<PAGE>
THE GREATER CHINA FUND, INC.
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REPORT OF THE INVESTMENT MANAGER
PERFORMANCE
The Greater China Fund's (the "Fund") net asset value appreciated 6.8% during
the six months ended June 30, 2000, increasing from $11.47 to $12.25.
MARKET REVIEW
China stocks reversed the downward trend in the second half 1999 to post
respectable gains during the period under review. Several forces had worked in
their favor.
Firstly, reviving economic growth in China further fueled market optimism as
China is one of the few economies in the region still gaining growth momentum.
GDP growth in the first half of 2000 reached 8.2% versus 7.1% in 1999. Consumer
confidence returned as deflation stabilized and stimulus measures (such as
salary increases and interest rate cuts) introduced by the government in the
second half of last year began to take effect. Exports continued to deliver
solid 39% year-on-year growth in the six month period, extending the strong
trend in the second half last year.
Secondly, after a restructuring of MSCI indices, China's weighting has been
increased significantly. For example, in the MSCI Far East Free Ex-Japan Index,
China's weighting was raised from less than 1% to near 9%. This has triggered
increase in interest from institutional investors on China stocks.
Thirdly, the collapse of TMT (technology, media and telecom) stocks globally in
the second quarter triggered a significant turnaround of market sentiment in
favor of value stocks. Offering value, China stocks became a safe haven for
investors who became wary of the high priced TMT stories.
The Fund benefitted from the rise in the markets during the period under review.
In particular, the strategy of a 'bar-bell' approach to 'Old' vs 'New' economy
stocks has paid off well. The Fund was reasonably well positioned for the rally
in the New Economy sectors, being overweight in telecommunications and
technology. However, the Fund largely ignored the more speculative aspects of
the TMT trend, such as profitless, cash consuming 'dot com' issues. The focus
has been on companies with viable business models and strong earnings and
cashflow and those stocks performed well during the period under review.
PROSPECTS
The Chinese government remains committed to SOE (state-owned enterprise) reform
through privatization of state-owned assets, restructuring and the forced
closure of inefficient operations. The pace of SOE reform is likely to
accelerate given China's expected WTO (world trade organization) entry. More
--------------------------------------------------------------------------------
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<PAGE>
THE GREATER CHINA FUND, INC.
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REPORT OF THE INVESTMENT MANAGER
CONCLUDED
aggressive activities such as mergers and acquisitions, deregulation of
protected industries (such as the telecom sector) and the introduction of share
option schemes can be expected. This will create investment opportunities to
equity investors as such reforms should lead to accelerating industry
consolidation in which strong and efficient players will emerge.
The quality of economic growth is improving. Unlike previous economic cycles
which have been led mainly by government and SOE related investment spending,
the recent growth of the Chinese economy has been broad-based. Demand side
factors were the key drivers including revived domestic consumption and strong
trade performance. Overall the sales/output ratio has been improving, meaning
less build-up of unwanted inventories. Higher productivity is also reflected in
China's exports to the USA which have fallen market share from ASEAN countries
despite a strong RMB. These encouraging secular trends are partially the results
of restructuring which is finally bearing fruit in China. The current recovery
of the economy is likely to be more than just a cyclical phenomenon and should
be more sustainable.
The successful listing of large capitalized stocks like China Unicom and
PetroChina coupled with the increased China weighting in MSCI indices has helped
to raise the international profile of China stocks. These are long term positive
measures to improve the liquidity and will lead towards the re-rating of China
shares.
There is little sign of an improvement in cross strait relations in the short
term. Despite the soft tone on independence since the new Taiwan President was
elected, the two sides remain divided on the definition of "One China". The
government of China needs some time to develop a new strategy and build trust in
the new president. Until then, cross-strait relations are likely to remain as
cool as before.
The outlook of the RMB remains stable. There is indeed pressure for the RMB to
appreciate due to a strong current account surplus. An increased inflow of
foreign direct investment upon China's entry into the WTO is likely to add
further pressure on RMB appreciation.
Overall, with positive cyclical trends and encouraging secular changes, there
are good reasons to be positive on the outlook of stock markets in Greater
China.
BARING ASSET MANAGEMENT (ASIA) LIMITED
Hong Kong
August 10, 2000
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PORTFOLIO OF INVESTMENTS
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
EQUITIES -- 96.4%
CHINA -- 21.1%
BUILDING MATERIALS -- 0.4%
6,882,000 Anhui Conch Cement*........ $ 556,175
------------
Electrical & Electronics -- 1.5%
4,290,000 Guangdong Kelon Electrical
Holdings "H"............. 2,325,091
------------
ENERGY -- 2.3%
17,400,000 PetroChina Co. Ltd*........ 3,615,932
------------
Machinery & Engineering -- 1.9%
1,674,618 China International Marine
Containers "B"........... 1,273,874
4,330,700 Shanghai Zhenhua Port
Machinery "B"............ 1,611,020
------------
2,884,894
------------
PETROCHEMICAL -- 3.9%
12,340,000 Shanghai Petrochemical
"H"+..................... 1,677,942
11,918,000 Yizheng Chemical Fibre
"H"...................... 2,369,688
12,404,000 Zhenhai Refining & Chemical
"H"...................... 1,925,321
------------
5,972,951
------------
UTILITIES -- 6.9%
12,198,000 Beijing Datang Power "H"... 2,738,310
12,832,000 Huaneng Power International
"H"+..................... 4,197,498
12,000,000 Zhejiang Southeast Electric
Power "B"................ 3,720,000
------------
10,655,808
------------
MISCELLANEOUS -- 4.2%
2,000,000 China Shipping Development
"H"*..................... 366,878
4,013,160 Shanghai Dazhong Taxi
"B"...................... 2,175,133
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
CHINA -- (concluded)
Miscellaneous -- (concluded)
19,390,000 Yanzhou Coal Mining "H".... $ 4,004,605
------------
6,546,616
------------
Total China................ 32,557,467
------------
HONG KONG -- 67.1%
AUTOMOBILES -- 2.0%
9,460,000 Brilliance China Auto
Holdings Ltd............. 1,626,118
12,000,000 Denway Investments Ltd.*... 1,385,415
------------
3,011,533
------------
BANKING -- 2.4%
1,222,400 Bank of East Asia.......... 2,853,913
2,900,000 HKCB Bank Holding Co.
Ltd.*.................... 837,021
------------
3,690,934
------------
CONGLOMERATES -- 17.3%
2,700,000 China Resources
Enterprise............... 3,238,407
1,057,000 Citic Pacific Ltd.......... 5,545,674
1,346,400 Hutchison Whampoa.......... 16,926,073
5,000,000 Tsingtao Brewery Co. Ltd
"H"...................... 910,782
------------
26,620,936
------------
CONSUMPTION -- 3.7%
1,000,000 Giordano International
Ltd...................... 1,520,108
2,850,000 Hengan International
Group.................... 650,760
6,740,000 NG Fung Hong............... 3,609,711
------------
5,780,579
------------
ELECTRICAL & ELECTRONICS -- 9.1%
600,000 ASM Pacific Technology..... 2,247,450
510,000 Johnson Electric
Holdings................. 4,841,254
</TABLE>
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<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
HONG KONG -- (concluded)
Electrical & Electronics -- (concluded)
3,342,000 Kingboard Chemical Holdings
Ltd...................... $ 1,704,118
3,024,000 Legend Holders Ltd......... 2,928,767
1,300,000 Varitronix International... 2,259,637
------------
13,981,226
------------
INFRASTRUCTURE -- 1.0%
1,846,774 New World Infratructure*... 1,622,783
------------
MEDIA -- 0.5%
128,000 Television Broadcasting
Ltd...................... 853,826
------------
Real Estate Development -- 2.8%
303,000 Cheung Kong Holdings....... 3,332,980
142,000 Sun Hung Kai Properties.... 1,020,076
------------
4,353,056
------------
TELECOMMUNICATION -- 21.2%
900,000 Cable & Wireless HKT
Ltd...................... 1,985,761
3,173,000 China Mobile Ltd.*......... 27,983,292
750,000 China Unicom Ltd.*......... 1,582,644
2,150,000 City Telecom Ltd........... 361,298
644,000 Global Tech Holdings
Ltd...................... 743,506
------------
32,656,501
------------
MISCELLANEOUS -- 7.1%
3,990,000 China Everbright Ltd....... 3,096,594
4,754,000 China Merchants Holdings
International+........... 3,262,639
906,000 Li & Fung Ltd.............. 4,532,615
------------
10,891,848
------------
Total Hong Kong............ 103,463,222
------------
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
TAIWAN -- 8.2%
ELECTRICAL & ELECTRONICS -- 8.2%
683,000 Hon Hai Precision
Industry................. $ 6,179,788
318,450 Ritek Incorporation
Ltd.*.................... 1,274,836
494,400 United Microelectronics*... 1,375,792
1,298,700 Winbond Electronics
Corp.*................... 3,761,898
------------
12,592,314
------------
Total Equities
(cost $123,383,787)...... 148,613,003
------------
<CAPTION>
Principal
Amount
(000)
<C> <S> <C>
CONVERTIBLE BOND -- 0.3%
CHINA -- 0.3%
AUTOMOBILES -- 0.3%
$2,000 Qingling Motors, 3.50% due
1/22/02 (cost
$1,332,219).............. 515,000
------------
TIME DEPOSIT -- 2.2%
3,343 Brown Brothers Harriman &
Co., Grand Cayman,
5.00%**, 7/3/00
(cost $3,343,000)........ 3,343,000
------------
Total Investments -- 98.9%
(cost $128,059,006)...... 152,471,003
Other assets in excess of
liabilities -- 1.1%...... 1,734,596
------------
NET ASSETS -- 100%......... $154,205,599
============
</TABLE>
----------
<TABLE>
<C> <S>
* Non-income producing security.
+ Security, or a portion thereof, was on loan at
June 30, 2000.
** Variable rate account -- rate resets on a
monthly basis; amount available upon 48 hours'
notice. The rate shown is the rate in effect on
June 30, 2000.
</TABLE>
See Notes to Financial Statements.
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4
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STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $128,059,006) $152,471,003
Investments of collateral received for securities on loan,
at value (cost $3,329,691) 3,329,691
Cash (including foreign currency with a cost and a
value of $1,524,242) 1,520,689
Dividends & interest receivable 727,847
Prepaid expenses 12,030
------------
Total assets 158,061,260
------------
LIABILITIES
Collateral for securities on loan 3,329,691
Investment management fee payable 153,407
Administration fee payable 25,775
Accrued expenses 346,788
------------
Total liabilities 3,855,661
------------
NET ASSETS $154,205,599
============
COMPOSITION OF NET ASSETS
Common stock, $0.001 par value; 12,593,049 shares issued and
outstanding (100,000,000 shares authorized) $ 12,593
Paid-in capital in excess of par 168,504,749
Undistributed net investment income 1,377,567
Accumulated net realized loss on investments (40,100,784)
Net unrealized appreciation of investments and other assets
and liabilities denominated in foreign currency 24,411,474
------------
NET ASSETS $154,205,599
============
Shares Outstanding 12,593,049
------------
NET ASSET VALUE PER SHARE $12.25
============
</TABLE>
See Notes to Financial Statements.
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STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2000
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $2,052,906
Interest 394,114
----------
Total investment income 2,447,020
----------
EXPENSES
Investment management fees 911,429
Custodian and accounting fees 163,619
Administration fees 153,288
Directors' fees and expenses 137,986
Shareholder reports 45,490
Legal fees 37,234
Audit fees 22,530
New York Stock Exchange listing fee 12,230
Transfer agent fees and expenses 4,176
Miscellaneous expenses 4,887
----------
Total expenses 1,492,869
----------
Net investment income 954,151
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investments (3,955,692)
Foreign currency transactions 26,841
----------
(3,928,851)
----------
Net change in unrealized appreciation/depreciation of
investments and
other assets and liabilities denominated in foreign
currencies 12,730,840
----------
Net realized and unrealized gain on investments and foreign
currency transactions 8,801,989
----------
NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS $9,756,140
==========
</TABLE>
See Notes to Financial Statements.
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the
Six Months
Ended For the Year
June 30, 2000 Ended
(unaudited) December 31, 1999
------------- ------------------
<S> <C> <C>
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income $ 954,151 $ 425,442
Net realized loss on investments and foreign
currency transactions (3,928,851) (14,505,520)
Net change in unrealized appreciation/
depreciation of investments and other
assets and liabilities denominated in
foreign currencies 12,730,840 52,346,559
------------ ------------
Net increase in net assets resulting from
investment operations 9,756,140 38,266,481
------------ ------------
NET ASSETS
Beginning of period 144,449,459 106,182,978
------------ ------------
End of period (including undistributed net
investment income of $1,377,567 and
$423,416, respectively) $154,205,599 $144,449,459
============ ============
</TABLE>
See Notes to Financial Statements.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Greater China Fund, Inc. (the "Fund") was incorporated in Maryland on
May 11, 1992, as a non-diversified, closed-end management investment company.
The Fund's investment objective is to seek long-term capital appreciation by
investing substantially all of its assets in listed equity securities of
companies which derive or are expected to derive a significant portion of their
revenues from goods produced or sold, investments made or services performed in
China. Investment operations commenced on July 23, 1992.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
VALUATION OF INVESTMENTS
All securities for which market quotations are readily available are valued at
the last sales price on the day of valuation or, if there was no sale on such
day, the last bid price quoted on such day. Short-term debt securities having a
maturity of 60 days or less are valued at amortized cost, or by amortizing their
value on the 61st day prior to maturity if their term to maturity from the date
of purchase was greater than 60 days, unless the Fund's Board of Directors
determines that such value does not represent the fair value of such securities.
Securities and assets for which market quotations are not readily available
(including investments which are subject to limitations as to their sale) are
valued at fair value as determined in good faith by or under the direction of
the Board of Directors.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are recorded on the trade date (the date on which the
buy or sell order is executed). Realized gains and losses on investments and
foreign currency transactions are calculated on the identified cost basis.
Interest income is recorded on an accrual basis. Dividend income and other
distributions are recorded on the ex-dividend date, except for certain dividends
which are recorded as soon after the ex-dividend date as the Fund, using
reasonable diligence, becomes aware of such dividends.
FOREIGN CURRENCY TRANSLATION
The books and records of the Fund are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars on the following basis:
(i) the foreign currency market value of investments and other assets and
liabilities denominated in foreign currency are translated at the closing
rate of exchange on the valuation date; and
(ii) purchases and sales of investments, income and expenses are translated at
the rate of exchange prevailing on the respective dates of such
transactions.
The resulting net foreign currency gain or loss is included in the Statement of
Operations.
The Fund does not generally isolate that portion of the results of operations
arising as a result of changes in the foreign currency exchange rates from the
fluctuations arising from changes in the market prices of securities.
Accordingly, such foreign currency gain (loss) is included in net realized and
unrealized gain (loss) on investments.
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THE GREATER CHINA FUND, INC.
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Net foreign currency gain (loss) from valuing foreign currency denominated
assets and liabilities at period end exchange rates is reflected as a component
of net unrealized appreciation of investments and other assets and liabilities
denominated in foreign currency. Net realized foreign currency gain (loss) is
treated as ordinary income for income tax reporting purposes.
SECURITY LENDING
The Fund may lend up to 27.5% of its total assets to qualified institutions.
When the Fund lends its securities, it continues to earn dividends and other
income on such securities. Under the terms of the securities lending agreement,
the securities on loan are to be secured at all times by cash or liquid
securities in an amount at least equal to 105% of the market value of the
foreign securities on loan, which are marked to market daily. The Fund bears the
risk of delay in recovery of, or even loss of rights in, the securities on loan
should the borrower fail financially. The Fund's lending agent is PaineWebber
Incorporated ("PaineWebber"). PaineWebber is authorized to invest the cash
collateral received in short-term securities, including investments in
affiliated mutual funds. Any income from investments of cash collateral in
excess of agent fees and of a predetermined rebate to the borrowers is retained
by the Fund and is included in interest income. For non-cash collateral, the
Fund earns a net fee, after payment of lending agents' fees paid by the
borrowers. For the six months ended June 30, 2000, net earnings to the Fund from
securities lending was $49,138, after deducting the borrowers' rebate of
$267,008 and PaineWebber fees of $26,459, of which $2,698 was payable to
PaineWebber at June 30, 2000. The market value of the securities on loan and the
cash collateral received with respect to such loans at June 30, 2000 was
$3,059,423 and $3,329,691, respectively.
At June 30, 2000, the Fund's investments from cash collected for securities on
loan are as follows:
<TABLE>
<CAPTION>
Shares Money Market Funds Value
--------------------- ------------------------------------------------------------ ----------
<C> <S> <C>
824,111 Aim Liquid Assets Fund...................................... $ 824,111
119,939 Aim Prime Fund.............................................. 119,939
2,337,577 Mitchell Hutchins Private Money Market Fund LLC............. 2,337,577
48,064 Scudder Money Market Series--Institutional.................. 48,064
----------
$3,329,691
==========
</TABLE>
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions are recorded on the ex-dividend date. Dividends and
distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
considered either temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
TAX STATUS
UNITED STATES
The Fund generally intends to distribute all or substantially all of its taxable
income and to comply with the other requirements of the U.S. Internal Revenue
Code applicable to regulated investment companies. Accordingly, no
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provision for U.S. federal income tax is required. The Fund's Board of
Directors, under certain circumstances, may determine to retain a portion of the
Fund's taxable income, if such retention is in the best interest of the Fund and
its shareholders.
CHINA
Presently, as a result of a ruling issued in July 1993 (the "July Ruling"), The
People's Republic of China ("PRC") State Administration of Taxation determined
that dividends paid on B shares and dividends received from a PRC company, the
shares of which are listed on non-PRC securities exchanges, including dividends
paid with respect to H shares, will not for the time being be subject to PRC
withholding tax. However, there is no assurance that the July Ruling will remain
in effect for the entire period that such shares are held by the Fund, as it is
a temporary provision. Based on the July Ruling, capital gains from the sale of
B shares and shares of a PRC company listed on a non-PRC securities exchange,
including H shares, will not for the time being be subject to 20% withholding
tax.
Capital gains with respect to debt securities of PRC companies are not covered
by the July Ruling and may be subject to 20% withholding tax.
In the future, were the July Ruling to be reversed, dividends received and
capital gains derived with respect to investments in securities of PRC companies
would be subject to withholding tax at a maximum rate of 20%.
HONG KONG
Under current Hong Kong law, no income tax is charged on dividends or other
distributions received by any person with respect to investments in Hong Kong
securities. Additionally, there is no tax in Hong Kong on capital gains realized
from the disposition of such securities. However, income received and gains
realized by any person in the course of a trade, profession or business carried
on in Hong Kong may be subject to Hong Kong profits tax. It is the intention of
the Fund to conduct its affairs in such a manner that it will not be subject to
such profits tax. To the extent that the Fund were to derive any profit from
such a trade, profession or business, its profit from the trading of securities
(including interest, dividends and capital gains) would be subject to profits
tax, which is currently a flat rate of 16% for corporations.
OTHER FOREIGN COUNTRIES
The Fund may be subject to certain taxes on dividends, capital gains and other
income imposed by the other foreign countries in which it invests.
--------------------------------------------------------------------------------
NOTE 2 INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENTS
The Fund has an investment management agreement ("Investment Management
Agreement") with Baring Asset Management (Asia) Limited (the "Investment
Manager"), an indirect wholly-owned subsidiary group of ING Group N.V. Under the
terms of the Investment Management Agreement, the Investment Manager manages the
Fund's investments in accordance with the Fund's investment objectives, policies
and restrictions, and makes investment decisions on behalf of the Fund,
including the selection of and the placing of orders with brokers and
--------------------------------------------------------------------------------
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THE GREATER CHINA FUND, INC.
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dealers to execute portfolio transactions on behalf of the Fund. As compensation
for its services, the Investment Manager receives a monthly fee, computed
weekly, at an annual rate of 1.25% of the Fund's average weekly net assets.
Mitchell Hutchins Asset Management Inc. (the "Administrator"), a wholly-owned
subsidiary of PaineWebber, has an administration agreement ("Administration
Agreement") with the Fund. Under the terms of the Administration Agreement, the
Administrator provides certain administrative services to the Fund. As
compensation for its services, the Administrator receives a monthly fee,
computed weekly, at an annual rate of 0.22% of the Fund's average weekly net
assets up to $75 million and 0.20% of such net assets in excess of $75 million,
subject to a minimum annual fee of $150,000.
--------------------------------------------------------------------------------
NOTE 3 TRANSACTIONS WITH AFFILIATES
The Investment Manager, out of its own assets, pays PaineWebber a quarterly fee
at an annual rate of 0.10% of the Fund's average weekly net assets in
consideration for certain consulting and shareholder support services (not
including advice or recommendations regarding the purchase or sale of investment
securities). For the six months ended June 30, 2000, $72,914 was paid or accrued
by the Investment Manager to PaineWebber for such services.
--------------------------------------------------------------------------------
NOTE 4 PORTFOLIO SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at June 30,
2000 was substantially the same as the cost of securities for financial
statement purposes. Accordingly, net unrealized appreciation of $24,411,997 was
composed of gross appreciation of $44,665,533 for those securities having an
excess of value over cost and gross depreciation of $20,253,536 for those
securities having an excess of cost over value.
For the six months ended June 30, 2000, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $39,449,278 and
$42,005,736, respectively.
--------------------------------------------------------------------------------
NOTE 5 CAPITAL STOCK
There were no transactions in shares of common stock for the six months ended
June 30, 2000 and for the year ended December 31, 1999.
--------------------------------------------------------------------------------
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NOTE 6 CONCENTRATION OF RISK
The Fund may have elements of risk, not typically associated with investments in
the U.S., due to concentrated investments in specific industries or investments
in foreign issuers located in a specific country or region. Such concentrations
may subject the Fund to additional risks resulting from future political or
economic conditions in such country or region and the possible imposition of
adverse governmental laws of currency exchange restrictions affecting such
country or region, which could cause the securities and their markets to be less
liquid and prices more volatile than those of comparable U.S. companies.
The Fund invests in fixed income securities issued by banks and other
corporations, the market values of which may change in response to interest rate
changes. The ability of the issuers of such fixed income securities to meet
their obligations may be affected by changing business and economic conditions
in a specific state, industry or region.
--------------------------------------------------------------------------------
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FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each period is
presented below:
<TABLE>
<CAPTION>
For the For the Years Ended
Six Months December 31,
June 30, 2000 --------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
-------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.47 $ 8.43 $ 13.46 $ 19.49 $ 14.52 $ 14.29
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.08 0.03 (0.01) (0.09) 0.10* 0.20
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 0.70 3.01 (4.10) (2.32) 5.93* 0.29
-------- -------- -------- -------- -------- --------
Total from investment operations 0.78 3.04 (4.11) (2.41) 6.03 0.49
-------- -------- -------- -------- -------- --------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income -- -- -- -- (0.09) (0.20)
In excess of net investment income -- -- -- (0.13) (0.03) --
From net realized gain on investments -- -- (0.92) (3.49) -- (0.01)
In excess of net realized gain on
investments -- -- -- -- -- (0.05)
-------- -------- -------- -------- -------- --------
Total dividends and distributions to
shareholders -- -- (0.92) (3.62) (0.12) (0.26)
-------- -------- -------- -------- -------- --------
FUND SHARE TRANSACTIONS
Dilutive effect of rights offering -- -- -- -- (0.89) --
Offering costs charged to paid-in capital in
excess of par -- -- -- -- (0.05) --
-------- -------- -------- -------- -------- --------
Total Fund share transactions -- -- -- -- (0.94) --
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 12.25 $ 11.47 $ 8.43 $ 13.46 $ 19.49 $ 14.52
======== ======== ======== ======== ======== ========
Market value, end of period $ 8.81 $ 8.38 $ 6.13 $ 10.88 $ 15.63 $ 14.13
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(1) 5.13% 36.73% (36.35)% (7.29)% 15.53% 18.48%
======== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $154,206 $144,449 $106,183 $169,518 $245,383 $139,246
Ratio of expenses to average net assets 2.05%** 2.23% 2.59%(2) 1.88% 2.07% 2.36%
Ratio of net investment income (loss) to
average net assets 1.31%** 0.36% (0.06)% (0.41)% 0.65% 1.39%
Portfolio turnover 28% 36% 41% 82% 37% 32%
</TABLE>
------------
<TABLE>
<C> <S>
* Based on average shares outstanding.
** Annualized.
(1) Total investment return is calculated assuming a purchase of
common stock at the current market price on the first day,
the purchase of common stock pursuant to any rights offering
occurring in the period, and a sale at the current market
price on the last day of each period reported. Dividends and
distributions, if any, are assumed, for purposes of this
calculation, to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Total investment return
does not reflect sales charges or brokerage commissions.
Total investment return for a period of less than one year
has not been annualized.
(2) The ratio of expenses to average net assets excluding excise
taxes was 2.29%
</TABLE>
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--------------------------------------------------------------------------------
13
<PAGE>
THE GREATER CHINA FUND, INC.
-------------------------------------------------------------------------
-------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"), each shareholder
will be deemed to have elected, unless PNC Bank, National Association (the "Plan
Agent") is otherwise instructed by the shareholder in writing, to have all
distributions, net of any applicable U.S. withholding tax, automatically
reinvested in additional shares of the Fund by the Plan Agent. Shareholders who
do not participate in the Plan will receive all dividends and distributions in
cash, net of any applicable U.S. withholding tax, paid in dollars by check
mailed directly to the shareholder by the plan agent, as dividend-paying agent.
Shareholders who do not wish to have dividends and distributions automatically
reinvested should notify the Plan Agent. Dividends and distributions with
respect to shares registered in the name of a broker-dealer or other nominee (in
"street name") will be reinvested under the Plan unless such service is not
provided by the broker or nominee or the shareholder elects to receive dividends
and distributions in cash. A shareholder whose shares are held by a broker or
nominee that does not provide a dividend reinvestment program may be required to
have his shares registered in his own name to participate in the Plan.
The Plan Agent serves as agent for the shareholders in administering the Plan.
If the Fund declares an income dividend or a capital gain distribution payable
either in the Fund's Common Stock or in cash, as shareholders may have elected,
non-participants in the Plan will receive cash and participants in the Plan will
receive Common Stock to be issued by the Fund. If the market price per share on
the valuation date equals or exceeds net asset value per share on that date, the
Fund will issue new shares to participants valued at net asset value, or if the
net asset value is less than 95% of the market price on the valuation date, then
valued at 95% of the market price. If net asset value per share on the valuation
date exceeds the market price per share on that date, the Plan Agent, as agent
for the participants, will buy shares of Common Stock on the open market.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in non-certificated form in
the name of the partcipant, and each shareholder's proxy will include those
shares purchased pursuant to the Plan.
There is no charge to participants for reinvesting dividends or capital gain
distributions. There will be no brokerage charge with respect to shares issued
directly by the Fund as a result of dividends or capital gain distributions
payable either in shares or in cash. However, each participant will pay a pro
rata share of brokerage commissions incurred with respect to the Plan Agent's
open market purchases in connection with the reinvestment of dividends and
distributions. The automatic reinvestment of dividends and distributions will
not relieve participants of any U.S. income tax that may be payable on such
dividends or distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund and the Plan Agent reserve the right to terminate the Plan as applied
to any dividend or distribution paid subsequent to notice of the termination
sent to the members of the Plan at least 30 days before the record date for
dividends or distributions. The Plan also may be amended by the Fund or the Plan
Agent, but (except when necessary or appropriate authority) only by at least 30
days' written notice to members of the Plan. All correspondence concerning the
Plan should be directed to the Plan Agent c/o PNC Bank, National Association,
300 Bellevue Parkway, Wilmington, Delaware 19809.
--------------------------------------------------------------------------------
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14
<PAGE>
THE GREATER CHINA FUND, INC.
-------------------------------------------------------------------------
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OTHER INFORMATION
ANNUAL SHAREHOLDERS' MEETING
The Fund's annual meeting of shareholders was held on May 3, 2000. Shareholders
voted to re-elect Mr. Richard Graham, Mr. John A. Hawkins and Mr. Tak Lung Tsim
as Directors, and to ratify the appointment of PricewaterhouseCoopers LLP as the
Fund's independent accountants for the fiscal year ending December 31, 2000. The
resulting vote count for each proposal is indicated below:
<TABLE>
<CAPTION>
For Against Withheld Authority
--------- ------- ------------------
<S> <C> <C> <C>
1. Election of Directors:
Mr. Richard Graham 8,977,366 -- 203,736
Mr. John A. Hawkins 8,963,472 -- 217,630
Mr. Tak Lung Tsim 8,990,916 -- 190,186
</TABLE>
In addition to the above re-elected Directors, Mr. Richard B. Bradley, Mr. John
A. Bult, Mr. Edward Y. Baker, Mr. Hugh G. Lynch and Mr. Jonathan J.K. Taylor
continue to serve as Directors of the Fund.
<TABLE>
<CAPTION>
For Against Withheld Authority
--------- ------- ------------------
<S> <C> <C> <C>
2. Ratification of the appointment
of PricewaterhouseCoopers LLP as
the Fund's independent accountant 8,876,422 302,412 2,268
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
15
<PAGE>
DIRECTORS
Richard B. Bradley, CHAIRMAN
Edward Y. Baker
John A. Bult
Richard Graham
John A. Hawkins
Hugh G. Lynch (APPOINTED, EFFECTIVE FEBRUARY 28, 2000)
Jonathan J.K. Taylor
Tak Lung Tsim
EXECUTIVE OFFICERS
Ronald G.M. Watt, PRESIDENT
Peter Cairns, SECRETARY
Julian F. Sluyters, VICE PRESIDENT
Sam Lau, VICE PRESIDENT
Paul H. Schubert, TREASURER & ASSISTANT SECRETARY
INVESTMENT MANAGER
Baring Asset Management (Asia) Ltd.
19th Floor
Edinburgh Tower
15 Queen's Road Central
Hong Kong
ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
New York, New York 10019
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
SHAREHOLDER SERVICING AGENT
PNC Bank, National Association
300 Bellevue Parkway
Wilmington, Delaware 19809
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
LEGAL COUNSEL
White & Case
1155 Avenue of the Americas
New York, New York 10036
This report, including the financial statements herein, is sent to the
shareholders of The Greater China Fund, Inc. for their information. It is not a
prospectus, circular or representation intended for use in the purchase or sale
of shares of the Fund or any securities mentioned in this report.
The financial information included herein is taken from the records of the Fund
without examination by independent accountants, who did not express an opinion
hereon.
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 at
market prices shares of its common stock in the open market.
The Greater China Fund, Inc.
51 West 52nd Street
New York, New York 10019
For information call (201) 318-4150
Additional information (including updated net asset value and market price) may
be obtained through the Fund's dedicated toll-free number, 800-655-2599.
The Greater China
Fund, Inc.
Semi-Annual Report
June 30, 2000
[MH/PW GREATER CHINA LOGO]
