JARDINE FLEMING
CHINA REGION FUND, INC.
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Annual Report
December 31, 1999
JARDINE FLEMING
CHINA REGION FUND, INC.
Contents
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Page
Objectives 1
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Management 1
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Market Information 1
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Highlights 2
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Investment Review 3
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Major Holdings 5
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Investment Portfolio 7
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Statement of Assets and Liabilities 13
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Statement of Operations 14
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Statement of Changes in Net Assets 15
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Financial Highlights 16
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Notes to Financial Statements 17
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Report of Independent Accountants 20
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Dividend Reinvestment and Cash Purchase Plan 21
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Directors and Administration 22
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JARDINE FLEMING
CHINA REGION FUND, INC.
Objectives
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Jardine Fleming China Region Fund, Inc. (the "Fund") seeks to achieve
long-term capital appreciation through investments primarily in equity
securities of companies with substantial assets in, or revenues derived from,
the People's Republic of China (PRC or China), Hong Kong, Taiwan, and
Macau-collectively, the China Region.
The Fund provides investors with an opportunity to participate in the
growing economies of the China Region, especially that of the PRC, although
investments are expected to be predominantly in securities listed on the Stock
Exchange of Hong Kong. Hong Kong enterprises have made substantial investments
in the PRC, in Guangdong Province in particular, where abundant cheap labor and
land are available. Hong Kong is also the largest trading partner of the PRC.
The economies of the PRC, Hong Kong, Taiwan, and Macau have become
increasingly linked over the past 10 years and are expected to become further
integrated now that Hong Kong and Macau have reverted to Chinese sovereignty.
Investments made by the Fund will seek to take advantage of opportunities
resulting from this linkage among the China Region markets.
Management
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Jardine Fleming International Management, Inc. ("JFIM") is the
investment management company appointed to advise and manage the Fund's
portfolio. JFIM is an investment management and advisory company owned by Robert
Fleming Holdings Ltd. ("Flemings"). Flemings has a team of investment managers
worldwide managing approximately $140 billion as of December 31, 1999, for both
institutional and private clients.
Albert Kan is the portfolio manager of the Fund. Mr. Kan joined Jardine
Fleming in 1997 as Assistant Director and portfolio manager specializing in
Hong Kong and China. Previously, he was Chief Investment Officer of Europe
Pacific Advisors, Ltd. where he focused on Hong Kong, China, Taiwan,
Singapore, and Malaysia.
Market Information
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The Fund is listed on the New York Stock Exchange (symbol JFC). The share
price is published in
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o The Wall Street Journal (daily)
o The Asian Wall Street Journal (daily)
o Reuters (page JFC)
The net asset value is published in
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o The Wall Street Journal under "Closed-End Funds" (every Monday)
o The Asian Wall Street Journal under "Closed-End Funds" (every Monday)
o South China Morning Post in Hong Kong (first Thursday of every month)
o Reuters (page JFC)
JARDINE FLEMING
CHINA REGION FUND, INC.
Highlights
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December 31, 1999 December 31, 1998
US$ US$
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Net Assets $107.3 million $68.3 million
Net Asset Value Per Share $11.78 $7.50
Market Data
Share Price on the
New York Stock Exchange $8.44 $5.50
Discount to Net Asset Value -28.4% -26.7%
Total Return for the Year Ended December 31, 1999
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Net Asset Value 57.6%
Share Price 54.2%
JFC Benchmark Index* 46.9%
MSCI Hong Kong Index 54.3%
BNP Prime Peregrine China Index 43.3%
Taiwan Weighted Index 35.3%
Net Asset Value and Share Price vs. Target Index
Net Asset Value Share Price JFC Benchmark Index*
7/16/92 100.0 100.0 100.0
9/92 100.9 80.0 79.1
12/92 109.3 93.0 90.2
3/93 120.5 108.9 94.3
6/93 122.3 120.1 83.1
9/93 128.4 126.8 84.7
12/93 189.0 187.4 129.0
3/94 136.6 136.1 91.1
6/94 124.0 123.3 82.8
9/94 133.0 129.8 94.1
12/94 115.7 94.3 72.2
3/95 109.4 94.3 67.1
6/95 111.9 92.3 69.3
9/95 112.9 94.4 68.8
12/95 103.5 84.5 63.3
3/96 110.1 95.1 70.7
6/96 112.0 87.7 71.5
9/96 112.2 85.6 74.7
12/96 132.8 95.3 97.4
3/97 134.0 99.5 99.7
6/97 170.3 124.9 114.4
9/97 167.7 124.4 116.2
12/97 110.0 82.9 83.7
3/98 107.6 80.8 83.7
6/98 72.7 54.2 63.5
9/98 60.8 40.9 56.9
12/98 69.9 46.8 61.4
3/99 69.7 47.8 62.5
6/99 90.4 74.4 80.7
9/99 84.11 56.86 75.59
12/99 110.11 72.07 90.23
* This benchmark is composed of the MSCI Hong Kong Index, 50%; BNP Prime
Peregrine China Index, 20%; Taiwan Weighted Index, 25%; HSBC Holdings
Limited, 5%. When calculating benchmark performance, the monthly
rebalancing method is used. The Board of Directors established the JFC
Benchmark Index in 1997, and the current composition dates from January
1999. Previously, the benchmark was composed of the Hong Kong All
Ordinaries Index, 60%; Credit Lyonnais Securities Asia All China B Index,
30%; and the Taiwan Weighted Index, 10%.
** Commencement of operations
Source: Jardine Fleming
JARDINE FLEMING
CHINA REGION FUND, INC.
Investment Review
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Dear Fellow Shareholders:
Global equity markets continued their upward trajectory in 1999. Rising
68.2%, the Hang Seng Index in Hong Kong was among many stock markets that closed
1999 at an all-time high. Also in 1999, the Shanghai and Shenzhen B Share
Indices rose by 32.0% and 57.5%, respectively, and Taiwan's Trade-Weighted Index
advanced by 35.3%.
The Fund capitalized on this favorable investment climate with its net
asset value and share price achieving respectable increases of 57.6% and 54.2%,
respectively, compared with a 46.9% increase in the JF China Region Fund
Benchmark.
The Hong Kong economy improved over the year. Real GDP growth, after
turning positive and rising by 0.5% year-on-year in the second quarter,
accelerated to 4.5% in the third quarter. The recovery was paced initially by
private consumption, but subsequently expanded to tourism and trade. During the
year, the government reached an agreement with Disney to build a new Disneyland
in Hong Kong and also spared no efforts in developing the technology sector -
efforts that were reflected in the phenomenal increase in prices of information
technology shares. Market liquidity also improved during the year. The aggregate
balance of the banking sector rose to HK$8 billion at year-end from HK$2.5
billion at the beginning of the year. Money market rates drifted downward, with
the overnight rate falling to around 1% by year-end.
China almost succeeded in obtaining an accession into the World Trade
Organization (WTO), pending the approval of the U.S. Congress and the European
Commission. Helped by infrastructure spending and repeated interest rate cuts,
real GDP grew by 7.1% in 1999, compared with 7.8% in 1998. The rebound in
exports in the second half of the year helped allay concerns about an imminent
devaluation of the renminbi. The one-year nondeliverable forward rate ended 1999
at 8.28 to the U.S. dollar, compared with 9.58 during the period of greatest
uncertainty in August 1998. To boost consumption through the wealth generated by
the stock market rally, the authorities adopted several measures to aid the
rally, such as a reduction in stamp duty and allowing companies to purchase
stocks via bank borrowing with securities as collateral. To enlarge the stock
universe and assist the restructuring of state-owned enterprises, the government
approved the formation of new funds and the listing of new enterprises.
The Taiwan economy escaped relatively unscathed in 1999, despite
political uneasiness caused by the "state-to-state theory" of President Lee and
the earthquake in September, which caused only minor and short-lived disruptions
to production and exports. Growth in the electronics sector, in particular, has
returned to its pre-earthquake heyday.
The Fund had been well positioned ahead of improvements in the Hong
Kong economy, by concentrating on blue chips and strategically underweighting H
shares and red chips. To benefit from the booming technology sector, the Fund
also picked up some good-quality Hong Kong high-tech companies. As the Morgan
Stanley index is in the process of increasing weightings in Taiwan, due in May
this year, the Fund has increased exposure in the Internet and the software
sectors, overweighting high-tech integrated circuit foundry stocks and companies
that enjoy cheap labor and land in China.
Outlook
On the back of sustained growth in the global industrialized countries
and accelerating growth in Japan and Asia, the economies of the China region
should continue to improve and prosper.
The Hong Kong economy, for one, is expected to strengthen further in
the coming quarters, as the recovery gains momentum and broadens to more sectors
of the economy. This will help cushion against any rise in domestic interest
rates brought about by the tightening of monetary policy by the U.S. Federal
Reserve. Labor market statistics have shown that the gap between employment,
which usually lags economic recovery, and labor force growth narrowed from 3.9%
in January to 0.9% in November, auguring well for future employment prospects.
On a longer-term horizon, a survey by the Hong Kong government suggests that
China's accession to the WTO will raise Hong Kong's real GDP by 0.5% per annum
in the coming 10 years. For China, incremental growth is forecast at 1.0% per
annum.
Governor Dai of the People's Bank of China said that growth in 2000
would at least match last year's 7% expansion. Fiscal spending will remain the
locomotive of growth, and the latest rebound in exports will continue.
Deflationary forces will likely subside in the second half of the year.
Restructuring of the ailing state-owned enterprises will continue apace while
restructuring of the banking sector will enable the state-owned commercial banks
to extend new loans to the cash-starved enterprises. For Taiwan, growth is
forecast to accelerate to 6.3% in 2000 from 5.3% last year, propelled by strong
overseas demand for electronics, information, and communication products.
The investment theme for this year will still be the Asian recovery.
Hong Kong, benefiting from its trade and investment links with Asia, should see
its stock market reflecting such positive developments. The outlook for the
property sector is crucial: the negative impact of rising interest rates will be
balanced by the reduction in public housing supply and banks' aggressiveness in
the mortgage market. In line with the global trend, the information technology
sector will continue to be the fastest area of growth in Hong Kong, capturing
the attention of both local and overseas investors. Reflecting both
developments, the Fund will focus on property stocks with a high-tech exposure.
By contrast, share holdings of large banks will be trimmed. As the mortgage rate
lagged behind the anticipated rise in money market rates, the banking industry
will likely experience further contraction in interest rate margins. The Fund
will retain interest in medium-sized banks with attractive valuations, however.
Confidence in Chinese enterprises improved after the debt restructuring
deal between Guangdong Enterprise and its creditor banks. This, along with
China's WTO accession prospects, has meant that investor interest in China has
picked up in the last few months. The Fund will therefore begin to accumulate
high-tech stocks and also cyclical stocks, such as chemical companies, that are
cheap relative to their regional counterparts.
Optimism on Taiwan is also improving as post-quake economic recovery
gathers momentum. Given the increase in Taiwan MSCI index weightings, foreigners
will be major buyers of the market. The Fund will continue to acquire quality
stocks in the bullish Internet and software sectors.
Taken together, given the improving fundamentals, we believe that this
asset mix will enable investors to reap the full benefits brought about by
economic recovery in the Greater China economies and to maximize their return
from the Fund. Following the decent performance of the previous year, we
continue to expect lucrative rewards in the coming year for long-term investors
committed to the China region markets.
Respectfully submitted,
The Rt. Hon. The Earl of Cromer
Chairman
January 21, 2000
JARDINE FLEMING
CHINA REGION FUND, INC.
Major Holdings
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At December 31, 1999
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% of Net
Assets
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Hutchison Whampoa 10.3
One of Hong Kong's leading conglomerates, controlling 60% and 50% of
the container ports in Hong Kong and Shanghai, respectively. Hutchison should
benefit from an increase in PRC exports.
Cheung Kong Holdings 7.7
One of Hong Kong's premier property companies with significant property
developments in Hong Kong and the PRC. Cheung Kong has been discussing numerous
property and infrastructure projects in China.
Cable & Wireless HKT 7.4
The dominant fixed line and cellular network operator in Hong Kong. It
has the best chance of gaining a lucrative position in China via relationships
with its existing shareholder, the Ministry of Post and Telecommunications,
particularly when China liberalizes its telecommunications market.
China Telecom (Hong Kong) 5.6
Owns and operates cellular network businesses with a combined 93%
market share in six provinces in China. With limited competition on the horizon,
the company is expected to grow from 12 million subscribers in 1999 to 16
million in 2000. It is the only listed PRC telecommunications stock in Hong Kong
included in the Hang Seng Index.
HSBC Holdings 5.6
Hong Kong's first home-grown international bank with a network of over
3,400 offices in more than 70 countries. Despite its prominent overseas
presence, HSBC has been active in pursuing expansion opportunities in the
restricted banking sector in China. It is one of the first four banks to be
granted a license to conduct renminbi business in the PRC.
Sun Hung Kai Properties 5.3
Hong Kong's premier and largest property company with an investment
properties portfolio of over 15 million square feet and a property development
landbank in excess of 30 million square feet. Although primarily focused in Hong
Kong, SHK Properties has been gradually expanding its property exposure to three
strategic locations in China - Beijing, Shanghai, and Guangzhou.
Hang Seng Bank 4.9
The largest local bank in Hong Kong. Hang Seng Bank is well known for
its conservative and prudent management. Apart from capitalizing on HSBC's
network in China, Hang Seng Bank has pursued its own expansion in China in
recent years with branches and representative offices in major cities.
Taiwan Semiconductor Manufacturing 4.7
The world's first and largest dedicated integrated circuit foundry. The
company currently operates two 6-inch-wafer fabs and three 8-inch-wafer fabs and
owns two-thirds of WaferTech, an 8-inch-wafer fab in Washington. TSM benefits
from the increase in outsourcing by major IC companies around the world.
United Micro Electronics 2.9
Designs, manufactures, and markets integrated circuits and related
electronics products. The main products are consumer electronics ICs, memory
ICs, personal computer peripheral ICs, communication ICs, and central processing
units. It is the second-largest IC company in the world.
CLP Holdings 2.6
The franchisee for electricity generation and transmission for the
Kowloon and New Territories area. CLP was one of the first Hong Kong companies
to pursue investment opportunities in China. Its first such investment was 1979,
and it is one of the largest shareholders of a power project in Shandong - one
of the largest projects in China. In 1997, CLP established a strategic
relationship with CITIC Pacific, which is ultimately owned by the State Council.
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Total Major Holdings 57.0
JARDINE FLEMING
CHINA REGION FUND, INC.
Investment Portfolio
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At December 31, 1999
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Holdings Market
(in shares Value
Description or par) (in US$)
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Common Stocks (unless otherwise noted)
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HONG KONG (66.0%)
Appliances & Household Durables (0.4%)
Guangdong Kelon Electrical Holdings 'H' 505,000 383,289
Banking (6.5%)
Bank of East Asia 359,594 999,193
Dao Heng Bank Group 80,000 412,684
* HKCB Bank Holding Co. 1,048,000 296,598
Hang Seng Bank Ltd. 462,400 5,279,218
6,987,693
Beverages & Tobacco (0.4%)
Shanghai Industrial Holdings 195,000 407,635
Broadcasting & Publishing (0.2%)
Television Broadcasts 29,000 197,723
Chemicals (1.1%)
China Merchants Holdings 786,000 647,122
Shanghai Petrochemical 946,000 148,469
* Yizheng Chemical Fibre 'H' 1,466,000 410,182
1,205,773
Data Processing & Reproduction (3.2%)
* Great Wall Technology 'H' 200,000 194,250
Legend Holdings 796,000 1,976,304
* Stone Electronic Technology 1,742,000 1,232,521
3,403,075
Electrical & Electronics (1.3%)
Johnson Electric Holdings 213,000 1,367,299
Energy Sources (0.4%)
Yanzhou Coal Mining 1,004,000 277,687
Zhenhai Refining & Chemical 'H' 920,000 163,324
441,011
Merchandising (0.7%)
China Everbright Ltd. 448,000 368,843
Goldlion Holdings 3,196,000 353,581
722,424
Multi-Industry (14.6%)
Beijing Enterprises Holdings 238,000 375,056
Citic Pacific 554,000 2,084,582
* Hutchison Whampoa 736,000 10,698,913
* Hutchison Whampoa, Warrants, 5/25/00 530,000 347,720
Swire Pacific 363,500 2,146,350
15,652,621
Real Estate (15.4%)
Cheung Kong Holdings 649,000 8,244,517
China Resources Enterprise 828,000 1,326,121
* New World China Land 205,600 76,040
Sun Hung Kai Properties 543,000 5,658,069
Wharf Holdings 530,000 1,230,655
16,535,402
Recreation (0.6%)
Yue Yuen Industrial Holdings 269,000 643,648
Telecommunications (13.7%)
Cable & Wireless 2,745,941 7,930,324
* China Telecom (Hong Kong) 968,000 6,051,946
Smartone Telecom Holdings 136,500 658,487
14,640,757
Transportation - Airlines (2.0%)
Cathay Pacific Airways Ltd. 1,135,000 2,022,223
China Southern Airlines Co. 570,000 124,654
2,146,877
Transportation - Road & Rail (0.2%)
Zhejiang Expressway 'H' 1,701,000 258,208
Transportation - Shipping (0.9%)
Cosco Pacific 1,238,000 1,027,221
Utilites - Electrical & Gas (4.2%)
CLP Holdings 600,000 2,763,234
Hong Kong & China Gas 1,098,700 1,505,262
* Shandong Intl Power Development 'H' 1,710,000 241,976
4,510,472
Wholesale & International Trade (0.2%)
Ng Fung Hong 492,000 253,168
TOTAL HONG KONG 70,784,296
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CHINA (0.0%)
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Shanghai Equities (USD) (0.0%)
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Industrial Components (0.0%)
Shanghai Diesel Engine 'B' 500 93
Leisure & Tourism (0.0%)
Huangshan Tourism Development 'B' 650 239
Real Estate (0.0%)
Shanghai Lujiazui Finance & Trade
Zone Development 'B' 247 78
Utilities - Electrical & Gas (0.0%)
Heilongjiang Electric Power 'B' 350 97
Total Shanghai Equities 507
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Shenzhen Equities (USD) (0.0%)
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Business & Public Services (0.0%)
China Merchant Shekou Port Service 'B' 66 30
Total Shenzhen Equities 30
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TOTAL CHINA 537
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TAIWAN (27.6%)
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Banking (2.1%)
China Trust Commercial Bank 725,600 843,855
First Commercial Bank 337,000 419,841
* Hua Nan Commercial Bank 278,000 348,995
ICBC 606,100 679,774
2,292,465
Business & Public Services (1.5%)
Systex 233,800 1,594,176
Chemicals (1.2%)
Formosa Plastics 245,030 487,952
Nan Ya Plastic 338,550 744,303
1,232,255
Data Processing & Reproduction (3.2%)
Acer Peripherals 426,000 1,764,537
Asustek Computer 114,920 1,211,997
Compal Electronics 145,795 490,087
3,466,621
Electrical & Electronics (8.4%)
Hon Hai Precision Industry 252,000 1,878,859
* Mosel Vitelic 565,000 900,112
Mosel Vitelic (USD) 36,205 497,819
Taiwan Semiconductor Manufacturing 949,560 5,052,622
* Winbond Electronics 290,000 688,386
9,017,798
Electronic Components, Instruments (3.8%)
Advanced Semiconductor Engineering 260,000 927,832
United Micro Electronics 871,700 3,110,735
4,038,567
Forest Products & Paper (0.4%)
* Chang Hwa Pulp 675,000 466,704
Industrial Components (0.9%)
* Pacific Electric Wire & Cable 1,337,000 945,719
Insurance (0.8%)
Cathay Life Insurance 369,150 888,030
Merchandising (0.8%)
President Chain Store Corp. 201,780 890,442
Metals-Steel (0.5%)
China Steel 724,500 535,555
Recreation (0.8%)
Ritek Incorp 135,197 818,462
Textiles & Apparel (1.4%)
Far Eastern Textile 631,300 1,508,603
Utilities - Electric & Gas (1.8%)
Phoenixtec Power 982,029 1,893,030
TOTAL TAIWAN 29,588,427
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UNITED KINGDOM (HKD) (5.6%)
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Banking (5.6%)
! HSBC Holdings 368,000 5,160,095
*! HSBC Holdings, Warrants, 3/31/00 4,200,000 859,073
6,019,168
TOTAL UNITED KINGDOM 6,019,168
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TOTAL INVESTMENTS
(99.2% of Net Assets) (Cost $68,791,397) 106,392,428
================================================================================
Other assets less liabilities 858,526
================================================================================
NET ASSETS 107,250,954
================================================================================
Aggregate cost is the same for Federal income tax purposes.
The aggregate unrealized gain for all securities is as follows:
Excess of market value over cost 39,229,618
Excess of cost over market value (1,628,587)
Net unrealized gain 37,601,031
================================================================================
HKD Hong Kong dollar
USD U.S. dollar
* Non-income producing
! Affiliated company
See accompanying notes to financial statements.
JARDINE FLEMING
CHINA REGION FUND, INC.
Statement of Assets and Liabilities
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At December 31, 1999
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(in US$)
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Investments at value (Note 2) (cost $68,791,397) 106,392,428
Cash and foreign currencies 1,853,776
Dividends receivable 15,074
Prepaid insurance premiums 10,180
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Total Assets 108,271,458
Liabilities
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Accrued expenses payable 294,259
Distributions payable 364,035
Due to investment advisor (Note 4) 362,210
Total Liabilities 1,020,504
Net Assets 107,250,954
================================================================================
Net assets consist of:
Common stock, $0.01 par value
(100,000,000 shares authorized;
9,101,372 shares issued and outstanding) 91,014
Paid-in capital 135,980,391
Accumulated realized gain (loss) on investments
and foreign currency transactions,
net of distributions (66,423,003)
Accumulated net unrealized gain (loss) on investments,
foreign currency holdings, and other assets
and liabilities denominated in foreign currencies 37,602,552
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Net Assets 107,250,954
================================================================================
Net Asset Value Per Share ($107,250,954 / 9,101,372) 11.78
================================================================================
See accompanying notes to financial statements.
JARDINE FLEMING
CHINA REGION FUND, INC.
Statement of Operations
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Year Ended December 31, 1999
- --------------------------------------------------------------------------------
(in US$)
- --------------------------------------------------------------------------------
Investment Income (Note 2)
- --------------------------------------------------------------------------------
Dividends 2,063,193
Interest 58,179
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Total Investment Income 2,121,372
Expenses
- --------------------------------------------------------------------------------
Investment advisory fees (Note 5) 1,061,548
Administration and accounting fees (Note 5) 285,000
Directors' fees and expenses 163,043
Custodian fees 116,841
Audit and legal fees 68,303
Shareholder report and meeting expenses 57,108
Shareholder service fees 17,035
Registration fees 25,500
Other expenses 33,488
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Total Expenses 1,827,866
- --------------------------------------------------------------------------------
Net Investment Income 293,506
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Realized and Unrealized Gain (Loss) on Investments, Foreign Currency
Holdings and Other Assets and Liabilities Denominated in Foreign Currencies
- --------------------------------------------------------------------------------
Net realized gain (loss) (Note 2)
Investment transactions (8,303,697)
Foreign currency transactions (6,739)
Net change in unrealized gain (loss) (Note 2)
Investment transactions 47,346,460
Foreign currency holdings and other assets
and liabilities denominated in foreign currencies (8,877)
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Net realized and unrealized gain on investments,
foreign currency holdings and other assets
and liabilities denominated in foreign currencies 39,027,147
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations 39,320,653
================================================================================
See accompanying notes to financial statements.
JARDINE FLEMING
CHINA REGION FUND, INC.
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Year Ended Year Ended
December 31, 1999 December 31, 1998
(in US$) (in US$)
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
Operations
Net investment income 293,506 188,258
Net realized gain (loss)
on investment transactions (8,303,697) (45,702,880)
Net realized gain (loss) on
foreign currency transactions (6,739) (106,194)
Net change in unrealized
gain (loss) on investments,
foreign currency holdings
and other assets and liabilities
denominated in foreign currencies 47,337,583 6,414,897
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 39,320,653 (39,205,919)
- --------------------------------------------------------------------------------
Dividends to Shareholders
From net investment income (Note 2) (364,035) -
- --------------------------------------------------------------------------------
Capital Contributions from Adviser (Note 4) 5,400 -
- --------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 38,962,018 (39,205,919)
Net Assets:
Beginning of period 68,288,936 107,494,855
- --------------------------------------------------------------------------------
End of period 107,250,954 68,288,936
================================================================================
See accompanying notes to financial statements.
JARDINE FLEMING
CHINA REGION FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
For For For For For
the the the the the
Year Year Year Year Year
Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
(In US$) (In US$) (In US$) (In US$) (In US$)
- --------------------------------------------------------------------------------
Per share operating performance
- --------------------------------------------------------------------------------
Net asset
value,
beginning of
period 7.50 11.81 14.31 11.17 12.58
- --------------------------------------------------------------------------------
Net investment
income 0.03 0.02 (0.01) 0.03 0.07
Net realized and
unrealized gain
(loss) on
investment and
foreign
currency-related
transactions 4.29 (4.33) (2.45) 3.13 (1.39)
- --------------------------------------------------------------------------------
Total from
investment
operations 4.32 (4.31) (2.46) 3.16 (1.32)
- --------------------------------------------------------------------------------
Less
distributions
Dividends from
net investment
income (0.04) - (0.04) (0.02) (0.09)
- --------------------------------------------------------------------------------
Net asset value,
end of period 11.78 7.50 11.81 14.31 11.17
================================================================================
Market value,
end of period 8.44 5.50 9.75 11.38 10.00
================================================================================
Total Investment
Return
Per share
market value 54.2% (43.6%) (13.9%) 13.9% (10.3%)
Per share net
asset value 57.6% (36.5%) (17.2%) 28.3% (10.5%)
RATIOS/SUPPLEMENTAL DATA
Net assets,
end of
period 107,250,954 68,288,936 107,494,855 130,224,095 101,647,112
Ratio of
expenses to
average net
assets 2.28% 2.49% 1.68% 2.18% 2.22%
Ratio of net
investment
income to
average net
assets 0.37% 0.24% (0.05%) 0.26% 0.60%
Portfolio
turnover rate 90.8% 111.9% 102.60% 44.40% 44.90%
Number of
shares
outstanding
at end of
period
(in thousands) 9,101 9,101 9,101 9,101 9,101
See accompanying notes to financial statements.
JARDINE FLEMING
CHINA REGION FUND, INC.
Notes to Financial Statements
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December 31, 1999
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1. Organization and Capital
Jardine Fleming China Region Fund Inc. (the "Fund") was incorporated in the
State of Maryland on May 22, 1992, and is registered as a non-diversified,
closed-end management investment company under the Investment Company Act
of 1940. The Fund commenced operations on July 16, 1992.
2. Significant Accounting Policies
The following significant accounting policies, which are in conformity with
generally accepted accounting principles of the United States of America
for investment companies, are consistently followed by the Fund in the
preparation of its financial statements.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from these estimates.
i) Security Valuation
All securities for which market quotations are readily available are
valued at the last sales price prior to the time of determination, or,
if no sales price is available at that time, at the mean between the
last current bid and asked prices. Securities that are traded
over-the-counter are valued, if bid and asked quotations are
available, at the mean between the current bid and asked prices.
Investments in short-term debt securities having a maturity of 60 days
or less are valued at amortized cost. All other securities and assets
are valued at fair value as determined in good faith by the Board of
Directors. In valuing the Fund's assets, quotations of foreign
securities in a foreign currency are translated to U.S. dollar
equivalents at the exchange rate in effect on the valuation date.
ii) Affiliated Companies
As defined by the Investment Company Act of 1940, an affiliated
company is one in which the fund owns at least 5% of the outstanding
voting securities.
iii) U.S. Federal Income Taxes
No provision for federal income taxes is required since the Fund
intends to continue to qualify as a regulated investment company and
distribute all of its taxable income. The Fund has capital loss
carryforwards for federal income tax purposes of $66,355,578 of which
$7,825,208 expires in 2004, $46,853,803 in 2006, and $11,676,567 in
2007.
In order for the fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, the
following reclassifications were made during the year ended December
31, 1999. The results of operations and net assets were not affected
by the increase/(decrease) to these accounts.
Undistributed net investment income $(117,729)
Undistributed net realized gain 172,883
Paid-in-capital (55,154)
iv) Foreign Currency Translation
The books and records of the Fund are maintained in United States
dollars. Foreign currency amounts are translated into U.S. dollars at
the mid-market price of such currencies against U.S. dollars as
follows:
o investments, other assets, and liabilities at the prevailing
rates of exchange on the valuation date;
o investment transactions and investment income at the prevailing
rates of exchange on the dates of such transactions
Although the net assets of the Fund are presented at the foreign
exchange rates and market values at the close of the period, the Fund
does not isolate that portion of the results of operations arising as
a result of changes in the foreign exchange rates from the
fluctuations arising from changes in the market prices of the
securities held at period-end. Similarly, the Fund does not isolate
the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of securities sold during
the period. Accordingly, realized and unrealized foreign currency
gains (losses) are included in the reported net realized and
unrealized gains (losses) on investment transactions balances.
Unrealized currency gains (losses) from valuing foreign currency
denominated assets and liabilities at period-end exchange rates are
reflected as a component of accumulated net unrealized gain (loss) on
investments, foreign currency holdings, and other assets and
liabilities denominated in foreign currencies.
v) Distribution of Income and Gains
The Fund intends to distribute to shareholders, at least annually,
substantially all of its net investment income and expects to
distribute annually any net long-term capital gains in excess of net
short-term capital losses. An additional distribution may be made to
the extent necessary to avoid the payment of a 4% Federal excise tax.
Income and capital gain distributions are determined in accordance
with federal income tax regulations and may differ from those
determined in accordance with generally accepted accounting
principles.
vi) Other
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the identified cost basis. Interest
income is recognized on the accrual basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Portfolio turnover rate is calculated by dividing the lesser of
purchases and sales of investment securities having maturities greater
than one year at the time of acquisition by the average monthly market
value of those investment securities.
3. Investment Transactions
Consistent with its investment objective, the Fund engages in the following
transactions practices. The investment objective, policies, program, and
risk factors of the Fund are described more fully in the Fund's Prospectus.
i) Foreign Transactions
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S.
dollar denominated transactions as a result of, among other factors,
the level of governmental supervision and regulation of foreign
securities markets and the possibility of political or economic
instability.
ii) Other
During the year ended December 31, 1999, the Fund made purchases of
$72,877,446 and sales of $72,039,633 of investment securities other
than short-term investments. There were no purchases or sales of U.S.
government securities.
4. Related Party Transactions
i) Jardine Fleming International Management Inc. ( the "Adviser"),
provides investment advisory services to the Fund under the terms of
an investment advisory agreement. From January 1, 1999, to August 31,
1999, the Adviser was paid a fee, computed weekly and payable monthly,
at the annual rate of 1.50% of the first $50 million, 1.25% of the
next $25 million and 1.00% of the excess over $75 million of the
Fund's weekly net assets. Since September 1, 1999, the Adviser has
been paid a new fee, computed weekly and payable monthly, at the
annual rate of 1.25% of the first $75 million and 1.00% of the excess
over $75 million of the Fund's weekly net assets.
ii) T. Rowe Price Associates, Inc. (the "Administrator") provides
administrative services to the Fund under an Administrative Services
Agreement. The Administrator receives a fee, payable monthly, at an
annual rate of 0.10% of the first $250 million, 0.075% of the next
$250 million, and 0.05% of the excess over $500 million of the Fund's
average weekly net assets, subject to a minimum annual fee of
$200,000, plus reimbursement for certain out-of-pocket expenses. The
Administrator also receives an annual fee of $85,000 for fund
accounting services pursuant to an Accounting Services Agreement. At
December 31, 1999, $47,269 was payable to the Administrator.
iii) During the year ended December 31, 1999, the Fund paid $64,076 in
brokerage commissions to Jardine Fleming Broking Ltd. and Jardine
Fleming Securities Ltd., affiliated brokers/dealers.
iv) In connection with the redemption of a portion of its initial
shares, the Adviser made a capital contribution of $5,400 to the Fund.
JARDINE FLEMING
CHINA REGION FUND, INC.
Report of Independent Accountants
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To the Board of Directors and Shareholders of Jardine Fleming China Region
Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Jardine Fleming China Region Fund,
Inc. (the "Fund") at December 31, 1999, and results of its operations, the
changes in its net assets and the financial highlights for each of the fiscal
periods presented, in conformity with accounting principles generally accepted
in the United States. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Baltimore , Maryland
February 7, 2000
JARDINE FLEMING
CHINA REGION FUND, INC.
Dividend Reinvestment and Cash Purchase Plan
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The Fund operates an optional Dividend Reinvestment and Cash Purchase Plan (the
"Plan") whereby:
a) shareholders may elect to receive dividend and capital gain
distributions in the form of additional shares of the Fund (the Share
Distribution Plan).
b) shareholders may make optional payments (any amount between $100 and
$3,000) which will be used to purchase additional shares in the open
market (the Share Purchase Plan).
For a copy of the Plan brochure, as well as a dividend reinvestment
authorization card, please contact:
1) State Street Bank & Trust Company or 2) T. Rowe Price Services, Inc.
(the Plan Agent): Telephone No: 800-638-8540
P. O. Box 8200 (toll free)
Boston, Massachusetts 02266-8200
Telephone No: 800-426-5523 (toll free)
The following should be noted with respect to the Plan:
If you participate in the Share Distribution Plan, whenever the Board of
Directors of the Fund declares an income dividend or net capital gain
distribution, you will automatically receive your distribution in newly issued
shares (cash will be paid in lieu of fractional shares) if the market price of
the shares on the date of the distribution is at or above the net asset value of
the shares. The number of shares to be issued to you by the Fund will be
determined by dividing the amount of the cash distribution to which you are
entitled (net of any applicable withholding taxes) by the greater of the net
asset value (NAV) per share on such date or 95% of the market price of a share
on such date. If the market price of the shares on such a distribution date is
below the NAV, the Plan Agent will, as agent for the participants, buy shares on
the open market, on the New York Stock Exchange or elsewhere, for the
participant's account on, or after, the payment date. There is no service charge
for purchases under this Plan.
For U.S. federal income tax purposes, shareholders receiving newly issued shares
pursuant to the Share Distribution Plan will be treated as receiving income or
capital gains in an amount equal to the fair market value (determined as of the
distribution date) of the shares received and will have a cost basis equal to
such fair market value. Shareholders receiving a distribution in the form of
shares purchased in the open market pursuant to the Plan will be treated as
receiving a distribution of the cash distribution that such shareholder would
have received had the shareholder not elected to have such distribution
reinvested and will have a cost basis in such shares equal to the amount of the
distribution.
There will be no brokerage charge to participants for shares issued directly by
the Fund under the Plan. Each participant will pay a pro rata share of brokerage
commissions incurred with respect to the Plan Agent's open market purchases of
shares in connection with the Plan. The Fund will pay the fees of the Plan Agent
for handling the Plan.
You may terminate your account under the Share Distribution Plan by notifying
the Plan Agent in writing. The Plan may be terminated by the Plan Agent or the
Fund with notice to you at least 30 days prior to any record date for the
payment of any distribution by the Fund. Upon any termination, the Plan Agent
will deliver a certificate or certificates for the full shares held for you
under the Plan and a cash adjustment for any fractional shares.
You also have the option of instructing the Plan Agent to make semiannual cash
purchases of shares in the open market. There is a service charge of $1.25 for
each purchase under this Share Purchase Plan.
JARDINE FLEMING
CHINA REGION FUND, INC.
Directors and Administration
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Officers and Directors The Rt. Hon. The Earl of Cromer - Director and
Chairman of the Board
A. Douglas Eu - Director, President, and Treasurer
S. M. Chung - Director
Alexander R. Hamilton - Director
Ng Yook Man - Director
Julian M. I. Reid - Director
Emmett J. Rice - Director
Anthony John Morgan - Secretary
Henry H. Hopkins - Assistant Secretary
Investment Adviser Jardine Fleming International Management Inc.
P.O. Box 3151
Road Town, Tortola
British Virgin Islands
Administrator T. Rowe Price Services, Inc.
100 East Pratt Street
Baltimore, Maryland 21202 U.S.A.
Custodian Citibank N.A.
New York:
111 Wall Street, 16th Floor
New York, New York 10005
U.S.A.
Hong Kong:
Citibank Tower
Citibank Plaza
3 Garden Road
Hong Kong
Independent Accountants PricewaterhouseCoopers, LLP
250 West Pratt Street
Baltimore, Maryland 21201
U.S.A.
Legal Counsel Cleary, Gottlieb, Steen & Hamilton
New York:
1 Liberty Plaza, 43rd Floor
New York, New York 10006
U.S.A.
Hong Kong:
39th Floor, Bank of China Tower
1 Garden Road
Hong Kong
Registrar, Transfer Agent, State Street Bank & Trust Company
and Dividend Paying Agent P. O. Box 8200
Boston, Massachusetts
02266-8200 U.S.A.
This report, including the financial statements herein, is sent to the
shareholders of the Fund 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 of any securities mentioned in this report.
JFCRM-AR-99
F01-051 12/31/99
