TaiwanGreaterChina SteveChampion

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Taiwan Greater China Fund June 9, 2004 Capital Link Conference New York

New Investment StrategyIn December 2003, The R.O.C.-Taiwan Fund adopted a new investment strategy: “investing primarily in Taiwan companies which derive or which are expected to derive a significant portion of their revenues from investments in or exports to mainland China.” The fund changed its name effective January 2, 2004 and, after a period of legal restructuring, began rebalancing its portfolio on February 26, 2004.: 

New Investment Strategy In December 2003, The R.O.C.-Taiwan Fund adopted a new investment strategy: “investing primarily in Taiwan companies which derive or which are expected to derive a significant portion of their revenues from investments in or exports to mainland China.” The fund changed its name effective January 2, 2004 and, after a period of legal restructuring, began rebalancing its portfolio on February 26, 2004.

Economic Rationale: 

Economic Rationale Higher GDP growth rate in mainland China. Best estimate of Taiwan investment in mainland China is $100 billion. Two-thirds of the growth in Taiwan’s 2003 exports came from shipments to mainland China.

Taiwan China Strategy Index: 

Taiwan China Strategy Index A custom index calculated by MSCI based on TFC inclusion factors. Full weight to MSCI companies which generate 25% or more of revenues or sales through investments in or exports to China. Partial weight to companies which include China business as an important part of their business strategy and which are experiencing rapidly growing revenues and earnings.

Why should one invest in China through Taiwan-based companies?: 

Why should one invest in China through Taiwan-based companies? Valuation Superior Country Risk Factors Corporate Governance Financial Regulations Accounting System/Transparency Legal System Media Coverage Political Risk Cultural Similarity

Average Premium/Discount NYSE-Listed Closed End Greater China FundsChina Fund, Greater China Fund, Templeton Dragon Fund, Taiwan Fund, Taiwan Greater China Fund: 

Average Premium/Discount NYSE-Listed Closed End Greater China Funds China Fund, Greater China Fund, Templeton Dragon Fund, Taiwan Fund, Taiwan Greater China Fund

TFC Premium/Discount vs. Average China Fund: 

TFC Premium/Discount vs. Average China Fund

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Companies We Like Au Optronics / China Motor Manufacturing Advantage – Au Optronics 3rd largest THT-LCD manufacturer with 12-13% global share Acer Spin-off in 2001 2 facilities in China for back-end assembly in Suzhou, Jiangsu Province Reduces cost as back-end assembly is labor intensive Allows for low-cost sourcing in China convenient to Suzhou plants Close to major customers 2.4M SF / 6,283 employees at the end of 2003 33.6% of 2003 US$3 billion sales in China Local Market – China Motor Taiwan’s top automobile manufacturer / 14.61% owned by Mitsubishi Motors Has 50/50% JV with Fujian provincial government in Fuzhou – SEM SEM has 67 dealers and 603 sales outlets in China 2003 results - Sold 83,533 units / US$ 982M / US$ 86M PBT CMC also exported ~US$270M in CKD sets to SEM China operations contributed 36% of CMC pre-tax profits Planned JV with DC and Fujian province to produce MB vans