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 investments.
Unrealized currency gains (losses) resulting 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.
Income and capital gain distributions are determined in accordance with federal income tax regulations and may differ from those determined in accordance with GAAP.
An affiliated issuer may be considered one which is under common control with a Fund. For the purposes of the report, the Fund assumes the following to be an affiliated issuer:
3. Investment Transactions
The investment objective, policies, program, and risk factors of the Fund are described fully in the Fund’s Prospectus.
During the six months ended June 30, 2008, the Fund made purchases of $75,542,608 and sales of $75,081,158 of investment securities other than short-term investments. There were no purchases or sales of U.S. Government securities.
4. Related party, Other Service Provider Transactions and Directors
i) — JF International Management Inc. (the Investment ‘Adviser’), an indirect wholly-owned subsidiary of JPMorgan Chase & Co., provides investment advisory services to the Fund under the terms of an investment advisory agreement. The Adviser is paid a fee, computed weekly and payable monthly, at the annual rate of 1.00% of the Fund’s weekly net assets. Investments in funds on which the Adviser or its affiliates charges a management fee are excluded from the calculation.
ii) — During the six months ended June 30, 2008, the Fund did not pay any brokerage commissions to JPMorgan Chase Group companies or affiliated brokers/dealers.
iii) Other Service Providers — Pursuant to an Administration Agreement, JPMorgan Investor Services, Co. (the “Administrator”), an indirect, wholly-owned subsidiary of JPMorgan Chase & Co., provides certain administration services to the Fund. In consideration of these services, the Administrator receives a fee computed daily and paid monthly at the annual rate of 0.02% of the first $12.5 billion of the average daily net assets of all funds in the JPMorgan International Fund Complex and 0.0175% of the average daily net assets in excess of $12.5 billion of all such funds subject to a minimum annual fee of $25,000. In addition, the Fund pays an annual administration fee of $87,500 in respect of tax, compliance, financial reporting and regulatory services.
JPMorgan Chase Bank N.A. (‘JPMCB’), an affiliate of the Fund, provides portfolio custody and accounting services for the Fund. The amounts paid directly to JPMCB by the Fund for custody and accounting services are included in Custodian and accounting fees in the Statement of Operations. The custodian fees may be reduced by credits earned by the Fund, based on uninvested cash balances held by the custodian.
iv) Directors — With effect from April 1, 2008, the Fund pays each of its Directors who is not a director, officer or employee of the Adviser, Administrator or any affiliate thereof, an annual fee of $22,000, the Audit Committee Chairman $26,000 and the Chairman $32,000 plus a $3,000 attendance fee for each Board meeting, Management Engagement Committee meeting and Audit Committee meeting attended. In addition, the Fund reimburses all Directors for travel and out-of-pocket expenses incurred in connection with Board of Directors meetings. Under normal circumstances, in order to minimize expenses, the Board expects to hold two meetings a year by telephone.
Prior to April 1, 2008, The Fund paid each of its Directors who is not a director, officer or employee of the Adviser, Administrator or any affiliate thereof an annual fee of $21,000 and the Chairman $30,000 plus $2,000 attendance fee for each Board meeting, $1,500 for each Management Engagement Committee meeting and $1,750 for each Audit Committee meeting attended.
5. Capital Share Transactions
On September 5, 2007, the Board of Directors renewed an authority for the Fund to purchase shares of its common stock from Fund stockholders, as described below. When shares trade at a discount to net asset value, any purchase of shares by the Fund has the effect of increasing the net asset value per share of the Fund’s remaining shares outstanding. All shares purchased by the Fund are thereafter considered authorized and unissued.
i) Share Repurchase Program — The Fund was authorized to repurchase up to 458,516 shares (10% of its issued and outstanding shares) in the open market through September 3, 2008. Repurchases can be made only when the Fund’s shares are trading at less than net asset value and at such times and amounts as it is believed to be in the best interest of the Fund’s stockholders.
During the six months ended June 30, 2008 and the year ended December 31, 2007, the Fund did not repurchase any shares under the share repurchase program.
JUNE 30, 2008 JF CHINA REGION FUND, INC. 17
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (Unaudited) (continued)
6. Risks and Uncertainties
i) China Region — Investing in securities of “China Region companies” may include certain risks and considerations not typically associated with investing in U.S. securities. In general, China Region companies are those that are organized under the laws of, or has a principal office in, the People’s Republic of China (including Hong Kong and Macau) (“China”), or Taiwan; the principal securities market for which is China or Taiwan; that derives at least 50% of its total revenues or profits from goods or services that are produced or sold, investments made, or services performed in China or Taiwan; or at least 50% of the assets of which are located in China or Taiwan. Such risks include fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, these securities may not be as liquid as U.S. securities. At June 30, 2008, the Fund had 30.0%, 37.7%, and 32.3% of its total investments invested in China, Hong Kong, and Taiwan, respectively.
ii) 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.
iii) Other — In the normal course of business, the Fund may enter into contracts that provide general indemnifications. The maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated; however, based on experience, the risk of any loss from such claims is considered remote.
7. Tax Status
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 under subchapter M of the Internal Revenue Code and distribute substantially all of its taxable income.
The tax character of distributions paid for the year ended December 31, 2007 was $12,988,245 from ordinary income and $10,983,246 from realized capital gains. Distributions deemed to be from PFICs are reflected in dividends from net investment income.
The tax character of distributions paid for the year ended December 31, 2006 was $419,175 ordinary income.
At December 31, 2007, the components of net assets (excluding paid-in capital) on a tax basis were as follows:
| Tax Basis Ordinary Income | | | | $ | 6,652,182 | | | | | |
| Tax Basis Long-Term Capital Gain | | | | | 14,871,886 | | | | | |
| Tax Unrealized Appreciation on Investments and Foreign Currencies | | | | | 33,262,897 | | | | | |
| Other Cumulative Temporary Differences | | | | | (145,626 | ) | | | | |
| Net Assets (Excluding Paid-In Capital) | | | | $ | 54,641,339 | | | | | |
The cumulative timing differences primarily consist of wash sales, PFIC mark to market and post-October loss deferrals.
During the year ended December 31, 2007, the Fund utilized capital loss carryforwards in the amount of $5,739,705.
Net capital losses incurred after October 31 and within the taxable year are deemed to arise on the first business day of the Fund’s next taxable year. For the year ended December 31, 2007, the Fund deferred to January 1, 2008 post October capital losses of $128,992 and post October currency losses of $16,634.
During the year ended December 31, 2007, the Fund reclassified $2,171,771 to undistributed net investment income from accumulated realized gains on investments as a result of permanent book and tax differences relating to realized foreign currency gains or losses and PFIC gains and losses. Net assets were not affected by the reclassifications.
18 JF CHINA REGION FUND, INC. JUNE 30, 2008
8. Recent Accounting Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”) was issued and is effective for fiscal years and interim periods beginning after November 15, 2008. SFAS 161 requires enhanced disclosures about a fund’s derivative and hedging activities. Management is currently evaluating the impact the adoption of SFAS 161 will have on the Fund’s financial statement disclosures.
JUNE 30, 2008 JF CHINA REGION FUND, INC. 19
RESULTS OF THE ANNUAL STOCKHOLDERS’ MEETING
The Fund held its annual stockholders’ meeting on May 8, 2008. At this meeting, stockholders re-elected the following nominee to the Fund’s Board of Directors.
I) Election of Directors
Nominee
|
|
|
| Votes For
|
| Votes Withheld
|
| Non-Voting Shares
|
| Total Voting Shares
|
|---|
| Julian M.I. Reid | | | | | 3,457,372 | | | | 145,271 | | | | 937,780 | | | | 4,585,160 | |
OTHER INFORMATION
Information About Portfolio Holdings
The Fund files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (the ‘Commission’) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at http://www.sec.gov and may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, on the Fund’s website at http://www.jfchinaregion.com or on the Commission’s website at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, on the Fund’s website at http://www.jfchinaregion.com or on the Commission’s website at http://www.sec.gov.
Certifications
Simon J. Crinage, as the Fund’s President, has certified to the New York Stock Exchange that, as of May 28, 2008, he was not aware of any violation by the Fund of applicable NYSE corporate governance listing standards. The Fund’s reports to the Commission on Forms N-CSR and N-CSRS contain certifications by the Fund’s principal executive officer and principal financial officer that relate to the Fund’s disclosure in such reports and that are required by Rule 30a-2(a) under the 1940 Act.
20 JF CHINA REGION FUND, INC. JUNE 30, 2008
FUND MANAGEMENT
(Unaudited)
Information pertaining to the Directors and officers of the Fund is set forth below.
Name, (DOB), Address and Position(s)
with Fund
|
|
|
| Term of Office and Length of Time Served
|
| Principal Occupation(s) During Past 5 Years
|
| Number of Portfolios
in Fund Complex
Overseen by Director*
|
| Other Trusteeships/Directorships
Held by Director
|
|---|
Independent Directors |
The Rt. Hon.
The Earl of Cromer
(June 3, 1946)
Finsbury Dials
20 Finsbury Street
London, EC2Y 9AQ
United Kingdom
Chairman and Director | | | | Three year term ends in 2009; Chairman and Director since 1994. | | Chairman of the Board of the Fund; Chief Executive Officer of Cromer Associates Limited (family business). Director of Schroder Asia Pacific Fund Limited (financial), Business Link Somerset Limited (financial services), Cambridge Asia Investments Limited (financials), Pedder Street Asia Absolute Return Fund Limited (financial); Chairman of Japan High Yield Property Fund Limited (financial), China IPO Group Limited (financial) and Western Provident Association (insurance). | | 1 | | See Principal Occupation. |
Alexander Reid Hamilton
(October 4, 1941)
P.O. Box 12343
General Post Office
Hong Kong
Director | | | | Three year term ends in 2010; Director since 1994. | | Director of Citic Pacific Limited (infrastructure), China Cosco Holdings Company Limited (shipping), Esprit Holdings Limited (clothing retail), Shangri-La Asia Limited (hotels), Octopus Cards Limited (financial services) and China Central Properties Limited (property). | | 1 | | See Principal Occupation. |
Julian M. I. Reid
(August 7, 1944)
Finsbury Dials,
20 Finsbury Street
London, EC2Y 9AQ
United Kingdom
Director | | | | Three year term ends in 2011;
Director since 1998. | | Chief Executive Officer of 3a Asset Management Limited (financial); Director and Chairman of Morgan’s Walk Properties Limited (property); Director and Chairman of Prosperity Voskhod Fund (financial); Director of ASA Limited (financial) and Director of 3a Global Growth Fund Limited (financial). | | 1 | | Director and Chairman of The Korea Fund, Inc. |
| * | | The Fund is the only fund in the Fund Complex. |
JUNE 30, 2008 JF CHINA REGION FUND, INC. 21
FUND MANAGEMENT
(Unaudited) (continued)
Information pertaining to the Directors and officers of the Fund is set forth below.
Name, (DOB), Address and Position(s) with Fund
|
|
|
| Term of Office and
Length of Time Served
|
| Principal Occupation(s) During Past 5 Years
|
|---|
Officers who are not Directors |
Simon J. Crinage
(May 10, 1965)
Finsbury Dials,
20 Finsbury Street
London, EC2Y 9AQ
United Kingdom
President | | | | Since 2003** | | President of the Fund; Managing Director, JPMorgan Asset Management. |
Michael J. James
(May 11, 1967)
Finsbury Dials,
20 Finsbury Street
London, EC2Y 9AQ
United Kingdom
Treasurer | | | | Since 2006** | | Treasurer of the Fund; Vice President, JPMorgan Asset Management. |
Christopher D. Legg
(March 12, 1982)
Finsbury Dials,
20 Finsbury Street
London, EC2Y 9AQ
United Kingdom
Secretary | | | | Since 2008** | | Secretary of the Fund; Associate, JPMorgan Asset Management since September 2005. |
| ** | | The officers of the Fund serve at the discretion of the Board. |
22 JF CHINA REGION FUND, INC. JUNE 30, 2008
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
(Unaudited)
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 the Plan Agent:
| | Computershare Trust Company, N.A.
P. O. Box 43010
Providence, RI 02940-3010
USA Telephone No.: 800-426-5523 (toll-free)
www.computershare.com |
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 semi-annual cash purchases of shares in the open market. There is a service charge of $1.25 for each purchase under this Share Purchase Plan.
JUNE 30, 2008 JF CHINA REGION FUND, INC. 23
DIRECTORS AND ADMINISTRATION
(Unaudited)
| Officers and Directors | | | | The Rt. Hon. The Earl of Cromer —
Director and Chairman of the Board
Alexander R. Hamilton — Director
Julian M. I. Reid — Director
Simon J. Crinage — President
Michael J. James — Treasurer
Christopher D. Legg — Secretary* | |
| |
| Investment Adviser | | | | JF International Management Inc.
P.O. Box 3151
Road Town, Tortola
British Virgin Islands | | | | |
| |
| Administrator | | | | J.P. Morgan Investor Services, Co.
73 Tremont Street, 11th Floor
Boston, Massachusetts 02108
U.S.A. | | |
| |
| Custodian | | | | JPMorgan Chase Bank N.A.
73 Tremont Street, 11th Floor
Boston, Massachusetts 02108
U.S.A. | | |
| |
Independent Registered
Public Accounting Firm | | | | PricewaterhouseCoopers LLP
300 Madison Avenue
New York, New York 10017
U.S.A. | | | | |
| |
| Legal Counsel | | | | Cleary Gottlieb Steen & Hamilton LLP
New York:
1 Liberty Plaza
New York, New York 10006
U.S.A. | | | | |
| | | | | Hong Kong:
Bank of China Tower
1 Garden Road
Hong Kong | | | | |
| |
| Registrar, Transfer Agent, and Dividend Paying Agent | | | | Computershare Trust Company, N.A.
P. O. Box 43010
Providence, Rhode Island 02940-3010
U.S.A. | | | | |
* | | Christopher D. Legg replaced Philip Jones as Fund Secretary effective March 6, 2008. |
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Fund may purchase shares of its common stock in the open market.
www.jfchinaregion.com
24 JF CHINA REGION FUND, INC. JUNE 30, 2008
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THIS PAGE IS INTENTIONALLY LEFT BLANK
This report, including the financial statements herein, is sent to the stockholders 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.
© JPMorgan Chase & Co., 2008 All rights reserved. June 2008. | | |
ITEM 2. CODE OF ETHICS.
(a) The JF China Region Fund, Inc. has adopted a code of ethics that applies its officers, directors and employees.
(b) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description.
(c) The registrant has not granted any waivers, including an implicit waiver, from any provision of the code of ethics.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Fund’s Board of Directors has determined that it does not have an "audit committee financial expert" serving on its audit committee. While the Fund believes that each of the members of its audit committee has sufficient knowledge of accounting principles and financial statements to serve on the audit committee, none has the requisite experience to qualify as an "audit committee financial expert" as such term is defined by the Securities and Exchange Commission.
Not applicable to a semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The Fund incorporates by reference the information disclosed under the caption “Independent Registered Public Accounting Firm” from its definitive proxy statement that will be filed with the Commission no later than 120 days after the end of the fiscal year covered by this report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The Fund has a separately designated audit committee consisting of all the independent directors of the Fund. The members of the audit committee are: The Rt. Hon. The Earl of Cromer, Alexander R. Hamilton and Julian M.I. Reid.
ITEM 6. SCHEDULE OF INVESTMENTS
Included in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company’s investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company’s investment adviser, or any other third party, that the company uses, or that are used on the company’s behalf, to determine how to vote proxies relating to portfolio securities.
Not applicable to a semi-annual report.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable to a semi-annual report.
(b) There has been no change, as of the date of this filing, in any of the portfolio managers identified in response to paragraph (a) (1) of this Item in the registrant’s most recently filed annual report on Form N-CSR.
ITEM 9. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the Fund’s board of directors since the Fund filed its last form NCSR
ITEM 11. CONTROLS AND PROCEDURES.
The Fund's principal executive and principal financial officers have concluded that the Fund’s disclosure controls and are effective, as of June 30, 2008, based on their evaluation of these controls and procedures.
There were no changes in the Fund's internal control over financial reporting that occurred during the last fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Fund's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) The code of ethics that is the subject of the disclosure required by Item 2 is incorporated by reference from EX-99.CODE ETH to the Fund's N-CSR, filed with the Commission on March 10, 2006.
| (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940. |
| (b) Certifications pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
JF China Region Fund, Inc.
By: | /s/_____________________________ |
Simon Crinage
President and Principal Executive Officer
September 5, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/___________________________ |
Simon Crinage
President and Principal Executive Officer
September 5, 2008
By: | /s/____________________________ |
Michael J. James
Treasurer and Principal Financial Officer
September 5, 2008
