tfc06302007ncsr.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
N-CSR
CERTIFIED
SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT
INVESTMENT COMPANIES
Investment
Company Act file number: 811-05617
Taiwan
Greater China Fund
(Exact
name of registrant as specified in charter)
Bank
Tower, Room 1001
205
Dun
Hua North Road
Taipei
105, Taiwan
Republic
of China
(Address
of principal executive offices) (Zip
code)
Brown
Brothers Harriman
40
Water
Street, P. O. 962047,
Boston,
MA 02196-2047
(Name
and
address of agent for service)
Registrant’s
telephone number, including area code:
1-617-742-1818
Date
of
fiscal year end: December 31
Date
of
reporting period: June 30, 2007
TAIWAN
GREATER CHINA FUND
|
www.taiwangreaterchinafund.com
|
Taiwan
Office:
|
Room
1001, 205 DunHua North Road
Taipei,
Taiwan, Republic of China
Tel:
886-2-2715-2988
Fax:
886-2-2715-3166
|
Officers
and Trustees:
David
N. Laux, Chairman and Trustee
Frederick
C. Copeland Jr., Vice Chairman and Trustee
Steven
R. Champion, President, Chief Executive
Officer
and Portfolio Manager
Tsung-Ming
Chung, Trustee and Audit Committee
Member
Edward
B. Collins, Trustee and Audit Committee
Member
Pedro-Pablo
Kuczynski, Trustee
Robert
P. Parker, Trustee and Audit Committee
Member
Cheryl
Chang, Chief Financial Officer,
Treasurer
and Secretary
|
Administrator
& Custodian:
Brown
Brothers Harriman & Co.
40
Water Street
Boston,
MA 02109
U.S.A.
Tel:
(617) 742-1818
|
Transfer
Agent,
Paying
and Plan Agent:
American
Stock Transfer & Trust Company
59
Maiden Lane – Plaza Level
New
York, NY 10038
U.S.A.
Telephone:
1-866-624-4110
|
Investor
Relations & Communications:
The
Altman Group, Inc.
60
East 42nd Street, Suite 405
New
York, NY 10165
Telephone:
(212) 681-9600
|
U.S.
Legal Counsel:
Clifford
Chance U.S. LLP
31
West 52nd Street
New
York, NY 10019-6131
U.S.A.
Tel:
(212) 878-8000
|
For
information on the Fund, including the NAV,
please
call toll free 1-800-343-9567.
|
Dear
Stockholders
The
strong rally in Taiwan’s stock market, which continued through the end of the
second quarter of 2007, sent the Taiwan Greater China Fund’s (TFC or the Fund)
net asset value per share (NAV) to levels last seen in the fall of
2000. TFC’s NAV closed the second quarter at $7.93 after peaking
during the quarter at $8.00 on June 25. The Fund’s closing NAV
reflected total US$ returns, after all expenses and taxes, of 15.1% for the
second quarter, 12.2% for the first half, and 33.1% for the preceding twelve
months.
The
Fund’s stock price on the New York Stock Exchange, however, suffered from the
increase in discounts affecting most closed-end country funds due to the
increased sensitivity to risk displayed by investors as credit problems rolled
through the markets and fears of asset price bubbles made investors more
cautious in most emerging markets and China in particular. TFC’s
stock price increased 10.3% for the second quarter, 5.1% for the first half
and
25.0% for the preceding twelve months.
The
Taiwan China Strategy Index* produced US$ total returns of 15.4% for the second
quarter, 12.3% for the first half and 32.6% for the preceding twelve
months. The MSCI Taiwan Index* yielded US$ total returns of 14.0%,
10.4% and 28.1% for the same time periods, respectively. The Taiwan
Stock Exchange Index (TAIEX) reflected US$ total returns of 14.2%, 13.4% and
36.0% for the same time periods, respectively. The Taiwan China
Strategy Index and the MSCI Taiwan Index are both US$ total return indices,
with
dividends reinvested and after the deduction of applicable withholding taxes,
while the TAIEX is computed in US$ on a total return basis, including the
reinvestment of dividends, but without the deduction of any withholding
taxes.
The
Fund’s discount to NAV averaged 9.6% during the second quarter, up from 5.8%
during the same period in 2006. For the first half of 2007, TFC’s
discount averaged 8.4%, and the corresponding figure for the preceding twelve
months was also 8.4%. During the second quarter, minimum closing
discount was 6.1% on April 20 and the maximum closing discount was 13.4% on
June
7.
The
Fund’s mean and median daily trading volumes for the first half were 36,158
shares and 24,250 shares, respectively, compared to 38,182 shares and 27,900
shares, respectively, for the same period in 2006.
The
Fund’s NAV performance is highly correlated with the performance of both the
MSCI Taiwan Index and the TAIEX with R2s** of 0.96
and
0.91, respectively, since the inception of the China-focused
strategy. The Fund continues to generate attractive alphas, defined
as the excess return to shareholders that cannot be explained by the Fund’s risk
level, of 0.04% per week against both indexes.
Performance
Attribution
In
May of
2006, the Fund contracted 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 29, 2007, the NT$ gross return for the MSCI Taiwan Index
in the Aegis model was 33.78%, while the portfolio-only return for the Fund
in
the model was 39.56%. This implies that 5.78 percentage points of the
return can be attributed to the active management of the Fund. Sector
selection contributed approximately 44% of that active return of the Fund during
the 12 month period. Looking at attribution over a longer period of
time, from the end of February 2004 when the Fund implemented its current
strategy, sector selection has contributed approximately 45% of active
returns.
Style
factors also were major contributors to active return during the last 12 months,
providing approximately 36% of active return. The Aegis model
considers 10 style factors, such as momentum, size, growth, yield, value,
etc. The fact that the Fund’s portfolio continues to be tilted
toward smaller-cap stocks provided the major contribution among the style
factors, with momentum being the second largest factor. Since the
inception of the Fund, style factors have been less of a feature of active
return, contributing only about 25%, with momentum continuing to be the largest
factor followed by size. Over the last 12 months, asset
selection contributed about 20% of total active returns. However,
since the inception of the Fund, asset selection has contributed about 30%
of
total active returns in excess of the MSCI Taiwan Index.
Portfolio
Valuation Measures
Corporate
valuations in Taiwan remain attractive relative to China, other emerging markets
and NASDAQ. At the end of the second quarter, the Fund’s heavily
tech-weighted portfolio was composed of companies with a weighted average
price-earnings ratio of 22.6, a weighted average price-book ratio of 3.9, a
weighted average cash dividend yield of 3.2% and a weighted average return
on
equity of 19.6%.
Taiwan
Political and Economic Developments
During
the second quarter, Taiwan set the dates for its upcoming legislative and
presidential elections. The legislative elections will be held on
January 12, 2008, while the presidential election will be on March 22,
2008. Taiwan’s ruling party, the Democratic Progressive Party (DPP),
and its main opposition party, the Kuomintang (KMT), have both chosen their
presidential candidates. The current President, Chen Shui-bian,
cannot run for a third term. Frank Hsieh, former Premier under Chen
and also former mayor of Kaohsiung, Taiwan’s second largest city, is the DPP
candidate, while Ma Ying-Jeou, former mayor of Taipei, is the KMT
candidate. Ma has chosen Vincent Siew as his running
mate. Siew is a technocrat with considerable experience in economic
matters. He also is viewed to be an asset to the ticket because he is
from the southern part of Taiwan, traditionally a DPP
stronghold. Hsieh has yet to choose a running mate.
Cross-strait
relations will be a key theme of the election campaign, as well as Taiwan’s
economic growth, which has lagged much of the region. The KMT has
been a strong proponent of closer ties with the Mainland, including loosening
investment restrictions for Taiwan companies investing in China and implementing
direct air and sea links. Ma views the closer ties as a critical
component in boosting Taiwan’s GDP. From the DPP’s point of view,
closer relations with China come at a price of loosing Taiwan’s unique identity
and increasing Taiwan’s economic vulnerability. Hsieh, however, is
trying to walk a more moderate line and has stated that he would be in favor
of
direct links and increased communication with China to lessen cross-strait
tensions. Ma is currently leading Hsieh in the most recent poll
conducted by the China Times in early July.
Export
growth and weakness of the NT Dollar were the two major economic stories over
the last quarter. Taiwan exports in June grew by 11%, nearly double
the consensus forecast rate and the largest gain in five
months. Year-over-year exports to China and HK during June grew
14.6%, while exports to Europe grew 17.8%. For the entire
second quarter, exports gained a total of 6.6% YOY. Taiwan’s interest
rates, the lowest in Asia after Japan, played a major role in the NT dollar’s
weakness during the second quarter, as investors moved money offshore to seek
higher returns. In an effort to stem the flow, the central bank
raised interest rates for the twelfth straight quarter by a more than expected
0.25%, and imposed higher reserve rates on commercial lenders’ foreign currency
deposits. By the end of the quarter, the Taiwan dollar had
strengthened, YTD having depreciated against the US$ by only 0.8%. By
comparison, the Chinese RMB appreciated by 2.5% in the same period. China is
Taiwan’s largest trading partner.
We
believe the Fund offers investors a smart way to invest in China’s dynamic
economy with the superior risk controls and lower volatility available through
Taiwan related companies.
Yours
truly,
/s/Steven
R. Champion
President,
CEO and Portfolio Manager
July
18,
2007
* 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, 2007
(Unaudited)
|
|
Industry
Diversification
|
|
|
|
|
|
|
Percent
of
|
|
Industry
|
|
|
|
U.S.
$ Value
|
|
Net
Assets
|
|
Semiconductors
|
|
|
|
25,897,020
|
|
21.43
|
%
|
Computer
Systems & Hardware
|
|
|
|
25,083,217
|
|
20.76
|
|
Electronic
Components
|
|
|
|
16,922,565
|
|
14.00
|
|
Plastics
|
|
|
|
13,595,865
|
|
11.25
|
|
Flat-Panel
Displays
|
|
|
|
10,496,752
|
|
8.69
|
|
Computer
Peripherals/ODM
|
|
|
|
7,158,963
|
|
5.92
|
|
Steel
|
|
|
|
6,040,264
|
|
5.00
|
|
Other
|
|
|
|
3,885,321
|
|
3.22
|
|
Cement
|
|
|
|
3,761,201
|
|
3.11
|
|
Food
|
|
|
|
3,716,007
|
|
3.08
|
|
Rubber
|
|
|
|
1,427,341
|
|
1.18
|
|
Transportation
|
|
|
|
1,410,000
|
|
1.17
|
|
Electrical
& Machinery
|
|
|
|
1,308,071
|
|
1.08
|
|
Textiles
|
|
|
|
1,170,829
|
|
0.97
|
|
Communications
Equipment
|
|
|
|
1,159,237
|
|
0.96
|
|
Electronics/Other
|
|
|
|
972,119
|
|
0.80
|
|
Glass,
Paper & Pulp
|
|
|
|
919,965
|
|
0.76
|
|
Chemicals
|
|
|
|
586,150
|
|
0.48
|
|
Retailing
|
|
|
|
255,378
|
|
0.21
|
|
Short
Term Securities
|
|
|
|
951,466
|
|
0.79
|
|
Liabilities,
Net of Other Assets
|
|
|
|
(5,874,635)
|
|
(4.86)
|
|
Net
Assets
|
|
|
|
$ 120,843,096
|
|
100.00
|
|
TAIWAN
GREATER CHINA FUND
|
Schedule
of Investments (Unaudited) / June 30,
2007
|
COMMON
STOCK —
104.07%
|
%
of
|
|
U.S.
Dollar
|
Cement
— 3.11%
|
Net
Assets
|
|
Value
|
|
1,139,960
|
shs.
|
Asia
Cement Corp.
|
1.24
|
|
$1,504,542
|
|
1,943,185
|
|
Taiwan Cement
Corp.
|
1.87
|
|
2,256,659
|
|
3,761,201
|
Chemicals
— 0.48%
|
|
|
369,100
|
|
Eternal
Chemical Co., Ltd.
|
0.48
|
|
586,150
|
|
|
Communications
Equipment — 0.96%
|
|
|
227,774
|
|
D-Link
Corp.
|
0.45
|
|
541,534
|
|
105,000
|
|
Gemetek
Technology Corp.
|
0.22
|
|
270,441
|
|
188,000
|
|
Zyxel
Communications Corp.
|
0.29
|
|
347,262
|
|
1,159,237
|
Computer
Peripherals/ODM — 5.92%
|
|
|
1,116,337
|
*
|
BenQ
Corp.
|
0.35
|
|
423,635
|
|
384,000
|
*
|
Foxconn
International Holdings, Ltd.
|
0.91
|
|
1,097,964
|
|
79,680
|
|
High
Tech Computer Corp.
|
1.18
|
|
1,425,654
|
|
2,104,119
|
|
Lite-on
Technology Corp.
|
2.24
|
|
2,716,130
|
|
893,411
|
|
Mitac
International Corp.
|
0.94
|
|
1,135,571
|
|
186,000
|
|
Teco
Image Systems Co., Ltd.
|
0.30
|
|
360,009
|
|
7,158,963
|
Computer
Systems & Hardware —
20.76%
|
|
|
455,325
|
|
Acer
Inc.
|
0.77
|
|
929,872
|
|
97,528
|
|
Advantech
Co., Ltd. (a)
|
0.26
|
|
312,137
|
|
1,928,060
|
|
Asustek
Computer Inc.
|
4.40
|
|
5,312,707
|
|
382,496
|
|
Compal
Electronics Inc.
|
0.34
|
|
413,887
|
|
1,720,291
|
|
Hon
Hai Precision Industry Co., Ltd.
|
12.32
|
|
14,891,797
|
|
479,000
|
|
Inventec
Co., Ltd.
|
0.30
|
|
363,548
|
|
796,013
|
|
Quanta
Computer Inc.
|
1.03
|
|
1,242,273
|
|
864,000
|
|
Wistron
Corp.
|
1.34
|
|
1,616,996
|
|
25,083,217
|
Electrical
& Machinery — 1.08%
|
|
|
575,000
|
|
Teco
Electric & Machinery Co., Ltd.
|
0.27
|
|
327,745
|
|
1,657,837
|
*
|
Walsin
Lihwa Corp.
|
0.81
|
|
980,326
|
|
1,308,071
|
Electronic
Components — 14.00%
|
|
147,000
|
|
A-DATA
Technology Co., Ltd.
|
0.48
|
|
575,768
|
|
369,641
|
|
Catcher
Technology Co., Ltd.
|
2.87
|
|
3,464,592
|
|
1,322,186
|
*
|
Delta
Electronics Inc.
|
4.32
|
|
5,219,023
|
|
96,000
|
|
Epistar
Corp.
|
0.33
|
|
393,569
|
|
303,690
|
|
Foxconn
Technology Co., Ltd.
|
3.02
|
|
3,656,406
|
|
94,000
|
|
Kinsus
Interconnect Technology Corp.
|
0.31
|
|
372,476
|
|
87,079
|
|
Merry
Electronics Co., Ltd.
|
0.26
|
|
318,509
|
|
19,178
|
|
Motech
Industry Co., Ltd.
|
0.21
|
|
251,361
|
|
110,000
|
*
|
Shin
Zu Shing Co., Ltd.
|
0.70
|
|
844,929
|
|
70,000
|
|
Tripod
Technology Corp.
|
0.29
|
|
357,388
|
|
410,000
|
|
Unimicron
Technology Corp.
|
0.52
|
|
629,856
|
|
1,747,000
|
*
|
Yageo
Corp.
|
0.69
|
|
838,688
|
|
16,922,565
|
Electronics/Other
— 0.80%
|
|
|
643,000
|
|
Synnex
Technology International Corp.
|
0.80
|
|
972,119
|
|
|
Flat-Panel
Displays — 8.69%
|
|
|
2,737,148
|
|
AU
Optronics Corp.
|
3.87
|
|
4,672,111
|
|
930,177
|
|
Chi
Mei Optoelectronics Corp.
|
0.92
|
|
1,105,750
|
|
4,676,951
|
*
|
Chunghwa
Picture Tubes, Ltd. (a)
|
1.04
|
|
1,261,633
|
|
834,000
|
*
|
Innolux
Display Corp.
|
2.86
|
|
3,457,258
|
|
10,496,752
|
Food
— 3.08%
|
|
|
1,408,000
|
|
Tingyi
(Cayman Islands) Holdings Corp. (a)
|
1.36
|
|
1,639,168
|
|
2,071,000
|
|
Uni-President
Enterprise Corp.
|
1.72
|
|
2,076,839
|
|
3,716,007
|
Glass,
Paper & Pulp — 0.76%
|
|
|
645,154
|
|
Taiwan
Glass Ind. Corp.
|
0.51
|
|
619,442
|
|
687,067
|
|
Yuen
Foong Yu Paper Manufacturing Co., Ltd.
|
0.25
|
|
300,523
|
|
919,965
|
Plastics
— 11.25%
|
|
|
1,457,299
|
|
Formosa
Chemicals & Fiber Corp.
|
2.79
|
|
3,367,013
|
|
1,176,983
|
|
Formosa
Plastics Corp.
|
2.47
|
|
2,992,010
|
|
3,279,319
|
|
Nan
Ya Plastics Corp.
|
5.99
|
|
7,236,842
|
|
13,595,865
|
Retailing
— 0.21%
|
|
|
89,512
|
|
President
Chain Store Corp.
|
0.21
|
|
255,378
|
|
|
Rubber
— 1.18%
|
|
|
1,114,940
|
|
Cheng
Shin Rubber Ind. Co., Ltd.
|
1.18
|
|
1,427,341
|
|
|
Semiconductors
—
21.43%
|
|
|
2,228,304
|
*
|
Advanced
Semiconductor Engineering Inc.
|
2.52
|
|
3,039,445
|
|
507,000
|
*
|
Inotera
Memories Inc.
|
0.53
|
|
642,105
|
|
501,400
|
|
MediaTek
Inc.
|
6.48
|
|
7,824,942
|
|
128,743
|
|
Novatek
Microelectronics Corp.
|
0.56
|
|
674,961
|
|
436,318
|
|
Powerchip
Semiconductor Corp.
|
0.22
|
|
265,987
|
|
65,000
|
|
Powertech
Technology Inc.
|
0.22
|
|
271,432
|
|
1,188,000
|
*
|
ProMOS
Technologies Inc.
|
0.41
|
|
499,715
|
|
70,500
|
|
Realtek
Semiconductor Corp.
|
0.29
|
|
350,271
|
|
541,332
|
|
Siliconware
Precision Industries Co., Ltd.
|
0.95
|
|
1,151,718
|
|
4,177,526
|
|
Taiwan
Semiconductor Manufacturing Co., Ltd.
|
7.47
|
|
9,028,015
|
|
3,550,861
|
|
United
Microelectronics Corp.
|
1.78
|
|
2,148,429
|
|
25,897,020
|
Steel
— 5.00%
|
|
|
4,954,149
|
|
China
Steel Corp.
|
5.00
|
|
6,040,264
|
|
|
Textiles
— 0.97%
|
|
1,141,515
|
|
Far
Eastern Textile Ltd.
|
0.97
|
|
1,170,829
|
|
Transportation
— 1.17%
|
|
|
359,000
|
|
U-Ming
Marine Transport Corp.
|
0.58
|
|
702,516
|
|
910,227
|
|
Yang
Ming Marine Transport Corp.
|
0.59
|
|
707,484
|
|
1,410,000
|
Other
— 3.22%
|
|
|
71,000
|
|
Giant
Manufacturing Co., Ltd.
|
0.11
|
|
130,498
|
|
101,275
|
|
Johnson
Health Tech Co., Ltd.
|
0.52
|
|
632,824
|
|
596,000
|
|
Merida
Industry Co., Ltd.
|
0.83
|
|
999,162
|
|
1,108,345
|
|
Pou
Chen Corp.
|
1.03
|
|
1,248,292
|
|
193,000
|
|
Yue
Yuen Industrial Holdings, Ltd.
|
0.50
|
|
598,754
|
|
156,000
|
|
Yung
Chi Paint & Varnish Manufacturing Co., Ltd.
|
0.23
|
|
275,791
|
|
3,885,321
|
|
|
TOTAL
COMMON STOCK (COST $88,971,486)
|
125,766,265
|
|
|
SHORT-TERM
SECURITIES —
0.79%†
|
Time
Deposit —
0.11%
|
|
Bank
of America—London, 4.74%, Due 07/02/07
|
0.11
|
|
132,966
|
|
|
Mutual
Fund — 0.68%
|
|
AIM
STIT-Liquid Assets Portfolio, 5.1786%‡
|
0.68
|
|
818,500
|
|
|
TOTAL
SHORT-TERM SECURITIES (COST $951,466)
|
951,466
|
|
|
TOTAL
INVESTMENTS IN SECURITIES AT MARKET VALUE
|
104.86
|
|
126,717,731
|
(COST
$89,922,952)
|
|
|
|
|
LIABILITIES
(NET OF OTHER ASSETS)
|
(4.86)
|
|
(5,874,635)
|
|
|
|
NET
ASSETS
|
100.00
|
|
$120,843,096
|
|
|
|
|
|
* Non-income
producing: These stocks did not pay a cash dividend during the past
year.
|
(a) All
or a portion of the security is out on loan.
|
† Inclusive
of all Short-term holdings, including collateral received from securities
lending
|
activites. Not
including such collateral, the percentage of portfolio holdings would
be
0.11%.
|
‡ Represents
investment of collateral received from securities lending
transactions.
|
See
accompanying notes to financial statements and independent accountants’ review
report.
TAIWAN
GREATER CHINA FUND
|
Statement
of Assets and Liabilities
|
June
30, 2007 (Unaudited) (Expressed in U.S. Dollars)
|
|
|
Assets
|
|
Investments
in securities at fair value (Market value of secuirties on loan—$751,068)
(Notes
2B, 2C, 3 and 6):
|
|
Common
Stock (cost —
$88,971,486)
|
|
$ 125,766,265
|
|
Short-term
securities (cost —
$132,966)
|
|
132,966
|
|
Investment
of cash collateral from securities loaned (cost -
$818,500)
|
|
818,500
|
|
|
Total
investment in securities at fair value (cost —
$89,922,952)
|
|
126,717,731
|
Cash
|
|
45
|
Foreign
cash (cost —
$1,194,080)
|
|
1,194,080
|
Receivable
for dividends
|
|
494,058
|
Office
equipment (Note 2D)
|
|
15,199
|
Prepaid
expenses and other assets
|
|
126,570
|
|
Total
assets
|
|
128,547,683
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Payable
for fund shares repurchased
|
|
6,222,511
|
Payable
for cash collateral for securities loaned
|
|
818,500
|
Accrued
employee salaries and bonus
|
|
232,256
|
Professional
fees payable
|
|
140,215
|
Shareholder
communication fees payable
|
|
80,013
|
Administration
fee payable (Note 4)
|
|
66,488
|
Due
to custodian
|
|
64,547
|
Custodian
fee payable (Note 5)
|
|
30,745
|
Trustee
fees and expense payable
|
|
30,408
|
Other
accrued expenses
|
|
18,904
|
|
Total
liabilities
|
|
7,704,587
|
|
|
|
Net
assets
|
|
$ 120,843,096
|
|
|
|
|
|
|
Components
of net assets
|
|
|
|
|
|
Par
value of shares of beneficial interest (Note 7)
|
|
$ 152,355
|
Additional
paid-in capital (Note 7)
|
|
180,436,256
|
Accumulated
net investment income
|
|
47,181,143
|
Accumulated
net realized loss on investments and foreign currency
transactions
|
|
(104,174,182)
|
Unrealized
net appreciation on investments (Note 6)
|
|
36,794,779
|
Cumulative
translation adjustment (Note 2F)
|
|
(39,547,255)
|
|
|
|
Net
assets
|
|
$ 120,843,096
|
|
|
|
|
|
|
Net
asset value per share (15,235,536 shares issued and outstanding,
par value
$0.01)
|
$7.93
|
See
accompanying notes to financial statements and independent accountants’ review
report.
TAIWAN
GREATER CHINA FUND
|
Statement
of Operations
|
For
the Six Months Ended June 30, 2007 (Unaudited) (Expressed in U.S.
Dollars)
|
|
|
Investment
income (Notes 2B, 2C)
|
|
|
Dividends
|
$656,940
|
|
Interest
|
4,184
|
|
|
661,124
|
|
|
|
Republic
of China taxes (Note 2H)
|
(123,215)
|
|
|
|
|
|
537,909
|
|
|
|
Expenses
|
|
|
Portfolio
management expenses:
|
|
|
|
Personnel
expenses
|
556,662
|
|
|
Research
expenses
|
94,166
|
|
|
Rental
expenses
|
29,373
|
|
|
Travel
expenses
|
9,955
|
|
|
Other
expenses
|
11,888
|
|
|
|
702,044
|
|
|
|
|
|
Shareholder
communication expenses
|
177,056
|
|
Legal
fees and expenses
|
123,376
|
|
Trustee
fees and expenses
|
110,200
|
|
Custodian
fee (Note 5)
|
86,094
|
|
Audit
and tax fee
|
63,049
|
|
Administrative
fee (Note 4)
|
58,728
|
|
Insurance
expenses
|
39,639
|
|
Other
expenses
|
59,642
|
|
|
|
|
|
1,419,828
|
|
Net
investment loss
|
(881,919)
|
|
|
|
Net
realized and unrealized gain (loss) on investments and foreign currencies
(Notes 2E and 6)
|
|
Net
realized gain (loss) on:
|
|
|
|
investments
(excluding short-term securities)
|
5,504,704
|
|
|
foreign
currency transactions
|
(10,909)
|
|
|
net
realized gain on investments and foreign currency
transactions
|
5,493,795
|
|
|
|
|
Net
changes in unrealized appreciation / depreciation on:
|
|
|
|
investments
|
9,841,048
|
|
|
translation
of assets and liabilities in foreign currencies
|
(778,582)
|
|
|
|
|
|
Net
realized and unrealized gain from investments and foreign
currencies
|
14,556,261
|
|
|
|
|
|
Net
increase in net assets resulting from operations
|
$13,674,342
|
See
accompanying notes to financial statements and independent accountants’ review
report.
TAIWAN
GREATER CHINA FUND
|
Statements
of Changes in Net Assets
|
For
the Six Months Ended June 30, 2007, and the Year Ended December 31,
2006
(Expressed in U.S. Dollars)
|
|
|
|
Six
Months
|
|
Year
Ended
|
|
Ended
June 30,
|
|
December
31,
|
|
2007
(Unaudited)
|
|
2006
|
Net
increase/decrease in net assets resulting from
operations
|
|
|
|
|
Net
investment income (loss)
|
$ (881,919)
|
|
$ 232,599
|
|
Net
realized gain on investments and foreign currency
|
|
|
|
|
|
transactions
|
5,493,795
|
|
5,454,909
|
|
Unrealized
appreciation on investments
|
9,841,048
|
|
14,977,468
|
|
Unrealized
depreciation on translation of
|
|
|
|
|
|
assets
and liabilities in foreign currencies
|
(778,582)
|
|
(607,703)
|
|
|
|
|
|
|
|
Net
increase in net assets resulting from operations
|
13,674,342
|
|
20,057,273
|
|
|
|
|
Capital
share transactions:
|
|
|
|
|
|
Cost
of semi-annual repurchase offer (Note 7B)
|
(6,222,511)
|
|
(11,029,814)
|
|
|
|
|
|
|
|
Net
assets, beginning of period
|
113,391,265
|
|
104,363,806
|
|
|
|
|
|
|
|
Net
assets, end of period
|
$ 120,843,096
|
|
$
113,391,265
|
|
See
accompanying notes to financial statements and independent accountants’ review
report.
TAIWAN
GREATER CHINA FUND
|
Financial
Highlights
|
(Expressed
in U.S. Dollars)
|
|
|
Six
Months
|
|
Ended
|
|
|
June
30, 2007
|
Years
Ended December 31,
|
|
(Unaudited)
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share operating performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of period
|
7.07
|
|
5.87
|
|
5.37
|
|
5.13
|
|
4.37
|
|
5.40
|
|
Net
investment income (loss)
|
(0.06)
|
(b)
|
0.01
|
|
0.05
|
|
(0.01)
|
|
(0.02)
|
|
(0.06)
|
|
Net
realized and unrealized gain / loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on
investments (a)
|
0.96
|
(b)
|
1.21
|
|
0.65
|
|
(0.24)
|
|
0.73
|
|
(1.02)
|
|
Net
realized and unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
appreciation
/ depreciation on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation
of foreign currencies (a)
|
(0.05)
|
(b)
|
(0.03)
|
|
(0.25)
|
|
0.26
|
|
0.11
|
|
0.05
|
|
|
|
Total
from investment operations
|
0.85
|
|
1.19
|
|
0.45
|
|
0.01
|
|
0.82
|
|
(1.03)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
to Shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income*
|
—
|
|
—
|
|
—
|
|
(0.01)
|
|
(0.06)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Stock Transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Tender Offer/Repurchase
|
0.01
|
(b)
|
0.01
|
|
0.05
|
|
0.24
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, end of period
|
7.93
|
|
7.07
|
|
5.87
|
|
5.37
|
|
5.13
|
|
4.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share market price, end of period
|
6.95
|
|
6.61
|
|
5.30
|
|
4.90
|
|
4.75
|
|
4.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investment return (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
Based
on Trust's market price
|
5.14
|
|
24.72
|
|
8.16
|
|
3.42
|
|
18.79
|
|
(14.74)
|
|
Based
on Trust's net asset value
|
12.16
|
|
20.44
|
|
9.31
|
|
4.94
|
|
18.75
|
|
(19.07)
|
|
U.S.
$ return of Taiwan Stock Exchange
Index**
|
13.40
|
|
20.35
|
|
3.03
|
|
11.69
|
|
35.32
|
|
(19.03)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
and supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (in thousands)
|
120,843
|
|
113,391
|
|
104,364
|
|
116,467
|
|
167,801
|
|
142,936
|
|
Ratio
of expenses to average net assets (%)
|
1.25†
|
|
2.55
|
|
2.12
|
|
2.79
|
|
2.57
|
|
2.19
|
|
Ratio
of net investment income (loss) to
average
net assets (%)
|
(0.78)†
|
|
0.22
|
|
0.99
|
|
(0.27)
|
|
(0.44)
|
|
(1.23)
|
|
Portfolio
turnover ratio (%)
|
15
|
|
24
|
|
16
|
|
137
|
|
78
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
|
|
†
|
Not
Annualized
|
|
|
See
accompanying notes to financial statements and independent accountants’ review
report.
Taiwan
Greater China Fund
Notes
to
Financial Statements / June 30, 2007 (Expressed in U.S. Dollars)
(Unaudited)
Note
1 — Organization of the Fund
The
Taiwan Greater China Fund (the “Fund” or the “Trust”, formerly known as The
R.O.C. Taiwan Fund) is a Massachusetts business trust formed in July 1988 and
registered with the U.S. Securities and Exchange Commission as a diversified,
closed-end management investment company under the Investment Company Act of
1940. The Trust changed its name from The R.O.C. Taiwan Fund to the Taiwan
Greater China Fund on December 29, 2003. The change took effect on the New
York
Stock Exchange on January 2, 2004.
The
Trust
was formed in connection with the reorganization (the “Reorganization”) of The
Taiwan (R.O.C.) Fund. The Taiwan (R.O.C.) Fund, which commenced operations
in
October 1983, was established under the laws of the Republic of China as an
open-end contractual investment fund pursuant to an investment contract between
International Investment Trust Company Limited and the Central Trust of China,
as custodian. Pursuant to the Reorganization, which was completed in May 1989,
the Trust acquired the entire beneficial interest in the assets constituting
The
Taiwan (R.O.C.) Fund. On February 23, 2004, the investment contract was
terminated and substantially all of the assets held in The Taiwan (R.O.C.)
Fund
were transferred to the direct account of the Trust. The Trust thereupon
converted to internal management and now directly invests in Taiwan as a Foreign
Institutional Investor (“FINI”). The Taiwan (R.O.C.) Fund was subsequently
liquidated.
As
required by the Trust’s Declaration of Trust, if the Trust’s shares trade on the
market at an average discount to net asset value per share (“NAV”) of more than
10% in any consecutive 12-week period after the most recent vote by the Trust’s
shareholders, the Trust must submit to the shareholders for a vote at its next
annual meeting a binding resolution that the Trust be converted from a
closed-end to an open-end investment company. The affirmative vote of
a majority of the Trust’s outstanding shares is required to approve such a
conversion. During the six months ended June 30, 2007, the Trust’s
shares did not trade at an average discount to NAV in any consecutive 12-week
period of more than 10%.
At
the
Annual Meeting of Shareholders held June 21, 2005, the shareholders approved
the
adoption by the Trust of an interval fund structure. The Trust now makes
semi-annual repurchase offers with respect to its shares (see Note
7B).
On
October 31, 2006, the Board of Trustees voted to abrogate the Fund’s policy
requiring the Republic of China Securities and Futures Bureau, Financial
Supervisory Commission’s (the “ROC FSC”) 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 amortized cost, which approximates fair value. Under this method,
the
difference between the cost of each security and its value at maturity is
accrued into income on a straight-line basis over the days to
maturity. Securities for which market quotations are not readily
available or if a development/event occurs that may significantly impact the
value of a security, may be fair-valued, in good faith, pursuant to procedures
established by the Board of Trustees.
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, 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 marketed 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-month ended
June 30, 2007, the Fund earned $1,649 and UBS Securities LLC earned $426 in
compensation as the Fund’s lending agent.
C
— Security transactions and investment income —Security transactions
are recorded on the date the transactions are entered into (the trade date).
Dividend income is recorded on the ex-dividend date, and interest income is
recorded on an accrual basis as it is earned.
D
— Office equipment — Office equipment is stated at cost less
accumulated depreciation. Depreciation is applied from the month such assets
were placed into service, using the straight-line method over the respective
useful lives of such assets.
E
— Realized gains and losses — For 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, 2006, the Trust utilized $3,573,582 of capital loss carryover with a total
loss carryover of $109,667,977 remaining.
This
capital loss carryover may be used to offset any future capital gains generated
by the Trust, and, if unused, $77,665,606 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 $379,346 realized on
investment transactions from November 1, 2006 through December 31, 2006 and
treat them as arising during the fiscal year ending December 31, 2007 for U.S.
federal income tax purposes.
F
— Foreign currency translation — Substantially all of the Trust’s
income is earned, and its expenses are partially paid, in New Taiwan Dollars
(“NT$”). 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, 2007, that rate was NT$32.8075 to $1.00. Investment
income and expenses are translated at the average exchange rate for the period.
Currency translation gains or losses are reported as a separate component of
changes in net assets resulting from operations.
The
Trust
does not separately record that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations
are
included with the net realized and unrealized gain or loss from
investments.
G
— Distributions to shareholders — It is the Trust’s policy to
distribute all ordinary income and net capital gains calculated in accordance
with U.S. federal income tax regulations. Such calculations may differ from
those based on U.S. generally accepted accounting principles. Permanent book
to
tax differences primarily relate to the treatment of the Trust’s gains from the
disposition of passive foreign investment company shares as well as the
nondeductibility of net operating losses for U.S. federal income tax purposes.
Temporary book to tax differences are primarily due to differing treatments
for
certain foreign currency losses.
H
— Taxes — The Trust intends to continue to elect and to continue to
qualify as a regulated investment company under the Internal Revenue Code of
1986, as amended (the “Code”). If the Trust complies with all of the applicable
requirements of the Code, it will not be subject to U.S. federal income and
excise taxes provided that it distributes all of its investment company taxable
income and net capital gains to its shareholders.
The
Republic of China (“R.O.C.”) levies a tax at the rate of 20% on cash dividends
and interest received by the Trust on investments in R.O.C. securities. In
addition, a 20% tax is levied based on par value of stock dividends (except
those which have resulted from capitalization of capital surplus) received
by
the Trust. For the six months ended June 30, 2007, total par value of stock
dividends received was $2,519.
Realized
gains on securities transactions are not subject to income tax in the R.O.C.;
instead, a securities transaction tax of 0.3% of the market value of stocks
sold
or transferred, is levied. Proceeds from sales of investments are net of
securities transaction tax of $76,862 paid for the six months ended June 30,
2007.
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. The Trust is required to implement FIN 48 no later than June 29,
2007. Based on management’s evaluation, FIN 48 does not have a
material impact on the Trust’s financial statements.
K
— Fair Value Measurements — On September 20, 2006, the FASB released
Statement of Financial Accounting Standards No. 157 “Fair Value Measurements”
(“FAS 157”). FAS 157 establishes an authoritative definition of fair
value, sets out a framework for measuring fair value, and requires additional
disclosures about fair-value measurements. The application of FAS 157
is required for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. Management does not believe that
the application of this standard will have material impact on the financial
statements of the Fund.
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 — Administrative Management
Brown
Brothers Harriman & Co. (“BBH”) provides administrative and accounting
services for the Trust, including maintaining certain books and records of
the
Trust, and preparing certain reports and other documents required by U.S.
federal and/or state laws and regulations. The Trust pays BBH a monthly fee
for
these services at an annual rate of 0.06% of the NAV of the Trust’s assets up to
$200 million, 0.05% of such NAV equal to or in excess of $200 million up to
$400
million and 0.04% of such NAV equal to or in excess of $400
million. The total payment to BBH for administrative and custodial
services is subject to a minimum annual fee of
$200,000. Out-of-pocket expenses will be billed at the actual amount
incurred at the time the good or service is purchased.
BBH
serves as custodian of the assets of the Trust. The Trust pays BBH a monthly
fee
for securities in the Taiwan market at an annual rate of 0.15% of the NAV of
the
Trust’s assets up to $200 million, 0.13% of such NAV equal to or in excess of
$200 million up to $400 million and 0.11% of such NAV equal to or in excess
of
$400 million. The 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
6 — Investments in Securities
Purchases
and proceeds from sales of securities, excluding short-term investments, for
the
six months ended June 30, 2007, included $17,038,841 for stock purchases and
$25,518,602 for stock sales, respectively.
At
June
30, 2007, 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, 2007, the unrealized
appreciation of $36,794,779 for U.S. federal income tax purposes consisted
of
$39,230,244 of gross unrealized appreciation and $2,435,465 of gross unrealized
depreciation.
Note
7 — Shares of Beneficial Interest
A
— The Trust’s Declaration of Trust permits the Trustees to issue an
unlimited number of shares of beneficial interest or additional classes of
other
securities. The shares have a par value of $0.01, and no other classes of
securities are outstanding at present. The Trust has a repurchase program which
allows for the repurchase of up to 10% of the outstanding shares. The share
repurchase program commenced on November 1, 2004.
In
connection with the share repurchase program referred to above, the Board of
Trustees authorized management to repurchase Trust shares in one or more block
transactions provided that no block exceeds 500,000 shares on any day, no more
than 1,000,000 shares in total are repurchased in block transactions, and that
such share repurchases are made on the New York Stock Exchange and in compliance
with the safe harbor provided by Rule 10b-18 under the Securities Exchange
Act
of 1934. This does not increase the overall repurchase authorization and the
Trust may continue to make non-block share repurchases under its share
repurchase program.
During
the six-month period ended June 30, 2007, 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
2006, the Trust accepted 888,498 shares for payment at a price of $5.84 per
share in accordance with its semi-annual repurchase offer. Pursuant
to the semi-annual repurchase offer, the purchase price was equal to 100% of
the
Trust’s net asset value per share at the close of regular trading on the Taiwan
Stock Exchange on June 30, 2006, to which a 2% repurchase fee was
applied. The purchased shares constituted approximately 5% of the
Trust’s previously outstanding shares.
In
December 2006, the Trust accepted 844,073 shares for payment at a price of
$6.92
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 net asset value per share as determined at the
close of regular trading on the Taiwan Stock Exchange on December 29, 2006,
to
which 2% repurchase fee was applied. The purchase shares constituted
approximately 5% of the Trust’s previously outstanding shares.
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.
At
June
30, 2007, 15,235,536 shares were outstanding.
Note
8 — Subsequent Events
During
the 12-week period ended July 13, 2007, the Trust’s shares traded at an average
discount to NAV of more than 10%, requiring the Trust to submit to shareholders
for a vote at its Annual Meeting, held on August 21, 2007, a binding resolution
that the Trust be converted from a closed-end to open-end investment
company. The binding resolution was not approved by the affirmative
vote of a majority of the Trust’s outstanding shares.
At
a
meeting of the Board of Trustees (the “Board”) held on August 21, 2007, the
Board approved a new investment advisory agreement between the Fund and Nanking
Road Capital Management, LLC (the “Adviser”), a company organized by the
employees of the Fund who currently manage the Fund’s investments.
At
a
Meeting of the Board of Trustees held on August 21,
2007, the Board elected Mr. Pedro-Pablo Kuczynski as Chairman of the Board,
replacing Mr. David N. Laux.
At
the
Annual Meeting of Shareholders held on August 21, 2007, shareholders voted
to
elect Mr. David
N. Laux and Mr. Pedro-Pablo Kuczynski as Trustees of the Trust, each to serve
for a term expiring on the date of the 2010 Annual Meeting of Shareholders,
or
the special meeting in lieu thereof.
At
the
Annual Meeting of Shareholders held on August 21, 2007, shareholders voted
to
approve an investment advisory agreement between the Trust and the
Adviser. In addition, the shareholders voted against the conversion
of the Trust from a closed end investment company to an open-end investment
company.
Taiwan
Greater China Fund
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 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 that from time to time the Fund may purchase shares of its common
stock
in the open market at prevailing market prices.
The
Trust’s policy with regard to voting stocks held in its portfolio is to vote in
accordance with the recommendations of Institutional Shareholder Services,
Inc.
(“ISS”) unless the Trust’s portfolio manager recommends to the contrary, in
which event the decision as to how to vote will be made by the Executive
Committee of the Trust’s Board of Trustees. A summary of the voting policies
followed by ISS may be found on the Trust’s website,
http://www.taiwangreaterchinafund.com, and a more detailed description of
those policies is available on the website of the Securities and Exchange
Commission (the “SEC”), http://www.sec.gov. In addition, information
regarding how the Trust voted proxies relating to its portfolio securities
during the 12-month period ended June 30, 2007 will be available on or through
the Trust’s website and on the SEC’s website no later than August 31,
2007.
Portfolio
Holdings
The
Trust
provides a complete list of its portfolio holdings in its report to shareholders
four times each year, at each quarter end. For the second and fourth quarters,
the list of portfolio holdings appears in the Trust’s semi-annual and annual
reports to shareholders. For the first and third quarters, the list of portfolio
holdings appears in its quarterly reports to shareholders. These reports are
available on the Trust’s website. The Trust also files the list of portfolio
holdings for the first and third quarters with the SEC on Form N-Q, which can
be
looked up on the SEC’s website at http://www.sec.gov. Form N-Q may also
be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. To
find out more about this public service, call the SEC at
1-800-SEC-0330.
For
additional information regarding the Trust, including additional portfolio
manager commentary and portfolio holdings information as of the end of each
fiscal quarter please visit our website at
http://www.taiwangreaterchinafund.com.
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,
2007, and the related statements of operations, changes in net assets, and
financial highlights for the six-month period ended June 30, 2007. 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, 2006, and in
our
report dated February 16, 2007, we expressed an unqualified opinion on such
statement of changes in net assets and financial highlights.
/s/KPMG
LLP
New
York,
New York
August
24, 2007
ITEM
2.
CODE OF ETHICS.
Not
applicable. This item is only required in an annual report on this
Form N-CSR.
ITEM
3.
AUDIT COMMITTEE FINANCIAL EXPERT.
Not
applicable. This item is only required in an annual report on this
Form N-CSR.
ITEM
4.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not
applicable. This item is only required in an annual report on this
Form N-CSR.
ITEM
5.
AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not
applicable. This item is only required in an annual report on this
Form N-CSR.
ITEM
6.
SCHEDULE OF INVESTMENTS.
A
Schedule of Investments is included as part of the report to shareholders filed
under item 1.
ITEM
7.
DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
Not
applicable. This item is only required in an annual report on this
Form N-CSR.
ITEM
8.
PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
8(a)
Not
applicable. This item is only required in an annual report on this
Form N-CSR.
8(b) There
has been no change, as of the date of filing, to the Portfolio Manager
identified in response to paragraph (a) of this Item in the registrant’s most
recent annual report on Form N-CSR.
ITEM
9.
PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY
AND
AFFILIATED PURCHASERS.
Period
|
(a)
Total
Number of Shares (or Units) Purchased
|
(b)
Average
Price Paid per Share (or Unit)
|
(c)
Total
Number of Shares (or Units) Purchased as Part of Publicly Announced
Plans
or Programs
|
(d)
Maximum
Number (or Approximate Dollar Value) of Shares (or Units) that May
Yet Be
Purchased Under the Plans or Programs
|
January
1
to
January
31
|
|
|
|
|
February
1
to
February
28
|
|
|
|
|
March
1
to
March
31
|
|
|
|
|
April
1
to
April
30
|
|
|
|
|
May
1
to
May
31
|
|
|
|
|
June
1
to
June
30
|
801,870(1)
|
7.76
|
801,870
(1)
|
0(2)
|
(1)
|
Semi-Annual
repurchase offer
|
(2)
|
Fund
may repurchase up to 2,179,932 shares under its repurchase program
commenced November 1, 2004. The repurchase program does not have
an
expiration date. As of June 30, 2007, 125,032 shares may be purchased
under the repurchase program.
|
ITEM
10.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There
have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant’s board of directors.
ITEM
11.
CONTROLS AND PROCEDURES.
(a)
The
registrant's principal executive officer and principal financial officer have
concluded that the registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (“1940
Act”)) are effective as of a date within 90 days of the filing date of this
report based on their evaluation of these controls and procedures of such
disclosure controls and procedures as required by Rule 30a-3(b) under the 1940
Act and Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934,
as amended.
(b)
The
registrant’s principal executive officer and principal financial officer are
aware of no change in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during
the second fiscal quarter of the period covered by this report that has
materially affected, or are reasonably likely to materially affect, the
registrant’s internal control over financial reporting.
ITEM
12.
EXHIBITS.
(a)(1)
CODE OF ETHICS REQUIRED BY ITEM 2 OF FORM N-CSR:
Not
applicable.
(a)(2)
CERTIFICATIONS REQUIRED BY RULE 30A-2(A) UNDER THE 1940 ACT:
See
Exhibit 99.77Q3Cert attached hereto.
(a)(3)
WRITTEN SOLICITATION TO PURCHASE SECURITIES PURSUANT TO RULE 23C-1 UNDER THE
1940 ACT
The
registrant has made no written solicitations to purchase securities pursuant
to
Rule 23C-1 under the 1940 Act during the period
covered
by the report to 10 or more persons.
(b)
CERTIFICATIONS REQUIRED BY RULE 30A-2(B) UNDER THE 1940 ACT:
See
Exhibit 99.906Cert attached hereto.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, the registrant has duly caused this report to be signed
on
its behalf by the undersigned, thereunto duly authorized.
Taiwan
Greater China Fund
By:
/s/ Steven R. Champion.
Name:
Steven R. Champion
Title:
President and Chief Executive Officer
Date:
September 6, 2007
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
By:
/s/ Steven R. Champion.
Name:
Steven R. Champion
Title:
President and Chief Executive Officer
By:
/s/ Cheryl Chang
Name:
Cheryl Chang
Title:
Chief Financial Officer
Date:
September 6, 2007