Dear
Shareholders:
You
are
cordially invited to attend the Annual Meeting of Shareholders (the “Meeting”)
of the Taiwan Greater China Fund (the “Trust”, formerly known as The R.O.C.
Taiwan Fund), which will be held at the offices of Clifford Chance US LLP,
31 W.
52nd Street, New York, NY 10019-6131 on Tuesday, June 24, 2008 at 9:30 a.m., New
York City time. A formal notice and a Proxy Statement regarding the Meeting,
a
proxy card for your vote at the Meeting and a postage prepaid envelope in
which
to return your proxy are enclosed. Shareholders who plan on attending the
Meeting will be required to provide valid identification in order to gain
admission.
At
the
Meeting, Shareholders will:
| |
(i)
|
Elect
two Trustees, each to serve for a term expiring on the date of
the 2011
Annual Meeting of Shareholders or the special meeting in lieu thereof;
|
| |
(ii)
|
Consider
whether to approve the conversion of the Trust from a closed-end
investment company into an open-end investment company; and
|
| |
(iii)
|
Transact
such other business as may properly come before the Meeting or
any
adjournment thereof.
|
The
Board
of Trustees recommends that you vote for each of the nominees
for Trustee named in the accompanying Proxy Statement.
The
Board
of Trustees recommends that you vote against approval of the
conversion of the Trust from a closed-end investment company to an open-end
investment company.
Whether
or not you plan to attend the Meeting in person, it is important that your
shares be represented and voted. After reading the enclosed notice and Proxy
Statement, please complete, date, sign and return the enclosed proxy card
at
your earliest convenience. Your return of the proxy card will not prevent
you
from voting in person at the Meeting should you later decide to do
so.
If
you
are a beneficial owner holding shares through a broker-dealer or other nominee,
please note that, under the rules of the New York Stock Exchange, broker-dealers
or other nominees may either use their discretion to vote your shares on
the
proposal described in paragraph (i) above without your instructions, or leave
your shares unvoted. Accordingly, the Board of Trustees of the Trust urges
all
beneficial owners of shares who are not also record owners of such shares
to
contact the institutions through which their shares are held and give
appropriate instructions, if necessary, to vote their shares. The Trust will
also be pleased to cooperate with any appropriate arrangement pursuant to
which
beneficial owners desiring to attend the Meeting may be identified as such
and
admitted to the Meeting as Shareholders.
Time
will
be provided during the Meeting for discussion, and Shareholders present will
have an opportunity to ask questions about matters of interest to
them.
Respectfully,
|
Steven
R. Champion
President
|
Pedro-Pablo
Kuczynski
Chairman
of the Board of Trustees
|
IMPORTANT
MATTERS WILL BE CONSIDERED AT THE MEETING. ACCORDINGLY, ALL SHAREHOLDERS,
REGARDLESS OF THE SIZE OF THEIR HOLDINGS, ARE URGED TO SIGN AND MAIL THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, OR TO GIVE APPROPRIATE INSTRUCTIONS
TO
PERSONS HOLDING SHARES OF RECORD ON THEIR BEHALF, PROMPTLY.
TAIWAN
GREATER CHINA FUND
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD JUNE 24, 2008
To
the
Shareholders of the Taiwan Greater China Fund:
NOTICE
IS
HEREBY GIVEN that the Annual Meeting of Shareholders (the “Meeting”) of the
Taiwan Greater China Fund (the “Trust”, formerly known as The R.O.C. Taiwan
Fund) will be held at the offices of Clifford Chance US LLP, 31 W.
52nd
Street,
New York, NY 10019-6131 on Tuesday, June 24, 2008 at 9:30 a.m., New York
City
time, for the following purposes:
|
|
1. |
To
elect two Trustees, each to serve for a term expiring on the date
of the
2011 Annual Meeting of Shareholders or the special meeting in lieu
thereof.
|
|
|
2. |
To
consider whether to approve the conversion of the Trust from a
closed-end
investment company into an open-end investment company; and
|
|
|
3. |
To
transact such other business as may properly come before the Meeting
or
any adjournment thereof.
|
The
Board
of Trustees of the Trust has fixed the close of business on, Wednesday, May
14,
2008 as the record date for the determination of Shareholders entitled to
notice
of and to vote at the Meeting and at any adjournment thereof. Shareholders
are
entitled to one vote for each share of beneficial interest of the Trust held
of
record on the record date with respect to each matter to be voted upon at
the
Meeting.
You
are
cordially invited to attend the Meeting. All Shareholders are requested to
complete, date and sign the enclosed proxy card and return it promptly, and
no
later than June 23, 2008, in the envelope provided for that purpose, which
does
not require any postage if mailed in the United States. If you are able to
attend the Meeting, you may, if you wish, revoke the proxy and vote personally
on all matters brought before the Meeting. The enclosed proxy is being solicited
by the Board of Trustees of the Trust.
BY
ORDER
OF THE BOARD OF TRUSTEES
Cheryl
Chang, Secretary
May
27,
2008
TAIWAN
GREATER CHINA FUND
PROXY
STATEMENT
INTRODUCTION
This
Proxy Statement is furnished in connection with the solicitation of proxies
on
behalf of the Board of Trustees (the “Board of Trustees” or the “Board”, the
Trustees of the Board are referred to as the “Trustees”) of the Taiwan Greater
China Fund (the “Trust”, formerly known as The R.O.C. Taiwan Fund) for use at
the Annual Meeting (the “Meeting”) of holders of shares (the “Shareholders”) of
the Trust (the “Shares”) to be held at the offices of Clifford Chance US LLP, 31
W. 52nd
Street,
New York, NY 10019-6131 on Tuesday, June 24, 2008 at 9:30 a.m., New York
City
time, and at any adjournment thereof.
This
Proxy Statement and the accompanying proxy are first being mailed to
Shareholders on or about May 27, 2008. Any Shareholder giving a proxy has
the
power to revoke it by mail (addressed to The Altman Group,
1200 Wall Street West, 3rd Floor, Lyndhurst, NJ 07071),
or in
person at the Meeting, by executing a superseding proxy or by submitting
a
notice of revocation to the Trust. All properly executed proxies received
by
mail on or before the close of business on June 23, 2008 or delivered personally
at the Meeting will be voted as specified in such proxies or, if no
specification is made, for proposal 1 and against proposal 2.
The
Board
of Trustees has fixed the close of business on Wednesday, May 14, 2008, as
the
record date for the determination of Shareholders entitled to notice of and
to
vote at the Meeting and at any adjournment thereof. Shareholders of record
will
be entitled to one vote for each Share. No Shares have cumulative voting
rights
for the election of the Trustees.
As
of the
record date, the Trust had 14,473,760
Shares outstanding. Abstentions will be counted as present for all purposes
in
determining the existence of a quorum.
One-third
of the Trust’s outstanding Shares, present in person or represented by proxy at
the Meeting, will constitute a quorum for the transaction of business at
the
Meeting. The affirmative vote of a plurality of the Shares present or
represented by proxy and voting on the matter in question at the Meeting
is
required to elect the nominees for election as Trustees. Approval of converting
the Trust from a closed-end fund to an open-end fund requires the affirmative
vote of a majority of the outstanding shares.
Shares
represented by duly executed proxies will be voted at the Meeting in accordance
with the instructions given. However,
if no instructions are specified on the proxy with respect to a proposal,
shares
will be voted FOR the election of the two nominees for Trustees, and AGAINST
the
conversion of the Trust from a closed-end investment company into an open-end
investment company and in accordance with the judgment of the persons appointed
as proxies upon any other matter that may properly come before the Meeting.
A
Shareholder may revoke a previously submitted proxy at any time prior to
the
Meeting by (i) a written revocation, which must be signed and include the
Shareholder’s name and account number, received by the Secretary of the Trust at
c/o Brown Brothers Harriman, P.O. Box 962047, Boston, MA 02196-2047; (ii)
properly executing a later-dated proxy; or (iii) attending the Meeting and
voting in person. Abstentions will be treated as votes present and not cast
at
the meeting. Accordingly, abstentions will not have the effect of votes in
opposition to the election of a Trustee under Proposal 1 but will effectively
be
treated as an “Against” vote for the conversion of the Trust to an open-end fund
under Proposal 2.
The
Trust
knows of no business that may or will be presented for consideration at the
Meeting, other than that mentioned in Proposals 1 and 2 described herein.
If any
matter not referred to above is properly presented, the persons named on
the
enclosed proxy will vote in accordance with their discretion. However, any
business that is not on the agenda for the Meeting may be presented for
consideration or action at the Meeting only with the approval of the Board
of
Trustees.
The
address of Brown Brothers Harriman, which provides certain administrative
services for the Trust, is 40 Water Street, Boston, Massachusetts 02109-3661.
BENEFICIAL
OWNERSHIP OF SHARES
The
following table provides information, as of May 14, 2008, except as noted,
regarding the beneficial ownership of Shares by (i) each person or group
known
to the Trust to be the beneficial owner of more than 5% of the Shares
outstanding, (ii) each of the Trust’s Trustees or Trustee nominees, (iii) each
executive officer of the Trust and (iv) all Trustees, Trustee nominees and
executive officers of the Trust as a group. Except as noted, each of the
named
owners has sole voting and dispositive power over the Shares
listed.
|
Name
and Address of
Beneficial
Owner
|
Amount
of Beneficial
Ownership
|
Percent
of Fund
|
| |
(1)
|
%
|
| |
(2)
|
%
|
| |
(3)
|
%
|
| |
(4)
|
%
|
TRUSTEES
AND EXECUTIVE OFFICERS
|
Name
|
Amount
of
Beneficial
Ownership
|
Percent
of Fund
|
Dollar
Range of Beneficial
Ownership
**
|
|
Steven
R. Champion
|
18,500
|
*
|
Over
$100,000
|
|
Frederick
C. Copeland, Jr.
|
7,000
|
*
|
$50,001-$100,000
|
|
David
Laux
|
6,000
|
*
|
$10,001-$50,000
|
|
Robert
P. Parker
|
2,000
|
*
|
$10,001-$50,000
|
|
Edward
B. Collins
|
3,000
|
*
|
$10,001-$50,000
|
|
Pedro
Pablo Kuczynski
|
2,300
|
*
|
$10,001-$50,000
|
|
Tsung-Ming
Chung
|
0
|
N/A
|
None
|
|
All
Trustees, Trustee nominees
and
executive officers as a
group
|
38,800
|
*
|
|
*Less
than 1%
**
Based
on the net asset value of the Shares on May 14, 2008 [$_______].
PROPOSAL
1.
ELECTION OF TRUSTEES
The
two
nominees for election to the Board of Trustees are Messrs. Robert P. Parker
and
Frederick C. Copeland. Mr. Parker is currently a Trustee of the Trust, and
if
reelected, will serve for a term expiring on the date of the 2011 Annual
Meeting
of Shareholders or the special meeting in lieu thereof. Mr. Copeland is
currently a Trustee of the Trust, and if elected, will serve for a term expiring
on the date of the 2011 Annual Meeting of Shareholders or the special meeting
in
lieu thereof. Messrs. Parker and Copeland were nominated by the Board of
Trustees by unanimous written consent dated April 28, 2008, following the
recommendation of the Nominating Committee of the Board at a meeting held
on
February 13, 2008.
The
persons named in the accompanying proxy will, in the absence of contrary
instructions, vote all proxies FOR the election of Messrs. Parker and
Copeland. Each nominee has indicated his consent to be named in the accompanying
proxy and that he will serve if elected. If Messrs. Parker and Copeland should
be unable to serve (an event not now anticipated), the proxies will be voted
for
such person(s), if any, as is designated by the Board of Trustees to replace
Mr.
Parker and/or Mr. Copeland as the case may be.
INFORMATION
CONCERNING NOMINEES
The
following table sets forth certain information concerning Messrs. Copeland
and
Parker.
| |
|
|
|
|
|
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
Business
Experience,
Other
Positions
with Affiliated
Persons
of the Trust and
Other
Directorships
Held
by Nominee
|
|
Non-Interested
Nominees
|
|
|
|
|
|
Robert
P. Parker (66)
101
California Street,
Suite
2830
San
Francisco, California 94111 U.S.A
|
Trustee
TTrustee
|
Trustee
since 1998 and until
the
2008 Annual Meeting of
Shareholders
or the special
meeting
in lieu thereof; and
Chairman
of the Board from February 2004 to July 2004
|
Chairman,
Parker Price
Venture
Capital, Inc.
(formerly
known as Allegro
Capital,
Inc.), since 1997
|
Director,
NexFlash Technologies, Inc., 2001-2005
Partner,
McCutchen, Doyle, Brown & Enersen (law firm),
1988-97
|
|
Frederick
C.
Copeland,
Jr. (66)
11
Deer Ridge Road
Avon,
Connecticut 06001 U.S.A.
|
Trustee
and Vice Chairman of the Board
|
Trustee
since May 2004 and
until
the 2008 Annual
Meeting
of Shareholders or
the
special meeting in lieu
thereof;
Vice Chairman of the Board since February 2006
|
Vice
Chairman, Chairman of Executive Committee, Far East National Bank
since
2004; Principal, Deer Ridge Associates,
LLC (financial
consulting),
2001- 2005
|
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
|
INFORMATION
CONCERNING OTHER TRUSTEES
The
following table sets forth certain information concerning the Trustees of
the
Trust (other than Messrs. Copeland and Parker).
| |
|
|
|
|
|
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
Business
Experience,
Other
Positions
with Affiliated
Persons
of the Trust and
Other
Directorships
Held
by Nominee
|
|
Non-Interested
Trustees
|
|
|
|
|
|
Edward
B. Collins (65)
765
Market Street,
Suite
31A
San
Francisco,
California
94103
U.S.A.
|
Trustee
|
Trustee
since 2000 and until the 2009 Annual Meeting of Shareholders or
the
special meeting in lieu thereof
|
Chairman,
California Bank of Commerce, since 2006; Managing Director, China
Vest
Group (venture capital investment), prior to 2000
|
Director,
Mediostream, since 2001; Partner, McCutchen, Doyle, Brown & Enersen
(law firm), 1987-95
|
|
Tsung-Ming
Chung (59)
4F,
No.1, Lane 21, Hsing-Hua Road
Kwei-Shan
Industrial Zone,
Taoyuan,
Taiwan, R.O.C.
|
Trustee
|
Trustee
since 2006 and until the 2009 Annual Meeting of Shareholders or
the
special meeting in lieu thereof
|
Chairman
and Chief Executive Officer, Dynapak International Technology Corp;
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
|
|
David
N. Laux (80)
The
Hampshire, Apt. No. 701
1101
N. Elm St. Greensboro, N.C. 24701 U.S.A.
|
Trustee
|
Trustee
since 1992 and until
the
2007 Annual Meeting of
Shareholders
or the special
meeting
in lieu thereof; Chairman of the Board since July 2004
|
Director,
International Foundation, 2001 to 2007; Chairman, Great Dads (non-profit),
2004 to 2006; President, US-Taiwan
Business
Forum,
from
2000 to 2005;
|
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
|
|
Pedro-Pablo
Kuczynski
(69)
Chequehuanla
967
San
Isidro, Lima, Peru
|
Trustee
and
Chairman
of the Board
|
Trustee
since 2007 and until the 2010 Annual Meeting of Shareholders or
special
meeting in lieu thereof; Chairman since August 2007;
Senior
Advisor and Partner, The Rohatyn Group (emerging markets manager),
since
2007
|
Prime
Minister of Peru, from 2005-2006;
Minister
of Economy of Peru, 2004-2005
Minister
of Economy of Peru, 2001-2002;
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
|
BOARD
STRUCTURE
Since
the
inception of the Trust in 1989, the Trustees of the Trust have been divided
into
three classes, each having a term of three years, with the term of one class
expiring each year. As of the date of this proxy statement, the Board has
six
members, with at least two members in each of the three classes.
BOARD
AND COMMITTEE MEETINGS
The
Board
of Trustees of the Trust held four meetings during the fiscal year ended
December 31, 2007. Each Trustee attended at least 75% of the total of (i)
all
meetings of the Board of Trustees and (ii) all meetings of each committee
of the
Board on which he served during the fiscal year ended December 31,
2007.
EXECUTIVE
COMMITTEE
The
Board
of Trustees dissolved the Executive Committee at the meeting of the Board
of
Trustees held on February 13, 2008.
NOMINATING
COMMITTEE
The
Board
of Trustees has a Nominating Committee, the current members of which are
Messrs.
Robert P. Parker (Chair) and David N. Laux. The members of the Nominating
Committee are not “interested persons” of the Trust, as defined in Section
2(a)(19) of the Investment Company Act, and also are independent Trustees
of the
Trust, as defined under the rules of the NYSE. The Nominating Committee has
a
charter, which is available on the Trust’s website at
www.taiwangreaterchinafund.com. The charter provides that the Nominating
Committee will consider recommendations of Trustee nominees submitted by
Shareholders. Any such recommendations should be sent to the Trust’s Nominating
Committee c/o Brown Brothers Harriman, P.O. Box 962047, Boston, Massachusetts
02196-2047, ATTN: Investor Services Counsel, Fund Administration. The charter
also provides that the Nominating Committee will consider potential candidates
who are personally known to members of the Nominating Committee, persons
who are
recommended to the Nominating Committee by other members of the Board and
other
persons known by Board members or persons identified by any search firm retained
by the Nominating Committee. In considering whether to recommend that an
individual be nominated as a Trustee, the Nominating Committee will take
the
following criteria, among others, into account: (i) the Board’s size and
composition; (ii) applicable listing standards and laws; (iii) an individual’s
expertise (especially with regard to matters relating to Taiwan, mainland
China
and public and private investment funds), experience and willingness to serve
actively; (iv) whether an individual will enhance the functioning of the
Board
and the compatibility of his or her views concerning the manner in which
the
Trust should be governed with the Board’s assessment of the interests of the
Trust’s shareholders; and (v) the number of company boards of directors on which
such individual serves.
During
the fiscal year ended December 31, 2007, the Nominating Committee did not
retain
any search firm or pay a fee to any third party to identify Trustee
candidates.
The
Nominating Committee held one meeting during the fiscal year ended December
31,
2007. On February 13, 2008, the Nominating Committee met and recommended
that
Messrs. Robert P. Parker and Frederick C. Copeland, Jr. be nominated to stand
for election at the 2008 Annual Meeting of Shareholders.
COMPENSATION
COMMITTEE
The
Board
of Trustees dissolved its Compensation Committee at a meeting of the Board
of
Trustees held on February 13, 2008.
AUDIT
COMMITTEE AND INDEPENDENT PUBLIC ACCOUNTANTS
The
Board
of Trustees has an Audit Committee established in accordance with Section
3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and Rule 32a-4 of the Investment Company Act. The current members of the
Audit Committee are Messrs. Edward B. Collins (Chair), Frederick C. Copeland,
Jr., Robert P. Parker and Tsung-Ming Chung. The members of the Audit Committee
are not interested persons of the Trust, as defined in the Investment Company
Act, and also are independent Trustees of the Trust, as defined in the rules
of
the NYSE.
The
responsibilities of the Audit Committee include, among other things, review
and
selection of the independent public accountants of the Trust, review of the
Trust’s financial statements prior to their submission to the Board of Trustees
and of other accounting matters of the Trust, and review of the administration
of the Trust’s Codes of Ethics and Whistleblower Policy.
Audit
Committee Report
The
Audit
Committee held two meetings during the fiscal year ended December 31, 2007.
The
Audit Committee also met on February 13, 2008. At those meetings the Audit
Committee, among other things:
(i)
approved the selection of KPMG LLP (“KPMG”) as the Trust’s independent public
accountants for its 2008 fiscal year;
(ii)
reviewed the audited financial statements of the Trust for its 2007 fiscal
year
and discussed those statements with the Trust’s management and
KPMG;
(iii)
discussed with the Trust’s management and KPMG those matters requiring
discussion by the Accounting Standards Board’s Statement of Auditing Standards
No. 61 as currently in effect, including the independence of KPMG;
(iv)
received the written disclosures and the letters from KPMG required by the
Independence Standards Board’s Standard No. 1 as currently in
effect;
(v)
reviewed the charter for the Audit Committee; and
(vi)
pre-approved the payment of fees for permitted non-audit services.
Based
upon the reviews, discussions and consideration described above, the Audit
Committee recommended to the Board of Trustees that the Trust’s audited
financial statements be included in its Annual Report to Shareholders for
the
Trust’s fiscal year ended December 31, 2007.
Edward
B.
Collins
Frederick
C. Copeland Jr.
Robert
P.
Parker
Tsung-Ming
Chung
Representatives
of KPMG are expected to be available at the Meeting and will have an opportunity
to make a statement if they desire to do so and are expected to be available
during the Meeting to respond to appropriate questions from
Shareholders.
AUDIT
FEES
The
aggregate fees to be paid for professional services rendered by KPMG, the
Trust’s independent auditors, in connection with the annual audit of the Trust’s
financial statements and for services normally provided by KPMG in connection
with statutory and regulatory filings or engagements for the fiscal years
ended
December 31, 2006 and December 31, 2007 were $84,000 and $96,533,
respectively.
NON-AUDIT
FEES
Audit
Related Fees. The Trust did not pay KPMG any audit-related fees (other than
those disclosed under “Audit Fees” above, and there were no audit related fees
paid by the Trust to KPMG that were required to be approved by the Trust’s Audit
Committee, in its 2006 and 2007 fiscal years.
Tax
Fees.
The aggregate fees to be paid for professional services rendered by KPMG
for the
preparation of the Trust’s federal income and excise tax returns and the
provision of tax advice and planning services for the 2006 and 2007 fiscal
years
were $28,600 and $29,300 respectively.
All
Other
Fees. The
Trust’s Audit Committee approved non-audit fees in an amount not to exceed
£5,000 (plus out-of pocket expenses) for the Trust’s fiscal year ended 2006. The
Trust’s Audit Committee approved non-audit fees in an amount not to exceed
$5,000 in addition to the approval of non-audit fees in an amount not to
exceed
£3,500 (plus out-of pocket expenses) for the Trust’s fiscal year ended
2007.
There
were no other fees billed for professional services rendered by KPMG for
services to the Trust other than the fees for services referenced above for
the
2006 and 2007 fiscal years.
Aggregate
Amount of Non-Audit Fees. The aggregate amount of non-audit fees to be paid
to
KPMG for services rendered to the Trust for its 2006 and 2007 fiscal years
were
$28,600 and £5,000
and
$34,300 respectively.
AUDIT
COMMITTEE’S PRE-APPROVAL POLICIES AND PROCEDURES
The
Audit
Committee approves the engagement of the Trust’s accountants to render audit or
non-audit services before such accountants perform such services.
All
services described under “Audit Fees” and “Non-Audit Fees” above that required
approval were pre-approved by the Audit Committee before KPMG’s engagement to
perform them.
POLICY
ON TRUSTEES’ ATTENDANCE AT ANNUAL SHAREHOLDER MEETINGS
The
Trust’s policy with regard to attendance by members of the Board of Trustees at
its Annual Meetings of Shareholders is that all Trustees are expected to
attend,
absent extenuating circumstances. All six Trustees attended the 2007 Annual
Meeting.
COMMUNICATIONS
WITH THE BOARD OF TRUSTEES
Shareholders
who wish to communicate with the Board of Trustees with respect to matters
relating to the Trust may address their correspondence to the Board as a
whole
or to individual members c/o Brown Brothers Harriman, P.O. Box 962047, Boston,
Massachusetts 02196-2047, ATTN: Investor Services Counsel, Fund
Administration.
OFFICERS
OF THE TRUST
The
following table sets forth certain information concerning the officers of
the
Trust. Information regarding Mr. Kuczynski, the Chairman of the Board, is
set
forth in the Trustee table above. The Chairman and the President (Messrs.
Kuczynski and Champion, respectively) each holds office until his successor
is
duly elected and qualified, and all other officers hold office at the discretion
of the Trustees.
| |
|
|
|
|
|
Name
(Age) and
Address
|
Position(s)
Held
with the
Trust
|
Length
of Time
Served
|
Principal
Occupation(s)
During
the Past
Five
Years
|
Other
Business Experience, Other Positions with Affiliated Persons of
the Trust
and Other Directorships Held by Nominee
|
|
Steven
R. Champion (62)
111
Gillett
Street
Hartford,
CT 06105 U.S.A.
|
President,
Chief
Executive
Officer
and
Portfolio
Manager;
President from May 1989 to June 1992
|
Since
February 2004
|
President,
Nanking Road Capital Management, since July 2007; President, Chief
Executive Officer and Portfolio Manager of the Fund from February,
2004 to
October, 2007; Executive Vice President, Bank
of Hawaii, 2001-2003;
Chief
Investment Officer,
Aetna
International (Insurance), from
prior
to 2000 to 2001
|
Director,
Connecticut Choral Artists, Inc., since 2007
|
|
Cheryl
Chang (43)
P.O.
Box 118-763 Taipei
Taipei
10599, Taiwan
|
Secretary,
Treasurer,
Chief Financial
Officer
and Chief Compliance Officer
|
Secretary,
Treasurer and Chief Financial Officer since June 2004; Chief Compliance
Officer
since
September 2004
|
Secretary,
Treasurer,
Chief Financial
Officer
and Chief Compliance Officer , Nanking Road Capital Management,
since July
2007; Secretary,
Treasurer,
Chief Financial
Officer
and Chief Compliance Officer of Fund from February, 2004 to October,
2007;
Senior Manager, KPMG
(Taipei
Office), from prior to 2000 to 2004; Assurances
and
Advisory Unit of
International
Practice
Group,
KPMG (audit, tax, finance and risk advisory) (Taipei Office),
2000-2004
|
|
TRUSTEE
AND OFFICER COMPENSATION
The
compensation received by each Trustee and officer of the Trust for the fiscal
year ended December 31, 2007 is set forth below.
| |
|
|
|
Name
|
Position
|
Total
Compensation from the Trust Paid to Trustees and officers
(1)(2)(3)
|
|
Edward
B. Collins
|
Trustee
|
$22,000(2)
|
|
Frederick
C. Copeland, Jr.
|
Trustee
|
$26,000(2)
|
|
David
N. Laux
|
Trustee
|
$25,109(2)
|
|
Robert
P. Parker
|
Trustee
|
$21,000(2)
|
|
Tsung-Ming
Chung
|
Trustee
|
$21,000(2)
|
|
Pedro-Pablo
Kuczynski
|
Trustee
|
$20,891(2)
|
|
Steven
R. Champion
|
President,
Chief Executive Officer, Portfolio Manager
|
$459,997(3)
|
|
Cheryl
Chang
|
Chief
Financial Officer, Secretary, Treasurer, Chief Compliance Officer
|
$106,346(3)
|
(1)
The
Trustees and officers of the Trust do not receive any pension or retirement
benefits from the Trust.
(2)
Compensation consists of a $2,000 meeting fee for each Board of Trustees’
meeting or committee meeting attended in person, $1,000 meeting fee for each
Board of Trustees’ meeting or committee meeting attended by telephone and an
annual retainer of $12,000 ($20,000 for the Chairman and $17,000 for the
Vice
Chairman).
(3)
As of
October 1, 2007, the Trust entered into an investment advisory agreement
(the
“Agreement”) with Nanking Road Capital Management, LLC (“NRC”) whereby the
Trust’s management structure changed from internally managed to externally
managed. 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.
Prior to October 1, 2007, Mr. Champion received a salary and was eligible
to
receive a bonus, each paid by the Trust.
REQUIRED
VOTE
The
affirmative vote of a plurality of Shares present or represented by proxy
and
voting on the matter in question at the Meeting is required to elect the
nominees for election as Trustees. Abstentions will be treated as votes present
and not cast at the meeting. Abstentions will not have the effect of votes
in
opposition to the election of a Trustee under this Proposal 1.
THE
BOARD
OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE ELECTION OF
THE NOMINEES AS TRUSTEES
PROPOSAL
2:
CONVERSION OF THE TRUST FROM A CLOSED-END INVESTMENT COMPANY TO AN OPEN-END
INVESTMENT COMPANY
BACKGROUND
AND SUMMARY
The
Trust
is registered as a closed-end investment company under the Investment Company
Act and has operated as a closed-end fund since the reorganization of The
Taiwan
(R.O.C.) Fund (which was an open-end fund not registered in the United States)
into the Trust on May 19, 1989. The Trust’s Amended and Restated Declaration of
Trust (the “Declaration of Trust”) and By-Laws provide that the Board of
Trustees is required to submit to the Shareholders at their next annual meeting
a binding resolution to convert the Trust into an open-end investment company
if
the Shares trade on the NYSE at an average discount from their net asset
value
(“NAV”) of more than 10% during any twelve-week period beginning after the most
recent such vote (which occurred at the Trust’s 2005 annual meeting). For these
purposes the average variation of the trading price of the Shares from their
NAV
is determined on the basis of such variances for each trading day (which
means
each day when the NYSE is open for trading) during the applicable twelve-week
period and then the average of such daily variances is determined for the
applicable 12-week period as of the end of such period. The affirmative vote
of
a majority of the Shares outstanding and entitled to vote is required for
the
adoption of such a resolution.
By
the
terms of the Declaration of Trust, this requirement became effective on June
1,
1992, and since then the Shareholders have voted on such a resolution eleven
times; in 1995, in each of the years from 1997 through 2005 and in 2007.
In each
instance the Board recommended that Shareholders vote against the resolution
to
convert the Trust into an open-end investment company, and such resolution
was
not adopted by the Shareholders. In the most recent vote, on August 21, 2007,
11.06% of the outstanding Shares were voted in favor of the proposal, 42.06%
were voted against, and 16.92% were either not present at the meeting, were
not
voted or abstained from voting on that particular matter (which are effectively
votes against the proposal).
After
the
vote in 2007, the Shares, like those of most other closed-end country
funds,
continued to trade at a discount. The average discount for the period
from the
2007 Annual Meeting of Shareholders until the record date for the 2008
Annual
Meeting of Shareholders was [ ]%, which was smaller than in recent years.
As of
the twelve-week period ending on November 16, 2007, the Shares traded
at an
average discount of more than 10% (11.88%), requiring the Board of Trustees
to
submit to the Shareholders the proposal described herein. Since the twelve
week
period ending November 16, 2007, until the record date for the 2008 Annual
Meeting of Shareholders, the Shares have traded at an average discount
of [
]%.
On
May
14, 2008, the Shares’ trading price on the NYSE closed at a discount to NAV per
Share of [ ]%.
Conversion of the Trust to an open-end investment company would eliminate
the
trading market in the Shares and provide Shareholders with a continuing
opportunity to redeem their Shares from the Trust at their NAV. The proposal
will be adopted, as provided in the Declaration of Trust, only if approved
by
holders of a majority of the Shares outstanding and entitled to
vote.
The
Board
of Trustees of the Trust considered information concerning the legal,
operational and practical differences between closed-end and open-end investment
companies, the Trust’s performance to date as a closed-end fund, the historical
relationship between the market price of the Shares and their NAV, the possible
effects of conversion on the Trust and alternatives to conversion. The Board
of
Trustees resolved to recommend to the Trust’s Shareholders that they vote
against the proposal to convert the Trust to an open-end investment
company.
In
making
this recommendation, the Board of Trustees considered measures it has taken
that
have proved effective in lowering the discount at which the Shares have traded
in relation to their NAV. These measures (described in further detail below)
included the establishment of a share repurchase program.
In
addition, the Board of Trustees considered the steps taken in an effort to
improve the Trust’s performance and the effect conversion of the Trust to an
open-end investment company may have on performance. In February 2004, the
Trust
implemented the Board’s new strategy of investing primarily in Taiwan Stock
Exchange listed companies which derive or which are expected to derive a
substantial portion of their revenues by exporting to or operating in mainland
China.
The
Board
of Trustees believes that conversion to an open-end investment company could
adversely affect the functioning of the Trust’s investment operations and its
investment performance, as described below under “Effect of Conversion on the
Trust - Portfolio Management.” The Board also believes that conversion could
expose the Trust to the risk of a substantial reduction in its size and a
corresponding loss of economies of scale and increase in its expenses as
a
percentage of NAV, as described below under “Effect of Conversion on the Trust -
Potential Increase in Expense Ratio and Decrease in Size.”
Since
the
reorganization of the Trust in 1989, the Shares periodically have traded
at a
premium (although not in recent years) above NAV. (See below under “Differences
Between Open-end and Closed-end Investment Companies - Fluctuation of Capital;
Redeemability of Shares; Elimination of Discount and Premium”.) The Shares’
average annual discount/premium (determined by comparing the Shares’ NAV to
their closing price on the NYSE on each trading day pursuant to the Trust’s
by-laws) by year is as follows:
|
YEAR
|
DISCOUNT(-)/
PREMIUM
|
|
1989
(May 12 to December 31)
|
2.71%
|
|
1990
|
-9.47%
|
|
1991
|
-3.29%
|
|
1992
|
4.26%
|
|
1993
|
3.45%
|
|
1994
|
0.75%
|
|
1995
|
1.23
%
|
|
1996
|
3.28%
|
|
1997
|
-17.06%
|
|
1998
|
-17.67%
|
|
1999
|
-14.24%
|
|
2000
|
-18.82%
|
|
2001
|
-14.51%
|
|
2002
|
-14.95%
|
|
2003
|
-11.33%
|
|
2004
|
-9.99%
|
|
2005
|
-7.55%
|
|
2006
|
-7.30%
|
|
2007
|
-9.72%
|
|
2008
(January 1, 2008 to March 31, 2008)
|
-9.56%
|
The
Board
of Trustees believes that eliminating the discount would not justify the
fundamental changes that conversion would entail to the Trust’s portfolio
management and operations, the risk of reduced size and the potential adverse
effect on the Trust’s investment performance.
In
order
to attempt to reduce or possibly eliminate the discount, the Board continues
to
seek to increase awareness about the Trust through Shareholder and market
communications and meetings by management with members of the investment
community specializing in the closed-end funds sector. While these efforts
have
not eliminated the Shares’ tendency in recent years to trade at a discount to
NAV, the Board of Trustees believes that such efforts have materially lessened
the discount as well as had a favorable effect on Shareholder relations by
keeping major Shareholders informed concerning the Trust’s investment strategies
and policies and by informing the Board of those Shareholders’ views concerning
the Trust’s management, strategies and policies.
In
addition, the Board of Trustees recognizes that discounts as well as premiums
can be a likely result of the closed-end format because of the probability
that
the shares of a closed-end fund will trade at a higher or lower price than
the
NAV per share. In addition, the Board of Trustees recognizes that discounts
(and
possible premiums) are an inherent consequence of the closed-end fund format.
Discounts can vary widely over time, and a market discount can offer an
investment advantage. For example, Shareholders have the opportunity to purchase
additional Shares in the market at the discounted price when the Shares trade
below their NAV. Shareholders who make such purchases could benefit in
circumstances in which the gap between the NAV and the market price of the
Shares narrows or is eliminated after they make their purchases, especially
when
the NAV is also increasing as a result of increases in the value of the Trust’s
investments. Correlatively, Shareholders could be disadvantaged if they buy
Shares at a premium or a small discount to NAV and the premium disappears
or the
discount widens, particularly if they decide to sell their Shares under such
circumstances. The Shares’ NAV at the end of each week is published in
compilations of such information for all closed-end funds in publications
such
as [The Wall Street Journal, The New York Times and Barron’s]; the daily NAV at
the close of the preceding trading day in Taiwan can be obtained by calling
the
Trust at 1-800-343-9567 or by accessing the Trust’s website at
www.taiwangreaterchinafund.com.
The
Board
of Trustees has considered, from time to time, various alternative measures
that
could be adopted for the purpose of seeking to reduce the discount to NAV
at
which the Shares have traded. On November 1, 2004, the Trust commenced a
share
repurchase program that allows for the repurchase of up to 10% of the
outstanding Shares of the Trust. In connection with the share repurchase
program, the Board of Trustees authorized management to repurchase Trust
Shares
in one or more block transactions as defined under Rule 10-b(18)(a)(5) of
the
Securities Exchange Act of 1934 (the “1934 Act”), provided that no block
exceeded 500,000 Shares on any day, no more than 1,000,000 Shares in total
were
repurchased in block transactions, and that such Share repurchases were made
on
the New York Stock Exchange and in compliance with the safe harbor provided
by
Rule 10b-18 1934 Act. As of February 28, 2005, the Trust had repurchased
the
maximum amount of Shares allowed to be purchased in block transactions. The
Trust continues to effect non-block repurchases under its share repurchase
program.
At
the
2005 Annual Meeting of Shareholders, both the Board of Trustees and Shareholders
approved the adoption of an interval fund structure. Since that approval,
the
Trust has conducted six semi-annual repurchase offers for between 5% and
25% of
the Trust’s outstanding securities. The Fund repurchased approximately 761,776
shares at its most recently completed semi-annual repurchase offer on December
17, 2007. Since the adoption of an interval fund structure, the Trust has
not
repurchased Shares in either block transactions or non-block transactions
under
the Trust’s share repurchase program.
If
the
proposal to convert the Trust from a closed-end investment company into an
open-end investment company is not approved, and the Shares continue to trade
at
a discount and the average discount is again greater than 10% during a
twelve-week period then the Shareholders will again have an opportunity to
consider converting the Trust into an open-end investment company at the
next
Shareholders meeting. The Board of Trustees may also decide at any time to
present to the Shareholders the question of whether the Trust should be
converted to an open-end investment company; however, under the Declaration
of
Trust such a voluntary submission would require the approval of two-thirds
of
the outstanding Shares for its adoption.
As
described below under “Measures to be Adopted if the Trust Becomes an Open-end
Fund -- Redemption Fee,” if the Shareholders vote to convert the Trust into an
open-end fund, the Board of Trustees may cause the Trust to impose a fee
payable
to the Trust on all redemptions of up to 2.00% of redemption proceeds for
a
certain period of time after conversion. In an effort to deter market timing
of
Shares after the conversion of the Trust from an open-end investment company,
the Board of Trustees may also decide to impose redemption fees in connection
with transactions within certain periods of time after the purchase of Shares
from the Trust.
DIFFERENCES
BETWEEN OPEN-END AND CLOSED-END INVESTMENT COMPANIES
1. Fluctuation
of Capital; Redeemability of Shares; Elimination of Discount and
Premium. Closed-end investment companies generally do not redeem their
outstanding shares or engage in the continuous sale of new securities, and
thus
operate with a relatively fixed capitalization. The shares of closed-end
investment companies are normally bought and sold in the securities market
at
prevailing market prices, which may be equal to, less than or more than NAV.
From May 12, 1989 to November 16. 2007 the Shares traded on the NYSE at prices
ranging from 31.55% below NAV (on April 27, 1990) to 35.36% above NAV (on
December 13, 1993). The Shares last traded at a premium of 0.79 % above NAV
on
October 2, 1996. On May 14, 2008, the closing price of a Share on the NYSE
was [
]% below its NAV.
Although
it is now possible, subject to certain restrictions, for both institutions
and
individuals outside Taiwan to invest directly in Taiwan stocks, the Board
of
Trustees believes that many foreign investors, and particularly foreign
individuals, continue to invest in the Taiwan market through a managed
intermediary like the Trust. In February 2004, the Board revised the Trust’s
investment strategy to provide that the Trust will primarily invest in Taiwan
companies that derive or expect to derive a significant portion of their
revenues from operations in or exports to mainland China, and the Board believes
that substantial expertise is required to select and assess companies with
that
profile. However, additional alternatives to the Trust may develop as vehicles
for investment in Taiwan securities by investors outside Taiwan, which could
have the effect of increasing any discount at which the Shares trade in relation
to their NAV.
By
contrast, open-end investment companies in the United States, commonly referred
to as mutual funds, issue redeemable securities with respect to which,
traditionally, no secondary trading market has been permitted to develop.
(Although this has changed in recent years with the establishment of
exchange-traded open-end funds, it remains true that the vast majority of
open-end funds, both in number and total assets, do not offer secondary market
trading in their shares.) Except during periods when the NYSE is closed or
trading thereon is restricted, or when redemptions may otherwise be suspended
in
an emergency as permitted by the Investment Company Act, the holders of these
redeemable securities have the right to surrender them to the mutual fund
and
obtain in return their proportionate share of the mutual fund’s NAV at the time
of the redemption (less any redemption fee charged by the fund or contingent
deferred sales charge imposed by the fund’s distributor). The Board of Trustees
has, in the past, not made any decision with respect to whether, upon conversion
to an open-end investment company, the Trust would follow an exchange traded
open-end format or one of a more traditional open-end investment company,
which
would not have a secondary trading market.
Most
mutual funds also continuously issue new shares to investors at a price based
upon their shares’ NAV at the time of issuance. Accordingly, an open-end fund
experiences continuing inflows and outflows of cash and may experience net
sales
or net redemptions of its shares.
Upon
conversion of the Trust into an open-end investment company, Shareholders
who
wished to realize the value of their Shares would be able to do so by redeeming
their Shares at NAV (less the redemption fee, if any, discussed below under
“Measures to be Adopted if the Trust Becomes an Open-end Fund -- Redemption
Fee”), which would rise or fall based upon the performance of the Trust’s
investment portfolio. The trading market for the Shares at a discount from
NAV
would be eliminated. Conversion would also eliminate, however, any possibility
that the Shares could trade at a premium over NAV.
Please
note that the interval fund structure adopted by the Trust in 2005 provides
Shareholders a semi-annual opportunity to liquidate a portion (but not
necessarily all) of their Shares at net asset value, less a 2% repurchase
fee.
2. Cash
Reserves. Because closed-end investment companies are not required to
meet redemptions, their cash reserves can be substantial or minimal, depending
on the investment manager’s investment strategy. The managers of many open-end
investment companies, on the other hand, believe it desirable to maintain
cash
reserves adequate to meet anticipated redemptions without prematurely
liquidating their portfolio securities. Although many open-end funds operate
successfully in this environment, the maintenance of larger cash reserves
required to operate prudently as an open-end investment company when net
redemptions are anticipated may reduce an open-end investment company’s ability
to achieve its investment objective by limiting its investment flexibility
and
the scope of its investment opportunities. In addition, open-end investment
companies are subject to a requirement that no more than 15% of their net
assets
may be invested in securities that are not readily marketable or are otherwise
considered to be illiquid. However, the Trust currently does not invest in,
nor
does it anticipate investing in, illiquid securities to any material
extent.
3. Raising
Capital. Closed-end investment companies may not issue new shares at a
price below NAV except in rights offerings to existing Shareholders, in payment
of distributions and in certain other limited circumstances. Accordingly,
the
ability of closed-end funds to raise new capital is restricted, particularly
at
times when their shares are not trading at a premium to NAV. The shares of
open-end investment companies, on the other hand, are offered by such companies
(in most cases continuously) at NAV, or at NAV plus a sales charge, and the
absence of a secondary trading market generally makes it impossible to acquire
such shares in any other way. The Trust most recently raised additional capital
in 1995, when it obtained net offering proceeds of approximately $64,000,000
upon the completion of a public offering of additional Shares at a small
premium
to NAV.
4. NYSE
Delisting; State and Federal Fees on Sales of Shares. If the Trust
converted to an open-end fund, the Shares would immediately be delisted from
the
NYSE. Some investment managers believe that the listing of an investment
company
on a U.S. stock exchange, particularly the NYSE, represents a valuable asset,
especially in terms of attracting non-U.S. investors. Delisting would save
the
Trust annual NYSE fees of approximately $30,000; but the absence of a stock
exchange listing, combined with the need to issue new Shares when investors
wish
to increase their holdings, would have the effect of requiring the Trust
to pay
federal registration fees, except to the extent that the underwriter of such
sales paid some or all of such fees. Any net savings or increased cost to
the
Trust because of the different expenses would not, however, be expected to
materially affect the Trust’s expense ratio.
5. Underwriting;
Brokerage Commissions or Sales Charges on Purchases and Sales. Open-end
investment companies typically seek to sell new shares on a continuous
basis in order to offset redemptions and avoid shrinkage in size. Shares
of
“load” open-end investment companies are normally offered and sold through a
principal underwriter, which deducts a sales charge from the purchase price
at
the time of purchase or from the redemption proceeds at the time of redemption,
receives a distribution fee from the fund (called a Rule 12b-1 fee), or both,
to
compensate it and securities dealers for sales and marketing services (see
“Measures to be Adopted if the Trust Becomes an Open-end Fund -- Underwriting
and Distribution” below). Shares of “no-load” open-end investment companies are
sold at NAV, without a sales charge, with the fund’s investment adviser or an
affiliate normally bearing the cost of sales and marketing from its own
resources. Shares of closed-end investment companies, on the other hand,
are
bought and sold in secondary market transactions at prevailing market prices
subject to the brokerage commissions charged by the broker-dealer firms
executing such transactions. Except in the case of shares sold pursuant to
a
rights offering, when a closed-end fund sells newly issued shares, it typically
does so in an underwritten public offering in which an underwriting fee of
4% or
more is imposed. Except in the case of a rights offering, such sales can
be made
only at or above the shares’ then applicable NAV after the deduction of such an
underwriting fee.
6. Shareholder
Services. Open-end investment companies typically provide more services
to shareholders and may incur correspondingly higher shareholder servicing
expenses. One service that is generally offered by open-end funds is enabling
shareholders to transfer their investment from one fund into another fund
that
is part of the same “family” of open-end funds at little or no cost to the
shareholders. The Trust has, in the past, engaged in no discussions with
any
family of funds to become a part of such family, and there can be no assurance
that the Trust would be able to make such an arrangement if the Shareholders
voted to convert the Trust to an open-end fund. If the requisite majority
of the
Shareholders approve this Proposal 3, the Board of Trustees would weigh the
cost
of any particular service against the anticipated benefit of such service.
The
Board of Trustees has not, in the past maintained a view as to which, if
any,
Shareholder services it would seek to make available to Shareholders and
implement as part of the Trust’s joining a family of funds or
otherwise.
7. Leverage.
Open-end investment companies are prohibited by the Investment Company Act
from
issuing “senior securities” representing indebtedness (i.e., bonds, debentures,
notes and other similar securities), other than indebtedness to banks with
respect to which there is asset coverage of at least 300% for all borrowings,
and may not issue preferred stock. Closed-end investment companies, on the
other
hand, are permitted to issue senior securities representing indebtedness
when
the 300% asset coverage test is met, may issue preferred stock subject to
a 200%
asset coverage test and are not limited to borrowings solely from banks.
This
greater ability to issue senior securities gives closed-end investment companies
more flexibility in “leveraging” their shareholders’ investments than is
available to open-end investment companies. This difference is not likely
to be
of importance with respect to the Trust, however, because the Trust’s
fundamental investment policies (which may be changed only with Shareholder
consent) forbid it to borrow more than 5% of its NAV (a restriction that
would
continue to apply if the Trust were an open-end fund) or to issue preferred
stock (even though such issuance is permitted by the Trust’s Declaration of
Trust).
8. Annual
Shareholders Meetings. The Trust is organized as a Massachusetts
business trust under the terms of the Declaration of Trust. As a closed-end
investment company listed on the NYSE, the Trust is required by the rules
of the
NYSE to hold annual meetings of its Shareholders. This requirement would
cease
upon a delisting of the Shares from the NYSE. A provision in the Declaration
of
Trust provides that, if the Trust were converted to an open-end investment
company, the Declaration of Trust could be amended to provide that the Trust
would no longer be required to hold annual meetings. However, no vote is
being
sought on such a proposal at this time. If the Trust were no longer required
to
hold annual meetings of Shareholders, it would still be required by the
Investment Company Act to have periodic meetings to approve certain matters
and,
under certain circumstances, to elect Trustees. (See the discussion below
under
“Measures to be Adopted if the Trust Becomes an Open-end Fund -- Effect on
the
Trust’s Declaration of Trust.”) The Trust would save the cost of annual
meetings, which management estimates to be approximately $45,000 per year;
however, these savings would not be expected to materially affect the Trust’s
expense ratio.
9. Reinvestment
of Dividends and Distributions. Like the plans of many other closed-end
funds, the Trust’s Dividend Reinvestment Plan (the “Plan”) permits Shareholders
to elect to reinvest their dividends and distributions on a different basis
than
would be the case if the Trust converted to an open-end investment company.
Currently, if the Shares are trading at a discount, the agent for the Plan
will
attempt to buy as many of the Shares as are needed for this purpose on the
NYSE
or elsewhere. This permits a reinvesting Shareholder to benefit by purchasing
additional Shares at a discount, and this buying activity may tend to lessen
any
discount. If Shares are trading at a premium, reinvesting Shareholders are
issued Shares at the higher of NAV and 95% of the market price. As an open-end
investment company, all dividends and distributions would be reinvested at
NAV
unless Shareholders elected to receive their dividends and distributions
in
cash.
10. Capital
Gains. The treatment of capital gains required under the Internal
Revenue Code of 1986, as amended (the “Code”) may be disadvantageous to
non-redeeming shareholders of an open-end fund. Although the fund’s manager may
be able to sell portfolio securities at a price that does not reflect a taxable
gain in order to raise cash to satisfy redeeming shareholders, a mutual fund
that is required to sell portfolio securities may realize a net capital gain
if
the fund’s basis in the portfolio securities sold is less than the sale price
obtained. The Code imposes both an income tax and an excise tax on a regulated
investment company’s net capital gain (regardless of whether the fund is
open-end or closed-end) unless the gain is distributed to all shareholders,
including non-redeeming shareholders. Furthermore, in order to make a capital
gain distribution, a fund may need to sell additional portfolio securities,
thereby reducing further its size and, possibly, creating additional capital
gain. While, as noted, taxes on such gains are also imposed on closed-end
funds,
a closed-end fund does not face the possible need to sell appreciated securities
in order to raise funds to meet redemption requests.
EFFECT
OF CONVERSION ON THE TRUST
In
addition to the inherent characteristics of open-end investment companies
described above, the Trust’s conversion to an open-end investment company would
potentially have the consequences described below.
1. Portfolio
Management. As noted above, a closed-end investment company operates
with a relatively fixed capitalization while the capitalization of an open-end
investment company fluctuates depending upon whether it experiences net sales
or
net redemptions of its shares. To the extent that this is true, if the Trust
were to convert to an open-end investment company, the Trust might be faced
with
a need to invest new monies near market highs and to sell portfolio securities
in a falling market when it might otherwise wish to invest. Because the Trust
is
a closed-end fund, however, the Trust currently is not required to invest
new
monies or liquidate portfolio holdings at what may be inopportune times,
and can
manage its portfolio with a primary emphasis on long-term
considerations.
The
Board
of Trustees has, in the past, believed that the closed-end format is better
suited than the open-end format to the Trust’s investment objective of achieving
long-term capital appreciation through investment primarily in publicly traded
equity securities of Taiwan issuers, particularly in view of the Trust’s primary
strategic focus on companies whose business is becoming increasingly integrated
with the economy of mainland China. The Board of Trustees has expressed in
the
past that, notwithstanding developments in Taiwan that have had the effect
of
liberalizing restrictions on investment by foreign investors in the Taiwan
securities market, investor psychology towards Taiwan (and mainland China)
remains susceptible to rapid and extreme swings that would be likely to have
a
material and unpredictable impact on inflows and outflows from the Trust
if it
were to become an open-end fund. The Board of Trustees has expressed in the
past
their belief that the Trust could better pursue its long-term investment
objective without short-term pressures to invest new monies or liquidate
portfolio holdings at times when its investment style would dictate doing
otherwise. Furthermore, the Board of Trustees believed that a need for the
Trust
to maintain some level of cash reserves to fund redemptions on an on-going
basis
could restrict the Trust’s ability to remain fully invested in equity securities
in circumstances in which its portfolio manager otherwise thought it
advantageous to be so invested.
2. Potential
Increase in Expense Ratio and Decrease in Size. Conversion to an
open-end investment company would raise the possibility of the Trust suffering
substantial redemptions of Shares, particularly in the period immediately
following the conversion, although the potential implementation of a redemption
fee of up to 2.00% for a certain period of time described below under “Measures
to be Adopted if the Trust Becomes an Open-end Fund” might reduce the number of
redemptions that would otherwise occur shortly after the conversion. Unless
the
Trust’s principal underwriter, if any, were able to generate sales of new Shares
sufficient to offset these redemptions or the performance of the Trust’s
investments was sufficiently favorable to offset net redemptions, the size
of
the Trust would be expected to shrink. (See “Measures to be Adopted if the Trust
Becomes an Open-end Fund -- Underwriting and Distribution.”) Because a majority
of the Trust’s operating expenses are fixed and others decline as a percentage
of the Trust’s NAV as the NAV increases, a decrease in the Trust’s asset size
would likely increase the ratio of its operating expenses to its income and
net
assets and, as a result, decrease the Trust’s net income per Share. Such a
decrease in size could result in a decision by the Board of Trustees to
terminate and liquidate the Trust if the amount of the Trust’s assets were
reduced such that it was no longer considered economically feasible for the
Trust to continue to carry on business.
3. Continuous
Public Offering Costs. In addition, the Trust might be required to
engage in a continuous public offering intended, at a minimum, to offset
redemptions. A continuous public offering of the Shares would require the
Trust
to maintain current registrations under federal and state securities laws
and
regulations, which would involve additional costs. See “Differences Between
Open-end and Closed-end Investment Companies -- Underwriting; Brokerage
Commissions or Sales Charges on Purchases and Sales” above.
4. Possible
Sales of Portfolio Securities. If the Trust were to experience
substantial redemptions of Shares following its conversion to an open-end
investment company, it would probably not have sufficient cash reserves to
fund
such redemptions and therefore could be required to sell portfolio securities
at
inopportune times and incur increased transaction costs in order to raise
cash
to meet such redemptions. In addition, the Trust could incur capital gains
in
connection with such transactions. See “Differences Between Open-end and
Closed-end Investment Companies -- Capital Gains” above.
5. Conversion
Costs. The process of converting the Trust to an open-end investment
company would involve legal and other expenses to the Trust, including the
preparation of a registration statement under the Securities Act of 1933,
as
amended (the “Securities Act”) (see “Measures to be Adopted if the Trust Becomes
an Open-end Fund -- Timing” below), and the payment of necessary fees with
respect to such registration statement and the sale of Shares in various
states.
The Board of Trustees has been advised that these conversion expenses, which
would be paid by the Trust and would result in a one-time increase in the
Trust’s expenses, could be expected to total at least $150,000. Because the
Trust is unable to determine at this time the actual costs that would be
involved, it is possible that the conversion expenses would be substantially
higher.
MEASURES
THAT MAY BE ADOPTED IF THE TRUST BECOMES AN OPEN-END
FUND
If
the
Shareholders voted to convert the Trust to an open-end fund, the Board of
Trustees may take the following actions.
1. Redemption
Fee. In order to reduce the number of redemptions of the Shares
immediately following the conversion of the Trust to an open-end investment
company (thereby reducing any disruption of the Trust’s normal portfolio
management) and to offset the brokerage and other costs of such redemptions,
the
Board of Trustees may decide that the Trust should impose a redemption fee
for a
period of time, to be retained by the Trust, of up to 2.00% of the redemption
proceeds payable by the Trust on all redemptions. While not required, such
a fee
would be similar to fees that have been proposed by other funds considering
a
conversion from closed-end to open-end status. In an effort to deter market
timing of Shares after the conversion of the Trust to an open-end investment
company, the Board of Trustees may also decide to impose redemption fees
in
connection with transactions within a certain period of time after the purchase
of Shares from the Trust.
2. Underwriting
and Distribution. If the Shareholders voted to convert the Trust to an
open-end investment company, the Board would consider whether to select a
principal underwriter of the Shares. The Shares could be offered and sold
directly by the Trust itself, and by any other broker-dealers who enter into
selling agreements with the principal underwriter. The Trust has engaged
in no
discussions with prospective principal underwriters, and there can be no
assurance regarding whether satisfactory arrangements with a principal
underwriter would be achieved. The Board of Trustees reserves the right to
cause
the Trust to enter into an underwriting agreement with a principal underwriter
in such form and subject to such conditions as the Board of Trustees deems
desirable. If a principal underwriter were selected, there could be no assurance
that any such broker-dealer firms would be able to generate sufficient sales
of
Shares to offset redemptions, particularly in the initial months following
conversion.
3. Effect
on the Trust’s Declaration of Trust. The Declaration of Trust provides
that, if the Shareholders voted to change the Trust’s subclassification under
the Investment Company Act from a closed-end investment company to an open-end
investment company, provisions in the Declaration of Trust (set forth in
Exhibit
A to this Proxy Statement) would become effective that authorize the issuance
of
redeemable securities at NAV and provide that the outstanding Shares will
be
redeemable at the option of the Shareholders. In addition, the Declaration
of
Trust provides that if the Trust becomes an open-end fund and is no longer
required by stock exchange rules to hold annual meetings for the election
of
Trustees, the Board of Trustees may submit a proposal, which may be adopted
by
vote of a majority of the Trust’s outstanding Shares, that the Trust cease to
hold annual meetings of its Shareholders and that it eliminate its staggered
Board of Trustees. These actions would have the consequence of requiring
Shareholders’ meetings to be held only when required by the Investment Company
Act, either for the election of Trustees (if a majority of the Trustees in
office were not elected by the Shareholders) or to approve specific matters
in
accordance with the Investment Company Act’s requirements.
4. Timing.
If the Shareholders voted to convert the Trust to an open-end investment
company, a number of steps would be required to implement such conversion,
including the preparation, filing and effectiveness of a registration statement
under the Securities Act covering the offering of the Shares and the negotiation
and execution of a new or amended agreement with the Trust’s transfer agent. It
is anticipated that such conversion would become effective by approximately
February 1, 2009 and that the discount, if any, at which the Shares trade
in
relation to their NAV would be reduced in anticipation of the ability to
redeem
Shares at NAV upon the completion of the conversion. The provisions of the
Declaration of Trust set forth in Appendix C would become effective
simultaneously with the effectiveness of the registration statement referred
to
above under the Securities Act. If, as noted immediately above in “Effect on the
Trust’s Declaration of Trust,” the Board of Trustees submitted, and Shareholders
approved, a proposal that the Trust no longer hold annual meetings of
Shareholders after becoming an open-end fund, the attendant savings in the
cost
of holding such meetings (see “Differences Between Open-end and Closed-end
Investment Companies -- Annual Shareholders Meetings”) would accrue in the years
following such approval.
REQUIRED
VOTE
An
affirmative vote of a majority of all outstanding Shares is required to approve
the conversion of the Trust from a closed-end investment company into an
open-end investment company. Abstentions and “non-votes” will be treated as
votes present and not cast at the meeting. Abstentions and “non-votes” will
however, have the effect of votes in opposition to this Proposal 2.
The
Board of Trustees recommends that Shareholders vote “AGAINST” conversion of the
Trust from a closed-end investment management company into an open-end
investment management company. The persons named in the accompanying proxy
will,
in the absence of contrary instructions, vote all proxies “AGAINST” this
proposal 2.
MISCELLANEOUS
Proxies
will be solicited by mail and may be solicited in person or by telephone,
email
or facsimile by officers or employees of the Trust. The Trust has also retained
The Altman Group to assist in the solicitation of proxies from Shareholders
at
an anticipated cost not to exceed $7,000 plus reimbursement of out-of-pocket
expenses. The expenses connected with the solicitation of these proxies and
with
any further proxies that may be solicited by such officers or employees or
by
The Altman Group in person or by telephone, email or facsimile will be borne
by
the Trust. The Trust will reimburse banks, brokers and other persons holding
Shares registered in their names or in the names of their nominees for their
expenses incurred in sending proxy material to and obtaining proxies from
the
beneficial owners of such Shares.
THE
TRUST’S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2007, INCLUDING FINANCIAL
STATEMENTS, WAS MAILED ON OR ABOUT FEBRUARY 29, 2008 TO SHAREHOLDERS OF
RECORD.
HOWEVER, A COPY OF THIS REPORT WILL BE PROVIDED, WITHOUT CHARGE, TO ANY
SHAREHOLDER UPON REQUEST. PLEASE CALL 1-800-343-9567 OR WRITE TO THE TAIWAN
GREATER CHINA FUND C/O BROWN BROTHERS HARRIMAN, P.O. BOX 962047, BOSTON,
MASSACHUSETTS 02196-2047 ATTN: INVESTOR SERVICES COUNSEL, FUND ADMINISTRATION
TO
REQUEST THE REPORT.
In
the
event that a quorum is not obtained for the transaction of business at the
Meeting by June 23, 2008, the persons named as proxies in the enclosed proxy
may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies in order to obtain such a quorum. Any such adjournment would require
the affirmative vote of the holders of a majority of the Shares voting that
are
present in person or by proxy at the session of the Meeting to be adjourned.
The
persons named as proxies in the enclosed proxy will vote in favor of such
adjournment if a quorum is not obtained. The costs of any such additional
solicitation and of any adjourned session will be borne by the
Trust.
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act and Section 30(h) of the Investment Company Act,
as
applied to the Trust, require that the Trust’s officers, Trustees and persons
who beneficially own more than ten percent of the Trust’s Shares (“Reporting
Persons”) file reports of ownership of the Trust’s Shares and changes in such
ownership with the SEC. Based solely upon a review of Forms 3 and 4 and
amendments thereto furnished to the Trust pursuant to Rule 16a-3(e) of the
Exchange Act during fiscal year 2007 and
Form
5 and amendments thereto furnished to the Trust with respect to fiscal year
2007, the Trust believes that all Reporting Persons made timely
filings.
SHAREHOLDER
PROPOSALS AND NOMINATIONS
Any
proposal by a Shareholder intended to be presented at the 2009 Annual Meeting
of
Shareholders must be received by the Taiwan Greater China Fund c/o Brown
Brothers Harriman, P.O. Box 962047, Boston, Massachusetts 02196-2047, ATTN:
Investor Services Counsel, not later than February 26, 2008. The Board of
Trustees will consider whether any such proposal should be submitted to a
Shareholder vote in light of applicable rules and interpretations promulgated
by
the Commission; but a Shareholder’s timely submission of a proposal will not
automatically confer a right to have that proposal presented for a vote at
the
Trust’s 2009 Annual Meeting. Any nomination by a Shareholder of a person to
stand for election as a Trustee at the 2009 Annual Meeting of Shareholders
must
be received by the Trust c/o Secretary P.O. Box 118-763 Taipei, Taipei 10599,
Taiwan, Republic of China, not later than February 26, 2009.
BY
ORDER
OF THE BOARD OF TRUSTEES
Cheryl
Chang
Secretary
May
27,
2008
EXHIBIT
A
ARTICLE
X OF THE TRUST’S DECLARATION OF TRUST REDEMPTIONS
In
the
event that the Shareholders of the Trust vote to convert the Trust from a
“Closed-end company” to an “Open-end company”. . . , the following provisions
shall, upon the effectiveness of such conversion, become effective:
SECTION
10.1. REDEMPTIONS. All outstanding Shares may be redeemed at the option of
the
holders thereof, upon and subject to the terms and conditions provided in
this
Article X. The Trust shall, upon application of any Shareholder or pursuant
to
authorization from any Shareholder, redeem or repurchase from such Shareholder
outstanding Shares for an amount per Share determined by the Trustees in
accordance with any applicable laws and regulations; provided that (a) such
amount per Share shall not exceed the cash equivalent of the proportionate
interest of each Share in the assets of the Trust attributable thereto at
the
time of the redemption or repurchase and (b) if so authorized by the Trustees,
the Trust may, at any time and from time to time, charge fees for effecting
such
redemption or repurchase, at such rates as the Trustees may establish, as
and to
the extent permitted under the 1940 Act, and may, at any time and from time
to
time, pursuant to the 1940 Act, suspend such right of redemption. The procedures
for and fees, if any, chargeable in connection with the effecting and suspending
redemption of Shares shall be as set forth in the prospectus filed as part
of
the Trust’s effective Registration Statement with the Commission from time to
time. Payment will be made in such manner as described in such
prospectus.
SECTION
10.2. REDEMPTIONS OF ACCOUNTS. The Trustees may redeem Shares of any Shareholder
at a redemption price determined in accordance with Section 10.1 if, immediately
following a redemption of Shares for any reason, the aggregate net asset
value
of the Shares in such Shareholder’s account is less than an amount determined by
the Trustees. If the Trustees redeem Shares pursuant to this Section 10.2,
a
Shareholder will be notified that the value of his account is less than such
amount and be allowed sixty (60) days to make an additional investment before
the redemption is processed.
ANNUAL
MEETING OF SHAREHOLDERS OF
TAIWAN
GREATER CHINA FUND
June
24, 2008
This
Proxy is Solicited on Behalf of the Board of Trustees
Please
date, sign and mail
your
proxy card in the
envelope
provided as soon
as
possible.
Please
detach along perforated line and mail in the envelope provided.
Please
note that the Trust has retained The Altman Group to assist in the solicitation
of proxies from Shareholders.
Signature
of Shareholder Date: Signature of Shareholder Date:
To
change
the address on your account, please check the box at right and indicate your
new
address in the address space above. Please note that changes to the registered
name(s) on the account may not be submitted via this method.
The
following items are proposed by the Trust:
| |
1.
|
The
election of two Trustees: Mr. Robert P. Parker, to serve for a
term
expiring on the date of the 2011 Annual Meeting of Shareholders
or the
special meeting in lieu thereof; and Mr. Frederick C. Copeland,
Jr., to
serve for a term expiring on the date of the 2011 Annual Meeting
of
Shareholders or the special meeting in lieu
thereof.
|
| |
2.
|
Consider
whether to approve the conversion of the Trust from a closed-end
investment company into an open-end investment
company
|
|
For
all Nominees
|
Withheld
from all Nominees
|
For
all Nominees EXCEPT
Nominee(s)
written below
|
| |
|
|
| |
|
|
|
For
Proposal 2
|
Withheld
from Proposal 2
|
Against
Proposal 2
|
| |
|
|
| |
|
|
Properly
executed proxies will be voted in the manner directed herein by the undersigned.
If no such directions are given, such proxies will be voted FOR Proposal
1 and
AGAINST Proposal 2.
Please
sign and return promptly in the enclosed envelope. No postage is required
if
mailed in the United States.
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
TO
INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE SIDE OF THIS
CARD.
Note:
Please sign exactly as your name or names appear on this Proxy. When shares
are
held jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer
is
a corporation, please sign full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
TAIWAN
GREATER CHINA FUND
This
Proxy is Solicited on Behalf of the Board of Trustees
Annual
Meeting of Shareholders
June
24, 2008
The
undersigned hereby appoints Pedro-Pablo Kuczynski, Steven R. Champion and
Cheryl
Chang, or each or either of them, as Proxies of the undersigned, with full
power
of substitution to each of them, to vote all shares of the Taiwan Greater
China
Fund (the "Trust") which the undersigned is entitled to vote at the Annual
Meeting of Shareholders of the Trust (the "Meeting") to be held at the offices
of Clifford Chance US LLP, 31 W. 52nd Street, New York, New York, Tuesday,
June
24, 2008 at 9:30 a.m., Eastern time, and at any adjournment thereof, in the
manner indicated on the reverse side and, in their discretion, on any other
business that may properly come before the Meeting or any such adjournment.
(Continued
and to be signed on the reverse side.)
COMMENTS: