
|
|
|
Net
realized and unrealized gain from investments and foreign
currencies
|
2,633,964
|
|
|
Net
increase in net assets resulting from operations
|
$
1,497,928
|
|
|
|
See
accompanying notes to financial statements and independent accountants’
review report.
|
TAIWAN
GREATER CHINA FUND
|
Statements
of Changes in Net Assets
|
For
the Six Months Ended June 30, 2006, and the Year Ended December 31,
2005
(Expressed in U.S. Dollars)
|
|
|
|
Six
Months
|
|
Year
Ended
|
|
Ended
June 30,
|
|
December
31,
|
|
2006
(Unaudited)
|
|
2005
|
Net
increase/decrease in net assets resulting from
operations
|
|
|
|
|
Net
investment income (loss)
|
$
(1,136,036)
|
|
$
1,064,783
|
|
Net
realized gain / loss on investments and foreign currency
|
|
|
|
|
|
transactions
|
2,145,704
|
|
(4,290,165)
|
|
Unrealized
appreciation / depreciation on investments
|
(534,386)
|
|
17,370,417
|
|
Unrealized
appreciation / depreciation on translation of
|
|
|
|
|
|
assets
and liabilities in foreign currencies
|
1,022,646
|
|
(5,120,285)
|
|
|
|
|
|
|
|
|
|
Net
increase in net assets resulting from operations
|
1,497,928
|
|
9,024,750
|
|
|
|
|
|
Capital
share transactions:
|
|
|
|
|
|
Cost
of semi-annual repurchase offer (Note 7B)
|
(5,188,828)
|
|
(11,333,291)
|
|
|
Cost
of shares repurchased (Note 7A)
|
-
|
|
(9,794,290)
|
|
|
Net
capital share transactions
|
(5,188,828)
|
|
(21,127,581)
|
|
|
|
|
|
Net
assets, beginning of period
|
104,363,806
|
|
116,466,637
|
|
|
|
|
|
Net
assets, end of period
|
$
100,672,906
|
|
$
104,363,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial statements and independent accountants’
review report.
|
TAIWAN
GREATER CHINA FUND
|
Financial
Highlights
|
(Expressed
in U.S. Dollars)
|
|
|
Six
Months
|
|
|
|
Ended
|
|
|
|
June
30, 2006
|
|
Years
Ended December 31,
|
|
(Unaudited)
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
2001
|
|
|
|
|
|
|
|
|
|
|
|
Per
share operating performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of period
|
5.87
|
|
5.37
|
|
5.13
|
|
4.37
|
|
5.40
|
|
5.78
|
|
Net
investment income (loss)
|
(0.06)
|
|
0.05
|
|
(0.01)
|
|
(0.02)
|
|
(0.06)
|
|
(0.05)
|
|
Net
realized and unrealized gain / loss
|
|
|
|
|
|
|
|
|
|
|
|
|
on
investments (a)
|
0.08
|
|
0.65
|
|
(0.24)
|
|
0.73
|
|
(1.02)
|
|
0.06
|
|
Net
realized and unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
appreciation
/ depreciation on
|
|
|
|
|
|
|
|
|
|
|
|
|
translation
of foreign currencies (a)
|
0.06
|
|
(0.25)
|
|
0.26
|
|
0.11
|
|
0.05
|
|
(0.39)
|
|
|
Total
from investment operations
|
0.08
|
|
0.45
|
|
0.01
|
|
0.82
|
|
(1.03)
|
|
(0.38)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
to Shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income*
|
—
|
|
—
|
|
(0.01)
|
|
(0.06)
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Stock Transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Tender Offer/Repurchase
|
0.01
|
|
0.05
|
|
0.24
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, end of period
|
5.96
|
|
5.87
|
|
5.37
|
|
5.13
|
|
4.37
|
|
5.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share market price, end of period
|
5.56
|
|
5.30
|
|
4.90
|
|
4.75
|
|
4.05
|
|
4.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investment return (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
Based
on Trust's market price
|
4.91
|
|
8.16
|
|
3.42
|
|
18.79
|
|
(14.74)
|
|
4.17
|
|
Based
on Trust's net asset value
|
1.53
|
|
9.31
|
|
4.94
|
|
18.75
|
|
(19.07)
|
|
(6.57)
|
|
U.S.
$ return of Taiwan Stock Exchange Index**
|
3.85
|
|
3.03
|
|
11.69
|
|
35.32
|
|
(19.03)
|
|
10.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
and supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (in thousands)
|
100,673
|
|
104,364
|
|
116,467
|
|
167,801
|
|
142,936
|
|
176,526
|
|
Ratio
of expenses to average net assets (%)
|
1.37†
|
|
2.12
|
|
2.79
|
|
2.57
|
|
2.19
|
|
2.01
|
|
Ratio
of net investment income (loss) to average net assets (%)
|
(1.05)†
|
|
0.99
|
|
(0.27)
|
|
(0.44)
|
|
(1.23)
|
|
(1.01)
|
|
Portfolio
turnover ratio (%)
|
1
|
|
16
|
|
137
|
|
78
|
|
107
|
|
173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 during
2004.
|
*
|
See
Note 2G for information concerning the Trust's distribution
policy.
|
**
|
Returns
for the Taiwan Stock Exchange Index are not total returns and reflect
only
changes in share price, and do not assume that
|
|
cash
dividends were reinvested. The Taiwan Stock Exchange Index is calculated
by the Taiwan Stock Exchange Corp.
|
†
|
Not
Annualized
|
|
See
accompanying notes to financial statements and independent accountants’
review report.
|
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / June 30, 2006 (Expressed in U.S. Dollars)
(Unaudited)
Note
1 — Organization of the Fund
The
Taiwan Greater China Fund (the “Fund” or 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 Taiwan (R.O.C.) 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 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
Taiwan (R.O.C.) Fund. On February 23, 2004, the investment contract was
terminated and substantially all of the assets held in The Taiwan (R.O.C.)
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 Taiwan (R.O.C.) 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 per share (“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. The affirmative vote of a majority
of the Trust’s outstanding shares is required to approve such a
conversion.
At
the
Annual Meeting of Shareholders held June 21, 2005, the shareholders approved
the
adoption by the Trust of an interval fund structure. The Trust now makes
semi-annual repurchase offers with respect to its shares (see Note
7B).
Note
2 — Summary of Significant Accounting Policies
A—
Basis
of presentation — The accompanying financial statements of the Trust have been
prepared in accordance with U.S. generally accepted accounting principles.
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. Securities for which market
quotations are not readily available or if a development/event occurs that
may
significantly impact the value of a security, may be fair-valued, in good faith,
pursuant to procedures established by the Board of 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.
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / June 30, 2006 (Expressed in U.S. Dollars) (Unaudited)
(Continued)
E—
Realized gains and losses — For U.S. 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, 2005, the Trust
generated a net capital loss of $3,691,414, and maintained a cumulative prior
year capital loss carryover of $109,550,145, resulting in a total capital loss
carryover of $113,241,559. 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 31,
2010,
$11,721,463 of such loss will expire on December 31, 2011 and $3,691,414 of
such
loss will expire on December 31, 2013.
In
accordance with federal income tax regulations, the Trust expects to elect
to
defer capital losses of $1,489,920 and currency losses of $287,513 realized
on
investment transactions from November 1, 2005 through December 31, 2005 and
treat them as arising during the fiscal year ending December 31, 2006 for U.S.
federal income tax purposes.
F—
Foreign
currency translation — Substantially all of the Trust’s income is earned, and
its expenses are partially paid, in New Taiwan Dollars (“NT$”). The cost and
market value of securities, currency holdings, and other assets and liabilities
that are denominated in NT$ are reported in the accompanying 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
June 30, 2006, that rate was NT$32.3615 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. 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.
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 six months ended June 30, 2006, total par value of stock
dividends received was $29,098.
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, is levied. Proceeds from sales of investments are net of
securities transaction tax of $39,678 paid for the six months ended June 30,
2006.
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 reported in the financial statements,
financial highlights and accompanying notes. Actual results could differ from
those estimates.
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / June 30, 2006 (Expressed in U.S. Dollars) (Unaudited)
(Continued)
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 — Administrative Management
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 U.S.
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. The total
payment to BBH for administrative and custodial services is subject to a minimum
annual fee of $200,000. Out-of-pocket expenses will be billed at the actual
amount incurred at the time the good or service is purchased.
Note
5 — Custodian
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 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
six months ended June 30, 2006, included $1,083,989 for stock purchases and
$13,173,257 for stock sales, respectively.
At
June
30, 2006, the cost of investments, excluding short-term investments, for U.S.
federal income tax purposes was approximately equal to the cost of such
investments for financial reporting purposes. At June 30, 2006, the unrealized
appreciation of $11,441,877 for U.S. federal income tax purposes consisted
of
$20,819,940 of gross unrealized appreciation and $9,378,063 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 referred to above, the Board of
Trustees 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 may continue to make non-block share repurchases under its share
repurchase program.
During
the year ended December 31, 2005, the Trust repurchased 1,942,600 shares,
including block transactions totaling 1,000,000 shares, at an average price
per
share of $4.99. 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 6.94%.
During
the six-month period ended June 30, 2006, the Trust did not repurchase any
shares under this program.
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / June 30, 2006 (Expressed in U.S. Dollars) (Unaudited)
(Continued)
B—
The
Trust has adopted an interval fund structure pursuant to which it will make
semi-annual repurchase offers of its shares of beneficial interest. The
percentage of outstanding shares of beneficial interest that the Trust can
offer
to repurchase in each repurchase offer will be established by the Trust’s Board
of Trustees shortly before the commencement of each offer, and will be between
5% and 25% of the Trust’s outstanding shares of beneficial interest. If the
repurchase offer is oversubscribed, the Trust may, but is not required to,
repurchase up to an additional 2% of shares outstanding.
In
December 2005, the Trust accepted 1,974,441 shares for payment at a price of
$5.74 per share in accordance with its semi-annual repurchase offer. Pursuant
to
the semi-annual repurchase offer, the purchase price was equal to 98% of the
Trust’s net asset value per share at the close of regular trading on the Taiwan
Stock Exchange on December 30, 2005. The purchased shares constituted
approximately 10% of the Trust’s previously outstanding shares.
In
June
2006, the Trust accepted 888,498 shares for payment at a price of $5.84 per
share in accordance with its semi-annual repurchase offer. Pursuant to the
semi-annual repurchase offer, the purchase price was equal to 98% of the Trust’s
net asset value per share at the close of regular trading on the Taiwan Stock
Exchange on June 30, 2006. The purchased shares constituted approximately 5%
of
the Trust’s previously outstanding shares.
At
June
30, 2006, 16,881,479 shares were outstanding.
TAIWAN
GREATER CHINA FUND
The
Trust has been certified as a distributing fund by the Board of Inland Revenue
of the United Kingdom for the period from its inception to December 31, 2004.
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 to 2003 and Chief Investment Officer of Aetna
International from 1997 to 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 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, 2006 will be
available on or through the Trust’s website and on the SEC’s website no later
than August 31, 2006.
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, 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 of portfolio
holdings for the first and third quarters with the SEC on Form N-Q, which can
be
looked up on the SEC’s website at http://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.
For
additional information regarding the Trust, including additional portfolio
manager commentary and portfolio holdings information as of the end of each
fiscal quarter please visit our website at http://www.taiwangreaterchinafund.com.
2006
ANNUAL MEETING OF SHAREHOLDERS
On
June
21, 2006, the Trust held an annual meeting to:
Elect
two
trustees, each to serve for a term expiring on the date of the 2009 Annual
Meeting of Shareholders or the special meeting in lieu thereof.
The
results of the shareholder votes are shown below. Proxies representing
13,050,098, or 73.44%, of the 17,769,977 eligible shares outstanding were voted
in respect of the election of trustees. Edward B. Collins and Tsung-Ming Chung
were each elected for a term expiring in 2009.
|
For
|
Withheld
|
Nominees
to the Board of Trustees
|
Edward
B. Collins
|
12,843,482
|
203,616
|
Tsung-Ming
Chung
|
12,898,961
|
151,137
|
David
N. Laux, Frederick C. Copeland, Jr. and Robert P. Parker, whose terms
did
not expire in 2006, remain
trustees.
|
Report
of Independent Registered Public Accounting Firm
The
Board
of Trustees and Shareholders of
Taiwan
Greater China Fund:
We
have
reviewed the accompanying statement of assets and liabilities of Taiwan Greater
China Fund (the “Fund”), including the schedule of investments, as of June 30,
2006, and the related statements of operations, changes in net assets, and
financial highlights for the six-month period ended June 30, 2006. These interim
financial statements and financial highlights are the responsibility of the
Fund’s management.
We
conducted our review in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). A review of interim financial information consists principally
of applying analytical procedures and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope than
an
audit conducted in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based
on
our review, we are not aware of any material modifications that should be made
to the accompanying interim financial statements and financial highlights
referred to above for them to be in conformity with U.S. generally accepted
accounting principles.
We
have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the statement of changes in net
assets and financial highlights for the year ended December 31, 2005, and in
our
report dated February 10, 2006, we expressed an unqualified opinion on such
statement of changes in net assets and financial highlights.
/s/
KPMG
LLP
New
York,
New York
August
11, 2006
ITEM
2.
CODE OF ETHICS.
Not
applicable. This item is only required in an annual report on this Form
N-CSR.
ITEM
3.
AUDIT COMMITTEE FINANCIAL EXPERT.
Not
applicable. This item is only required in an annual report on this Form
N-CSR.
ITEM
4.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not
applicable. This item is only required in an annual report on this Form
N-CSR.
ITEM
5.
AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not
applicable. This item is only required in an annual report on this Form
N-CSR.
ITEM
6.
SCHEDULE OF INVESTMENTS.
A
Schedule of Investments is included as part of the report to shareholders filed
under item 1.
ITEM
7.
DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
Not
applicable. This item is only required in an annual report on this Form
N-CSR.
ITEM
8.
PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
8(a)
Not
applicable. This item is only required in an annual report on this Form
N-CSR.
8(b)
There has been no change, as of the date of filing, to the Portfolio Manager
identified in response to paragraph (a) of this Item in the registrant’s most
recent annual report on Form N-CSR.
ITEM
9.
PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY
AND
AFFILIATED PURCHASERS.
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
|
January
1
to
January
31
|
|
|
|
|
February
1
to
February
28
|
|
|
|
|
March
1
to
March
31
|
|
|
|
|
April
1
to
April
30
|
|
|
|
|
May
1
to
May
31
|
|
|
|
|
June
1
to
June
30
|
888,498(1)
|
5.84
|
888,498
(1)
|
0(2)
|
(1) |
Semi-Annual
repurchase offer
|
(2) |
Fund
may repurchase up to 2,179,932 shares under its repurchase program
commenced November 1, 2004. The repurchase program does not have
an
expiration date. As of June 30, 2006, 125,032 shares may be purchased
under the repurchase program.
|
ITEM
10.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There
have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant’s board of directors.
ITEM
11.
CONTROLS AND PROCEDURES.
(a)
The
registrant's principal executive 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 (“1940
Act”)) are effective as of a date within 90 days of the filing date of this
report based on their evaluation of these controls and procedures of such
disclosure controls and procedures as required by Rule 30a-3(b) under the 1940
Act and Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934,
as amended.
(b)
The
registrant’s principal executive officer and principal financial officer are
aware of no change in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during
the second fiscal quarter of the period covered by this report that has
materially affected, or are reasonably likely to materially affect, the
registrant’s internal control over financial reporting.
ITEM
12.
EXHIBITS.
(a)(1)
CODE OF ETHICS REQUIRED BY ITEM 2 OF FORM N-CSR:
Not
applicable.
(a)(2)
CERTIFICATIONS REQUIRED BY RULE 30A-2(A) UNDER THE 1940 ACT:
See
Exhibit 99.77Q3Cert attached hereto.
(a)(3)
WRITTEN SOLICITATION TO PURCHASE SECURITIES PURSUANT TO RULE 23C-1 UNDER THE
1940 ACT
The
registrant has made no written solicitations to purchase securities pursuant
to
Rule 23C-1 under the 1940 Act during the period
covered
by the report to 10 or more persons.
(b)
CERTIFICATIONS REQUIRED BY RULE 30A-2(B) UNDER THE 1940 ACT:
See
Exhibit 99.906Cert 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:
August 18, 2006
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
By:
/s/
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:
August 18, 2006