|
|
|
|
TAIWAN GREATER CHINA
FUND
www.taiwangreaterchinafund.com
Trustees and
Officers:
Pedro-Pablo Kuczynski, Chairman
and Trustee
Frederick C. Copeland Jr., Vice
Chairman, Trustee and
Audit Committee Member
David N. Laux, Trustee
Tsung-Ming Chung, Trustee and
Audit Committee
Member
Edward B. Collins, Trustee and
Audit Committee
Member
Robert P. Parker, Trustee and
Audit Committee
Member
Steven R. Champion, President,
Chief Executive
Officer and Portfolio Manager
Regina Foley, Chief Financial
Officer,
Treasurer and
Secretary
Manager:
Nanking Road Capital Management,
LLC
111 Gillett
Street
Hartford, CT
06105
U.S.A.
Tel: (860)
278-7888
Administrator &
Custodian:
Brown Brothers Harriman &
Co.
40 Water
Street
Boston, MA
02109
U.S.A.
Tel: (617)
742-1818
Transfer Agent, Paying and Plan
Agent:
American Stock Transfer &
Trust Company
59 Maiden Lane – Plaza
Level
New York, NY
10038
U.S.A.
Telephone: (866)
624-4110
Investor Relations &
Communications:
The Altman Group,
Inc.
60 East 42nd Street,
Suite 916
New York, NY
10165
U.S.A.
Telephone: (212)
681-9600
U.S. Legal
Counsel:
Clifford Chance US
LLP
1 West 52nd
Street
New York, NY
10019-6131
U.S.A.
Tel: (212)
878-8000
For information on the Fund,
including the NAV, please call toll free
1-800-343-9567.
Current and historical (from
2/27/2004) NAV information can be found on the Fund’s website at
www.taiwangreaterchinafund.com
|
Semi-Annual
Report
June 30,
2010
|
Dear Shareholders
Even as the island’s economy continued
to prosper during the six months ended June 30, 2010 and the landmark Economic
Cooperation Framework Agreement (“ECFA”) was signed with China on June 29, 2010,
Taiwan’s stock market as measured by the MSCI Taiwan index produced negative
total returns of 12.4% as measured in U.S. dollar terms. The Fund’s stock price
and net asset value declined 12.7% and 15.6%, respectively, during the six-month
period. The decline in net asset value return was net of expenses and taxes of
1.40%. The volatility of the overall Taiwan stock market, based on the 30-day
annualized rate calculated by Bloomberg rose sharply to 23.3% at the end of the
second quarter, compared to 14.1% at March 31, 2010 and 15.2% at year-end
2009.
The Taiwan Greater China Fund’s (the
“Fund”) discount to net asset value averaged 8.4% during the second quarter,
down from 9.6% during the first quarter of 2010 and 9.2% for 2009 as a whole.
The Fund’s discount to net asset value averaged 9.0% during the six months ended
June 30, 2010. The highest closing discount during the quarter was 11.6%
recorded on June 4th, and the lowest closing discount was
the 5.9% recorded on May 3rd. The Fund’s mean and median daily
trading volume for the quarter declined 13.3% and 19.4%, respectively, to 21,167
and 12,364 shares. Additionally, as compared to the six months ended June 30,
2009, the Fund’s mean and median trading volume declined 19.9% and 25.8%,
respectively.
The Fund’s net asset value performance
remains highly correlated to the overall performance of the Taiwan stock market
during the past year with an R-squared of 0.97 relative to the MSCI Taiwan
index. The Fund’s beta is 0.98, indicating that the Fund’s net asset value is
slightly less volatile than the overall Taiwan market. The Fund produced an
alpha (a measure of “excess return,” which cannot be explained by the risk
level) of 3 basis points per week relative to the index.
Market valuations for the Fund’s
portfolio of high quality companies at the end of the first quarter present a
highly attractive picture. According to Bloomberg statistics, the heavily
technology-weighted portfolio had a weighted average forward price-earnings
ratio of 11.7, a weighted average price-book ratio of 2.4, a weighted average
cash dividend yield of 3.8%, and a weighted average return on equity of
18.7%. The Fund generally holds shares in companies with high liquidity
levels, low leverage, and high quality earnings.
The Fund uses Bloomberg to provide
attribution analysis for its portfolio. The Bloomberg analysis compares the New
Taiwan dollar (“NT$”) total returns of the Fund’s portfolio to the NT$ total
returns of the Fund’s benchmarks.
For the year-to-date period ending June
30, 2010, the NT$ return of the Fund’s portfolio was approximately –12.9% while
the return of MSCI Taiwan index was approximately –11.8%. Therefore, the active
return for the Fund was approximately –1.1%. Sector allocation contributed
approximately +2.2% to the active return while asset selection contributed 1.0%.
There was also contribution of approximately -0.1% due to currency, a result of
holding two Hong Kong positions. Our underweight to financial, overweight to
basic material, and overweight to consumer non-cyclical sectors were the primary
drivers to our positive active return over the past year. The primary detractor
from this performance for the one year period ended June 30, 2010 was our
security selections in the consumer cyclical sector. For the three months ended
June 30, 2010, the portfolio returned approximately -9.8%. This was worse than
the roughly -8.2% return generated by the MSCI Taiwan index over the same
period. The resulting active return of about -1.6% was attributable mainly to
our poorly performing security selections in the communications, technology,
financial, and consumer cyclical sectors. During the three months ended June 30,
2010, the brightest spot was our slight overweight to and security selections in
the consumer non-cyclical sector.
The ECFA was signed between Taiwan and
China on June 29, 2010 in Chongqing. This landmark agreement will lower tariff
rates on 539 categories of Taiwan products and 267 categories of products from
China. It is estimated that this will save Taiwan exporters approximately $1
billion in customs duties. This “early harvest” list includes significant
benefits for Taiwan’s financial sector as it expands into mainland China. The
agreement is expected to increase Taiwan’s annual economic growth rate by
approximately 0.4%.
Chinese tourists continue to visit
Taiwan in record numbers, with approximately 4,505 tourists arriving per day in
May. Twenty-eight new weekly flights were added between Taipei’s Songshan
airport and Hongqiao in Shanghai. This is in addition to the existing 56 weekly
flights from Songshan to Shanghai’s Pudong Airport.
Taiwan’s economy continues to strengthen
with Citibank increasing its projection of 2010 growth in gross domestic product
to 7.0%. During May 2010, export orders reached $33.7 billion, the third highest
level on record with overseas production exceeding 50% for the third consecutive
month. Taiwan’s foreign exchange reserves rose to a new high of $360.1 billion,
making Taiwan the world’s sixth largest net creditor nation.
We believe that a portfolio of
Taiwan-based companies, which conduct significant business operations in China,
offers investors an attractive long-term investment
opportunity.
Yours truly,
Steven R.
Champion
President, CEO and Portfolio
Manager
July 31, 2010
TAIWAN
GREATER CHINA FUND
PORTFOLIO HIGHLIGHTS
Schedule of Investments by Industry as
of June 30, 2010 (Unaudited)
Industry
Diversification
|
|
|
|
|
Percent of
|
|
Industry
|
|
U.S. $
Value
|
|
|
Net Assets
|
|
|
|
|
|
|
|
|
|
|
Computer Systems &
Hardware
|
|
|
14,642,024 |
|
|
|
21.56
|
% |
|
|
|
|
|
|
|
|
|
Semiconductors
|
|
|
12,930,909 |
|
|
|
19.04 |
|
|
|
|
|
|
|
|
|
|
Plastics
|
|
|
8,574,287 |
|
|
|
12.63 |
|
|
|
|
|
|
|
|
|
|
Electronic
Components
|
|
|
7,557,736 |
|
|
|
11.12 |
|
|
|
|
|
|
|
|
|
|
Flat-Panel
Displays
|
|
|
3,948,918 |
|
|
|
5.81 |
|
|
|
|
|
|
|
|
|
|
Food
|
|
|
3,321,636 |
|
|
|
4.88 |
|
|
|
|
|
|
|
|
|
|
Steel
|
|
|
3,239,868 |
|
|
|
4.77 |
|
|
|
|
|
|
|
|
|
|
Financial
Services
|
|
|
2,605,691 |
|
|
|
3.84 |
|
|
|
|
|
|
|
|
|
|
Computer
Peripherals/ODM
|
|
|
2,405,251 |
|
|
|
3.54 |
|
|
|
|
|
|
|
|
|
|
Cement
|
|
|
1,833,533 |
|
|
|
2.70 |
|
|
|
|
|
|
|
|
|
|
Electronics/Other
|
|
|
1,705,890 |
|
|
|
2.52 |
|
|
|
|
|
|
|
|
|
|
Other
Non-Tech
|
|
|
1,533,131 |
|
|
|
2.26 |
|
|
|
|
|
|
|
|
|
|
Textiles
|
|
|
868,606 |
|
|
|
1.28 |
|
|
|
|
|
|
|
|
|
|
Rubber
|
|
|
825,433 |
|
|
|
1.22 |
|
|
|
|
|
|
|
|
|
|
Glass, Paper &
Pulp
|
|
|
601,575 |
|
|
|
0.89 |
|
|
|
|
|
|
|
|
|
|
Electrical &
Machinery
|
|
|
422,792 |
|
|
|
0.62 |
|
|
|
|
|
|
|
|
|
|
Retailing
|
|
|
389,522 |
|
|
|
0.58 |
|
|
|
|
|
|
|
|
|
|
Transportation
|
|
|
288,892 |
|
|
|
0.43 |
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
94,583 |
|
|
|
0.14 |
|
|
|
|
|
|
|
|
|
|
Internet
Content-Entertainment
|
|
|
74,074 |
|
|
|
0.11 |
|
|
|
|
|
|
|
|
|
|
Short-Term
Securities
|
|
|
71,203 |
|
|
|
0.10 |
|
|
|
|
|
|
|
|
|
|
Liabilities (Net of Other
Assets)
|
|
|
(29,513
|
) |
|
|
(0.04
|
) |
|
|
|
|
|
|
|
|
|
Net Assets
|
|
|
67,906,041 |
|
|
|
100.00 |
|
TAIWAN GREATER CHINA FUND
Schedule of
Investments (Unaudited) / June 30, 2010
COMMON STOCK —
99.94%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
% of
|
|
|
U.S. Dollar
|
|
Cement —
2.70%
|
|
|
|
Net Assets
|
|
|
Value
|
|
878,683
|
|
Asia Cement
Corp.
|
|
|
1.14
|
|
|
$ |
775,048 |
|
1,248,373
|
|
Taiwan Cement
Corp.
|
|
|
1.56
|
|
|
|
1,058,485 |
|
|
|
|
|
|
|
|
|
|
1,833,533 |
|
Computer Peripherals/ODM —
3.54%
|
|
|
|
|
|
|
|
|
165,628
|
|
Chicony
Electronics Co., Ltd.
|
|
|
0.54
|
|
|
|
369,863 |
|
93,843
|
|
HTC
Corp.
|
|
|
1.85
|
|
|
|
1,253,280 |
|
709,350
|
|
lite-on
Technology Corp.
|
|
|
1.15
|
|
|
|
782,108 |
|
|
|
|
|
|
|
|
|
|
2,405,251 |
|
Computer Systems & Hardware —
21.56%
|
|
|
|
|
|
|
|
|
431,397
|
|
Acer
Inc.
|
|
|
1.48
|
|
|
|
1,007,564 |
|
289,834
|
|
Asustek Computer
Inc.
|
|
|
3.18
|
|
|
|
2,155,922 |
|
780,676
|
|
Compal
Electronics Inc.
|
|
|
1.38
|
|
|
|
937,126 |
|
2,145,860
|
|
Hon Hai Precision
Industry Co., Ltd.
|
|
|
11.19
|
|
|
|
7,597,734 |
|
1,021,046
|
|
Quanta Computer
Inc.
|
|
|
2.73
|
|
|
|
1,855,150 |
|
736,300
|
|
Wistron
Corp.
|
|
|
1.60
|
|
|
|
1,088,528 |
|
|
|
|
|
|
|
|
|
|
14,642,024 |
|
Electrical & Machinery —
0.62%
|
|
|
|
|
|
|
|
|
348,000
|
|
Teco Electric
& Machinery Co., Ltd.
|
|
|
0.21
|
|
|
|
143,750 |
|
751,837 |
*
|
Walsin Lihwa
Corp.
|
|
|
0.41
|
|
|
|
279,042 |
|
|
|
|
|
|
|
|
|
|
422,792 |
|
Electronic Components —
11.12%
|
|
|
|
|
|
|
|
|
263,343
|
|
Catcher
Technology Co., Ltd.
|
|
|
0.84
|
|
|
|
572,529 |
|
417,000
|
|
Coretronic
Corp.
|
|
|
0.91
|
|
|
|
616,483 |
|
681,991
|
|
Delta Electronics
Inc.
|
|
|
3.23
|
|
|
|
2,192,284 |
|
215,658 |
*
|
E Ink Holdings
Inc.
|
|
|
0.39
|
|
|
|
264,905 |
|
137,715
|
|
Everlight
Electronics Co.
|
|
|
0.52
|
|
|
|
354,152 |
|
226,034
|
|
Foxconn
Technology Co., Ltd.
|
|
|
1.11
|
|
|
|
754,675 |
|
780,092 |
*
|
Pegatron
Corp.
|
|
|
1.07
|
|
|
|
728,062 |
|
132,405
|
|
Shin Zu Shing
Co., Ltd.
|
|
|
0.59
|
|
|
|
402,181 |
|
81,100
|
|
Simplo Technology
Co., Ltd.
|
|
|
0.65
|
|
|
|
442,055 |
|
236,450
|
|
TXC
Corp.
|
|
|
0.54
|
|
|
|
367,921 |
|
422,000
|
|
WPG Holdings Co.,
Ltd.
|
|
|
1.16
|
|
|
|
786,396 |
|
10,000
|
|
Young Fast
Optoelectronics Co., Ltd.
|
|
|
0.11
|
|
|
|
76,093 |
|
|
|
|
|
|
|
|
|
|
7,557,736 |
|
Electronics/Other —
2.52%
|
|
|
|
|
|
|
|
|
199,000
|
|
Lumax
International Corp., Ltd.
|
|
|
0.48
|
|
|
|
323,864 |
|
634,776
|
|
Synnex Technology
International Corp.
|
|
|
2.04
|
|
|
|
1,382,026 |
|
|
|
|
|
|
|
|
|
|
1,705,890 |
|
See accompanying notes to unaudited
financial statements and independent accountants’ review
report.
TAIWAN
GREATER CHINA FUND
Schedule of
Investments (Continued) (Unaudited) / June 30, 2010
Shares
|
|
|
|
% of
|
|
|
U.S. Dollar
|
|
Financial Services —
3.84%
|
|
Net Assets
|
|
|
Value
|
|
1,151,000
|
|
Cathay Financial
Holding Co., Ltd.
|
|
|
2.53
|
|
|
$ |
1,717,697 |
|
792,000
|
|
Fubon Financial
Holding Co., Ltd.
|
|
|
1.31
|
|
|
|
887,994 |
|
|
|
|
|
|
|
|
|
|
2,605,691 |
|
Flat-Panel Displays —
5.81%
|
|
|
|
|
|
|
|
|
3,182,292 |
*
|
AU Optronics
Corp.
|
|
|
4.19
|
|
|
|
2,846,495 |
|
1,062,732 |
*
|
Chimei Innolux
Corp.
|
|
|
1.62
|
|
|
|
1,102,423 |
|
|
|
|
|
|
|
|
|
|
3,948,918 |
|
Food —
4.88%
|
|
|
|
|
|
|
|
|
|
|
151,375
|
|
Great Wall
Enterprises Co.
|
|
|
0.19
|
|
|
|
131,876 |
|
436,000
|
|
Tingyi (Cayman
Islands) Holdings Corp.
|
|
|
1.58
|
|
|
|
1,075,368 |
|
1,317,266
|
|
Uni-President
Enterprise Corp.
|
|
|
2.14
|
|
|
|
1,456,469 |
|
776,000
|
|
Want Want China
Holdings, Ltd.
|
|
|
0.97
|
|
|
|
657,923 |
|
|
|
|
|
|
|
|
|
|
3,321,636 |
|
Glass, Paper & Pulp —
0.89%
|
|
|
|
|
|
|
|
|
654,365
|
|
Taiwan Glass
Industrial Corp.
|
|
|
0.89
|
|
|
|
601,575 |
|
|
|
|
|
|
|
|
|
|
|
|
Hotels —
0.14%
|
|
|
|
|
|
|
|
|
|
|
7,700
|
|
Formosa
International Hotels Corp.
|
|
|
0.14
|
|
|
|
94,583 |
|
|
|
|
|
|
|
|
|
|
|
|
Internet Content-Entertainment —
0.11%
|
|
|
|
|
|
|
|
|
9,000
|
|
Chinese Gamer
International Corp.
|
|
|
0.11
|
|
|
|
74,074 |
|
|
|
|
|
|
|
|
|
|
|
|
Plastics —
12.63%
|
|
|
|
|
|
|
|
|
|
1,069,897
|
|
Formosa Chemicals
& Fiber Corp.
|
|
|
3.63
|
|
|
|
2,462,283 |
|
1,491,271
|
|
Formosa Plastics
Corp.
|
|
|
4.64
|
|
|
|
3,149,512 |
|
1,844,968
|
|
Nan Ya Plastics
Corp.
|
|
|
4.36
|
|
|
|
2,962,492 |
|
|
|
|
|
|
|
|
|
|
8,574,287 |
|
Retailing —
0.58%
|
|
|
|
|
|
|
|
|
|
87,850
|
|
Far Eastern
Department Stores Co., Ltd.
|
|
|
0.11
|
|
|
|
72,168 |
|
107,445
|
|
President Chain
Store Corp.
|
|
|
0.47
|
|
|
|
317,354 |
|
|
|
|
|
|
|
|
|
|
389,522 |
|
Rubber —
1.22%
|
|
|
|
|
|
|
|
|
|
|
405,754
|
|
Cheng Shin Rubber
Ind. Co., Ltd.
|
|
|
1.22
|
|
|
|
825,433 |
|
|
|
|
|
|
|
|
|
|
|
|
Semiconductors —
19.04%
|
|
|
|
|
|
|
|
|
2,138,762
|
|
Advanced
Semiconductor Engineering Inc.
|
|
|
2.51
|
|
|
|
1,703,836 |
|
349,346
|
|
MediaTek
Inc.
|
|
|
7.23
|
|
|
|
4,909,669 |
|
100,851
|
|
Powertech
Technology Inc.
|
|
|
0.42
|
|
|
|
282,217 |
|
495,193
|
|
Siliconware
Precision Industries Co., Ltd.
|
|
|
0.79
|
|
|
|
539,064 |
|
2,566,284
|
|
Taiwan
Semiconductor Manufacturing Co., Ltd.
|
|
|
7.11
|
|
|
|
4,830,090 |
|
1,494,397
|
|
United
Microelectronics Corp.
|
|
|
0.98
|
|
|
|
666,033 |
|
|
|
|
|
|
|
|
|
|
12,930,909 |
|
See accompanying notes to unaudited
financial statements and independent accountants’ review
report.
TAIWAN GREATER CHINA
FUND
Schedule of Investments (Continued)
(Unaudited) / June 30, 2010
Shares
|
|
|
|
% of
|
|
|
U.S. Dollar
|
|
Steel —
4.77%
|
|
|
|
Net Assets
|
|
|
Value
|
|
3,418,696
|
|
China Steel
Corp.
|
|
|
4.66
|
|
|
$ |
3,164,132 |
|
96,004
|
|
Tung Ho Steel
Enterprise Corp.
|
|
|
0.11
|
|
|
|
75,736 |
|
|
|
|
|
|
|
|
|
|
3,239,868 |
|
Textiles —
1.28%
|
|
|
|
|
|
|
|
|
|
|
837,334
|
|
Far Eastern New
Century Corp.
|
|
|
1.28
|
|
|
|
868,606 |
|
|
|
|
|
|
|
|
|
|
|
|
Transportation —
0.43%
|
|
|
|
|
|
|
|
|
151,000
|
|
U-Ming Marine
Transport Corp.
|
|
|
0.43
|
|
|
|
288,892 |
|
|
|
|
|
|
|
|
|
|
|
|
Other Non-Tech —
2.26%
|
|
|
|
|
|
|
|
|
274,660
|
|
Giant
Manufacturing Co., Ltd.
|
|
|
1.23
|
|
|
|
835,987 |
|
357,900
|
|
Merida Industry
Co., Ltd.
|
|
|
0.74
|
|
|
|
501,321 |
|
250,696
|
|
Pou Chen
Corp.
|
|
|
0.29
|
|
|
|
195,823 |
|
|
|
|
|
|
|
|
|
|
1,533,131 |
|
TOTAl COMMON STOCK (COST
$64,897,301)
|
|
|
|
|
|
|
67,864,351 |
|
|
|
|
|
|
|
|
|
|
SHORT TERM SECURITIES —
0.10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Deposit —
0.10%
|
|
|
|
|
|
|
|
|
Citibank - London, 0.03%, Due
07/01/10
|
|
|
0.10
|
|
|
|
71,203 |
|
|
|
|
|
|
|
|
|
|
TOTAL SHORT-TERM SECURITIES (COST
$71,203)
|
|
|
|
|
|
|
71,203 |
|
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS IN
SECURITIES AT FAIR VALUE
|
|
|
|
|
|
|
|
|
(COST
$64,968,504)
|
|
|
100.04
|
|
|
|
67,935,554 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES (NET OF OTHER
ASSETS)
|
|
|
(0.04)
|
|
|
|
(29,513
|
) |
|
|
|
|
|
|
|
|
|
NET ASSETS
|
|
|
|
|
100.00
|
|
|
$ |
67,906,041 |
|
* Non-income producing: These stocks did
not pay a cash dividend during the past year.
See accompanying notes to unaudited
financial statements and independent accountants’ review
report.
TAIWAN GREATER CHINA
FUND
Statement of Assets and Liabilities
June 30, 2010 (Unaudited) (Expressed in
U.S. Dollars)
Assets
|
|
|
|
|
|
|
|
Investments in securities at
market value (Notes 2B, 2D, 3 and 7)
|
|
|
|
Common Stock
(cost — $64,897,301)
|
|
$ |
67,864,351 |
|
Short-term
securities (cost — $71,203)
|
|
|
71,203 |
|
Total investment in securities at
fair value (cost — $64,968,504)
|
|
|
67,935,554 |
|
|
|
|
|
|
Cash
|
|
|
142,996 |
|
Foreign cash (cost —
$6,017)
|
|
|
6,007 |
|
Dividend
receivable
|
|
|
14,910 |
|
Prepaid expenses and other
assets
|
|
|
188,560 |
|
Total
assets
|
|
|
68,288,027 |
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Professional fees
payable
|
|
|
186,779 |
|
Management fee payable (Note
4)
|
|
|
61,665 |
|
Shareholder communication fees
payable
|
|
|
41,513 |
|
Administration fee payable (Note
5)
|
|
|
24,873 |
|
Custodian fee payable (Note
6)
|
|
|
11,005 |
|
Other accrued
expenses
|
|
|
56,151 |
|
Total
liabilities
|
|
|
381,986 |
|
|
|
|
|
|
Net assets
|
|
$ |
67,906,041 |
|
|
|
|
|
|
Components of net
assets
|
|
|
|
|
|
|
|
|
|
Par value of shares of beneficial
interest (Note 8)
|
|
$ |
111,995 |
|
Additional paid-in capital (Note
8)
|
|
|
88,827,884 |
|
Accumulated net investment
income
|
|
|
58,847,304 |
|
Accumulated net realized loss on
investments and foreign currency transactions
|
|
|
(43,002,670
|
) |
Unrealized net appreciation on
investments (Note 7)
|
|
|
2,967,050 |
|
Cumulative translation adjustment
(Note 2F)
|
|
|
(39,845,522
|
) |
|
|
|
|
|
Net assets
|
|
$ |
67,906,041 |
|
|
|
|
|
|
Net asset value per share
(11,199,520 shares issued and outstanding, par value
$0.01)
|
|
$ |
6.06 |
|
See accompanying notes to unaudited
financial statements and independent accountants’ review
report.
TAIWAN GREATER CHINA
FUND
Statement of
Operations
For the Six Months Ended June 30, 2010
(Unaudited) (Expressed in U.S. Dollars)
Investment income (Notes 2B,
2D)
|
|
|
|
Dividends
|
|
$ |
153,469 |
|
Interest and
other income
|
|
|
207 |
|
|
|
|
153,676 |
|
|
|
|
|
|
Republic of China taxes (Note
2H)
|
|
|
(48,089
|
) |
|
|
|
|
|
|
|
|
105,587 |
|
Expenses
|
|
|
|
|
Management fee
(Note 4)
|
|
|
458,822 |
|
Shareholder
communication expenses
|
|
|
144,023 |
|
Trustee fees and
expenses
|
|
|
117,040 |
|
Audit and tax
fee
|
|
|
67,521 |
|
Administrative
fee (Note 5)
|
|
|
57,546 |
|
Custodian fee
(Note 6)
|
|
|
55,595 |
|
Insurance
expenses
|
|
|
49,292 |
|
Legal fees and
expenses
|
|
|
48,767 |
|
Other
expenses
|
|
|
56,082 |
|
|
|
|
1,054,688 |
|
|
|
|
|
|
Net investment
loss
|
|
|
(949,101
|
) |
|
|
|
|
|
Net realized and unrealized gain
(loss) on investments and foreign currencies (Notes 2F and
7)
|
|
Net realized gain
(loss) on:
|
|
|
|
|
investments
(including short-term securities)
|
|
|
334,593 |
|
foreign currency
transactions
|
|
|
(7,046
|
) |
Net realized gain
on investments and foreign currency transactions
|
|
|
327,547 |
|
|
|
|
|
|
Net changes in
unrealized depreciation on:
|
|
|
|
|
investments
|
|
|
(11,776,189
|
) |
translation of
assets and liabilities in foreign currencies
|
|
|
(551,194
|
) |
Net unrealized
depreciation on investments and foreign currency
transactions
|
|
|
(12,327,383
|
) |
|
|
|
|
|
Net realized and
unrealized loss from investments and foreign
currencies
|
|
|
(11,999,836
|
) |
|
|
|
|
|
Net decrease in
net assets resulting from operations
|
|
$ |
(12,948,937 |
) |
See accompanying notes to unaudited
financial statements and independent accountants’ review
report.
TAIWAN GREATER CHINA
FUND
Statement of Changes in Net
Assets
For the Six Months Ended June 30, 2010
and the Year Ended December 31, 2009 (Expressed in U.S.
Dollars)
|
|
Six Months
|
|
|
Year Ended
|
|
|
|
Ended June
30,
|
|
|
December
31,
|
|
|
|
2010
(Unaudited)
|
|
|
2009
|
|
Net increase (decrease) in net
assets resulting from operations
|
|
|
|
|
|
|
Net investment
loss
|
|
$ |
(949,101 |
) |
|
$ |
(436,113 |
) |
Net realized gain
on investments and foreign
|
|
|
|
|
|
|
|
|
currency
transactions
|
|
|
327,547 |
|
|
|
1,328,719 |
|
Unrealized appreciation
(depreciation) on investments
|
|
|
(11,776,189
|
) |
|
|
39,826,892 |
|
Unrealized appreciation
(depreciation) on translation of
|
|
|
|
|
|
|
|
|
assets and
liabilities in foreign currencies
|
|
|
(551,194
|
) |
|
|
1,559,690 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net
assets resulting from operations
|
|
|
(12,948,937
|
) |
|
|
42,279,188 |
|
|
|
|
|
|
|
|
|
|
Capital share
transactions:
|
|
|
|
|
|
|
|
|
Cost of
semi-annual repurchase offer (Note 8B)
|
|
|
(3,737,100
|
) |
|
|
(7,406,801
|
) |
Net increase (decrease) in net
assets
|
|
|
(16,686,037
|
) |
|
|
34,872,387 |
|
|
|
|
|
|
|
|
|
|
Net assets, beginning of
period
|
|
|
84,592,078 |
|
|
|
49,719,691 |
|
|
|
|
|
|
|
|
|
|
Net assets, end of
period
|
|
$ |
67,906,041 |
|
|
$ |
84,592,078 |
|
See accompanying notes to unaudited
financial statements and independent accountants’ review
report.
TAIWAN GREATER CHINA
FUND
Financial Highlights
(Expressed in U.S.
Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2010
|
|
|
Years Ended December
31,
|
|
|
|
(Unaudited)
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Per share operating
performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value,
beginning of period
|
|
$ |
7.18 |
|
|
$ |
3.81 |
|
|
$ |
8.02 |
|
|
$ |
7.07 |
|
|
$ |
5.87 |
|
|
$ |
5.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income (loss) (a)
|
|
|
(0.08 |
) |
|
|
(0.03 |
) |
|
|
0.15 |
|
|
|
0.02 |
|
|
|
0.01 |
|
|
|
0.05 |
|
Net realized and
unrealized gain (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on
investments
|
|
|
(0.97 |
) |
|
|
3.24 |
|
|
|
(4.21 |
) |
|
|
0.92 |
|
|
|
1.21 |
|
|
|
0.65 |
|
Net realized and
unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
appreciation (depreciation)
on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation of foreign
currencies
|
|
|
(0.08 |
) |
|
|
0.15 |
|
|
|
(0.16 |
) |
|
|
(0.01 |
) |
|
|
(0.03 |
) |
|
|
(0.25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total from investment
operations
|
|
|
(1.13 |
) |
|
|
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) |
|
|
0.01 |
(a) |
|
|
0.02 |
(a) |
|
|
0.01 |
|
|
|
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of
period
|
|
$ |
6.06 |
|
|
$ |
7.18 |
|
|
$ |
3.81 |
|
|
$ |
8.02 |
|
|
$ |
7.07 |
|
|
$ |
5.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share market price, end of
period
|
|
|
5.55 |
|
|
|
6.36 |
|
|
|
3.53 |
|
|
|
7.23 |
|
|
|
6.61 |
|
|
|
5.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment return
(%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on Trust's
market price
|
|
|
(12.74 |
) |
|
|
80.18 |
|
|
|
(51.18 |
) |
|
|
9.38 |
|
|
|
24.72 |
|
|
|
8.16 |
|
Based on Trust's
net asset value
|
|
|
(15.60 |
) |
|
|
88.45 |
|
|
|
(52.49 |
) |
|
|
13.44 |
|
|
|
20.44 |
|
|
|
9.31 |
|
U.S. $ return of
Taiwan Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
Index**
|
|
|
(11.02 |
) |
|
|
82.88 |
|
|
|
(46.66 |
) |
|
|
9.23 |
|
|
|
20.35 |
|
|
|
3.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios and supplemental
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end
of period (in thousands)
|
|
$ |
67,906 |
|
|
$ |
84,592 |
|
|
$ |
49,720 |
|
|
$ |
116,031 |
|
|
$ |
113,391 |
|
|
$ |
104,364 |
|
Ratio of expenses
to average net
assets
(%)
|
|
|
1.34 |
† |
|
|
2.80 |
|
|
|
2.37 |
|
|
|
2.30 |
|
|
|
2.55 |
|
|
|
2.12 |
|
Ratio of net
investment income (loss) to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average net
assets (%)
|
|
|
(1.20 |
)† |
|
|
(0.64 |
) |
|
|
2.29 |
|
|
|
0.28 |
|
|
|
0.22 |
|
|
|
0.99 |
|
Portfolio
turnover ratio (%)
|
|
|
2 |
|
|
|
11 |
|
|
|
22 |
|
|
|
26 |
|
|
|
24 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Based
on average monthly shares outstanding. |
*
|
See Note 2G for information
concerning the Trust's distribution
policy.
|
**
|
Returns for the Taiwan Stock
Exchange Index are not total returns and reflect only changes in share
price, and do not assume that cash dividends were reinvested. The Taiwan
Stock Exchange Index is calculated by the Taiwan Stock Exchange
Corp.
|
See accompanying notes to unaudited
financial statements and independent accountants’ review
report.
TAIWAN GREATER CHINA
FUND
Notes to
Financial Statements / June 30, 2010 (Expressed in U.S. Dollars)
(Unaudited)
Note 1 — Organization and Acquisition of
The Taiwan (R.O.C.) Fund
The Taiwan Greater China Fund (the
“Fund” or the “Trust”) 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 (“NYSE”) 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 to be held at a date to be determined. The
affirmative vote of a majority of the Trust’s outstanding shares is required to
approve such a conversion.
At the Annual Meeting of Shareholders
held June 21, 2005, the shareholders approved the adoption by the Trust of an
interval fund structure. The Trust now makes semi-annual repurchase offers with
respect to its shares (see Note 8B).
On October 31, 2006, the Board of
Trustees terminated the Fund’s policy requiring the Republic of China Securities
and Futures Bureau, Financial Supervisory Commission (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 33 1/3% 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
business. The Trust did not have securities on loan during the six month period
ended June 30, 2010.
TAIWAN GREATER CHINA
FUND
Notes to
Financial Statements / June 30, 2010 (Expressed in U.S. Dollars) (Unaudited)
(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 of such loss will expire on December 31,
2017.
In accordance with federal income tax
regulations, the Trust expects to elect to defer currency losses of $1,636,206
realized on investment transactions from November 1, 2009 through December 31,
2009 and treat them as arising during the fiscal year ended December 31, 2010
for U.S. federal income tax purposes.
F — Foreign currency translation —
Substantially all of the Trust’s income is earned, and its expenses are
partially paid, in New Taiwan Dollars (“NT$”). 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 U.S. $ in Taiwan at the end of the period. At June 30, 2010, that rate
was NT$32.1975 to $1.00. Investment income and expenses are translated at the
average exchange rate for the period. Currency translation gains or losses are
reported as a separate component of changes in net assets resulting from
operations.
The Trust does not separately record
that portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes in
market prices of securities held. Such fluctuations are included with the net
realized and unrealized gain or loss from investments.
G — Distributions to shareholders — It is
the Trust’s policy to distribute all ordinary income and net realized capital
gains calculated in accordance with U.S. federal income tax regulations. Such
calculations may differ from those based on 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.
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 net
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.
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. The Trust did not receive any stock
dividends for the six months ended June 30, 2010.
TAIWAN GREATER CHINA
FUND
Notes to
Financial Statements / June 30, 2010 (Expressed in U.S. Dollars) (Unaudited)
(continued)
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 $18,217 paid for the six months ended June 30, 2010.
I — Use of estimates — The preparation of
financial statements in conformity with GAAP 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 470 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— In January 2010, the Financial Accounting Standards Board issued
Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about
Fair Value Measurements.” This ASU will add new requirements for disclosures
into and out of Levels I and II fair-value measurements and information on
purchases, sales, issuances and settlements on a gross basis in the
reconciliation of Level III fair-valued measurements. It also clarifies existing
fair value disclosures about the level of disaggregation, inputs and valuation
techniques. Except for the detailed Level III reconciliation disclosures, the
guidance in the ASU is effective for annual and interim reporting periods in
fiscal years beginning after December 15, 2009. The new disclosures for Level
III activity are effective for annual and interim reporting periods in fiscal
years beginning after December 15, 2010. Management is currently evaluating the
impact that adoption will have on the Trust’s
portfolio holdings disclosures.
The Trust values its investments in
accordance with 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.
TAIWAN GREATER CHINA
FUND
Notes to
Financial Statements / June 30, 2010 (Expressed in U.S. Dollars) (Unaudited)
(continued)
In some instances, the inputs used to
measure fair value might fall in different levels of the fair value hierarchy.
The level in the fair value hierarchy within which the fair value measurement in
its entirety falls shall be determined based on the lowest input level that is
significant to the fair value measurement in its entirety.
The following table summarizes the
valuation of the Trust’s securities at June 30, 2010 using the fair value
hierarchy:
At June 30,
2010
|
|
Level I*
|
|
|
Level II*
|
|
|
Level III
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
67,935,554 |
|
|
|
- |
|
|
|
- |
|
|
$ |
67,935,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,864,351 |
|
|
|
- |
|
|
|
- |
|
|
|
67,864,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time
Deposits
|
|
|
71,203 |
|
|
|
- |
|
|
|
- |
|
|
|
71,203 |
|
* At June 30, 2010, there were no
transfers in or out of Level I and Level II fair value
measurements.
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
investment agreement, NRC is responsible, among other things, for investing and
managing the assets of the Trust and administering the Trust’s affairs. The
Trust pays NRC a fee at an annual rate of 1.25% of the NAV of the Trust’s assets
up to $150 million and 1.00% of such NAV in excess of $150
million.
Note 5 — Administrative
Management
Brown Brothers Harriman & Co.
(“BBH”) provides administrative and accounting services for the Trust, including
maintaining certain books and records of the Trust, and preparing certain
reports and other documents required by U.S. federal
and/or state laws and regulations. The Trust pays BBH a monthly fee for these
services at an annual rate of 0.06% of the NAV of the Trust’s assets up to $200
million, 0.05% of such NAV equal to or in excess of $200 million up to $400
million and 0.04% of such NAV equal to or in excess of $400 million. The total
payment to BBH for administrative and custodial services is subject to a minimum
annual fee of $200,000. Out-of-pocket expenses will be billed at the actual
amount incurred at the time the goods or service is
purchased.
Note 6 — Custodian
BBH serves as custodian of the assets of
the Trust. The Trust pays BBH a monthly fee for securities in the Taiwan market
at an annual rate of 0.15% of the Trust’s market value of Taiwan holdings up to
$200 million, 0.13% of such Taiwan holdings equal to or in excess of $200
million up to $400 million and 0.11% of such Taiwan holdings equal to or in
excess of $400 million. The Trust pays BBH a monthly fee for securities in the
Hong Kong market at an annual rate of 0.10% of the Trust’s market value of Hong
Kong holdings. The total payment to BBH for administrative and custodial
services is subject to a minimum annual fee of $200,000.
Note 7 — Investments in
Securities
Purchases and proceeds from sales of
securities, excluding short-term investments, for the six months ended June 30,
2010, included $1,496,961 for stock purchases and $5,996,642 for stock sales,
respectively.
At June 30, 2010, 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, 2010, the unrealized
appreciation of $2,967,050 for U.S. federal income tax purposes consisted of
$11,555,561 of gross unrealized appreciation and $8,588,511 of gross unrealized
depreciation.
Note 8 — Shares of Beneficial
Interest
A
— The Trust’s Declaration of Trust permits the Trustees to issue an unlimited
number of shares of beneficial interest or additional classes of other
securities. The shares have a par value of $0.01, and no other classes of
securities are outstanding at present. The Trust has a repurchase program which
allows for the repurchase of up to 10% of the outstanding shares. The share
repurchase program commenced on November 1, 2004.
TAIWAN GREATER CHINA
FUND
Notes to
Financial Statements / June 30, 2010 (Expressed in U.S. Dollars) (Unaudited)
(continued)
In connection with the share repurchase
program referred to above, the Board of Trustees authorized management to
repurchase Trust shares in one or more block transactions provided that no block
exceeds 500,000 shares on any day, no more than 1,000,000 shares in total are
repurchased in block transactions, and such share repurchases are made on the
NYSE and in compliance with the safe harbor provided by Rule 10b-18 under the
Securities Exchange Act of 1934, as amended. This does not increase the overall
repurchase authorization and the Trust will continue to make non-block share
repurchases under its share repurchase program.
During the six months ended June 30,
2010, 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 is
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 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.
In June 2010, the Trust accepted 589,448
shares for payment at a price of $6.34 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 21, 2010, 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, January 27, 2010 and May 14, 2010.
At June 30, 2010, 11,199,520 shares were
outstanding.
Note 9 — Subsequent
Events
Management of the Fund has performed an
evaluation of subsequent events through the date the financial statements were
issued. This evaluation did not result in any subsequent events that
necessitated disclosures and/or adjustments.
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 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.
NYSE Certification
In 2009, the Trust Chief Executive
Officer provided to 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, 2010 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.
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, 2010, and the related
statements of operations, changes in net assets, and financial highlights for
the sixth-month period ended June 30, 2010. 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 for the year ended
December 31, 2009 and financial highlights for each of the years in the
five-year period ended December 31, 2009, and in our report dated February 25,
2010, we expressed an unqualified opinion on such statement of changes in net
assets and financial highlights.
Boston, MA
August 26, 2010
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