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
Republic
of China
(Address
of principal executive offices) (Zip code)
Brown
Brothers Harriman & Co.
40
Water Street, P. O. 962047
Boston,
MA 02196-2047
(Name and
address of agent for service)
Registrant’s
telephone number, including area code: (800) 343-9567
Date of
fiscal year end: December
31
Date of
reporting period: December 31,
2008
Form
N-CSR is to be used by management investment companies to file reports with the
Commission not later than 10 days after the transmission to stockholders of any
report that is required to be transmitted to stockholders under Rule 30e-1 under
the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission
may use the information provided on Form N-CSR in its regulatory, disclosure
review, inspection, and policymaking rules.
A
registrant is required to disclose the information specified by Form N-CSR, and
the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
(“OMB”) control number. Please direct all comments concerning the
accuracy of the information collection burden estimate and any suggestions for
reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth
Street, NW, Washington, DC 20549-0609. The OMB has reviewed this
collection of information under clearance requirements of 44 U.S.C. §
3507.
ITEM 1.
REPORTS TO STOCKHOLDERS
Annual
Report
December
31, 2008
Like
markets throughout the world, the Taiwan stock market suffered through a dismal
year in 2008, with the overall stock market as measured by the Taiwan Stock
Exchange Index (TAIEX) yielding US$denominated total returns of -43.7%. It is
scant comfort to note that other emerging markets did even worse during the
year, including China -62.6%, Korea -57.2%, India -61.0%, Brazil -55.3%, and
Russia -72.3%. From its 2008 peak of 9310 on May 20th, the Taiwan market dropped
50.2% to close the year at 4591. The MSCI Taiwan Index produced a similar
negative dollar return of -46.0%. These US dollar returns factor in a 1.1% drop
in the value of the Taiwan dollar during the year. The volatility of the overall
Taiwan market based on a 30 day annualized rate calculated by Bloomberg was
36.0% at year-end, compared to 27.7% in 2007, and 11.6% in 2006. Interestingly,
the Taiwan market was significantly less volatile than the same measure for the
S & P 500 Index which reached 59.7% on December 31.
Fund
Performance
Considering
the worldwide financial turmoil experienced during 2008, it was somewhat
surprising that Taiwan’s financial stocks outperformed the overall market by
8.8% during the year, much of this out performance coming in January and March.
This is important to the Fund since Taiwan’s financial sector has little
investment in China and, consequently, the Fund holds shares in only one company
in the sector. The Fund’s primary benchmark, the Taiwan China Strategy Index*,
declined 53.0% for the year, and the similar S & P/Polaris China Play 50
Index had US dollar returns of -56.2%. The Fund’s shares on the New York Stock
Exchange declined 51.2% for the year, and the Fund’s net asset value declined
52.5% after expenses of 2.4%, taxes on cash dividends of 1.0%, and taxes on
stock dividends of 0.2%.
The
Fund’s discount to net asset value averaged 9.8% during the year, up from 9.7%
in 2007, and 7.3% in 2006. The maximum discount during the year was 21.7% on
October 10, and the minimum was 4.1% on October 28.
The
Fund’s mean and median daily trading volumes were 37,037 shares and 25,800
shares, respectively, during the year, compared to 42,510 shares and 27,800
shares, respectively, in 2007.
The
Fund’s net asset value performance is highly correlated with the performance of
the broad Taiwan market indices with R2’s** of
0.94 and 0.96 relative to the TAIEX and the MSCI Taiwan indexes, respectively.
The Fund’s betas relative to the two broad indexes are 1.00 and 0.98,
respectively, and the Fund’s alphas relative to those indexes are +0.8 basis
points and -1.0 basis point per week, respectively. Alpha is a measure of
“excess return” or returns which cannot be explained by the risk level of an
asset. Relative to the S & P/Polaris China Play 50 Index, the Fund has an
R2
of 0.93, a beta of 0.99, and a positive alpha of 11 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$returns of the Fund’s portfolio. The MSCI Index
represents the overall market in Taiwan while the Fund’s strategy calls for
investment in Taiwan companies doing business in China.
For the
12 months ending December 2008, the NT$gross return for the MSCI Taiwan index in
the Aegis model was a negative 44.5% while the portfolio-only return for the
Fund in the model was a negative 49.9%. This implies that a negative 5.4
percentage points of return can be attributed to the China strategy and the
active management of the fund. The negative performance continues to be a result
of Q1 2008 results, when the China strategy and the active management showed a
negative contribution of 7.4 percentage points. Q1 2008 results were primarily a
result of the strong performance of the financial sector and the
under-representation of financials in the TFC portfolio given their minimal
activity in China, coupled with an over-representation of technology stocks
given that they are the major sector operating in China.
Over the
longer term, since the inception of the Fund’s China focused strategy in 2004,
the China strategy and the active management of the Fund has contributed 2.6
percentage points with the MSCI Taiwan returning a negative 22.1% in NT$in the
model while the Fund returned a negative 19.5%. This represents a 12%
improvement over the MSCI Taiwan Index returns in NT$. Sector selection was the
key source of returns over this period, contributing more than the total active
return of the Fund but momentum stocks and smaller cap stocks positively
contributed to active return, while growth stocks and overall asset selection
were detriments. The dramatic effects of the last quarter of 2008 shifted asset
selection from being a positive contributor to active returns over the long term
to a negative factor.
Portfolio
Valuation Measures
Corporate
valuations in Taiwan remain at low levels despite the eroding business climate.
Due to improvements in Taiwan’s financial reporting, we can now calculate more
up-to-date valuation statistics than in the past, and at year-end, the Fund’s
heavily tech-weighted portfolio was composed of companies with a weighted
average price-earnings ratio of 12.6, a weighted average price-book ratio of
2.2, a weighted average cash dividend yield of 10.7%, and a weighted average
return on equity of 22.1%.
Taiwan
Political and Economic Developments
Last year
marked a major political shift for Taiwan as a new administration began to
implement its promises to improve relations with China. But the positive impact
of the political developments was more than offset by the global economic crisis
and falling demand in Taiwan’s main export markets.
The year
started off with a Kuomintang (KMT) victory in the Taiwan legislative elections
in January, with the Pan-Blue coalition winning 75% of the seats. In March, the
voters elected the KMT’s Ma Ying-jeou as President by a margin of 58% to 42%
over Frank Hsieh, the pro-independence Democratic Progressive Party candidate.
Chen Shui-bian, the President for the last eight years, was unable to run
because of term limits. During the campaign, Ma emphasized improving
cross-strait relations and domestic investment to spur economic
growth.
Within
about six weeks after Ma’s inauguration in May, he fulfilled one of his key
promises as direct weekend passenger flights commenced between Taiwan and China.
Initially, 36 charter flights were established and by the end of the year the
flights were expanded to a daily basis, the total number of weekly flights was
increased to 108 and flights were allowed to fly a direct route rather than
entering Taiwan only through Hong Kong airspace. Direct cargo flights and
shipping links were also launched at the end of the year. Another campaign
promise was to liberalize limitations on investments by Taiwan companies in
mainland China. In August, the government lifted investment limitations for
about 60% of Taiwan’s listed companies, while most other companies had their
limits increased to 60% of net worth. This ultimately will help to rationalize
corporate and capital structures of Taiwan companies that have invested in
China. A number of other firsts related to China also happened during the year,
including the opening of Taiwan to Chinese tourists, the visit of Chen Yunlin,
China’s top envoy to Taiwan and the highest ranking Chinese official to visit
Taiwan since 1949, and the change of rules to allow banks and securities
companies to invest in their Chinese counterparts through third-country
subsidiaries.
On the
economic side, the news was not so positive. During the first half of the year,
Taiwan’s export growth was an impressive 18.1% YOY, driven by exports to China,
much of which went into goods ultimately exported to the US and Europe. But by
September, exports were beginning to slide and in December exports fell 41.9%
YOY, with exports to China slowing 57.1%. Export orders in December,
representing shipments 1-3 months in the future, also declined 33% YOY. The
impact of the dramatically weakening global economy was also seen in GDP
figures, as foreign demand accounts traditionally for 60% of GDP. After
first half GDP growth of 5.4% compared to the year earlier period, third quarter
growth came in at a negative 1.5% and fourth quarter as well as the first two
quarters of 2009 are forecast to be negative. The government has revised its
overall 2008 growth forecast to 1.9% and is expecting 2009 growth to be 2.1%,
although the Taiwan Institute of Economic Research believes that 2009 GDP will
only grow 0.9%.
Like many
other countries, Taiwan reacted to the global crisis by enacting a number of
measures targeted at boosting the economy and strengthening the financial
system. The Central Bank began cutting interest rates in September and has now
lowered them six times from 3.625% to 1.5%, with the latest cut in January 2009.
Early in the crisis, the government lowered the bank reserve ratio, expanded the
REPO mechanism and fully guaranteed bank deposits. A US$28 billion stimulus
package is now also being implemented which calls for US$15 billion on
infrastructure spending over four years as well as US$2.5 billion on shopping
vouchers which were distributed prior to Chinese New Year in late January. The
stimulus package also focuses on encouraging investment through tax incentives
and land purchase subsidies, boosting exports through export financing, and
providing credit guarantees for small and medium businesses and targeted
assistance for key industries. President Ma’s election proposal for 12 major
domestic infrastructure projects implemented through public-private partnerships
remains on the drawing board.
The
worldwide economic slowdown notwithstanding, China’s economy is expected to grow
at a 7.5% rate in 2009, and well managed, well governed Taiwan related companies
will continue to be deeply involved in the China market. With low corporate
valuations and less volatility than many markets the Taiwan companies in which
the Fund invests will continue to make it a smart way to play China for long
term investors.
Yours
truly,
Steven R.
Champion
President,
CEO and Portfolio Manager
January
30, 2009
*
|
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 DECEMBER 31, 2008
|
|
Industry
Diversification
|
Industry
|
|
U.S. $ Value
|
|
|
Percent
of
Net Assets
|
|
Computer
Systems & Hardware
|
|
|
10,228,047 |
|
|
|
20.57 |
% |
Semiconductors
|
|
|
8,543,149 |
|
|
|
17.18 |
|
Plastics
|
|
|
5,911,088 |
|
|
|
11.89 |
|
Electronic
Components
|
|
|
3,976,560 |
|
|
|
7.99 |
|
Flat-Panel
Displays
|
|
|
3,896,762 |
|
|
|
7.84 |
|
Steel
|
|
|
3,622,504 |
|
|
|
7.29 |
|
Food
|
|
|
2,977,387 |
|
|
|
5.99 |
|
Cement
|
|
|
2,087,961 |
|
|
|
4.20 |
|
Computer
Peripherals/ODM
|
|
|
1,811,457 |
|
|
|
3.64 |
|
Other
|
|
|
1,389,317 |
|
|
|
2.79 |
|
Financial
Services
|
|
|
1,036,534 |
|
|
|
2.09 |
|
Electronics/Other
|
|
|
849,017 |
|
|
|
1.71 |
|
Textiles
|
|
|
616,257 |
|
|
|
1.24 |
|
Transportation
|
|
|
577,271 |
|
|
|
1.16 |
|
Rubber
|
|
|
433,734 |
|
|
|
0.87 |
|
Electrical
& Machinery
|
|
|
354,496 |
|
|
|
0.71 |
|
Glass,
Paper & Pulp
|
|
|
351,211 |
|
|
|
0.71 |
|
Retailing
|
|
|
314,164 |
|
|
|
0.63 |
|
Communications
Equipment
|
|
|
232,372 |
|
|
|
0.47 |
|
Short-Term
Securities
|
|
|
122,307 |
|
|
|
0.25 |
|
Other
Assets (Less Liabilities)
|
|
|
388,096 |
|
|
|
0.78 |
|
Net
Assets
|
|
$ |
49,719,691 |
|
|
|
100.00 |
|
TAIWAN GREATER CHINA
FUND
Schedule of Investments / December
31, 2008
|
COMMON STOCK —
98.97%
|
|
|
|
|
Shares
|
|
|
|
% of
Net Assets
|
|
|
U.S. Dollar
Value
|
|
Cement —
4.20%
|
|
|
|
|
|
838,615 |
|
Asia Cement
Corp.
|
|
|
1.46 |
|
|
$ |
726,975 |
|
|
1,657,373 |
|
Taiwan
Cement Corp.
|
|
|
2.74 |
|
|
|
1,360,986 |
|
|
|
|
|
|
|
|
|
|
|
2,087,961 |
|
|
|
|
|
|
|
Communications Equipment —
0.47%
|
|
|
|
|
|
|
165,787 |
|
Gemtek
Technology
|
|
|
0.47 |
|
|
|
232,372 |
|
|
|
|
|
|
|
Computer Peripherals/ODM —
3.64%
|
|
|
|
|
|
|
108,899 |
|
HTC
Corp.
|
|
|
2.18 |
|
|
|
1,085,041 |
|
|
1,111,433 |
|
Lite-on
Technology Corp.
|
|
|
1.46 |
|
|
|
726,416 |
|
|
|
|
|
|
|
|
|
|
|
1,811,457 |
|
|
|
|
|
|
|
Computer Systems & Hardware —
20.57%
|
|
|
|
|
|
|
500,651 |
|
Acer
Inc.
|
|
|
1.31 |
|
|
|
649,859 |
|
|
90,980 |
|
Advantech
Co., Ltd.
|
|
|
0.26 |
|
|
|
131,678 |
|
|
2,151,154 |
|
Asustek
Computer Inc.
|
|
|
4.85 |
|
|
|
2,412,093 |
|
|
460,494 |
|
Compal
Electronics Inc.
|
|
|
0.49 |
|
|
|
242,040 |
|
|
2,515,531 |
|
Hon
Hai Precision Industry Co., Ltd.
|
|
|
9.90 |
|
|
|
4,920,841 |
|
|
426,242 |
|
Inventec
Co., Ltd.
|
|
|
0.24 |
|
|
|
120,136 |
|
|
1,094,828 |
|
Quanta
Computer Inc.
|
|
|
2.32 |
|
|
|
1,154,241 |
|
|
787,075 |
|
Wistron
Corp.
|
|
|
1.20 |
|
|
|
597,159 |
|
|
|
|
|
|
|
|
|
|
|
10,228,047 |
|
|
|
|
|
|
|
Electrical & Machinery —
0.71%
|
|
|
|
|
|
|
465,000 |
|
Teco
Electric & Machinery Co., Ltd.
|
|
|
0.29 |
|
|
|
143,103 |
|
|
1,090,837 |
|
Walsin
Lihwa Corp.
|
|
|
0.42 |
|
|
|
211,393 |
|
|
|
|
|
|
|
|
|
|
|
354,496 |
|
|
|
|
|
|
|
Electronic Components —
7.99%
|
|
|
|
|
|
|
218,676 |
|
Catcher
Technology Co., Ltd.
|
|
|
0.73 |
|
|
|
362,472 |
|
|
1,011,129 |
|
Delta
Electronics Inc.
|
|
|
3.94 |
|
|
|
1,956,388 |
|
|
150,979 |
|
Everlight
Electronics Co.
|
|
|
0.40 |
|
|
|
198,735 |
|
|
275,557 |
|
Foxconn
Technology Co., Ltd.
|
|
|
1.30 |
|
|
|
648,192 |
|
|
25,695 |
|
Motech
Industry Co., Ltd.
|
|
|
0.12 |
|
|
|
60,599 |
|
|
65,000 |
|
Nan
Ya Printed Circuit Board Corp.
|
|
|
0.27 |
|
|
|
136,659 |
|
|
141,799 |
|
Shin
Zu Shing Co., Ltd.
|
|
|
0.71 |
|
|
|
354,292 |
|
|
263,000 |
|
TXC
Corp.
|
|
|
0.34 |
|
|
|
167,485 |
|
|
221,378 |
|
Unimicron
Technology Corp.
|
|
|
0.18 |
|
|
|
91,738 |
|
|
|
|
|
|
|
|
|
|
|
3,976,560 |
|
|
|
|
|
|
|
Electronics/Other —
1.71%
|
|
|
|
|
|
|
125,000 |
|
Lumax
International Corp., Ltd.
|
|
|
0.30 |
|
|
|
147,018 |
|
|
677,615 |
|
Synnex
Technology International Corp.
|
|
|
1.41 |
|
|
|
701,999 |
|
|
|
|
|
|
|
|
|
|
|
849,017 |
|
See accompanying notes to financial
statements.
TAIWAN GREATER CHINA
FUND
Schedule of Investments
(Continued) / December 31,
2008
|
Shares
|
|
|
|
% of
Net Assets
|
|
|
U.S. Dollar
Value
|
|
Financial Services —
2.09%
|
|
|
|
|
|
932,000 |
|
Cathay
Financial Holding Co., Ltd.
|
|
|
2.09 |
|
|
|
1,036,534 |
|
|
|
|
|
|
|
Flat-Panel Displays —
7.84%
|
|
|
|
|
|
|
3,622,381 |
|
AU
Optronics Corp.
|
|
|
5.48 |
|
|
|
2,726,250 |
|
|
2,028,847 |
|
Chi
Mei Optoelectronics Corp.
|
|
|
1.34 |
|
|
|
667,648 |
|
|
3,147,951 |
|
Chunghwa
Picture Tubes, Ltd.
|
|
|
0.65 |
|
|
|
320,368 |
|
|
246,983 |
|
Innolux
Display Corp.
|
|
|
0.37 |
|
|
|
182,496 |
|
|
|
|
|
|
|
|
|
|
|
3,896,762 |
|
|
|
|
|
|
|
Food —
5.99%
|
|
|
|
|
|
|
290,405 |
|
Great
Wall Enterprises Co.
|
|
|
0.45 |
|
|
|
222,987 |
|
|
662,000
|
*
|
Tingyi
(Cayman Islands) Holdings Corp.
|
|
|
1.54 |
|
|
|
767,061 |
|
|
1,815,638 |
|
Uni-President
Enterprise Corp.
|
|
|
3.22 |
|
|
|
1,598,828 |
|
|
938,000 |
|
Want
Want China Holdings, Ltd.
|
|
|
0.78 |
|
|
|
388,511 |
|
|
|
|
|
|
|
|
|
|
|
2,977,387 |
|
|
|
|
|
|
|
Glass, Paper & Pulp —
0.71%
|
|
|
|
|
|
|
616,384 |
|
Taiwan
Glass Ind. Corp.
|
|
|
0.71 |
|
|
|
351,211 |
|
|
|
|
|
|
|
Plastics —
11.89%
|
|
|
|
|
|
|
1,217,299 |
|
Formosa
Chemicals & Fiber Corp.
|
|
|
2.99 |
|
|
|
1,483,652 |
|
|
1,632,983 |
|
Formosa
Plastics Corp.
|
|
|
4.36 |
|
|
|
2,169,416 |
|
|
2,099,319 |
|
Nan
Ya Plastics Corp.
|
|
|
4.54 |
|
|
|
2,258,020 |
|
|
|
|
|
|
|
|
|
|
|
5,911,088 |
|
|
|
|
|
|
|
Retailing —
0.63%
|
|
|
|
|
|
|
131,512 |
|
President
Chain Store Corp.
|
|
|
0.63 |
|
|
|
314,164 |
|
|
|
|
|
|
|
Rubber —
0.87%
|
|
|
|
|
|
|
504,777 |
|
Cheng
Shin Rubber Ind. Co., Ltd.
|
|
|
0.87 |
|
|
|
433,734 |
|
|
|
|
|
|
|
Semiconductors —
17.18%
|
|
|
|
|
|
|
2,597,762 |
|
Advanced
Semiconductor Engineering Inc.
|
|
|
1.88 |
|
|
|
934,020 |
|
|
369,543 |
|
MediaTek
Inc.
|
|
|
4.99 |
|
|
|
2,482,837 |
|
|
112,525 |
|
Powertech
Technology Inc.
|
|
|
0.38 |
|
|
|
187,204 |
|
|
543,193 |
|
Siliconware
Precision Industries Co., Ltd.
|
|
|
0.93 |
|
|
|
463,433 |
|
|
3,015,005 |
|
Taiwan
Semiconductor Manufacturing Co., Ltd.
|
|
|
8.20 |
|
|
|
4,078,924 |
|
|
1,752,397 |
|
United
Microelectronics Corp.
|
|
|
0.80 |
|
|
|
396,731 |
|
|
|
|
|
|
|
|
|
|
|
8,543,149 |
|
|
|
|
|
|
|
Steel —
7.29%
|
|
|
|
|
|
|
5,146,621 |
|
China
Steel Corp.
|
|
|
7.29 |
|
|
|
3,622,504 |
|
|
|
|
|
|
|
Textiles —
1.24%
|
|
|
|
|
|
|
963,093 |
|
Far
Eastern Textile, Ltd.
|
|
|
1.24 |
|
|
|
616,257 |
|
|
|
|
|
|
|
Transportation —
1.16%
|
|
|
|
|
|
|
195,000
|
*
|
China
Airlines
|
|
|
0.09 |
|
|
|
45,276 |
|
|
235,000 |
|
U-Ming
Marine Transport Corp.
|
|
|
0.57 |
|
|
|
281,407 |
|
|
814,261 |
|
Yang
Ming Marine Transport Corp.
|
|
|
0.50 |
|
|
|
250,588 |
|
|
|
|
|
|
|
|
|
|
|
577,271 |
|
See accompanying notes to financial
statements.
TAIWAN GREATER CHINA
FUND
Schedule of Investments
(Continued) / December 31,
2008
|
Shares
|
|
|
|
% of
Net Assets
|
|
|
U.S. Dollar
Value
|
|
Other —
2.79%
|
|
|
|
|
|
|
|
222,050 |
|
Giant
Manufacturing Co., Ltd.
|
|
|
0.99 |
|
|
|
493,234 |
|
|
481,000 |
|
Merida
Industry Co., Ltd.
|
|
|
1.20 |
|
|
|
597,238 |
|
|
669,473 |
|
Pou
Chen Corp.
|
|
|
0.60 |
|
|
|
298,845 |
|
|
|
|
|
|
|
|
|
|
|
1,389,317 |
|
|
|
|
|
|
|
|
|
|
TOTAL
COMMON STOCK (COST $74,292,941)
|
|
|
|
|
|
|
49,209,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
SHORT-TERM SECURITIES —
0.25%
Time Deposit —
0.25%
|
|
|
|
|
|
|
|
|
JP Morgan Chase - London, 0.06%,
Due 01/02/09
|
|
|
0.25 |
|
|
|
122,307 |
|
|
|
|
|
|
|
|
|
|
TOTAL SHORT-TERM
SECURITIES
(COST
$122,307)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122,307 |
|
|
|
|
|
|
|
|
|
|
TOTAL
INVESTMENTS IN SECURITIES AT FAIR VALUE
(COST
$74,415,248)
|
|
|
|
|
|
|
|
|
|
|
99.22 |
|
|
|
49,331,595 |
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS (LESS LIABILITIES)
|
|
|
0.78 |
|
|
|
388,096 |
|
|
|
|
|
|
|
|
|
|
NET
ASSETS
|
|
|
100.00 |
|
|
$ |
49,719,691 |
|
*
|
Non-income
producing: These stocks did not pay a cash dividend during the past
year.
|
See
accompanying notes to financial statements.
TAIWAN
GREATER CHINA FUND
Statement
of Assets and Liabilities
December
31, 2008 (Expressed in U.S. Dollars)
Assets
|
|
|
|
Investments
in securities at Market value (Notes 2B, 2D, 3 and 7)
|
|
|
|
Common
Stock (cost — $74,292,941)
|
|
$ |
49,209,288 |
|
Short-term
securities (cost — $122,307)
|
|
|
122,307 |
|
Total
investment in securities at fair value (cost —
$74,415,248)
|
|
|
49,331,595 |
|
|
|
|
|
|
Foreign
cash (Cost — $453,719)
|
|
|
449,737 |
|
Prepaid
expenses and other assets
|
|
|
247,587 |
|
Total
assets
|
|
|
50,028,919 |
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Professional
fees payable
|
|
|
131,888 |
|
Administration
fee payable (Note 5)
|
|
|
68,350 |
|
Accrued
management fee (Note 4)
|
|
|
53,125 |
|
Shareholder
communication fees payable
|
|
|
36,073 |
|
Custodian
fee payable (Note 6)
|
|
|
19,792 |
|
Total
liabilities
|
|
|
309,228 |
|
|
|
|
|
|
Net
assets
|
|
$ |
49,719,691 |
|
|
|
|
|
|
Components
of net assets
|
|
|
|
|
|
|
|
|
|
Par
value of shares of beneficial interest (Note 8)
|
|
$ |
130,626 |
|
Additional
paid-in capital (Note 8)
|
|
|
161,106,671 |
|
Accumulated
net investment income
|
|
|
58,245,503 |
|
Accumulated
net realized loss on investments and foreign currency
transcactions
|
|
|
(103,825,438 |
) |
Unrealized
net depreciation on investments (Note 7)
|
|
|
(25,083,653 |
) |
Cumulative
translation adjustment (Note 2F)
|
|
|
(40,854,018 |
) |
|
|
|
|
|
Net
assets
|
|
$ |
49,719,691 |
|
|
|
|
|
|
Net
asset value per share (13,062,568 shares issued and
outstanding, par value $0.01)
|
|
$ |
3.81 |
|
See
accompanying notes to financial statements.
TAIWAN
GREATER CHINA FUND
Statement
of Operations
For
the Year Ended December 31, 2008 (Expressed in U.S. Dollars)
Investment
income (Note 2B, 2C, 2D)
|
|
|
|
Dividends
|
|
$ |
5,066,099 |
|
Securities
lending income
|
|
|
112,290 |
|
Interest
and other income
|
|
|
22,016 |
|
|
|
|
5,200,405 |
|
|
|
|
|
|
Republic
of China taxes (Note 2H)
|
|
|
(1,031,997 |
) |
|
|
|
4,168,408 |
|
|
|
|
|
|
Expenses
|
|
|
|
|
Management
fee (Note 4)
|
|
|
1,124,205 |
|
Shareholder
communication expenses
|
|
|
196,419 |
|
Trustee
fees and expenses
|
|
|
187,954 |
|
Administrative
fee (Note 5)
|
|
|
140,974 |
|
Custodian
fee (Note 6)
|
|
|
129,984 |
|
Audit
and tax fee
|
|
|
108,266 |
|
Insurance
expenses
|
|
|
86,934 |
|
Legal
fees and expenses
|
|
|
47,245 |
|
Other
expenses
|
|
|
100,391 |
|
|
|
|
2,122,372 |
|
|
|
|
|
|
Net
investment income
|
|
|
2,046,036 |
|
|
|
|
|
|
Net
realized and unrealized loss on investments and foreign currencies (Notes
2F and 7)
|
|
|
|
|
Net
realized loss on:
|
|
|
|
|
investments
(excluding short-term securities)
|
|
|
(6,683,994 |
) |
foreign
currency transactions
|
|
|
(188,634 |
) |
net
realized loss on investments and foreign currency
transactions
|
|
|
(6,872,628 |
) |
|
|
|
|
|
Net
changes in unrealized depreciation on:
|
|
|
|
|
investments
|
|
|
(52,029,736 |
) |
translation
of assets and liabilities in foreign currencies
|
|
|
(1,988,385 |
) |
|
|
|
|
|
Net
realized and unrealized loss from investments and foreign
currencies
|
|
|
(60,890,749 |
) |
|
|
|
|
|
Net
decrease in net assets resulting from operations
|
|
|
(58,844,713 |
) |
See
accompanying notes to financial statements.
TAIWAN
GREATER CHINA FUND
Statement
of Changes in Net Assets
For
the Years Ended December 31, 2008 and 2007 (Expressed in U.S.
Dollars)
|
|
2008
|
|
|
2007
|
|
Net
increase (decrease) in net assets resulting from
operations
|
|
|
|
|
|
|
Net
investment income
|
|
$ |
2,046,036 |
|
|
$ |
341,464
|
|
Net
realized gain (loss) on investments and foreign currency
transactions
|
|
|
(6,872,628 |
) |
|
|
13,995,967 |
|
Unrealized
depreciation on investments
|
|
|
(52,029,736 |
) |
|
|
(7,648 |
) |
Unrealized
depreciation on translation of assets and liabilities in foreign
currencies
|
|
|
(1,988,385 |
) |
|
|
(96,960 |
) |
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in net assets resulting from
operations
|
|
|
(58,844,713 |
) |
|
|
14,232,823 |
|
|
|
|
|
|
|
|
|
|
Capital
share transactions:
|
|
|
|
|
|
|
|
|
Cost
of semi-annual repurchase offer (Note 8B)
|
|
|
(7,466,652 |
) |
|
|
(11,593,032 |
) |
|
|
|
|
|
|
|
|
|
Net
assets, beginning of year
|
|
|
116,031,056 |
|
|
|
113,391,265 |
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year
|
|
$ |
49,719,691 |
|
|
$ |
116,031,056 |
|
See
accompanying notes to financial statements.
TAIWAN
GREATER CHINA FUND
Financial
Highlights
(Expressed
in U.S. Dollars)
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Per
share operating performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of year
|
|
|
8.02 |
|
|
|
7.07 |
|
|
|
5.87 |
|
|
|
5.37 |
|
|
|
5.13 |
|
Net
investment income (loss)
|
|
|
0.15 |
|
|
|
0.02 |
|
|
|
0.01 |
|
|
|
0.05 |
|
|
|
(0.01 |
) |
Net
realized and unrealized gain (loss) on investments (a)
|
|
|
(4.21 |
) |
|
|
0.92 |
|
|
|
1.21 |
|
|
|
0.65 |
|
|
|
(0.24 |
) |
Net
realized and unrealized appreciation (depreciation) on translation of
foreign currencies (a)
|
|
|
(0.16 |
) |
|
|
(0.01 |
) |
|
|
(0.03 |
) |
|
|
(0.25 |
) |
|
|
0.26 |
|
Total
from investment operations
|
|
|
(4.22 |
) |
|
|
0.93 |
|
|
|
1.19 |
|
|
|
0.45 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
to Shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income*
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Stock Transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Tender Offer/Repurchase
|
|
|
0.01 |
(b) |
|
|
0.02 |
(b) |
|
|
0.01 |
|
|
|
0.05 |
|
|
|
0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, end of year
|
|
|
3.81 |
|
|
|
8.02 |
|
|
|
7.07 |
|
|
|
5.87 |
|
|
|
5.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share market price, end of year
|
|
|
3.53 |
|
|
|
7.23 |
|
|
|
6.61 |
|
|
|
5.30 |
|
|
|
4.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investment return (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based
on Trust’s market price
|
|
|
(51.18 |
) |
|
|
9.38 |
|
|
|
24.72 |
|
|
|
8.16 |
|
|
|
3.42 |
|
Based
on Trust’s net asset value
|
|
|
(52.49 |
) |
|
|
13.44 |
|
|
|
20.44 |
|
|
|
9.31 |
|
|
|
4.94 |
|
U.S.
$return of Taiwan Stock Exchange Index**
|
|
|
(46.66 |
) |
|
|
9.23 |
|
|
|
20.35 |
|
|
|
3.03 |
|
|
|
11.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
and supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (in thousands)
|
|
|
49,720 |
|
|
|
116,031 |
|
|
|
113,391 |
|
|
|
104,364 |
|
|
|
116,467 |
|
Ratio
of expenses to average net assets (%)
|
|
|
2.37 |
|
|
|
2.30 |
|
|
|
2.55 |
|
|
|
2.12 |
|
|
|
2.79 |
|
Ratio
of net investment income to average net assets (%)
|
|
|
2.29 |
|
|
|
0.28 |
|
|
|
0.22 |
|
|
|
0.99 |
|
|
|
(0.27 |
) |
Portfolio
turnover ratio (%)
|
|
|
22 |
|
|
|
26 |
|
|
|
24 |
|
|
|
16 |
|
|
|
137 |
|
(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 financial statements.
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / December 31, 2008 (Expressed in U.S.
Dollars)
Note
1 — Organization and Acquisition of The Taiwan (R.O.C.) Fund
The
Taiwan Greater China Fund (the “Fund” or the “Trust”) 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. The Taiwan (R.O.C.) Fund was subsequently liquidated. At
the Annual Meeting of Shareholders held on August 21, 2007, shareholders
approved 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. Because the Trust’s shares traded at an average discount to NAV of
more than 10% for the 12-week period ended October 10, 2008, the Trust’s
shareholders will be asked to consider the conversion of the Trust to an
open-end investment company at the 2009 annual meeting. 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 on June 21, 2005, 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 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 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 total assets to qualified broker-dealers or
financial institutions. 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 Trust receives
compensation for securities lending activities from interest earned on the
invested cash collateral net of fee rebates paid to the borrower. The Trust’s
lending agency agreement with UBS Securities LLC (“UBS”) was terminated at the
end of October as UBS has decided to exit the securities lending agency
business. For the year ended December 31, 2008, the Fund earned $112,290 and UBS
earned $39,751 in compensation as the Trust’s lending agent. As of December 31,
2008, the Trust did not have any securities on loan. 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.
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / December 31, 2008 (Expressed in U.S. Dollars)
(continued)
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, 2008, the Trust utilized $5,335,840 of
capital loss carryover with a total loss carryover of $91,449,362
remaining.
This
capital loss carryover may be used to offset any future capital gains generated
by the Trust, and, if unused, $59,446,991 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 $224,372, currency losses of
$1,215,369 and capital losses of $12,127,908 realized on investment transactions
from November 1, 2008 through December 31, 2008 and treat them as arising during
the fiscal year ending December 31, 2009 for U.S. federal income tax
purposes.
F — Foreign currency
translation — Substantially all of the Trust’s income is earned, and its
expenses are partially paid, in New Taiwan Dollars (“NT$”). 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 December 31,
2008, that rate was NT$32.8190 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 realized capital gains calculated in accordance with U.S. federal income tax
regulations. Such calculations may differ from those based on U.S. generally
accepted accounting principles. In order to reconcile such differences,
accumulated net investment income was increased by $5,436,068, accumulated net
realized loss on investments was decreased by $55,228, and additional paid in
capital was decreased by $5,380,840 to reflect the impact of such differences in
accordance with U.S. generally accepted accounting principles. Permanent book to
tax differences primarily relate to the treatment of the Trust’s gains from the
disposition of passive foreign investment company shares as well as the
nondeductibility of net operating losses for U.S. federal income tax purposes.
Temporary book to tax differences are primarily due to differing treatments for
certain foreign currency losses.
As of
December 31, 2008, the components of distributable earnings/ (accumulated
losses) on a tax basis were as follows:
Undistributed
net investment income
|
|
$ |
0000 |
|
Accumulated
capital and other losses
|
|
|
(44,821,507 |
) |
Unrealized
appreciation (depreciation)
|
|
|
(25,842,080 |
) |
|
|
$ |
(70,663,587 |
) |
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.
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / December 31, 2008 (Expressed in U.S. Dollars)
(continued)
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, 2008, no provision
for income tax would be required in the Trust’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 Trust. For the twelve months ended December 31, 2008, the total par value of
stock dividends received was $611,532.
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 $76,557 paid for the twelve months ended December
31, 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 did 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).
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / December 31, 2008 (Expressed in U.S. Dollars)
(continued)
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
December 31, 2008
|
|
Total
|
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
Investments
|
|
$ |
49,331,595 |
|
|
$ |
49,331,595 |
|
|
|
— |
|
|
|
— |
|
Note
3 — Investment Considerations
Because
the Trust concentrates its investments in publicly traded equities 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 services are 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
year ended December 31, 2008, included $19,373,857 for stock purchases and
$26,335,953 for stock sales, respectively.
At
December 31, 2008, the cost of investments, excluding short-term investments,
for U.S. federal income tax purposes was $75,051,368. At December 31, 2008, the
unrealized depreciation of $25,842,080 for U.S. federal income tax purposes
consisted of $1,287,194 of gross unrealized appreciation and $27,129,274 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.
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / December 31, 2008 (Expressed in U.S. Dollars)
(continued)
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 year ended December 31, 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 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 NAV 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 NAV 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 NAV 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.
In
December 2008, the Trust accepted 687,504 shares for payment at a price of $3.85
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 NAV at the close of regular trading on the Taiwan Stock Exchange on
December 17, 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 (the “SEC”) to register its common shares for
one or more potential offerings in the future. On December 18, 2008, the Trust
filed an amended Registration Statement on Form N-2 with the SEC to register its
common shares for one or more potential offerings in the future. The filing has
been declared effective by the SEC and 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
December 31, 2008, 13,062,568 shares were outstanding.
Report
of Independent Registered Public Accounting Firm
The
Shareholders and Board of Trustees of
Taiwan
Greater China Fund:
We have
audited the accompanying statement of assets and liabilities of the Taiwan
Greater China Fund (the “Fund”), including the schedule of investments, as of
December 31, 2008, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the years in the
two-year period then ended and financial highlights for each of the years in the
five-year period then ended. These financial statements and financial highlights
are the responsibility of the Fund’s management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2008, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the financial statements and financial highlights referred to above
present fairly, in all material respects, the financial position of the Fund as
of December 31, 2008, and the results of its operations for the year then ended,
the changes in its net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the years in the five-year
period then ended, in conformity with U.S. generally accepted accounting
principles.
Boston,
Massachusetts
February
25, 2009
[THIS
PAGE INTENTIONALLY LEFT BLANK]
TAIWAN
GREATER CHINA FUND
Additional
Information (unaudited)
The
Fund has obtained an agreement letter from Offshore Funds Centre of 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 was Executive Vice President of the
Bank of Hawaii from 2001 to 2003 and Chief Investment Officer of Aetna
International from 2000 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 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 stating that he was unaware of any
violations of such 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 Risk Metrics Group, formerly
Institutional Shareholder Services, Inc., 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 may
be found on the Trust’s website, www.taiwangreaterchinafund.com, and a more
detailed description of those policies is available on the website of the SEC,
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 is available on or through the Trust’s website and on the SEC’s
website.
Portfolio
Holdings
The Trust
provides a complete list of its portfolio holdings in its report to shareholders
four times each year, at each quarter end. For the second and fourth quarters,
the list of portfolio holdings appears in the Trust’s semi-annual and annual
reports to shareholders. For the first and third quarters, 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 is
available on the SEC’s website at www.sec.gov. Form N-Q may also be reviewed and
copied at the SEC’s Public Reference Room, 100 F. Street N.E., Room 1580,
Washington, DC, 20549. 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 www.taiwangreaterchinafund.com. Please call toll free 1-800-343-9567
for any further information.
Information Concerning Trustees
and Officers
|
|
Name
(Age) and
Address
|
|
Position(s)
Held
with the
Trust
|
|
Term
of Office and
Length
of Time
Served
|
|
Principal
Occupation(s)
During
the Past
Five
Years
|
|
Other
Directorships
Held
by
Director
|
Non-Interested
Trustees
|
|
|
|
|
|
|
|
|
Tsung-Ming
Chung (59)
4F,
No.1, Lane 21, Hsing-Hua Road
Kwei-Shan
Industrial Zone,
Taoyuan,
Taiwan, R.O.C.
|
|
Trustee
and Audit Committee Member
|
|
Trustee
since 2006 and until the 2009 Annual Meeting of Shareholders or the
special meeting in lieu thereof
|
|
Chairman
and Chief Executive Officer, Dynapak International Technology Corp, since
2002; Chairman, Systems and Chips, Inc.; Director, Arima Group
(technology)
|
|
Director,
Far Eastern International Bank; Director and Chairman of Audit Committee,
Taiwan Mobile Co.; Director and Audit Committee Chairman,
SMIC
|
Edward
B. Collins (66)
765
Market Street,
Suite
31A San Francisco,
California
94103 USA
|
|
Trustee
and Audit Committee Member
|
|
Trustee
since 2000 and until the 2009 Annual Meeting of Shareholders or the
special meeting in lieu thereof
|
|
Managing
Director, China Vest Group (venture capital investment), since prior to
2004
|
|
Director
Bookham Inc., since May 2008 Director, Medio Stream, Inc, since 2001;
Chairman, California Bank of Commerce, since 2006; Partner, McCutchen,
Doyle, Brown & Enersen (law firm), 1987–95
|
Frederick
C. Copeland, Jr. (67)
11
Deer Ridge Road
Avon,
Connecticut 06001
U.S.A.
|
|
Trustee,
Vice Chairman, and Audit Committe member
|
|
Trustee
since May 2004 and until the 2011 Annual Meeting of Shareholders or the
special meeting in lieu thereof; Vice Chairman of the Board since February
2006
|
|
Vice
Chairman, Director, Chairman of Executive Committee, Far East National
Bank since 2004; Principal, Deer Ridge Associates, LLC (financial
consulting), 2001-2006
|
|
Director,
Mercantile Commerce Bank Holding, since 2007; Director, Mercantile
Commerce Bank, since 2007; President, Chief Executive Officer and Chief
Operating Officer, Aetna International (insurance), from 1995 to 2001;
Executive Vice President, Aetna, Inc. (insurance), from 1997 to 2001;
Chairman, President and Chief Executive Officer, Fleet Bank, N.A.,
1993–1995; President and Chief Executive Officer, Citibank Canada Ltd.,
1987–1993; Taiwan Country Head, Citibank, 1983–1987
|
Pedro-Pablo
Kuczynski (70)
Chequehuanla
967
San
Isidro, Lima,
Peru
|
|
Trustee
and Chairman
|
|
Trustee
since 2007 and until the 2010 Annual Meeting of Shareholders or the
special meeting in lieu thereof; and Chairman since August
2007
|
|
Senior
Advisor and Partner, The Rohatyn Group (emerging markets manager), since
2007; Prime Minister of Peru, 2005–2006; Minister of Economy of Peru,
2001–2002; 2004–2005; Partner and CEO, Latin America Enterprise Fund
(private equity), 1995–2001
|
|
Chairman
and Director, Advanced Metallurgical Group (“AMG, N.V.”), since 2007;
Director, Ternium Inc., since 2007
|
David
N. Laux (81)
The
Hampshire, Apt. 701
1101
N. Elm St.
Greensboro,
NC, 27401 U.S.A.
|
|
Trustee
|
|
Trustee
since 1992 and until the 2010 Annual Meeting of Shareholders or the
special meeting in lieu thereof; and Chairman from July 2004 to August
2007
|
|
Director
International Foundation, 2001–2007; Chairman, Great Dads (non-profit),
2004–2006; President, US-Taiwan Business Forum, from 2000 to 2005;
Director, US-Taiwan Business Council, 2000-present
|
|
President,
US-ROC (Taiwan) Business Council, 1990–2000; Chairman and Managing
Director, American Institute in Taiwan, 1987–90; Director of Asian
Affairs, National Security Council, The White House,
1982–86
|
Robert
P. Parker (67)
101
California Street
Suite
2830 San Francisco,
California
94111 U.S.A.
|
|
Trustee
and Audit Committee Member
|
|
Trustee
since 1998 and until the 2011 Annual Meeting of Shareholders or the
special meeting in lieu thereof; and Chairman from February to July
2004
|
|
Chairman,
Parker Price Venture Capital, Inc. (formerly known as Allegro Capital,
Inc.), since prior to 2004
|
|
Director,
NexFlash Technologies, Inc., 2001-2005 Partner, McCutchen, Doyle, Brown
& Enersen (law firm), 1988–97
|
Non-Trustee
Officers
|
Steven
R. Champion (63)
111
Gillett Street
Hartford,
CT 06105
|
|
President,
Chief Executive Officer and Portfolio Manager
|
|
President,
Chief Executive Officer and Portfolio Manager, since February 2004;
President from May 1989 to June 1992
|
|
President,
Nanking Road Capital Management, LLC, since July 2007; President, Chief
Executive Officer and Portfolio Manager of the Fund from February 2004 to
October 2007; Executive Vice President, Bank of Hawaii, 2001–2003; Chief
Investment Officer, Aetna International, from prior to 2000 to
2001
|
|
None
|
Cheryl
Chang (44)
111
Gillett Street
Hartford,
CT 06105
|
|
Secretary,
Treasurer, Chief Financial Officer and Chief Compliance
Officer
|
|
Secretary,
Treasurer and Chief Financial Officer since June 2004; Chief Compliance
Officer since September 2004
|
|
Secretary,
Treasurer, Chief Financial Officer and Chief Compliance Officer, Nanking
Road Capital Managment LLC, since July 2007; Senior Manager, KPMG (Taipei
Office), from prior to 2000 to 2004; Assurances and Advisory Unit of
International Practice Group, KPMG (Taipei Office),
2000–2004
|
|
None
|
[THIS
PAGE INTENTIONALLY LEFT BLANK]
[THIS
PAGE INTENTIONALLY LEFT BLANK]
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, 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 916
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.
As of the
fiscal year ended December 31, 2008 (the “Reporting Period”), the registrant has
adopted a code of ethics applicable to its principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. There have not been any changes to, or
waivers from, any provision of the code of ethics during the Reporting Period. A
copy of this code of ethics is filed as an exhibit to this report.
ITEM 3.
AUDIT COMMITTEE FINANCIAL EXPERT.
The
registrant's Board of Trustees has determined that Tsung-Ming Chung possesses
the attributes identified in Item 3 of Form N-CSR to qualify as an “audit
committee financial expert” and has designated Mr. Chung as the registrant’s
audit committee financial expert. Mr. Chung is independent for purposes of
paragraph (a)(2) of Item 3 of Form N-CSR.
ITEM 4.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit
Fees. The aggregate fees billed for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for each of the
fiscal years ended December 31, 2008 and December 31, 2007 were $19,000 and
$65,310, respectively.
(b) Audit Related
Fees. For each of the fiscal years ended December 31, 2008 and
December 31, 2007, the aggregate fees billed for assurance and related services
rendered to the registrant by the principal accountant that are reasonably
related to the performance of the audit of the registrant's financial statements
and are not reported under paragraph (a) of this Item were $27,540 and $0,
respectively.
(c) Tax Fees. For each of
the fiscal years ended December 31, 2008 and December 31, 2007, the aggregate
fees billed for professional services rendered to the registrant by the
principal accountant for tax compliance, tax advice, and tax planning were
$3,600 and $30,263 respectively. The services for the fiscal year
ended December 31, 2007 and December 31, 2008 consisted of (i) review or
preparation of U.S. federal, state, local and excise tax returns; (ii) U.S.
federal, state and local tax planning, advice and assistance regarding
statutory, regulatory or administrative developments, and (iii) tax advice
regarding tax qualification.
(d) All Other Fees. For
each of the fiscal years ended December 31, 2008 and December 31, 2007, the
aggregate fees billed for products and services provided to the registrant by
the principal accountant, other than the services reported in paragraphs (a)
through (c) of this Item were $0 and $0, respectively.
(e) (1)
In accordance with the Audit Committee Charter, the audit committee shall
pre-approve the engagement of the auditor, including the fees to be paid to the
auditor, to provide any audit or non-audit services to the registrant and any
non-audit services to the registrant’s investment adviser or any entity
controlling, controlled by or under common control with the investment adviser
that provides on-going services to the registrant if the engagement relates
directly to the operations and financial reporting of the
registrant. The Chairman of the audit committee may pre-approve
certain services to be provided by the auditor to the registrant. All
such delegated pre-approvals shall be presented to the audit committee no later
than the next audit committee meeting.
(2) The percentage of services
described in each of paragraphs (b) through (d) of this Item 4 that were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X are as follows:
(b)
100%
(c)
100%
(d)
100%
(f) Not
Applicable.
(g) Aggregate fees billed to the registrant
for non-audit services for each of the fiscal years ended December 31, 2008 and December 31, 2007 were $0. The aggregate fees billed by
the auditor for non-audit services rendered to the registrant’s investment
adviser and any entity controlling, controlled by, or under common control with
the investment adviser that provides ongoing services to the registrant
were $0 for each of the fiscal years ended December 31, 2008 and December 31, 2007.
(h) There were no non-audit services rendered to the
registrant's investment adviser, or any entity controlling, controlled by,
or under common control with the adviser that provide on-going services to the
registrant.
ITEM 5.
AUDIT COMMITTEE OF LISTED REGISTRANTS.
The
registrant has a separately-designated standing audit committee, which was
established in accordance with Section 3(a)(58)(A) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”).
The
members of the registrant's audit committee are: Edward B. Collins (Chairman),
Robert P. Parker, Frederick C. Copeland, Jr. and Tsung-Ming Chung.
ITEM 6.
SCHEDULE OF INVESTMENTS.
A
Schedule of Investments as of the close of the Reporting Period is included as
part of the report to shareholders filed under Item 1 of this Form
N-CSR.
ITEM 7.
DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
The
registrant's policy with regard to voting shares held in its portfolio is to
vote in accordance with the recommendations of Risk Metrics Group, formerly
Institutional Shareholder Services Inc., unless the registrant's chief executive
officer recommends to the contrary, in which event the decision as to how to
vote shares will be made by the registrant's Board of Trustees.
ITEM 8.
PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(1) Portfolio Manager. Steven
R. Champion has been President, Chief Executive Officer and Portfolio Manager of
the registrant since February 2004. Mr. Champion has been President of
Nanking Road Capital Management LLC (“NRC”), the registrant’s investment adviser
(“Adviser”), since July
2007 and has retained his
positions as Chief Executive Officer and portfolio manager of the registrant
through NRC. He was
Executive Vice President of the Bank of Hawaii from 2001-2003 and Chief
Investment Officer of Aetna International from 2000-2001. Mr. Champion also
previously served as the portfolio manager of The Taiwan (R.O.C.) Fund, the
predecessor to the registrant, from 1987 to 1989, and President and portfolio
manager of the registrant 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.
(2) Other Accounts Managed by Portfolio
Manager. As of the fiscal year ended December 31, 2008, Mr.
Champion managed the registrant with approximately $49,719,691 million in assets
under management. As of the fiscal year ended December 31, 2008, Mr.
Champion did not manage any mutual funds, pooled investment vehicles or other
accounts.
While the
Portfolio Manager does not currently manage any other fund or account, actual or
potential conflicts of interest may arise when a portfolio manager has
management responsibilities with respect to more than one fund. The
Adviser has adopted policies and procedures that it believes are reasonably
designed to address potential conflicts of interest. As a result, the
Adviser does not believe that these potential conflicts of interest will affect
the Portfolio Manager’s professional judgment while managing the
registrant.
(3) Compensation. As of
October 31, 2007, the registrant entered into an investment advisory agreement
(the “Agreement”) with NRC, whereby the registrant’s management structure
changed from an internally managed entity to an externally managed
entity. Mr. Champion is
the principal owner of NRC and controls its affairs. In that
connection, he determines the compensation to be
paid to himself and other
NRC employees out of NRC’s
investment advisory revenues, net of other expenses. If profits are
available for distribution
to NRC’s owners after the
payment of salary, bonus and other operating expenses, Mr. Champion is the
principal beneficiary of those profits. In determining compensation and bonuses
to be paid to him and other NRC officers and employees, Mr. Champion
has structured NRC’s compensation program to attract and
retain key personnel as well as to provide incentives for top quality
performance. The factors that he expects to take into account in
making such decisions include competence, diligence, creativity and dedication
and his assessment of the level of importance of a
person’s performance as
an employee or consultant
to NRC’s success as an
enterprise. In assessing his own performance as portfolio manager,
Mr. Champion expects to base his assessment on a variety of factors, the most
important of which is the
registrant’s (and other clients’, if any) investment performance in
relation to various benchmarks. Mr. Champion anticipates that the
relationship between salary and bonus payments to himself and other officers and
employees of NRC, on the one hand, and the proportion of
NRC’s profits to which he
will be entitled as a result of his ownership and profit interest in NRC, on the
other hand, may vary from year to year, particularly if NRC acquires other
investment management or advisory clients and if the proportion of NRC owned by
Mr. Champion changes. In addition to a base salary, bonus and his
profit interest, Mr. Champion is eligible for health insurance and deferred
compensation benefits.
Prior to
October 31, 2007, Mr. Champion received a salary pursuant to an employment
agreement he entered into with the registrant. The salary was fixed each year
and may have been adjusted from year to year based on the performance of the
registrant and various other quantitative and qualitative factors, as determined
by the Compensation Committee of the Board of Trustees of the registrant. In
addition, Mr. Champion received a bonus for the year ended December 31, 2007.
Such bonus was calculated based on the performance of the registrant and various
other quantitative and qualitative factors, as determined by the Compensation
Committee of the Board of Trustees of the registrant.
(4) As of
the fiscal year ended December 31, 2008, Mr. Champion beneficially owned shares
in the registrant with a market value between $50,001-$100,000.
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
29
|
|
|
|
|
March
1
to
March
31
|
|
|
|
|
April
1
to
April
30
|
|
|
|
|
May
1
to
May
31
|
|
|
|
|
June
1
to
June
30
|
(1) 723,688
|
$6.66
|
(1) 723,688
|
(2) 0
|
July
1
to
July
31
|
|
|
|
|
August
1
to
August
31
|
|
|
|
|
September
1
to
September
30
|
|
|
|
|
October
1
to
October
31
|
|
|
|
|
November
1
to
November
30
|
|
|
|
|
December
1
to
December
31
|
(1) 687,504
|
$3.85
|
(1) 687,504
|
(2) 0
|
Total
|
1,411,192
|
$10.51
|
1,411,192
|
125,032
|
(1)
|
Shares
repurchased under the Fund’s semi-annual repurchase
offer.
|
(2)
|
In
addition to the semi-annual repurchase offer, the registrant may
repurchase up to 2,179,932 shares under a separate repurchase program (the
“Repurchase Program”) which commenced on November 1, 2004. The Repurchase
Program does not have an expiration date. No shares were
repurchased under the Repurchase Program during the fiscal year ended
December 31, 2008. As of the fiscal year ended December 31, 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 Trustees.
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 (the “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 required by
Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) or 15d-15(b) under the
Exchange Act.
(b) There
were no changes in the registrant's internal control 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 have 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 is filed as Exhibit 12(a)(1) to
this Form N-CSR.
(a)(2)
Certifications Pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes Oxley Act of 2002, as amended, are filed as Exhibit 12(a)(2) to
this Form N-CSR.
(a)(3)
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, Section 906 of the
Sarbanes Oxley Act of 2002, Rule 13a-14(b) or Rule 15d-14(b) under the Exchange
Act, and Section 1350 of Chapter 63 of Title 18 of the United States Code are
furnished as Exhibit 12(b) to this Form N-CSR.
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 (Principal Executive Officer)
Date: March
9, 2009
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 (Principal Executive Officer)
Date: March
9, 2009
By:
/s/
Cheryl
Chang
Name:
Cheryl Chang
Title:
Chief Financial Officer (Principal Financial Officer and Principal Accounting
Officer)
Date: March
9, 2009