Unassociated Document
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)
P.O.
Box 118-763 Taipei
Taipei
10599, Taiwan
(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)
(800)
343-9567
Registrant’s
telephone number, including area code:
Date
of
fiscal year end: December
31
Date
of
reporting period: June
30, 2008
Item
1. Reports to Stockholders.
Semi-Annual
Report
June
30,
2008
In
the
volatile and generally chaotic second quarter of 2008, Taiwan Greater China
Fund
(TFC) proved to be a smart way to invest in China as the country’s economy
continued to grow at an impressive 10.1% rate. The Chinese stock market was
decoupled from the strong domestic economy and suffered a 18.5% decline for
the
quarter and a 40.0% decline for the first half. TFC’s strategy of investing in
China through Taiwan related companies led to considerably less suffering,
with
the Fund’s market price and net asset value declining a relatively modest 11.5%
and 12.5%, respectively. For the first half, these measures declined 15.5%
and
15.0%, respectively. As computed by Bloomberg, the Fund was also much less
volatile than the Chinese stock market as a whole, with the daily volatility
of
the stock price at 32.8 compared to the 46.3 reached by the Shanghai Composite
index.
Fund
Performance
During
the second quarter, the overall Taiwan market as measured by the Taiwan Stock
Exchange Index yielded a negative total return of 11.7% in US dollar terms,
about the same as the negative 10.6% registered by the MSCI Taiwan Index.
Weighed down by the negative results in the local market, Taiwan companies
doing
a major portion of their business in China slightly underperformed the Taiwan
market as a whole, with the Taiwan China Strategy Index*, the Fund’s primary
benchmark, declining 12.9% and the S&P Polaris China Play 50 Index declining
14.5% during the quarter. The Taiwan dollar was very stable during the second
quarter, appreciating 0.1% during the period.
The
Fund’s discount to net asset value averaged 9.1% during the second quarter and
9.3% during the first half, compared to 9.7% in 2007 and 7.3% in 2006. The
maximum discount was 11.4% on April 11, and the minimum discount was 6.9%
on
April 1.
The
Fund’s mean and median daily trading volume declined during the quarter to
33,839 shares and 22,185 shares, respectively. This compares to 44,813 shares
and 38,400 shares, respectively during the first quarter.
The
Fund’s net asset value performance is highly correlated to the performance of
the broad Taiwan market indexes with R2’s** of 0.93 and 0.94 relative
to the TAIEX and MSCI Taiwan Index, respectively. The Fund’s betas relative to
the two broad indexes are both 1.0, and the alphas are 1.0 and 0.1 basis
point
per week, respectively. Relative to the S&P Polaris China Play 50 Index, the
Fund has an R2 of 0.93, a beta of 0.96 and an alpha of 18 basis
points per week.
Performance
Attribution
The
Fund
contracts with MSCI Barra*** to provide attribution data from their Aegis
Performance Analyst model. The attribution model compares the NT$ returns
of the
MSCI Taiwan Index with the NT$ returns of the Fund’s portfolio.
For
the
12 months ending June 2008, the NT$ gross return for the MSCI Taiwan Index
in
the Aegis model was a negative 13.3% while the portfolio-only return for
the
Fund in the model was a negative 18.2%. This implies that a negative 4.9
percentage points of return can be attributed to the active management of
the
Fund. The negative performance was a result of Q1 2008 results, where the
NT$
gross return for MSCI Taiwan Index in the model was -1.05% and the
portfolio-only return for the Fund in the model was -7.4%. That quarter’s result
will continue to have an impact on attribution through the remainder of this
year.
Over
the
longer term, since the inception of the Fund’s China focused strategy, sector
selection contributed 53% of active returns. Asset selection contributed
36% and
style factors, such as momentum, yield or value, contributed 11%. And active
returns averaged 3.9% on an annualized basis up through December 2007. However,
Q1
2008
was a significant departure from the last nearly four years. In that quarter,
stock selection, style factors and sector selection were all negative
contributors. This departure primarily is a result of the strong performance
in
the financial sector in the MSCI Taiwan Index and the under-representation
of
financials in the TFC portfolios given that sector’s minimal activity in China.
But financial sector performance was not the only factor. In the first quarter
of 2008, the underperformance of tech shares, which make up a larger share
of
the TFC portfolio because of the extent of their investment in China, also
negatively impacted returns as compared to the MSCI Taiwan Index.
Portfolio
Valuation Measures
Market
valuations for the high quality companies in the Fund’s portfolio are very
attractive. The technology heavy portfolio has a weighted average historical
price-earnings ratio of 11.0, a weighted average price-book ratio of 2.1,
a
weighted average cash dividend yield of 4.7%, and a weighted average return
on
equity of 22.4%. The Fund generally holds shares in companies with high
liquidity levels, low leverage, and high quality earnings.
Taiwan
Political and Economic Developments
Upon
his
inauguration as President on May 20th, Ma Ying-jeou quickly began implementing
a
number of initiatives aimed at the improvement of cross-strait relations
and the
strengthening of economic ties. The Kuomintang (KMT) laid groundwork in April
with an “informal” meeting at the Boao Forum for Asia in Hainan between Chinese
President Hu Jintao and Taiwan Vice President-elect Vincent Siew. While not
an
official governmental meeting, it was the highest level political contact
between Taiwan and China since the KMT left the mainland for Taiwan in 1949.
Immediately after the inauguration, Wu Poh-hsiung, chairman of the ruling
KMT,
also met with Hu in Beijing.
Ma
then
moved quickly to fulfill his promise of increased direct cross-strait flights.
Negotiations were completed to allow weekend charter flights between China
and
Taiwan, and the first flights occurred on July 4th to much fanfare. A “Lion
Dance” and sprays of water from fire trucks greeted the first arrival in Taipei
and Taiwanese music played at Shanghai’s Pudong International Airport. Six
China-based airlines and five from Taiwan will make a total of 36 round-trip
flights each week. At present, the flight paths have to divert to enter Taiwan
on the existing Hong Kong-Taiwan flight paths which add considerable time
to the
flights from Shanghai and Beijing, but it is still a huge improvement over
the
nearly day-long process which previously existed. More direct flight paths
are
on the table for future negotiations within the next three months, as are
regularly scheduled daily flights and cargo flights.
On
the
flights from China were the first of the Chinese tourists entering Taiwan
under
the new agreement to allow an average of 3,000 Chinese tourists per day.
Spending by Chinese tourists overseas has risen 38% this year to US$24.3
billion, the 2nd best performance of the top ten countries after South Korea
according to the World Tourism Organization, and the increase in tourism
is
expected by the government to boost Taiwan’s GDP about 5% this year. Taiwan has
also allowed China’s Yuan to be legally exchanged into New Taiwan Dollars for
the first time island-wide. Chinese tourists are allowed to bring in 20,000
Yuan
or US$2,900.
Another
of the KMT’s election promises was to revise upward the amount that Taiwan
companies can invest in China. Smaller companies have been able to invest
40% of
net worth, but Taiwan’s larger companies were effectively limited to slightly
over 20%. In July, the government announced that smaller companies will be
able
to invest 60% of their net worth in China. But more importantly, for companies
with annual revenues of more than NT$500 million (US$16M), more than 50
employees and operational headquarters in Taiwan, investment limits will
be
eliminated. This eliminates restrictions for 444 of Taiwan’s largest companies,
or about 61% of the Taiwan market capitalization. It is anticipated that
this
change will encourage the rationalization of corporate structures, capital
structures and funding of Taiwan subsidiaries in China.
Taiwan’s
cabinet also approved a proposal to allow local securities, futures and asset
management companies to invest in Chinese counterparts directly. The same
proposal allows cross-listings of exchanged-traded funds between the Hong
Kong
and Taiwan stock exchanges. Although the effective date has not been announced,
the cabinet also said that it will allow Taiwan mutual funds to increase
their
investments in China from the current 0.4% of their assets to 10% and will
eliminate restrictions on investing in Hong Kong H shares.
We
believe that the economic integration of Taiwan and China is speeding up
and
that the valuations in the market have reached very attractive levels for
world
class Taiwan companies operating in China. For example, a recent study by
Morgan
Stanley on the top 50 global technology stocks includes seven Taiwan companies
with substantial operations in China, all of which are in the Fund’s portfolio.
We believe that the Fund remains a smart way to invest in China and that
current
valuations are compelling.
Yours
truly,
Steven
R.
Champion
President,
CEO and Portfolio Manager
July
30,
2008
* |
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 and 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, 2008 (Unaudited)
Industry
|
|
U.S.
$ Value
|
|
Percent
of
Net
Assets
|
|
Computer
Systems & Hardware
|
|
|
19,882,558
|
|
|
21.22
|
%
|
Semiconductors
|
|
|
17,055,449
|
|
|
18.20
|
|
Flat-Panel
Displays
|
|
|
11,432,477
|
|
|
12.20
|
|
Plastics
|
|
|
10,480,861
|
|
|
11.18
|
|
Electronic
Components
|
|
|
8,917,698
|
|
|
9.52
|
|
Steel
|
|
|
8,541,536
|
|
|
9.12
|
|
Cement
|
|
|
4,148,840
|
|
|
4.43
|
|
Computer
Peripherals/ODM
|
|
|
4,086,700
|
|
|
4.36
|
|
Food
|
|
|
3,626,128
|
|
|
3.87
|
|
Other
|
|
|
2,556,462
|
|
|
2.73
|
|
Electronics/Other
|
|
|
1,639,983
|
|
|
1.75
|
|
Textiles
|
|
|
1,367,273
|
|
|
1.46
|
|
Transportation
|
|
|
1,324,865
|
|
|
1.41
|
|
Glass,
Paper & Pulp
|
|
|
916,684
|
|
|
0.98
|
|
Electrical
& Machinery
|
|
|
726,644
|
|
|
0.78
|
|
Rubber
|
|
|
659,287
|
|
|
0.70
|
|
Retailing
|
|
|
594,952
|
|
|
0.63
|
|
Communications
Equipment
|
|
|
369,879
|
|
|
0.39
|
|
Chemicals
|
|
|
129,828
|
|
|
0.14
|
|
Short-Term
Securities
|
|
|
13,736,638
|
|
|
14.66
|
|
Liabilities,
Net of Other Assets
|
|
|
(18,487,701
|
)
|
|
(19.73
|
)
|
Net
Assets
|
|
$
|
93,707,041
|
|
|
100.00
|
|
TAIWAN
GREATER CHINA FUND
Schedule
of Investments (Unaudited) / June 30, 2008
COMMON
STOCK — 105.07%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cement
— 4.43%
|
|
%
of
Net
Assets
|
|
|
U.S.
Dollar Value
|
|
|
1,186,996
|
shs.
|
Asia
Cement Corp.
|
|
1.90
|
|
$
|
1,779,604
|
|
|
1,753,726
|
|
Taiwan
Cement Corp.
|
|
2.53
|
|
|
2,369,236
|
|
|
|
|
|
|
|
|
|
4,148,840
|
|
Chemicals
— 0.14%
|
|
|
|
|
|
|
|
156,352
|
|
Eternal
Chemical Co., Ltd.
|
|
0.14
|
|
|
129,828
|
|
Communications
Equipment — 0.39%
|
|
|
|
|
|
|
|
98,913
|
|
Gemtek
Technology
|
|
0.23
|
|
|
215,110
|
|
|
61,000
|
|
Zinwell
Corporation
|
|
0.16
|
|
|
154,769
|
|
|
|
|
|
|
|
|
|
369,879
|
|
Computer
Peripherals/ODM — 4.36%
|
|
|
|
|
|
|
|
344,000
|
|
Foxconn
International Holdings, Ltd.
|
|
0.36
|
|
|
333,477
|
|
|
93,384
|
|
HTC
Corp.
|
|
2.23
|
|
|
2,092,397
|
|
|
1,229,600
|
|
Lite-on
Technology Corp.
|
|
1.32
|
|
|
1,237,764
|
|
|
392,202
|
|
Qisda
Corp.
|
|
0.28
|
|
|
261,050
|
|
|
178,469
|
|
Teco
Image Systems Co., Ltd.
|
|
0.17
|
|
|
162,012
|
|
|
|
|
|
|
|
|
|
4,086,700
|
|
Computer
Systems & Hardware — 21.22%
|
|
|
|
|
|
|
|
548,839
|
|
Acer
Inc.
|
|
1.15
|
|
|
1,081,456
|
|
|
96,411
|
|
Advantech
Co., Ltd.
|
|
0.27
|
|
|
247,790
|
|
|
1,898,544
|
|
Asustek
Computer Inc.
|
|
5.52
|
|
|
5,167,298
|
|
|
669,318
|
(a)
|
Compal
Electronics Inc.
|
|
0.77
|
|
|
723,384
|
|
|
1,966,549
|
|
Hon
Hai Precision Industry Co., Ltd.
|
|
10.34
|
|
|
9,687,433
|
|
|
450,850
|
|
Inventec
Co., Ltd.
|
|
0.28
|
|
|
265,918
|
|
|
1,181,193
|
|
Quanta
Computer Inc.
|
|
1.95
|
|
|
1,829,285
|
|
|
615,357
|
|
Wistron
Corp.
|
|
0.94
|
|
|
879,994
|
|
|
|
|
|
|
|
|
|
19,882,558
|
|
Electrical
& Machinery — 0.78%
|
|
|
|
|
|
|
|
516,000
|
|
Teco
Electric & Machinery Co., Ltd.
|
|
0.31
|
|
|
289,042
|
|
|
1,212,837
|
|
Walsin
Lihwa Corp.
|
|
0.47
|
|
|
437,602
|
|
|
|
|
|
|
|
|
|
726,644
|
|
Electronic
Components — 9.52%
|
|
|
|
|
|
|
|
266,433
|
|
Catcher
Technology Co., Ltd.
|
|
0.81
|
|
|
759,394
|
|
|
1,100,245
|
|
Delta
Electronics Inc.
|
|
3.27
|
|
|
3,063,436
|
|
|
100,304
|
|
Epistar
Corp.
|
|
0.19
|
|
|
181,118
|
|
|
210,000
|
|
Everlight
Electronics Co.
|
|
0.58
|
|
|
542,498
|
|
|
278,143
|
(a)*
|
Foxconn
Technology Co., Ltd.
|
|
1.37
|
|
|
1,287,678
|
|
|
94,000
|
|
Kinsus
Interconnect Technology Corp.
|
|
0.22
|
|
|
207,523
|
|
|
22,253
|
|
Motech
Industry Co., Ltd.
|
|
0.19
|
|
|
173,047
|
|
|
143,250
|
|
Shin
Zu Shing Co., Ltd.
|
|
0.81
|
|
|
757,587
|
|
|
81,000
|
|
Transcend
Information
|
|
0.22
|
|
|
208,449
|
|
|
234,380
|
|
Tripod
Technology Corp.
|
|
0.63
|
|
|
586,172
|
|
|
585,820
|
|
Unimicron
Technology Corp.
|
|
0.71
|
|
|
665,957
|
|
See
accompanying notes to unaudited financial statements and independent
accountants’ review report.
TAIWAN
GREATER CHINA FUND
Schedule
of Investments (Continued) (Unaudited) / June 30, 2008
Electronic
Components (Cont’d.)
|
|
%
of
Net
Assets
|
|
|
U.S.
Dollar
Value
|
|
|
1,567,000
|
shs.
|
Yageo
Corp.
|
|
0.52
|
|
$
|
484,839
|
|
|
|
|
|
|
|
|
|
8,917,698
|
|
Electronics/Other
— 1.75%
|
|
|
|
|
|
|
|
126,000
|
|
Lumax
International Corp., Ltd.
|
|
0.25
|
|
|
230,008
|
|
|
684,650
|
|
Synnex
Technology International Corp.
|
|
1.50
|
|
|
1,409,975
|
|
|
|
|
|
|
|
|
|
1,639,983
|
|
Flat-Panel
Displays — 12.20%
|
|
|
|
|
|
|
|
4,177,132
|
|
AU
Optronics Corp.
|
|
7.01
|
|
|
6,565,372
|
|
|
2,490,664
|
(a)
|
Chi
Mei Optoelectronics Corp.
|
|
3.07
|
|
|
2,876,510
|
|
|
4,186,951
|
(a)*
|
Chunghwa
Picture Tubes, Ltd.
|
|
1.17
|
|
|
1,096,801
|
|
|
497,712
|
*
|
Innolux
Display Corp.
|
|
0.95
|
|
|
893,794
|
|
|
|
|
|
|
|
|
|
11,432,477
|
|
Food
— 3.87%
|
|
|
|
|
|
|
|
308,000
|
|
Great
Wall Enterprises Co.
|
|
0.49
|
|
|
454,665
|
|
|
698,000
|
|
Tingyi
(Cayman Islands) Holdings Corp.
|
|
0.92
|
|
|
862,817
|
|
|
1,919,560
|
|
Uni-President
Enterprise Corp.
|
|
2.46
|
|
|
2,308,646
|
|
|
|
|
|
|
|
|
|
3,626,128
|
|
Glass,
Paper & Pulp — 0.98%
|
|
|
|
|
|
|
|
634,208
|
|
Taiwan
Glass Ind. Corp.
|
|
0.72
|
|
|
674,989
|
|
|
621,617
|
|
Yuen
Foong Yu Paper Manufacturing Co., Ltd.
|
|
0.26
|
|
|
241,695
|
|
|
|
|
|
|
|
|
|
916,684
|
|
Plastics
— 11.18%
|
|
|
|
|
|
|
|
1,255,299
|
|
Formosa
Chemicals & Fiber Corp.
|
|
2.64
|
|
|
2,473,496
|
|
|
1,195,983
|
|
Formosa
Plastics Corp.
|
|
3.08
|
|
|
2,884,688
|
|
|
2,410,319
|
|
Nan
Ya Plastics Corp.
|
|
5.46
|
|
|
5,122,677
|
|
|
|
|
|
|
|
|
|
10,480,861
|
|
Retailing
— 0.63%
|
|
|
|
|
|
|
|
104,000
|
|
Far
Eastern Department Store Co., Ltd.
|
|
0.12
|
|
|
110,687
|
|
|
145,512
|
|
President
Chain Store Corp.
|
|
0.51
|
|
|
484,265
|
|
|
|
|
|
|
|
|
|
594,952
|
|
Rubber
— 0.70%
|
|
|
|
|
|
|
|
487,415
|
|
Cheng
Shin Rubber Ind. Co., Ltd.
|
|
0.70
|
|
|
659,287
|
|
|
|
|
|
|
|
|
|
|
|
Semiconductors
— 18.20%
|
|
|
|
|
|
|
|
2,806,704
|
|
Advanced
Semiconductor Engineering Inc.
|
|
2.69
|
|
|
2,524,771
|
|
|
159,040
|
|
Inotera
Memories Inc.
|
|
0.10
|
|
|
93,280
|
|
|
445,320
|
|
MediaTek
Inc.
|
|
5.48
|
|
|
5,135,740
|
|
|
118,197
|
|
Novatek
Microelectronics Corp.
|
|
0.37
|
|
|
343,509
|
|
|
429,341
|
|
Powerchip
Semiconductor Corp.
|
|
0.13
|
|
|
122,230
|
|
|
113,750
|
|
Powertech
Technology Inc.
|
|
0.43
|
|
|
399,175
|
|
|
1,065,000
|
|
ProMOS
Technologies Inc.
|
|
0.22
|
|
|
206,343
|
|
|
70,025
|
|
Realtek
Semiconductor Corp.
|
|
0.15
|
|
|
143,518
|
|
|
597,518
|
|
Siliconware
Precision Industries Co., Ltd.
|
|
0.94
|
|
|
881,063
|
|
See accompanying notes to unaudited financial statements
and
independent accountants’ review report.
TAIWAN
GREATER CHINA FUND
Schedule
of Investments (Continued) (Unaudited) / June 30, 2008
Semiconductors
(Cont’d.)
|
|
%
of
Net
Assets
|
|
|
U.S.
Dollar
Value
|
|
|
2,816,526
|
shs.
|
Taiwan
Semiconductor Manufacturing Co., Ltd.
|
|
6.44
|
|
$
|
6,032,397
|
|
|
2,211,902
|
|
United
Microelectronics Corp.
|
|
1.25
|
|
|
1,173,423
|
|
|
|
|
|
|
|
|
|
17,055,449
|
|
Steel
— 9.12%
|
|
|
|
|
|
|
|
5,396,933
|
|
China
Steel Corp.
|
|
8.89
|
|
|
8,331,427
|
|
|
117,000
|
|
Tung
Ho Steel Enterprise Corp.
|
|
0.23
|
|
|
210,109
|
|
|
|
|
|
|
|
|
|
8,541,536
|
|
Textiles
— 1.46%
|
|
|
|
|
|
|
|
1,049,170
|
|
Far
Eastern Textile Ltd.
|
|
1.46
|
|
|
1,367,273
|
|
|
|
|
|
|
|
|
|
|
|
Transportation
— 1.41%
|
|
|
|
|
|
|
|
217,000
|
|
China
Airlines
|
|
0.10
|
|
|
94,384
|
|
|
261,000
|
|
U-Ming
Marine Transport Corp.
|
|
0.73
|
|
|
688,008
|
|
|
823,162
|
|
Yang
Ming Marine Transport Corp.
|
|
0.58
|
|
|
542,473
|
|
|
|
|
|
|
|
|
|
1,324,865
|
|
Other
— 2.73%
|
|
|
|
|
|
|
|
127,000
|
|
Giant
Manufacturing Co., Ltd.
|
|
0.37
|
|
|
341,055
|
|
|
535,000
|
|
Merida
Industry Co., Ltd.
|
|
1.30
|
|
|
1,216,370
|
|
|
1,012,350
|
|
Pou
Chen Corp.
|
|
0.94
|
|
|
883,974
|
|
|
90,000
|
|
Yung
Chi Paint & Varnish Manufacturing Co., Ltd.
|
|
0.12
|
|
|
115,063
|
|
|
|
|
|
|
|
|
|
2,556,462
|
|
TOTAL
COMMON STOCK (COST $95,344,693)
|
|
|
|
|
98,458,104
|
|
|
|
|
|
|
|
|
SHORT-TERM
SECURITIES — 14.66%†
|
|
|
|
|
|
|
Time
Deposit — 14.66%
|
|
|
|
|
|
|
Brown
Brothers Harriman -
Grand Cayman, 1.70%, Due 7/01/08
|
|
0.08
|
|
|
79,088
|
|
Citibank
- London, 1.70%, Due 7/01/08‡
|
|
14.58
|
|
|
13,657,550
|
|
|
|
|
|
|
|
|
TOTAL
SHORT-TERM SECURITIES (COST $13,736,638)
|
|
|
|
|
13,736,638
|
|
|
|
|
|
|
|
|
TOTAL
INVESTMENTS IN SECURITIES AT FAIR VALUE
(COST
$109,081,331)
|
|
119.73
|
|
|
112,194,742
|
|
|
|
|
|
|
|
|
LIABILITIES
(NET OF OTHER ASSETS)
|
|
(19.73)
|
|
|
(18,487,701
|
)
|
|
|
|
|
|
|
|
NET
ASSETS
|
|
100.00
|
|
$
|
93,707,041
|
|
(a)
|
All
or a portion of the security is out on
loan.
|
*
|
Non-income
producing: These stocks did not pay a cash dividend during the
past
year.
|
†
|
Inclusive
of all short-term holdings, including collateral received from
securities
lending activites. Not including such collateral, the percentage
of
portfolio holdings would be 0.09%.
|
‡
|
Represents
investment of collateral received from securities lending
transactions.
|
See accompanying notes to unaudited financial statements
and
independent accountants’ review report.
TAIWAN
GREATER CHINA FUND
Statement
of Assets and Liabilities
June
30, 2008 (Unaudited) (Expressed in U.S. Dollars)
Assets
|
|
|
|
|
|
|
|
|
|
Investments
in securities at market value (Market value of securities on loan
—
$10,900,652)
|
|
|
|
|
(Notes
2B, 2C, 2D, 3 and 7):
|
|
|
|
|
Common
Stock (cost — $95,344,693)
|
|
$
|
98,458,104
|
|
Short-term
securities (cost — $79,088)
|
|
|
79,088
|
|
Investment
of cash collateral from securities loaned (cost -
$13,657,550)
|
|
|
13,657,550
|
|
Total
investment in securities at fair value (cost —
$109,081,331)
|
|
|
112,194,742
|
|
Foreign
cash (cost — $180,558)
|
|
|
180,748
|
|
Receivable
for investment income
|
|
|
273,936
|
|
Prepaid
expenses and other assets
|
|
|
81,774
|
|
Total
assets
|
|
|
112,731,200
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Payable
for cash collateral for securities loaned
|
|
|
13,657,550
|
|
Payable
for fund shares repurchased
|
|
|
4,819,762
|
|
Accrued
management fee (Note 4)
|
|
|
117,000
|
|
Professional
fees payable
|
|
|
153,727
|
|
Shareholder
communication fees payable
|
|
|
96,980
|
|
Administration
fee payable (Note 5)
|
|
|
60,890
|
|
Trustee
fees and expense payable
|
|
|
56,480
|
|
Custodian
fee payable (Note 6)
|
|
|
56,379
|
|
Other
accrued expenses
|
|
|
5,391
|
|
Total
liabilities
|
|
|
19,024,159
|
|
|
|
|
|
|
Net
assets
|
|
$
|
93,707,041
|
|
|
|
|
|
|
Components
of net assets
|
|
|
|
|
|
|
|
|
|
Par
value of shares of beneficial interest (Note 8)
|
|
$
|
137,501
|
|
Additional
paid-in capital (Note 8)
|
|
|
169,127,526
|
|
Accumulated
net investment income
|
|
|
49,866,347
|
|
Accumulated
net realized loss on investments and foreign currency
transactions
|
|
|
(92,976,316
|
)
|
Unrealized
net appreciation on investments (Note 7)
|
|
|
3,113,411
|
|
Cumulative
translation adjustment (Note 2F)
|
|
|
(35,561,428
|
)
|
|
|
|
|
|
Net
assets
|
|
$
|
93,707,041
|
|
|
|
|
|
|
Net
asset value per share (13,750,072 shares issued and outstanding,
par value
$0.01)
|
|
$
|
6.82
|
|
See accompanying notes to unaudited financial statements
and
independent accountants’ review report.
TAIWAN
GREATER CHINA FUND
Statement
of Operations
For
the Six Months Ended June 30, 2008 (Unaudited) (Expressed in U.S.
Dollars)
Investment
income (Notes 2B, 2C, 2D)
|
|
|
|
|
Dividends
|
|
$
|
340,244
|
|
Interest
|
|
|
2,376
|
|
Security
lending income
|
|
|
92,565
|
|
|
|
|
435,185
|
|
|
|
|
|
|
Republic
of China taxes (Note 2H)
|
|
|
(57,954
|
)
|
|
|
|
377,231
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
Management
fee (Note 4)
|
|
|
689,910
|
|
Shareholder
communication expenses
|
|
|
123,862
|
|
Trustee
fees and expenses
|
|
|
115,729
|
|
Custodian
fee (Note 6)
|
|
|
81,930
|
|
Legal
fees and expenses
|
|
|
48,307
|
|
Audit
and tax fee
|
|
|
42,890
|
|
Insurance
expenses
|
|
|
41,491
|
|
Administrative
fee (Note 5)
|
|
|
37,142
|
|
Other
expenses
|
|
|
93,022
|
|
|
|
|
|
|
|
|
|
1,274,283
|
|
Net
investment loss
|
|
|
(897,052
|
)
|
|
|
|
|
|
Net
realized and unrealized gain (loss) on investments and foreign
currencies
(Notes 2E and 7)
|
|
|
|
|
Net
realized gain (loss) on:
|
|
|
|
|
investments
(excluding short-term securities)
|
|
|
4,437,495
|
|
foreign
currency transactions
|
|
|
(516,229
|
)
|
net
realized gain on investments and foreign currency
transactions
|
|
|
3,921,266
|
|
Net
changes in unrealized appreciation /depreciation on:
|
|
|
|
|
investments
|
|
|
(23,832,672
|
)
|
translation
of assets and liabilities in foreign currencies
|
|
|
3,304,205
|
|
|
|
|
|
|
Net
realized and unrealized gain (loss) from investments and foreign
currencies
|
|
|
(16,607,201
|
)
|
|
|
|
|
|
Net
increase (decrease) in net assets resulting from operation
|
|
$
|
(17,504,253
|
)
|
See accompanying notes to unaudited financial statements
and
independent accountants’ review report.
TAIWAN
GREATER CHINA FUND
Statements
of Changes in Net Assets
For
the Six Months Ended June 30, 2008 and the Year Ended December 31, 2007
(Expressed in U.S. Dollars)
|
|
Six
Months
Ended
June 30,
2008
(Unaudited)
|
|
Year
Ended December 31,
2007
|
|
Net
increase/decrease in net assets resulting from
operations
|
|
|
|
|
|
|
|
Net
investment income (loss)
|
|
$
|
(897,052
|
)
|
$
|
341,464
|
|
Net
realized gain on investments and foreign currency
transactions
|
|
|
3,921,266
|
|
|
13,995,967
|
|
Unrealized
appreciation/depreciation on investments
|
|
|
(23,832,672
|
)
|
|
(7,648
|
)
|
Unrealized
appreciation/depreciation on translation of assets and liabilities
in
foreign currencies
|
|
|
3,304,205
|
|
|
(96,960
|
)
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in net assets resulting from
operations
|
|
|
(17,504,253
|
)
|
|
14,232,823
|
|
|
|
|
|
|
|
|
|
Capital
share transactions:
|
|
|
|
|
|
|
|
Cost
of semi-annual repurchase offer (Note 8B)
|
|
|
(4,819,762
|
)
|
|
(11,593,032
|
)
|
|
|
|
|
|
|
|
|
Net
assets, beginning of period
|
|
|
116,031,056
|
|
|
113,391,265
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period
|
|
$
|
93,707,041
|
|
$
|
116,031,056
|
|
See accompanying notes to unaudited financial statements
and
independent accountants’ review report.
TAIWAN
GREATER CHINA FUND
Financial
Highlights
(Expressed
in U.S. Dollars)
|
|
Six
Months
Ended
June
30, 2008
|
|
Years
Ended December 31,
|
|
|
|
(Unaudited)
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
Per
share operating performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of period
|
|
|
8.02
|
|
|
7.07
|
|
|
5.87
|
|
|
5.37
|
|
|
5.13
|
|
|
4.37
|
|
Net
investment income (loss)
|
|
|
(0.06
|
)
|
|
0.02
|
|
|
0.01
|
|
|
0.05
|
|
|
(0.01
|
)
|
|
(0.02
|
)
|
Net
realized and unrealized gain / loss
on
investments (a)
|
|
|
(1.34
|
)
|
|
0.92
|
|
|
1.21
|
|
|
0.65
|
|
|
(0.24
|
)
|
|
0.73
|
|
Net
realized and unrealized appreciation / depreciation on translation
of
foreign currencies (a)
|
|
|
0.19
|
|
|
(0.01
|
)
|
|
(0.03
|
)
|
|
(0.25
|
)
|
|
0.26
|
|
|
0.11
|
|
Total
from investment operations
|
|
|
(1.21
|
)
|
|
0.93
|
|
|
1.19
|
|
|
0.45
|
|
|
0.01
|
|
|
0.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
to Shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income*
|
|
|
—
|
)
|
|
—
|
)
|
|
—
|
)
|
|
—
|
)
|
|
(0.01
|
)
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Stock Transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Tender Offer/Repurchase
|
|
|
0.01
|
|
|
0.02
|
(b)
|
|
0.01
|
|
|
0.05
|
|
|
0.24
|
|
|
—
|
)
|
Net
asset value, end of period
|
|
|
6.82
|
|
|
8.02
|
|
|
7.07
|
|
|
5.87
|
|
|
5.37
|
|
|
5.13
|
|
Per
share market price, end of period
|
|
|
6.11
|
|
|
7.23
|
|
|
6.61
|
|
|
5.30
|
|
|
4.90
|
|
|
4.75
|
|
Total
investment return (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based
on Trust’s market price
|
|
|
(15.49
|
)
|
|
9.38
|
|
|
24.72
|
|
|
8.16
|
|
|
3.42
|
|
|
18.79
|
|
Based
on Trust’s net asset value
|
|
|
(14.96
|
)
|
|
13.44
|
|
|
20.44
|
|
|
9.31
|
|
|
4.94
|
|
|
18.75
|
|
U.S.
$ return of Taiwan Stock Exchange Index**
|
|
|
(5.48
|
)
|
|
9.23
|
|
|
20.35
|
|
|
3.03
|
|
|
11.69
|
|
|
35.32
|
|
Ratios
and supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (in thousands)
|
|
|
93,707
|
|
|
116,031
|
|
|
113,391
|
|
|
104,364
|
|
|
116,467
|
|
|
167,801
|
|
Ratio
of expenses to average net assets (%)
|
|
|
1.16
|
† |
|
2.30
|
|
|
2.55
|
|
|
2.12
|
|
|
2.79
|
|
|
2.57
|
|
Ratio
of net investment income (loss)
to
average net assets (%)
|
|
|
(0.82
|
)† |
|
0.28
|
|
|
0.22
|
|
|
0.99
|
|
|
(0.27
|
)
|
|
(0.44
|
)
|
Portfolio
turnover ratio (%)
|
|
|
11
|
|
|
26
|
|
|
24
|
|
|
16
|
|
|
137
|
|
|
78
|
|
(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.
|
(b) |
Based
on average monthly shares outstanding.
|
* |
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.
|
See accompanying notes to unaudited financial statements
and
independent accountants’ review report.
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / June 30, 2008 (Expressed in U.S. Dollars)
(Unaudited)
Note
1 — Organization and Acquisition of The Taiwan (R.O.C.)
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, as amended. 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. At the Annual Meeting of Shareholders held on August 21, 2007,
shareholders voted to approve an advisory agreement between the Fund and
Nanking
Road Capital Management, LLC (the “NRC”), a company organized by employees of
the Fund who had managed the Fund’s investments for the period from February
2004 to September 2007.
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, 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
8B).
On
October 31, 2006, the Board of Trustees terminated the Fund’s policy requiring
the Republic of China Securities and Futures Bureau, Financial Supervisory
Commission’s (the “ROC FSC”) to consent to change certain policies of the
Fund.
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 or Hong Kong
Stock Exchange. Securities traded on a principal securities exchange are
valued
at the closing price on such exchange. Short-term investments are valued
at net
asset value per share (“NAV”) or at amortized cost, which approximates fair
value. Under the amortized cost 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 are, 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
—
Lending
of Portfolio Securities —The Trust may lend portfolio securities up to 331/3% of
the market value of the Fund’s assets to qualified broker-dealers or
institutional investors. All loans of portfolio securities are required to
be
secured by cash, U.S. government or government agency securities or bank
letters
of credit, in each case in an amount equal, at the inception of the loan
and
continuing throughout the life of loan, to 105% of the market value of
securities lent, which are marked-to-market daily. The Fund receives
compensation for securities lending activities from interest earned on the
invested cash collateral net of fee rebates paid to the borrower. The Fund’s
lending agent is UBS Securities LLC, a wholly-owned indirect subsidiary of
UBS
AG. For the six
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / June 30, 2008 (Expressed in U.S. Dollars) (Unaudited)
(continued)
months
ended June 30, 2008, the Fund earned $92,565 and UBS Securities LLC earned
$30,816 in compensation as the Fund’s lending agent. In the event of default or
bankruptcy by the counterparty, the Trust could experience delays and costs
in
recovering the loaned securities or in gaining access to the
collateral.
D
—
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.
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, 2007, the Trust
utilized $12,882,776 of capital loss carryover with a total loss carryover
of
$96,785,201 remaining.
This
capital loss carryover may be used to offset any future capital gains generated
by the Trust, and, if unused, $64,782,830 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 passive foreign investment company losses of $3,064,459 and currency
losses of $1,600,186 realized on investment transactions from November 1,
2007
through December 31, 2007 and treat them as arising during the fiscal year
ending December 31, 2008 for U.S. federal income tax purposes.
F
—
Foreign
currency translation — Substantially all of the Trust’s income is earned, and
its expenses are partially paid, in New Taiwan Dollars (“NT$”). 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, 2008, that rate was NT$30.3485 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.
Management
has analyzed the Trust’s tax positions taken on federal income tax returns for
all open tax years and has concluded that as of December 31, 2007, no provision
for income tax would be required in the fund’s financial statements. The Trust’s
federal and state income and federal excise tax returns for tax years for
which
the applicable statutes of limitations have not expired are subject to
examination by the Internal Revenue Service and state departments of
revenue.
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
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / June 30, 2008 (Expressed in U.S. Dollars) (Unaudited)
(continued)
Trust.
For the six months ended June 30, 2008, the Fund did not receive any stock
dividend.
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 fair value of stocks
sold
or transferred is levied. Proceeds from sales of investments are net of
securities transaction tax of $38,139 paid for the six months ended June
30,
2008.
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.
J
—
Accounting for Uncertainty in Income Taxes — On July 13, 2006, the Financial
Accounting Standards Board (FASB) released FASB Interpretation No. 48
“Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance
for how uncertain tax positions should be recognized, measured, presented
and
disclosed in the financial statements. FIN 48 requires the evaluation of
tax
positions taken or expected to be taken in the course of preparing the Trust’s
tax returns to determine whether the tax positions are “more-likely-than-not” of
being sustained by the applicable tax authority. Tax positions not deemed
to
meet the more-likely-than-not threshold would be recorded as a tax benefit
or
expense in the current year. Adoption of FIN 48 is required for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years
as
of the effective date. As required, the Trust implemented FIN 48 on January
1,
2007. Based on management’s evaluation, FIN 48 does not have a material impact
on the Trust’s financial statements.
K
—
Fair
Value Measurements — Effective January 1, 2008, the Trust adopted FAS 157 - Fair
Value Measurements (“FAS 157” or “the Statement”). FAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles (“GAAP”), and expands disclosures about fair value
measurement. The changes to current practices resulting from the application
of
the Statement relate to the definition of fair value, the methods used to
measure fair value, and expanded disclosures about fair value measurement.
The
Statement emphasizes that fair value is a market based measurement, not an
entity specific measurement; as such, a fair value measurement should be
determined based on the assumptions that market participants would use in
pricing the asset or liability. As a basis for considering market participant
assumptions in fair value measurements, the Statement establishes a fair
value
hierarchy that distinguishes between (1) market participant assumptions
developed based on market data obtained from sources independent of the Trust
(observable inputs) and (2) the Trust’s own assumptions about market participant
assumptions developed based on the best information available in the
circumstances (unobservable inputs). The three levels defined by the FAS
157
hierarchy are as follows:
Level
I -
Quoted prices (unadjusted) in active markets for identical assets or liabilities
that the reporting entity has the ability to access at the measurement date.
Level
II
- Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly. Level II assets
include the following: quoted prices for similar assets or liabilities in
active
markets, quoted prices for identical or similar assets or liabilities in
markets
that are not active, inputs other than quoted prices that are observable
for the
asset or liability, and inputs that are derived principally from or corroborated
by observable market data by correlation or other means (market-corroborated
inputs).
Level
III
- Unobservable pricing input at the measurement date for the asset or liability.
Unobservable inputs shall be used to measure fair value to the extent that
observable inputs are not available.
In
some
instances, the inputs used to measure fair value might fall in different
levels
of the fair value hierarchy. The level in the fair value hierarchy within
which
the fair value measurement in its entirety falls shall be determined based
on
the lowest input level that is significant to the fair value measurement
in its
entirety.
The
following table summarizes the valuation of the Trust’s securities using the
fair value hierarchy:
At June
30, 2008 |
Total
|
Level I
|
Level II
|
Level III
|
Investments |
$112,194,742
|
$112,194,742
|
–
|
|
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / June 30, 2008 (Expressed in U.S. Dollars)
(Unaudited)
(continued)
Note
3 — Investment Considerations
Because
the Trust concentrates its investments in publicly traded equity 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 Management
As
described in Note 1, the Trust entered into an investment advisory and
management agreement with NRC on October 1, 2007. Pursuant to the investment
agreement, NRC is responsible, among other things, for investing and managing
the assets of the Trust and administering the Trust’s affairs. The Trust pays
NRC a fee at an annual rate of 1.25% of the NAV of the Trust’s assets up to $150
million and 1.00% of such NAV in excess of $150 million.
Note
5 — 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 goods or service is purchased.
Note
6 — 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 Trust’s
market value of Taiwan holdings up to $200 million, 0.13% of such Taiwan
holdings equal to or in excess of $200 million up to $400 million and 0.11%
of
such Taiwan holdings equal to or in excess of $400 million. The Trust pays
BBH a
monthly fee for securities in the Hong Kong market at an annual rate of 0.10%
of
the Trust’s market value of Hong Kong holdings. The total payment to BBH for
administrative and custodial services is subject to a minimum annual fee
of
$200,000.
Note
7 — Investments in Securities
Purchases
and proceeds from sales of securities, excluding short-term investments,
for the
six months ended June 30, 2008, included $11,842,633 for stock purchases
and
$13,638,784 for stock sales, respectively.
At
June
30, 2008, 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, 2008, the unrealized
appreciation of $3,113,411 for U.S. federal income tax purposes consisted
of
$16,621,608 of gross unrealized appreciation and $13,508,197 of gross unrealized
depreciation.
Note
8 — 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 will continue to make non-block share repurchases under its share
repurchase program.
During
the six months ended June 30, 2008, the Trust did not repurchase any shares
under this program.
B
—
The
Trust has adopted an interval fund structure pursuant to which it will make
semi-annual
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / June 30, 2008 (Expressed in U.S. Dollars)
(Unaudited)
(continued)
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
June
2007, the Trust accepted 801,870 shares for payment at a price of $7.76 per
share in accordance with its semi-annual repurchase offer. Pursuant to the
semi-annual repurchase offer, the purchase price was equal to 100% of the
Trust’s net asset value per share at the close of regular trading on the Taiwan
Stock Exchange on June 29, 2007, to which a 2% repurchase fee was applied.
The
purchased shares constituted approximately 5% of the Trust’s previously
outstanding shares.
In
December 2007, the Trust accepted 761,776 shares for payment at a price of
$7.05
per share in accordance with its semi-annual repurchase offer. Pursuant to
the
semi-annual repurchase offer, the purchase price was equal to 100% of the
Trust’s net asset value per share at the close of regular trading on the Taiwan
Stock Exchange on December 17, 2007, to which a 2% repurchase fee was applied.
The purchased shares constituted approximately 5% of the Trust’s previously
outstanding shares.
In
June
2008, the Trust accepted 723,688 shares for payment at a price of $6.66 per
share in accordance with its semi-annual repurchase offer. Pursuant to the
semi-annual repurchase offer, the purchase price was equal to 100% of the
Trust’s net asset value per share at the close of regular trading on the Taiwan
Stock Exchange on June 27, 2008, to which a 2% repurchase fee was applied.
The
purchased shares constituted approximately 5% of the Trust’s previously
outstanding shares.
On
July
15, 2008, the Trust filed a Registration Statement on Form N-2 with the
Securities and Exchange Commission to register its common shares for one
or more
potential offerings in the future. While the Fund has no present intention
to
conduct such an offering, the filing, once it is declared effective by the
Securities and Exchange Commission, will permit the Fund to move rapidly
to
conduct an offering of its shares in the future if the Board of Trustees
of the
Fund believes market conditions are appropriate.
At
June
30, 2008, 13,750,072 shares were outstanding.
TAIWAN
GREATER CHINA FUND
Additional
Information (unaudited)
The
Fund has obtained an agreement letter from the Offshore Funds Centre of the
United Kingdom dated January 23, 2007 that its investors do not hold “material
interest” in an offshore fund. Therefore, the Fund does not need to seek
distributing fund status.
Steven
R.
Champion has been the President, Chief Executive Officer and portfolio manager
of the Trust since February 2004. He has been the President of NRC since July
2007. 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.
Notice
is
hereby given in accordance with Section 23(c) of the Investment Company Act
of
1940, as amended, that from time to time the Fund may purchase shares of its
common stock in the open market at prevailing market
prices.
New
York Stock Exchange Certification
In
2008,
the Trust’s Chief Executive Officer provided to the New York Stock Exchange the
annual CEO certification regarding the Trust’s compliance with the NYSE’s
Corporate Governance listing standards.
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 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, 2008 will be
available on or through the Trust’s website and on the SEC’s website no later
than August 29, 2008.
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
found 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.
The
Trust
issues a new monthly update each month, which can be viewed on the Trust’s
website at http://www.taiwangreaterchinafund.com. Please call toll free
1-800-343-9567 for any further information.
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,
2008, and the related statements of operations, changes in net assets, and
financial highlights for the sixth-month period ended June 30, 2008. 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, 2007, and
in our
report dated February 28, 2008, we expressed an unqualified opinion on such
statement of changes in net assets and financial highlights.
Boston,
MA
August
27, 2008
2008
ANNUAL MEETING OF SHAREHOLDERS (unaudited)
On
June
24, 2008,
the
Trust held an annual meeting to:
(i) |
Elect
two trustees, each to serve for a term expiring on the date of
the 2011
Annual Meeting of Shareholders or the special meeting in lieu
thereof.
|
(ii) |
Consider
whether to approve the conversion of the Trust from a closed end
investment company to an open end investment
company.
|
The
results of the shareholder votes are shown below. Votes representing 10,986,848,
or 75.91%, of the 14,473,760 eligible shares outstanding were represented
by
proxy. Robert P. Parker and Frederick C. Copeland Jr. were each elected for
a
term expiring in 2011. The conversion from a closed-end fund to an open-end
fund
was not approved.
|
|
|
Nominees
to the
Board of Trustees |
|
|
|
|
|
|
For
|
Withheld
|
Robert
P. Parker
|
9,791,775
|
1,195,073
|
Frederick
C. Copeland, Jr.
|
9,945,850
|
1,040,998
|
Pedro-Pablo
Kuczynski, David N. Laux, Edward B. Collins and Tsung-Ming Chung,
whose
terms did not expire in 2008,
remain trustees.
|
|
Approval
of Conversion from a Closed-End Investment Company to an Open-End
Investment Company
|
For |
Against
|
Withheld/Abstain
|
6,260,801
|
1,207,388
|
27,506
|
TAIWAN
GREATER CHINA FUND
www.taiwangreaterchinafund.com
Trustees
and Officers:
Pedro-Pablo
Kuczynski, Chairman and Trustee
Frederick
C. Copeland Jr., Vice Chairman, Trustee and Audit Committee Member
David
N.
Laux, Trustee
Tsung-Ming
Chung, Trustee and Audit Committee Member
Edward
B.
Collins, Trustee and Audit Committee Member
Robert
P.
Parker, Trustee and Audit Committee Member
Steven
R.
Champion, President and Chief Executive Officer and Portfolio
Manager
Cheryl
Chang, Chief Financial Officer, Treasurer
and Secretary
Taiwan
Greater China Fund
P.O.
Box
118-763 Taipei
Taipei
10599, Taiwan
Manager:
Nanking
Road Capital Management, LLC
111
Gillett Street
Hartford,
CT 06105
Tel:
(860) 278-7888
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 US 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.
Current
and historical (from 2/27/2004) NAV information can be found on the Fund’s
website at
www.taiwangreaterchinafund.com
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. 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.
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
|
January
1
to
January
31
|
|
|
|
|
February
1
to
February
29
|
|
|
|
|
March
1
to
March
31
|
|
|
|
|
April
1
to
April
30
|
|
|
|
|
May
1
to
May
31
|
|
|
|
|
June
1
to
June
30
|
723,688¹
|
$6.66
|
723,688¹
|
125,032²
|
Total
|
723,688¹
|
$6.66
|
723,688¹
|
125,032²
|
¹ |
Semi-Annual
Repurchase Offer
|
²
|
The
Fund purchased 1,942,600 shares under its repurchase program, which
commenced on November 1, 2004. As of June 30, 2008, 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.
11(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 such disclosure
controls and procedures as required by Rule 30a-3(b) under the
1940 Act
and Rule 13a-15(b) under the Securities Exchange Act of 1934, as
amended.
|
11
(b)
|
There
were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act), 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.
12(a)(1)
Code of Ethics required by Item 2 of Form N-CSR.
Not
applicable.
12(a)(2)
Certifications required by Rule 30a-2(a) under the 1940 Act:
Exhibits
302 and 906 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.
(Registrant)
Taiwan
Greater China Fund
By
(Signature and Title)
/s/
Steven R. Champion
Steven
R.
Champion
Title:
Chief Executive Officer
Date:
September 5, 2008
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
(Signature and Title)
/s/
Steven R. Champion
Steven
R.
Champion
Title:
Chief Executive Officer
Date:
September 5, 2008
By
(Signature and Title)
/s/
Cheryl Chang
Cheryl
Chang
Title:
Chief Financial Officer
Date:
September 5, 2008