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)
c/o
Nanking Road Capital Management, LLC
111
Gillett Street
Hartford,
CT 06105
(Address
of principal executive offices) (Zip code)
Brown
Brothers Harriman & Co.
40
Water Street
Boston,
MA 02106-3604
(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,
2009
ITEM 1.
REPORTS TO STOCKHOLDERS
Annual
Report
December
31, 2009
After its
severe collapse in late 2008, Taiwan’s stock market staged a dramatic recovery
in 2009 and was among the best performing emerging markets worldwide for the
year. After reaching an intraday low of 3955 in late November and after closing
2008 at 4591, the Taiwan Stock Exchange index (TAIEX) rose 83.0% in dollar terms
during 2009 to close the year at 8188. Additionally, during 2009 the TWSE
returned 88.1% on a total return basis, measured in US dollars. The more
numerically rigorous MSCI Taiwan index rose 79.2% for the year on a total return
basis, net of the impact of withholding taxes on dividends, and the Taiwan China
Strategy index rose 96.6%, on the same basis. The volatility of the overall
Taiwan stock market based on the 30 day annualized rate calculated by Bloomberg
declined significantly to 15.2% at year-end, compared to 36.0% and 27.7% at
year-ends 2008 and 2007, respectively. The Fund’s stock price on the New York
Stock Exchange rose 80.2% and its net asset value increased 88.33%1 after
taxes and expenses of 3.5%.
The
Fund’s discount to net asset value averaged 9.2% in 2009, slightly lower than
the 9.8% and 9.7% discounts recorded in 2008 and 2007, respectively. The highest
closing discount for the year was the 14.5% recorded on September 1, and the
lowest closing discount was the 0.6% discount reached on May 1. The Fund traded
at intraday premiums on April 30 and May 1, the first premiums in many years.
The Fund’s mean and median daily trading volumes for 2009 declined to 26,435
shares and 16,663 shares, respectively, compared to 37,037 shares and 25,800
shares, respectively, in 2008.
The
Fund’s net asset value performance remained highly correlated to the overall
performance of the Taiwan stock market during 2009 with R-squared’s of 0.93 and
0.95 relative to the TAIEX and the MSCI Taiwan indexes, respectively. The Fund’s
betas relative to the two broad-based indexes are 0.93 and 0.95, respectively,
indicating that the Fund’s net asset value is slightly less volatile than the
overall Taiwan market. The Fund produced alphas (measures of “excess return”
which cannot be explained by the risk level) of 18 basis points per week and 19
basis points per week relative to the two indexes, respectively.
Performance
Attribution
Taiwan
Greater China Fund uses Bloomberg to provide attribution analysis for the Fund’s
portfolio. The Bloomberg analysis compares the NT$ total returns of the Fund’s
portfolio to the NT$ total returns of the Fund’s benchmarks. For the one year
period ending December 31, 2009, the NT$ return of the Fund’s portfolio was
90.1% while the return of MSCI Taiwan was 75.6%. Therefore the active return for
the fund was a 14.5%. Sector allocation contributed 9.3% to the active return
while asset selection contributed 5.2%. There was also contribution of -0.1% due
to currency, a result of holding several Hong Kong shares. Telecommunications,
computer hardware, financials and semiconductors were all nearly equal
contributors to active returns. Cash and cement were the main negative
contributors. For the three months ending December 31, 2009, the portfolio
returned 9.6% compared to MSCI Taiwan’s return of 7.5%, for an active return of
2.1%. Sector allocation contributed 1.7% while stock selection contributed 0.5%,
and currency had a very slight negative contribution. Financials and flat panel
displays were the main positive sector contributors while cement and cash were
the main negative contributors to active sector returns.
Portfolio
Valuation Measures
Market
valuations for the Fund’s portfolio of generally high quality companies at the
end of the 4th quarter
moved toward a more normal range as profitability continued to improve. The
heavily technology weighted portfolio had a weighted average historical
price-earnings ratio of 20.1, a weighted average price-book ratio of 2.7, a
weighted average cash dividend yield of 2.3%, and a weighted average return on
equity of 10.4%. On a forward-looking basis based on consensus earnings from
Bloomberg for 2010, the price earnings ratio of the portfolio is 15.0. The Fund
generally holds shares in companies with high liquidity levels, low leverage,
and high quality earnings.
1 While we
normally round return percentages to one decimal point, we have shown this
number with two decimal places because it is an extremely auspicious number in
Chinese numerology.
Taiwan
Political and Economic Developments
Despite
the strong showing for Taiwan in the markets, its heavily export-oriented
economy was significantly impacted by the global financial crisis. In the first
quarter of 2009, exports were down 36.7% Year over Year (“YoY”). But the economy
showed a steady recovery over the year and by the 4th
quarter, YoY exports were actually up 16.9%, albeit from Q4 2008’s low base.
Overall for the year, 2009 exports were down 20.4%. Direct exports to China,
however, were an exception. For the year, exports to China grew 1.6% and Q4 2009
China exports were up 45.8% YoY. This is partially a result of China’s
successful stimulus policy to promote domestic demand in response to the global
downturn and its impact on Chinese exports. Taiwan, in particular, benefited
from Chinese government subsidies to consumers for computers, cell phones and
LCD TV’s. China accounted for 41.1% of total Taiwan exports in 2009. The Taiwan
government is projecting 2010 export growth to be in the 15-20%
range.
Taiwan
also enacted its own stimulus amounting to US$4.4 billion in 2009, as part of a
4-year plan for public works spending. In addition, the Central Bank of China,
Taiwan’s central bank, has kept interest rates at 1.25% since February 2009. The
consumer price index declined YoY for 11 straight months during 2009, allowing
the CBC to keep an accommodative monetary policy. The CBC has faced upward
speculative pressure on the Taiwan dollar. In early 2009, the NT$ depreciated to
NT$35.2 per US$ but by the end of the year had appreciated to NT$32.0, for a YoY
appreciation of 2.5%. The CBC felt there was an inflow of foreign funds to
Taiwan not being invested in the market but rather held for currency
speculation. The CBC has taken a number of steps including allowing investors
only a week to invest after incoming funds are converted to local currency and
banning foreigners from placing funds in NT$ time deposits.
In the
first quarter of 2009, Taiwan’s GDP fell by 9.1%. However, the third quarter
decline was only 1.3% YoY. Overall, the government statistics bureau expects a
positive 4th quarter
but an overall decline in GDP of 2.5% for the entire year. The GDP decline was
exacerbated by Typhoon Morakot, which struck the island in August. It was the
worst storm in 50 years and the death toll was over 600 people. The statistics
bureau is projecting 2010 GDP growth of 4.4%.
2009 was
a year for significant progress on cross-straits policy. On April 30th, China
Mobile, China’s largest telecommunications company announced that it had come to
an agreement with Taiwan’s 3rd largest
telecom operator, Far Eastone Telecommunications to buy 12% of the company. The
announcement caught the market by surprise and over 2/3’s of the stocks on the
TWSE closed up limit (7%) the following day. Both China and Taiwan followed over
the next month with policy changes to accommodate Chinese investment in over 100
industries and projects in Taiwan, although telecom was not on the allowed
investment list so the China Mobile acquisition has not moved ahead. In the six
months since the official June 30th opening
of Chinese investments in Taiwan, only 23 investments totalling US$37.5 million
have been approved but these investments mark an almost 60-year milestone in
Taiwan and China relations.
Another
major event was the enactment of three financial services memoranda of
understanding covering cooperation in the banking, securities and insurance
industries. The MOU’s were executed in November and took effect on January 16,
2010. The banking MOU paves the way for Taiwan banks to open or upgrade
representative offices to branches in China without the normal 3-year wait and
for Chinese banks to establish branches in Taiwan. Investments in existing banks
are not covered in the MOU.
Taiwan
continues to see the benefits of improved transportation links and the lifting
of travel restrictions for Chinese tourists to visit Taiwan. Taiwan opened to
Chinese tourists in mid-2008 and in 2009 about 960,000 tourists visited the
island. It is estimated by tourism officials that Chinese tourists may have
contributed slightly over US$1 billion to the Taiwan economy. The
improved political climate is also reflected in the recent Business Environment
Risk Intelligence report ranking Taiwan as 5th
globally in terms of its overall investment climate out of 50 nations surveyed.
Taiwan ranked behind Switzerland, Singapore, the Netherlands and
Norway.
Taiwan’s
economy and corporate earnings are expected to continue their recovery in the
coming year. The economic integration between Taiwan and China is accelerating,
and we believe this will continue to be a positive force for Taiwan
equities.
Yours
truly,
Steven R.
Champion
President,
CEO and Portfolio Manager
February
25, 2010
TAIWAN GREATER CHINA FUND
PORTFOLIO
HIGHLIGHTS
Schedule of Investments by
Industry as of December 31,
2009
|
Industry
|
|
U.S.
$ Value
|
|
|
Percent
of
Net
Assets
|
|
Computer
Systems & Hardware
|
|
|
21,154,421 |
|
|
|
25.01 |
% |
Semiconductors
|
|
|
16,466,685 |
|
|
|
19.46 |
|
Plastics
|
|
|
9,302,615 |
|
|
|
10.99 |
|
Electronic
Components
|
|
|
9,035,743 |
|
|
|
10.68 |
|
Flat-Panel
Displays
|
|
|
6,058,814 |
|
|
|
7.16 |
|
Steel
|
|
|
3,629,119 |
|
|
|
4.29 |
|
Food
|
|
|
3,360,573 |
|
|
|
3.98 |
|
Financial
Services
|
|
|
3,096,415 |
|
|
|
3.66 |
|
Computer
Peripherals/ODM
|
|
|
2,678,768 |
|
|
|
3.17 |
|
Cement
|
|
|
2,177,492 |
|
|
|
2.57 |
|
Electronics/Other
|
|
|
1,860,153 |
|
|
|
2.20 |
|
Other
Non-Tech
|
|
|
1,295,422 |
|
|
|
1.53 |
|
Textiles
|
|
|
1,105,228 |
|
|
|
1.31 |
|
Rubber
|
|
|
984,625 |
|
|
|
1.16 |
|
Electrical
& Machinery
|
|
|
456,495 |
|
|
|
0.54 |
|
Glass,
Paper & Pulp
|
|
|
400,599 |
|
|
|
0.47 |
|
Transportation
|
|
|
322,913 |
|
|
|
0.38 |
|
Communications
Equipment
|
|
|
282,613 |
|
|
|
0.33 |
|
Circuit
Boards
|
|
|
242,958 |
|
|
|
0.29 |
|
Retailing
|
|
|
226,413 |
|
|
|
0.27 |
|
Internet
Content-Entertainment
|
|
|
119,229 |
|
|
|
0.14 |
|
Hotels
|
|
|
98,760 |
|
|
|
0.12 |
|
Short-Term
Securities
|
|
|
218,733 |
|
|
|
0.26 |
|
Other
Assets (Less Liabilities)
|
|
|
17,292 |
|
|
|
0.03 |
|
Net
Assets
|
|
$ |
84,592,078 |
|
|
|
100.00 |
|
TAIWAN GREATER CHINA FUND
Schedule of Investments / December
31, 2009
|
|
|
|
|
|
|
|
|
|
|
COMMON STOCK — 99.72%
|
|
|
Shares
|
|
|
|
% of
Net Assets
|
|
|
U.S. Dollar
Value
|
|
Cement — 2.57%
|
|
|
|
719,683 |
|
Asia Cement
Corp.
|
|
|
0.92 |
|
|
$ |
778,024 |
|
|
|
1,317,373 |
|
Taiwan
Cement Corp.
|
|
|
1.65 |
|
|
|
1,399,468 |
|
|
|
|
|
|
|
|
|
|
|
|
2,177,492 |
|
Circuit Boards — 0.29%
|
|
|
|
72,000 |
|
Tripod
Technology Corp.
|
|
|
0.29 |
|
|
|
242,958 |
|
Communications Equipment
— 0.33%
|
|
|
|
156,491 |
|
Gemtek
Technology
|
|
|
0.33 |
|
|
|
282,613 |
|
Computer Peripherals/ODM — 3.17%
|
|
|
|
174,628 |
|
Chicony
Electronics Co., Ltd.
|
|
|
0.50 |
|
|
|
423,400 |
|
|
|
98,843 |
|
HTC
Corp.
|
|
|
1.34 |
|
|
|
1,131,867 |
|
|
|
748,350 |
|
Lite-on
Technology Corp.
|
|
|
1.33 |
|
|
|
1,123,501 |
|
|
|
|
|
|
|
|
|
|
|
|
2,678,768 |
|
Computer Systems & Hardware
— 25.01%
|
|
|
|
455,397 |
|
Acer
Inc.
|
|
|
1.62 |
|
|
|
1,368,802 |
|
|
|
1,940,228 |
|
Asustek
Computer Inc.
|
|
|
4.43 |
|
|
|
3,746,421 |
|
|
|
823,676 |
|
Compal
Electronics Inc.
|
|
|
1.35 |
|
|
|
1,141,367 |
|
|
|
2,333,860 |
|
Hon
Hai Precision Industry Co., Ltd.
|
|
|
13.06 |
|
|
|
11,047,470 |
|
|
|
1,077,046 |
|
Quanta
Computer Inc.
|
|
|
2.77 |
|
|
|
2,342,172 |
|
|
|
777,300 |
|
Wistron
Corp.
|
|
|
1.78 |
|
|
|
1,508,189 |
|
|
|
|
|
|
|
|
|
|
|
|
21,154,421 |
|
Electrical & Machinery
— 0.54%
|
|
|
|
366,000 |
|
Teco
Electric & Machinery Co., Ltd.
|
|
|
0.19 |
|
|
|
160,097 |
|
|
|
793,837
|
* |
Walsin
Lihwa Corp.
|
|
|
0.35 |
|
|
|
296,398 |
|
|
|
|
|
|
|
|
|
|
|
|
456,495 |
|
Electronic Components — 10.68%
|
|
|
|
277,343 |
|
Catcher
Technology Co., Ltd.
|
|
|
0.92 |
|
|
|
773,827 |
|
|
|
440,000 |
|
Coretronic
Corp.
|
|
|
0.75 |
|
|
|
637,890 |
|
|
|
719,991 |
|
Delta
Electronics Inc.
|
|
|
2.66 |
|
|
|
2,249,585 |
|
|
|
144,715 |
|
Everlight
Electronics Co.
|
|
|
0.64 |
|
|
|
542,588 |
|
|
|
238,034 |
|
Foxconn
Technology Co., Ltd.
|
|
|
1.09 |
|
|
|
922,223 |
|
|
|
42,000 |
|
Kinsus
Interconnect Technology Corp.
|
|
|
0.13 |
|
|
|
112,331 |
|
|
|
17,340 |
|
Largan
Precision Co., Ltd.
|
|
|
0.27 |
|
|
|
228,090 |
|
|
|
29,629 |
|
Motech
Industry Co., Ltd.
|
|
|
0.17 |
|
|
|
140,714 |
|
|
|
226,658
|
* |
Prime
View International Co., Ltd.
|
|
|
0.70 |
|
|
|
596,291 |
|
|
|
139,405 |
|
Shin
Zu Shing Co., Ltd.
|
|
|
0.82 |
|
|
|
694,727 |
|
|
|
85,100 |
|
Simplo
Technology Co., Ltd.
|
|
|
0.60 |
|
|
|
505,194 |
|
|
|
248,450 |
|
TXC
Corp.
|
|
|
0.54 |
|
|
|
457,225 |
|
|
|
199,378 |
|
Unimicron
Technology Corp.
|
|
|
0.34 |
|
|
|
289,048 |
|
|
|
446,000 |
|
WPG
Holdings Co., Ltd.
|
|
|
0.92 |
|
|
|
776,185 |
|
|
|
10,000 |
|
Young
Fast Optoelectronics Co., Ltd.
|
|
|
0.13 |
|
|
|
109,825 |
|
|
|
|
|
|
|
|
|
|
|
|
9,035,743 |
|
See
accompanying notes to financial statements.
TAIWAN GREATER CHINA FUND
Schedule of
Investments
(Continued) /
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
% of
Net Assets
|
|
|
U.S. Dollar
Value
|
|
Electronics/Other — 2.20%
|
|
|
|
209,000 |
|
Lumax International Corp.,
Ltd.
|
|
|
0.48 |
|
|
$ |
403,562 |
|
|
|
670,776 |
|
Synnex
Technology International Corp.
|
|
|
1.72 |
|
|
|
1,456,591 |
|
|
|
|
|
|
|
|
|
|
|
|
1,860,153 |
|
Financial Services — 3.66%
|
|
|
|
1,215,000
|
* |
Cathay
Financial Holding Co., Ltd.
|
|
|
2.68 |
|
|
|
2,266,345 |
|
|
|
676,000
|
* |
Fubon
Financial Holding Co., Ltd.
|
|
|
0.98 |
|
|
|
830,070 |
|
|
|
|
|
|
|
|
|
|
|
|
3,096,415 |
|
Flat-Panel Displays — 7.16%
|
|
|
|
3,358,292 |
|
AU
Optronics Corp.
|
|
|
4.81 |
|
|
|
4,071,229 |
|
|
|
1,826,847
|
* |
Chi
Mei Optoelectronics Corp.
|
|
|
1.52 |
|
|
|
1,284,281 |
|
|
|
2,832,951
|
* |
Chunghwa
Picture Tubes, Ltd.
|
|
|
0.43 |
|
|
|
363,795 |
|
|
|
229,002 |
|
Innolux
Display Corp.
|
|
|
0.40 |
|
|
|
339,509 |
|
|
|
|
|
|
|
|
|
|
|
|
6,058,814 |
|
Food — 3.98%
|
|
|
|
159,375 |
|
Great
Wall Enterprises Co.
|
|
|
0.21 |
|
|
|
175,282 |
|
|
|
438,000 |
|
Tingyi
(Cayman Islands) Holdings Corp.
|
|
|
1.28 |
|
|
|
1,084,424 |
|
|
|
1,390,266 |
|
Uni-President
Enterprise Corp.
|
|
|
2.03 |
|
|
|
1,713,643 |
|
|
|
552,000 |
|
Want
Want China Holdings, Ltd.
|
|
|
0.46 |
|
|
|
387,224 |
|
|
|
|
|
|
|
|
|
|
|
|
3,360,573 |
|
Glass, Paper & Pulp
— 0.47%
|
|
|
|
489,365 |
|
Taiwan
Glass Industrial Corp.
|
|
|
0.47 |
|
|
|
400,599 |
|
Hotels — 0.12%
|
|
|
|
7,700 |
|
Formosa
International Hotels Corp.
|
|
|
0.12 |
|
|
|
98,760 |
|
Internet Content-Entertainment
— 0.14%
|
|
|
|
9,000 |
|
Chinese
Gamer International Corp.
|
|
|
0.14 |
|
|
|
119,229 |
|
Plastics — 10.99%
|
|
|
|
1,128,897 |
|
Formosa
Chemicals & Fiber Corp.
|
|
|
2.89 |
|
|
|
2,447,875 |
|
|
|
1,573,271 |
|
Formosa
Plastics Corp.
|
|
|
3.91 |
|
|
|
3,308,217 |
|
|
|
1,946,968 |
|
Nan
Ya Plastics Corp.
|
|
|
4.19 |
|
|
|
3,546,523 |
|
|
|
|
|
|
|
|
|
|
|
|
9,302,615 |
|
Retailing — 0.27%
|
|
|
|
92,850 |
|
Far
Eastern Department Stores Co., Ltd.
|
|
|
0.13 |
|
|
|
106,469 |
|
|
|
50,445 |
|
President
Chain Store Corp.
|
|
|
0.14 |
|
|
|
119,944 |
|
|
|
|
|
|
|
|
|
|
|
|
226,413 |
|
Rubber — 1.16%
|
|
|
|
428,754 |
|
Cheng Shin Rubber Ind. Co.,
Ltd.
|
|
|
1.16 |
|
|
|
984,625 |
|
See
accompanying notes to financial statements.
TAIWAN GREATER
CHINA FUND
Schedule of Investments
(Continued) / December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
% of
Net Assets
|
|
|
U.S. Dollar
Value
|
|
Semiconductors — 19.47%
|
|
|
|
2,257,762 |
|
Advanced
Semiconductor Engineering Inc.
|
|
|
2.41 |
|
|
$ |
2,035,164 |
|
|
|
382,346 |
|
MediaTek
Inc.
|
|
|
7.88 |
|
|
|
6,666,013 |
|
|
|
64,000 |
|
Novatek
Microelectronics Corp., Ltd.
|
|
|
0.25 |
|
|
|
213,963 |
|
|
|
105,851 |
|
Powertech
Technology Inc.
|
|
|
0.42 |
|
|
|
358,839 |
|
|
|
13,650 |
|
RichTek
Technology Corp.
|
|
|
0.17 |
|
|
|
139,462 |
|
|
|
522,193 |
|
Siliconware
Precision Industries Co., Ltd.
|
|
|
0.84 |
|
|
|
707,287 |
|
|
|
2,728,284 |
|
Taiwan
Semiconductor Manufacturing Co., Ltd.
|
|
|
6.50 |
|
|
|
5,498,252 |
|
|
|
1,577,397
|
* |
United
Microelectronics Corp.
|
|
|
1.00 |
|
|
|
847,705 |
|
|
|
|
|
|
|
|
|
|
|
|
16,466,685 |
|
Steel — 4.29%
|
|
|
|
3,413,696 |
|
China
Steel Corp.
|
|
|
4.16 |
|
|
|
3,519,769 |
|
|
|
101,004 |
|
Tung
Ho Steel Enterprise Corp.
|
|
|
0.13 |
|
|
|
109,350 |
|
|
|
|
|
|
|
|
|
|
|
|
3,629,119 |
|
Textiles — 1.31%
|
|
|
|
884,334 |
|
Far
Eastern Textile, Ltd.
|
|
|
1.31 |
|
|
|
1,105,228 |
|
Transportation — 0.38%
|
|
|
|
159,000 |
|
U-Ming
Marine Transport Corp.
|
|
|
0.38 |
|
|
|
322,913 |
|
Other Non-Tech — 1.53%
|
|
|
|
168,660 |
|
Giant
Manufacturing Co., Ltd.
|
|
|
0.56 |
|
|
|
472,167 |
|
|
|
377,900 |
|
Merida
Industry Co., Ltd.
|
|
|
0.72 |
|
|
|
613,982 |
|
|
|
263,696 |
|
Pou
Chen Corp.
|
|
|
0.25 |
|
|
|
209,273 |
|
|
|
|
|
|
|
|
|
|
|
|
1,295,422 |
|
TOTAL
COMMON STOCK (COST $69,612,814)
|
|
|
|
|
|
|
84,356,053 |
|
SHORT TERM SECURITIES — 0.26%
|
|
Time Deposit — 0.26%
|
|
Wells Fargo - Grand Cayman, 0.03%, Due
01/04/10
|
|
|
0.26 |
|
|
|
218,733 |
|
TOTAL SHORT-TERM
SECURITIES
|
|
|
|
|
|
|
|
|
(COST
$218,733)
|
|
|
|
|
|
|
218,733 |
|
TOTAL
INVESTMENTS IN SECURITIES AT FAIR VALUE
|
|
|
|
|
|
|
|
|
(COST $69,831,547)
|
|
|
99.98 |
|
|
|
84,574,786 |
|
OTHER
ASSETS (LESS LIABILITIES)
|
|
|
0.02 |
|
|
|
17,292 |
|
NET
ASSETS
|
|
|
100.00 |
|
|
$ |
84,592,078 |
|
* 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, 2009 (Expressed in U.S. Dollars)
Assets
|
|
|
|
Investments
in securities at market value (Notes 2B, 2D, 3 and 7)
|
|
|
|
Common
Stock (cost — $69,612,814)
|
|
$ |
84,356,053 |
|
Short-term
securities (cost — $218,733)
|
|
|
218,733 |
|
Total
investment in securities at fair value (cost —
$69,831,547)
|
|
|
84,574,786 |
|
|
|
|
|
|
Cash
|
|
|
85,750 |
|
Foreign
cash (cost — $68,322)
|
|
|
69,071 |
|
Prepaid
expenses and other assets
|
|
|
237,874 |
|
Total
assets
|
|
|
84,967,481 |
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Professional
fees payable
|
|
|
192,688 |
|
Management
fee payable (Note 4)
|
|
|
98,663 |
|
Shareholder
communication fees payable
|
|
|
27,775 |
|
Custodian
fee payable (Note 6)
|
|
|
15,896 |
|
Administration
fee payable (Note 5)
|
|
|
11,993 |
|
Other
accrued expenses payable
|
|
|
28,388 |
|
Total
liabilities
|
|
|
375,403 |
|
|
|
|
|
|
Net
assets
|
|
$ |
84,592,078 |
|
Components
of net assets
|
|
|
|
|
Par
value of shares of beneficial interest (Note 8)
|
|
$ |
117,890 |
|
Additional
paid-in capital (Note 8)
|
|
|
92,559,089 |
|
Accumulated
net investment income
|
|
|
59,796,405 |
|
Accumulated
net realized loss on investments and foreign currency
transactions
|
|
|
(43,330,217 |
) |
Unrealized
net depreciation on investments (Note 7)
|
|
|
14,743,239 |
|
Cumulative
translation adjustment (Note 2F)
|
|
|
(39,294,328 |
) |
|
|
|
|
|
Net
assets
|
|
$ |
84,592,078 |
|
Net
asset value per share (11,788,968 shares issued
and outstanding, par value $0.01)
|
|
$ |
7.18 |
|
See
accompanying notes to financial statements.
TAIWAN
GREATER CHINA FUND
Statement
of Operations
For
the Year Ended December 31, 2009 (Expressed in U.S. Dollars)
|
|
|
|
Investment
income (Notes 2B, 2C, 2D)
|
|
|
|
Dividends
|
|
$ |
1,931,901 |
|
Interest
and other income
|
|
|
298 |
|
|
|
|
1,932,199 |
|
Republic
of China taxes (Note 2H)
|
|
|
(469,556 |
) |
|
|
|
1,462,643 |
|
Expenses
|
|
|
|
|
Management
fee (Note 4)
|
|
|
855,127 |
|
Trustee
fees and expenses
|
|
|
201,973 |
|
Shareholder
communication expenses
|
|
|
186,585 |
|
Audit
and tax fee
|
|
|
120,986 |
|
Legal
fees and expenses
|
|
|
100,822 |
|
Insurance
expenses
|
|
|
101,573 |
|
Administrative
fee (Note 5)
|
|
|
95,970 |
|
Custodian
fee (Note 6)
|
|
|
95,937 |
|
Other
expenses
|
|
|
139,783 |
|
|
|
|
1,898,756 |
|
Net
investment loss
|
|
|
(436,113 |
) |
Net
realized and unrealized loss on investments and foreign currencies (Notes
2F and 7)
|
|
|
|
|
Net
realized gain on:
|
|
|
|
|
investments
(excluding short-term securities)
|
|
|
1,285,491 |
|
foreign
currency transactions
|
|
|
43,228 |
|
Net
realized gain on investments and foreign currency
transactions
|
|
|
1,328,719 |
|
Net
changes in unrealized appreciation on:
|
|
|
|
|
investments
|
|
|
39,826,892 |
|
translation
of assets and liabilities in foreign currencies
|
|
|
1,559,690 |
|
Net
realized and unrealized gain from investments and foreign
currencies
|
|
|
42,715,301 |
|
Net
increase in net assets resulting from operations
|
|
|
42,279,188 |
|
See
accompanying notes to financial statements.
TAIWAN
GREATER CHINA FUND
Statements
of Changes in Net Assets
For
the Years Ended December 31, 2009 and 2008 (Expressed in U.S.
Dollars)
|
|
2009
|
|
|
2008
|
|
Net
increase (decrease) in net assets resulting from
operations
|
|
|
|
|
|
|
Net
investment income (loss)
|
|
$ |
(436,113 |
) |
|
$
2,046,036
|
|
Net
realized gain (loss) on investments and foreign currency
transactions
|
|
|
1,328,719 |
|
|
|
(6,872,628 |
) |
Unrealized
appreciation (depreciation) on investments
|
|
|
39,826,892 |
|
|
|
(52,029,736 |
) |
Unrealized
appreciation (depreciation) on translation of assets and liabilities in
foreign currencies
|
|
|
1,559,690 |
|
|
|
(1,988,385 |
) |
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in net assets resulting from
operations
|
|
|
42,279,188 |
|
|
|
(58,844,713 |
) |
|
|
|
|
|
|
|
|
|
Capital
share transactions:
|
|
|
|
|
|
|
|
|
Cost
of semi-annual repurchase offer (Note 8B)
|
|
|
(7,406,801 |
) |
|
|
(7,466,652 |
) |
|
|
|
|
|
|
|
|
|
Net
assets, beginning of year
|
|
|
49,719,691 |
|
|
|
116,031,056 |
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year
|
|
$ |
84,592,078 |
|
|
$ |
49,719,691 |
|
See
accompanying notes to financial statements.
TAIWAN
GREATER CHINA FUND
Financial
Highlights
(Expressed
in U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years
Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Per
share operating performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of year
|
|
$ |
3.81 |
|
|
$ |
8.02 |
|
|
$ |
7.07 |
|
|
$ |
5.87 |
|
|
$ |
5.37 |
|
Net
investment income (loss) (a)
|
|
|
(0.03 |
) |
|
|
0.15 |
|
|
|
0.02 |
|
|
|
0.01 |
|
|
|
0.05 |
|
Net
realized and unrealized gain (loss) on investments
|
|
|
3.24 |
|
|
|
(4.21 |
) |
|
|
0.92 |
|
|
|
1.21 |
|
|
|
0.65 |
|
Net
realized and unrealized appreciation (depreciation) on translation of
foreign currencies
|
|
|
0.15 |
|
|
|
(0.16 |
) |
|
|
(0.01 |
) |
|
|
(0.03 |
) |
|
|
(0.25 |
) |
Total
from investment operations
|
|
|
3.36 |
|
|
|
(4.22 |
) |
|
|
0.93 |
|
|
|
1.19 |
|
|
|
0.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
to Shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income*
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Stock Transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Tender Offer/Repurchase
|
|
|
0.01 |
(a) |
|
|
0.01 |
(a) |
|
|
0.02 |
(a) |
|
|
0.01 |
|
|
|
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, end of year
|
|
$ |
7.18 |
|
|
$ |
3.81 |
|
|
$ |
8.02 |
|
|
$ |
7.07 |
|
|
$ |
5.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share market price, end of year
|
|
|
6.36 |
|
|
|
3.53 |
|
|
|
7.23 |
|
|
|
6.61 |
|
|
|
5.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investment return (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based
on Trust’s market price
|
|
|
80.18 |
|
|
|
(51.18 |
) |
|
|
9.38 |
|
|
|
24.72 |
|
|
|
8.16 |
|
Based
on Trust’s net asset value
|
|
|
88.45 |
|
|
|
(52.49 |
) |
|
|
13.44 |
|
|
|
20.44 |
|
|
|
9.31 |
|
U.S.
$ return of Taiwan Stock Exchange Index**
|
|
|
82.88 |
|
|
|
(46.66 |
) |
|
|
9.23 |
|
|
|
20.35 |
|
|
|
3.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
and supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (in thousands)
|
|
$ |
84,592 |
|
|
$ |
49,720 |
|
|
$ |
116,031 |
|
|
$ |
113,391 |
|
|
$ |
104,364 |
|
Ratio
of expenses to average net assets (%)
|
|
|
2.80 |
|
|
|
2.37 |
|
|
|
2.30 |
|
|
|
2.55 |
|
|
|
2.12 |
|
Ratio
of net investment income (loss) to average net assets
(%)
|
|
|
(0.64 |
) |
|
|
2.29 |
|
|
|
0.28 |
|
|
|
0.22 |
|
|
|
0.99 |
|
Portfolio
turnover ratio (%)
|
|
|
11 |
|
|
|
22 |
|
|
|
26 |
|
|
|
24 |
|
|
|
16 |
|
|
|
(a)
|
Based
on average 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, 2009 (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 (the “SEC”) as a diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended. The
Trust changed its name from The R.O.C. Taiwan Fund to the Taiwan Greater China
Fund on December 29, 2003. The change took effect on the New York Stock Exchange
on January 2, 2004.
The Trust
was formed in connection with the reorganization (the “Reorganization”) of The
Taiwan (R.O.C.) Fund. The Taiwan (R.O.C.) Fund, which commenced operations in
October 1983, was established under the laws of the Republic of China as an
open-end contractual investment fund pursuant to an investment contract between
International Investment Trust Company Limited and the Central Trust of China,
as custodian. Pursuant to the Reorganization, which was completed in May 1989,
the Trust acquired the entire beneficial interest in the assets constituting The
Taiwan (R.O.C.) Fund. On February 23, 2004, the investment contract was
terminated and substantially all of the assets held in The Taiwan (R.O.C.) Fund
were transferred to the direct account of the Trust. The Trust thereupon
converted to internal management and now directly invests in Taiwan as a Foreign
Institutional Investor (“FINI”). The Taiwan (R.O.C.) Fund was subsequently
liquidated. At the Annual Meeting of Shareholders held on August 21, 2007,
shareholders 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 December
4, 2009, the Trust’s shareholders will be asked to consider the conversion of
the Trust to an open-end investment company at the 2010 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, the shareholders approved
the adoption by the Trust of an interval fund structure. The Trust now makes
semi-annual repurchase offers with respect to its shares (see Note
8B).
On
October 31, 2006, the Board of Trustees terminated the Fund’s policy requiring
the Republic of China Securities and Futures Bureau, Financial Supervisory
Commission (the “ROC FSC”) to consent to change certain policies of the
Fund.
Note
2 — Summary of Significant Accounting Policies
A — Basis
of presentation — The accompanying financial statements of the Trust have been
prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”).
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. 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 in October 2008, as UBS decided to exit the
securities lending agency business. The Trust did not have securities
on loan during the fiscal year ended December 31, 2009.
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / December 31, 2009 (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, 2009, the Trust had $59,446,991 of
capital loss carryover expire with a total loss carryover of $42,932,949
remaining.
This
capital loss carryover may be used to offset any future capital gains generated
by the Trust, and, if unused, $16,589,494 of such loss will expire on December
31, 2010, $11,721,463 of such loss will expire on December 31, 2011, $3,691,414
of such loss will expire on December 31, 2013 and $10,930,578 will expire on
December 31, 2017.
In
accordance with federal income tax regulations, the Trust expects to elect to
defer currency losses of $1,636,206, realized on investment transactions from
November 1, 2009 through December 31, 2009 and treat them as arising during the
fiscal year ending December 31, 2010 for U.S. federal income tax
purposes.
F — Foreign currency
translation — Substantially all of the Trust’s income is earned, and its
expenses are partially paid, in New Taiwan Dollars (“NT$”). 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 (“U.S.$”) based on the closing
market rate for the United States Dollar in Taiwan at the end of the year. At
December 31, 2009, that rate was NT$32.0055 to U.S. $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 GAAP.
In order to reconcile such differences, accumulated net investment income was
increased by $1,987,015 and accumulated net realized loss on investments was
increased by $59,166,502 to reflect the impact of such differences in accordance
with GAAP. 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, 2009, the components of distributable earnings/ (accumulated
losses) on a tax basis were as follows:
Undistributed
net investment income
|
|
$ |
0 |
|
Accumulated
capital and other losses
|
|
|
(20,139,656 |
) |
Unrealized
appreciation
|
|
|
12,054,755 |
|
|
|
$ |
(8,084,901 |
) |
H — Taxes — The Trust intends
to continue to elect and to continue to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the “Code”). If the
Trust complies with all of the applicable requirements of the Code, it will not
be subject to U.S. federal income and excise taxes provided that it distributes
all of its investment company taxable income and net capital gains to its
shareholders.
Management
has analyzed the Trust’s tax positions taken on federal income tax returns for
all open tax years and has concluded that, as of December 31, 2009, 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.
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / December 31, 2009 (Expressed in U.S. Dollars)
(continued)
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 year ended December 31, 2009, total par value of stock
dividend received was $460,345.
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 $46,635 paid for the year ended December 31,
2009.
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 — ASC 740 provides guidance for how uncertain tax
positions should be recognized, measured, presented and disclosed in the
financial statements. ASC 740 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. As required, the Trust
implemented ASC 740 on January 1, 2007. Based on management’s
evaluation, ASC 740 did not have a material impact on the Trust’s financial
statements.
K — Fair Value Measurements
and Disclosures — Effective January 1, 2008, the Trust adopted Accounting
Standards Codification 820 - Fair Value Measurements and Disclosures (“ASC
820”). ASC 820 defines fair value, establishes a framework for measuring fair
value in GAAP, and expands disclosures about fair value
measurement. The changes to current practices resulting from the
application of ASC 820 relate to the definition of fair value, the methods used
to measure fair value, and expanded disclosures about fair value measurement.
ASC 820 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, ASC 820 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
ASC 820 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 I that are observable
for the asset or liability, either directly or indirectly. Level II
assets include the following: quoted prices for similar assets or liabilities
in active markets, quoted prices for identical or similar assets or liabilities
in markets that are not active, inputs other than quoted prices that are
observable for the asset or liability, and inputs that are derived principally
from or corroborated by observable market data by correlation or other means
(market-corroborated inputs).
Level III
– Unobservable pricing input at the measurement date for the asset or
liability. Unobservable inputs shall be used to measure fair value to
the extent that observable inputs are not available.
In some
instances, the inputs used to measure fair value might fall in different levels
of the fair value hierarchy. The level in the fair value hierarchy
within which the fair value measurement in its entirety falls shall be
determined based on the lowest input level that is significant to the fair value
measurement in its entirety.
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / December 31, 2009 (Expressed in U.S. Dollars)
(continued)
The
following table summarizes the valuation of the Trust’s securities at December
31, 2009 using the fair value hierarchy:
At
December 31, 2009
|
|
Level
I
|
|
Level
II
|
|
Level
III
|
|
|
Total
|
|
Investments,
at value
|
|
$ |
84,574,786 |
|
—
|
|
|
— |
|
|
$ |
84,574,786 |
|
Common
Stocks
|
|
|
84,356,053 |
|
—
|
|
|
— |
|
|
|
84,356,05 |
|
Time
Deposits
|
|
|
218,733 |
|
—
|
|
|
— |
|
|
|
218,733 |
|
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 NT$, changes in the relationship of the
NT$ to the U.S.$ 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 advisory agreement with NRC on
October 1, 2007. Pursuant to the advisory agreement, NRC is
responsible, among other things, for investing and managing the assets of the
Trust and administering the Trust’s affairs. The Trust pays NRC a fee
at an annual rate of 1.25% of the NAV of the Trust’s assets up to $150 million
and 1.00% of such NAV in excess of $150 million.
Note
5 — Administrative Management
Brown
Brothers Harriman & Co. (“BBH”) provides administrative and accounting
services for the Trust, including maintaining certain books and records of the
Trust, and preparing certain reports and other documents required by U.S.
federal and/or state laws and regulations. The Trust pays BBH a monthly fee for
these services at an annual rate of 0.06% of the NAV of the Trust’s assets up to
$200 million, 0.05% of such NAV equal to or in excess of $200 million up to $400
million and 0.04% of such NAV equal to or in excess of $400
million. The total payment to BBH for administrative and custodial
services is subject to a minimum annual fee of $200,000. Out-of-pocket expenses
will be billed at the actual amount incurred at the time the goods or service is
purchased.
Note
6 — Custodian
BBH
serves as custodian of the assets of the Trust. The Trust pays BBH a monthly fee
for securities in the Taiwan market at an annual rate of 0.15% of the Trust’s
market value of Taiwan holdings up to $200 million, 0.13% of such Taiwan
holdings equal to or in excess of $200 million up to $400 million and 0.11% of
such Taiwan holdings equal to or in excess of $400 million. The Trust pays BBH a
monthly fee for securities in the Hong Kong market at an annual rate of 0.10% of
the Trust’s market value of Hong Kong holdings. The total payment to BBH for
administrative and custodial services is subject to a minimum annual fee of
$200,000.
Note
7 — Investments in Securities
Purchases
and proceeds from sales of securities, excluding short-term investments, for the
year ended December 31, 2009, included $6,988,759 for stock purchases and
$14,544,850 for stock sales, respectively.
At
December 31, 2009, the cost of investments, excluding short-term investments,
for U.S. federal income tax purposes was $72,301,296. At December 31, 2009, the
unrealized appreciation of $12,054,757 for U.S. federal income tax purposes
consisted of $19,912,640 of gross unrealized appreciation and $7,857,883 of
gross unrealized depreciation.
Note
8 — Shares of Beneficial Interest
A — The
Trust’s Declaration of Trust permits the Trustees to issue an unlimited number
of shares of beneficial interest or additional classes of other securities. The
shares have a par value of $0.01, and no other classes of securities are
outstanding at present. The Trust has a repurchase program which allows for the
repurchase of up to 10% of the outstanding shares. The share repurchase program
commenced on November 1, 2004.
In
connection with the share repurchase program referred to above, the Board of
Trustees authorized management to repurchase Trust shares in one or more block
transactions provided that no block exceeds 500,000 shares on any day, no more
than 1,000,000 shares in total are repurchased in block transactions, and 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.
TAIWAN
GREATER CHINA FUND
Notes
to Financial Statements / December 31, 2009 (Expressed in U.S. Dollars)
(continued)
During
the year ended December 31, 2009, the Trust did not repurchase any shares under
this program.
B — The Trust has adopted an
interval fund structure pursuant to which it makes 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
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.
In June
2009, the Trust accepted 653,128 shares for payment at a price of $5.08 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
24, 2009, to which a 2% repurchase fee was applied. The purchased
shares constituted approximately 5% of the Trust’s previously outstanding
shares.
In
December 2009, the Trust accepted 620,472 shares for payment at a price of $6.59
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 16, 2009, 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 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 and on January 22, 2009, the Registration
Statement was declared effective by the SEC. The Fund filed
subsequent amendments for the same purpose on November 11, 2009 and January 27,
2010.
At
December 31, 2009, 11,788,968 shares were outstanding.
Note
9 — Subsequent Events
Management
of the Fund has performed an evaluation of subsequent events through February
25, 2010, which is the date the financial statements were
issued. This evaluation did not result in any subsequent events that
necessitated disclosures and/or adjustments.
Report
of Independent Registered Public Accounting Firm
The
Board of Directors and Shareholders
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, 2009, and the related statement of operations for the year then
ended, the statements of changes in 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. These financial statements and financial
highlights are the responsibility of the Company’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, 2009, by correspondence with custodians. 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, 2009, 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, 2010
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, President and Chief Executive Officer of the Fund has served as
Portfolio Manager responsible for the day to day management of the Fund’s
portfolio since February 2004. Prior to October 1, 2007, Mr. Champion was
employed directly by the Fund as the portfolio Manager for the Fund. Since
October 1, 2007, he has been employed by NCR, Investment Manager to serve as
Portfolio Manager to the Fund. Mr. Champion 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 2009,
the Trust’s Chief Executive Officer provided to the New York Stock Exchange (the
“NYSE”) 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,
2009 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.
2009
ANNUAL MEETING OF SHAREHOLDERS (unaudited)
On
September 10, 2009, the Trust held an annual meeting to:
(i)
|
Elect
two trustees, each to serve for a term expiring on the date of the 2012
Annual Meeting of Shareholders or the special meeting held in lieu
thereof.
|
(ii)
|
Consider
whether to approve the conversion of the Trust from a closed end
investment company to an open-end investment
company.
|
The
results of the shareholder votes are shown below. Votes representing 8,954,031,
or 72.16%, of the 12,409,440 eligible shares outstanding were represented by
proxy. Edward B. Collins and Tsung-Ming Chung were each elected for a term
expiring in 2012. Votes representing approximately 39% of the eligible shares
outstanding were voted for the conversion from a closed-end fund to an open-end
fund which did not constitute a majority of the outstanding shares, therefore,
the conversion was not approved.
Nominees
to the Board of Trustees
|
For
|
Withheld
|
Edward
B. Collins
|
8,110,586
|
843,445
|
Tsung-Ming
Chung
|
8,341,231
|
612,800
|
Pedro-Pablo
Kuczynski, David N. Laux, Robert P. Parker and Frederick C. Copeland Jr., whose
terms did not expire in 2009, remain trustees.
Approval
of Conversion from a Closed-End Investment Company to an Open-End Investment
Company
For
|
Against
|
Withheld/Abstain
|
4,418,855
|
2,338,643
|
26,701
|
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 (60)
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 2012 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 (67)
765
Market Street,
Suite
31A San Francisco,
California
94103 USA
|
|
Trustee
and
Audit
Committee
Member
|
|
Trustee
since 2000 and until the 2012
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. (68)
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 (71)
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 (82)
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 (68)
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 (64)
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, hief 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
|
Regina
Foley (45)
111
Gillett Street
Hartford,
CT 06105
|
|
Secretary,
Treasurer,
Chief
Financial
Officer and
Chief
Compliance
Officer
|
|
Secretary,
Treasurer, Chief Financial
Officer and Chief Compliance Officer since
September 2009
|
|
Secretary,
Treasurer, Chief Financial Officer and Chief Compliance Officer,
Nanking
Road Capital Managment LLC, since June 2009; Finance Manager, Pfizer,
2007–2009; Assistant Controller, Alea Group, 2006–2007;
Finance
Manager.
ING, January 2006 to November 2006; and Assistant Director, The
Hartford Financial Services Group, 2002–2006
|
|
None
|
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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
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
Regina
Foley, Chief Financial Officer, Treasurer
and Secretary
Manager:
Nanking
Road Capital Management, LLC
Administrator
& Custodian:
Brown
Brothers Harriman & Co.
Transfer
Agent,
Paying
and Plan Agent:
American
Stock Transfer & Trust Company
59 Maiden
Lane – Plaza Level
Investor
Relations & Communications:
60 East
42nd Street, Suite 916
U.S.
Legal Counsel:
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, 2009 (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, 2009 and December 31, 2008 were $85,000 and
$85,000, respectively.
(b) Audit Related
Fees. For each of the fiscal years ended December 31, 2009 and
December 31, 2008, 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 $7,400 and $20,150,
respectively.
(c) Tax Fees. For each of
the fiscal years ended December 31, 2009 and December 31, 2008, the aggregate
fees billed for professional services rendered to the registrant by the
principal accountant for tax compliance, tax advice, and tax planning were
$30,000 and $30,000 respectively. The services for the fiscal year
ended December 31, 2008 and December 31, 2009 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, 2009 and December 31, 2008, 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, 2009 and
December 31, 2008 were
$0 and $0, respectively. 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 and $0 for each of the fiscal years ended December 31, 2009
and December 31, 2008.
(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)
|
Investments
in securities of unaffiliated issuers as of the close of the reporting
period are 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, President and Chief Executive Officer of the Fund has served as
Portfolio Manager responsible for the day to day management of the Fund’s
portfolio since February 2004. Prior to October 1, 2007, Mr. Champion was employed directly by the Fund as
the Portfolio Manager for the Fund. Since October 1, 2007, he has been employed by Nanking Road Capital
Management, LLC (“NRC”), the Investment Manager, to serve as
Portfolio Manager to the Fund. Mr. Champion 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, 2009, Mr.
Champion managed the registrant with approximately $84,592,078 million in assets under
management. As of the fiscal year ended December 31, 2009, Mr.
Champion did not manage any mutual funds, pooled investment vehicles or other
accounts other than the registrant.
While Mr.
Champion 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. NRC
has adopted policies and procedures that it believes are reasonably designed to
address potential conflicts of interest. As a result, NRC 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 prorated bonus for the year ended December 31,
2007, which was paid to Mr. Champion in 2008. 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, 2009, Mr. Champion beneficially owned shares
in the registrant with a market value of over $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
28
|
|
|
|
|
March
1
to
March
31
|
|
|
|
|
April
1
to
April
30
|
|
|
|
|
May
1
to
May
31
|
|
|
|
|
June
1
to
June
30
|
(1) 653,128
|
$5.08
|
(1) 653,128
|
(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) 620,472
|
$6.59
|
(1) 620,472
|
(2) 0
|
Total
|
1,273,600
|
$11.67
|
1,273,600
|
125,032
|
(1)
|
Shares
repurchased under the registrant’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. As of December 31, 2009, 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) 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 (“SOX”), 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 this report to 10
or more persons.
(b)
Certifications required by Rule 30a-2(b) under the 1940 Act, Section 906 of SOX,
Rule 13a-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
10, 2010
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
10, 2010
By: /s/ Regina
Foley
Name:
Regina Foley
Title:
Chief Financial Officer (Principal Financial Officer and Principal Accounting
Officer)
Date: March
10, 2010