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JARDINE FLEMING
CHINA REGION FUND, INC.
ANNUAL REPORT
DECEMBER 31, 2001
[DRAGON GRAPHIC OMITTED]
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-01 F01-051 12/31/01
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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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Chairman's Statement 3
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Investment Review 4
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Major Holdings 8
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Investment Portfolio 10
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Statement of Assets and Liabilities 15
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Statement of Operations 16
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Statements of Changes in Net Assets 17
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Financial Highlights 18
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Notes to Financial Statements 19
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Report of Independent Accountants 23
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Results of the Annual Shareholders Meeting 24
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Fund Management 25
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Dividend Reinvestment and Cash Purchase Plan 26
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Directors and Administration 27
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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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JF International Management Inc. ("JFIM") (formerly Jardine Fleming
International Management Inc.) is the investment management company appointed to
advise and manage the Fund's portfolio. With the completion of the merger
between Robert Fleming Holdings Ltd. and The Chase Manhattan Corporation
("Chase") in October 2000, and the subsequent merger between Chase and J.P.
Morgan & Co. Incorporated in January 2001, JFIM became part of J.P. Morgan Chase
& Co. ("JPMC"), one of the world's premier financial services institutions. In
asset management, JPMC will operate globally under the name of JPMorgan Fleming
Asset Management ("JPMFAM"), although in Asia it will use the sub-brand JF Asset
Management. Funds under management for the global asset management business was
US $604.7 billion as of December 31, 2001. The investment philosophy of JPMFAM
is to maintain two distinct and separate investment processes for their equity
products.
Chung Man Wing is the portfolio manager of the Fund. Mr. Chung joined JFIM
in late 2000 as head of the Greater China team. Previously, he was chief
investment officer at HSBC Asset Management (Asia).
MARKET INFORMATION
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THE FUND IS LISTED ON THE NEW YORK STOCK EXCHANGE (SYMBOL JFC). THE SHARE PRICE
IS PUBLISHED IN
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[] The Wall Street Journal (daily)
[] The Asian Wall Street Journal (daily)
[] Reuters (page JFC)
THE NET ASSET VALUE IS PUBLISHED IN
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[] The Wall Street Journal under "Closed-End Funds" (every Monday)
[] The Asian Wall Street Journal under "Closed-End Funds" (every Monday)
[] South China Morning Post in Hong Kong (first Thursday of every month)
[] Reuters (page JFC)
--1--
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JARDINE FLEMING
CHINA REGION FUND, INC.
HIGHLIGHTS
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DECEMBER 31, 2001 December 31, 2000
US$ US$
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Net Assets $38.2 MILLION $56.2 million
Net Asset Value Per Share $8.14 $9.34
MARKET DATA
Share Price on the
New York Stock Exchange $6.57 $7.06
Discount to Net Asset Value -19.3% -24.4%
TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 2001
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Net Asset Value -12.8%
Share Price -6.9%
JFC Benchmark Index* -10.8%
MSCI Hong Kong Index (Total) -18.6%
BNP Prime Peregrine China Index -7.0%
Taiwan Weighted Index +10.6%
NET ASSET VALUE AND SHARE PRICE VS. TARGET INDEX
[LINE GRAPH OMITTED]
DATA POINTS FOR EDGAR PURPOSES AS FOLLOWS:
July 16, 1992=100
Net JF China JFC
Asset Value Share Price Benchmark Index*
7/16/92** 100.00% 100.00% 100.00%
7/27/92 99.78 98.33 89.81
8/28/92 100.43 94.20 91.11
9/30/92 100.94 80.00 79.15
10/30/92 108.60 92.53 90.31
11/30/92 111.05 96.67 91.95
12/31/92 109.29 93.02 90.21
1/29/93 110.16 96.37 87.65
2/26/93 117.49 98.85 97.55
3/31/93 120.54 108.90 94.28
4/30/93 125.48 118.95 97.84
5/28/93 129.84 122.30 92.05
6/30/93 122.35 120.09 83.13
7/30/93 120.67 116.73 77.96
8/27/93 124.75 129.29 82.27
9/30/93 128.39 126.81 84.74
10/29/93 147.17 150.32 102.63
11/26/93 156.34 166.71 113.90
12/31/93 188.96 187.39 128.98
1/28/94 175.52 183.65 111.34
2/25/94 158.91 148.41 103.16
3/31/94 136.56 136.08 91.08
4/29/94 132.14 134.18 87.30
5/27/94 136.06 148.41 90.89
6/30/94 123.99 123.29 82.84
7/29/94 130.78 126.47 87.48
8/26/94 130.78 135.83 92.18
9/30/94 132.98 129.56 94.14
10/28/94 132.34 126.47 89.14
11/23/94 124.35 110.76 80.63
12/30/94 115.72 94.29 72.23
1/27/95 101.37 90.10 62.02
2/24/95 108.27 98.48 66.92
3/31/95 109.37 94.29 67.13
4/30/95 105.33 90.10 63.43
5/26/95 113.68 107.01 70.35
6/30/95 111.93 92.33 69.32
7/28/95 116.08 95.51 73.64
8/31/95 108.89 88.13 69.66
9/30/95 112.85 94.42 68.82
10/31/95 110.46 89.22 67.02
11/30/95 104.65 85.02 64.06
12/29/95 103.54 84.52 63.34
1/31/96 112.35 107.76 72.64
2/29/96 113.37 95.08 73.99
3/31/96 110.12 95.08 70.65
4/30/96 111.70 96.18 68.52
5/31/96 112.25 94.07 71.64
6/30/96 111.98 87.73 71.47
7/31/96 110.21 81.39 71.69
8/30/96 110.68 84.52 73.69
9/30/96 112.16 85.62 74.73
10/31/96 113.18 83.51 77.45
11/29/96 125.79 90.86 89.15
12/31/96 132.84 95.25 97.43
1/31/97 135.63 99.49 99.27
2/28/97 138.13 99.49 100.73
3/27/97 133.96 99.49 99.65
4/30/97 148.44 106.94 106.53
5/31/97 159.48 115.41 111.06
6/30/97 170.35 124.89 114.45
7/31/97 178.89 130.22 117.43
8/31/97 187.33 126.50 121.24
9/30/97 167.65 124.38 116.19
10/31/97 124.12 87.29 88.50
11/28/97 107.96 84.67 82.92
12/31/97 110.00 82.89 83.73
1/30/98 85.88 79.75 70.48
2/28/98 114.29 88.25 86.61
3/31/98 107.58 80.77 83.66
4/30/98 98.27 74.90 76.62
5/29/98 83.74 60.57 69.04
6/30/98 72.75 54.24 63.53
7/31/98 57.28 44.10 56.17
8/31/98 51.32 29.76 50.16
9/30/98 60.82 40.91 56.88
10/30/98 70.51 50.48 65.12
11/30/98 72.47 53.14 64.68
12/31/98 69.86 46.76 61.44
1/29/99 63.27 45.70 55.92
2/26/99 63.43 44.63 56.22
3/31/99 69.67 47.82 62.49
4/30/99 82.25 62.17 74.33
5/31/99 76.94 57.39 69.97
6/30/99 90.35 74.39 80.74
7/30/99 84.95 60.57 75.80
8/31/99 88.77 61.11 78.44
9/30/99 84.11 56.86 73.92
10/29/99 87.65 59.51 75.69
11/30/99 99.29 68.01 82.85
12/31/99 110.11 72.07 90.38
1/31/00 108.99 69.94 90.33
2/29/00 113.38 73.68 91.87
3/31/00 118.43 75.28 96.89
4/28/00 100.86 64.07 87.24
5/31/00 94.69 62.46 82.27
6/30/00 98.52 66.73 85.48
7/31/00 102.07 69.94 89.73
8/31/00 103.94 71.54 88.73
9/29/00 95.34 66.73 79.73
10/31/00 87.40 64.07 72.78
11/30/00 83.00 61.93 68.48
12/29/00 87.30 60.33 71.12
1/31/01 95.81 71.33 78.24
2/28/01 91.42 67.57 76.15
3/30/01 84.59 60.73 69.80
4/30/01 86.09 63.89 69.03
5/31/01 87.12 66.46 67.29
6/29/01 84.69 66.20 65.30
7/31/01 78.98 60.22 61.21
8/31/01 73.10 54.24 57.47
9/28/01 66.37 50.83 48.34
10/31/01 71.51 51.34 51.10
11/30/01 76.18 55.95 57.64
12/31/01 76.09 56.12 63.41
* JFC Benchmark: MSCI Golden Dragon Index (Total)
Prior to March 2001: 25% Taiwan Weighted Index, 20% BNP Prime Peregrine China
Index, 50% MSCI Hong Kong Index, 5% HSBC
Prior to March 1999: 60% Hong Kong All Ordinaries Index, 30% Credit Lyonnais
Securities Asia All China B Index, 10% Taiwan Weighted Index
Prior to January 1997: Peregrine Greater China Index
** Commencement of operations
Source: JF
--2--
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JARDINE FLEMING
CHINA REGION FUND, INC.
CHAIRMAN'S STATEMENT
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Dear Fellow Shareholders,
Fiscal year 2001 proved a difficult year for global equity markets in light
of the US-led slowdown in global economic growth, and the China region was no
exception. After some stellar performance during first half 2001, Chinese shares
lost steam around mid-year as the market became increasingly concerned about
policy risks, the supply overhang of state-owned shares, and growing competition
in the Mainland telecom industry. As such, the MSCI China Index was down 24.7%
over the year. In Hong Kong, deflation and economic hardship dampened investor
appetite for shares and resulted in a 18.6% drop in the MSCI Hong Kong Index. By
contrast, after suffering during the first nine months of the year, the
Taiwanese market rallied strongly in the 4Q 2001 on improving prospects for the
electronics sector. The MSCI Taiwan Index finished the year up 10.5%.
During this volatile period, the Fund underperformed the MSCI Golden Dragon
Index, the Fund's benchmark, by 2% in NAV terms, and declined in absolute terms
by 12.8%. The Fund's share price performed relatively better, falling by only
7.0% during the year.
Going forward, China is expected to continue to be the growth engine for
Asia. China's accession into the WTO not only paves the way for more foreign
investment, but also encourages its thriving private sector, which in turn
should drive the next phase of growth. As economic interaction within the
Greater China zone strengthens, competitive Taiwanese and Hong Kong companies
will benefit from cost cutting and market access. The emergence of well-managed
"private chips" in Hong Kong and China and world-class electronics exporters in
Taiwan will provide ample investment opportunities to investors.
During the year, the Fund repurchased a total of 150,600 shares in the open
market at a per-share weighted average discount to NAV of 20.03%. In addition,
pursuant to a tender offer commencing on June 11, 2001, the Fund purchased a
total of 1,172,856 shares, representing 20% of the Fund's issued and outstanding
shares, at a price equal to 95% of the Fund's NAV per share on the closing date
of July 9, 2001. The Board noted that the discount of the Fund has improved
since May 2001 to a level as low as 13% and prevailing at a level below 20% for
most of the period following announcement of the tender offer. The Board
continues to be committed to conducting a partial tender offer or similar
transactions if the Fund's shares trade at an average discount to NAV in excess
of 20% for any 13-week period, limited to one such transaction in each calendar
year.
The Board considers an annual total expense ratio above 2.85% to be
unacceptable. The Board recognizes that the reduction in the number of shares,
through share repurchases and tender offers, has an adverse impact on the
expense ratio of the Fund. The Board believes that it would be in the best
interest for shareholders if it adopts a calculation approach to determine this
expense ratio that excludes expenses of a non-recurring nature such as those
associated with a tender offer and the Fund's entering into a contract with a
new administrator, whilst the ordinary operating expenses pertaining to the
relevant year will be included. On this basis, the Board estimates the Fund's
total expense ratio for 2001 at approximately 2.73%; as compared with the 3.51%
presented in our financial statements. If the 2.85% expense ratio calculated on
the above basis is exceeded the Board will put forward proposals to shareholders
on the structure of the Fund.
Respectfully submitted,
/S/ The Rt. Hon. The Earl of Cromer
The Rt. Hon. The Earl of Cromer
Chairman
January 22, 2002
--3--
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JARDINE FLEMING
CHINA REGION FUND, INC.
INVESTMENT REVIEW
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Dear Fellow Shareholders:
2001 was a volatile year for equity investors worldwide. Within the China
Region, the MSCI Hong Kong Index fell by 18.6% on the back of stubborn domestic
deflation. Mainland Chinese stocks continued to be plagued by policy
uncertainty, poor corporate governance and anemic earnings growth. As a result,
the MSCI China Index was down 24.7% over the year. In Taiwan, however, despite
economic slowdown and low corporate earnings visibility, supportive liquidity
conditions and investors' anticipation of a technology sector recovery boosted
the MSCI Taiwan Index in the fourth quarter and helped it close the year up
10.5%.
Given these varied performances and high intra-period volatility in the
Region's equity markets, the net asset value of the Fund fell 12.8% while the
share price dropped 6.9%. This compares with the 10.8% decline in the Jardine
Fleming China Region Fund benchmark.
In Hong Kong, the fall in the equity market reflected the difficult economic
and corporate environment. Despite multiple interest rate cuts, business
appetite stayed low, as there were limited investment opportunities amid a
deflationary economic restructuring. Consumer confidence remained fragile given
the still deteriorating employment prospect. External trade was affected by the
US economic slowdown and was battered further by the September 11 tragedy. As
such, the outlook for GDP and corporate earnings was uncertain and investors
were ambivalent towards the traditional blue chip stocks. Nonetheless, the
cautious sentiment towards the broad market notwithstanding, selected mid cap
stocks with established management and high earnings growth visibility attracted
investors interest. In particular, manufacturing and export stocks that were
trading at low valuations were perceived to be good proxies for a possible
recovery in the US and global economy; hence their share price outperformance.
Initial euphoria and subsequent disappointment characterized the performance
of Chinese equities. Having started the year on a low note, the B share markets
in Shanghai and Shenzhen were subsequently pushed higher by domestic investors
on positive expectations about strong GDP growth, China's entry into the World
Trade Organization ("WTO") and Beijing's bid to host the 2008 Olympiad. The
unexpected policy relaxation in February, which formally allowed participation
in B shares by domestic hard currency holders, fuelled speculation of eventual
unification with the domestic A shares and propelled the B shares into uncharted
territory in May. This also triggered a spillover effect into the Hong
Kong-listed H shares and red chips, which climbed to their year highs at
mid-year. However, heavy profit-taking in the B shares occurred in June and the
selling pressure escalated as their domestic A share counterparts collapsed on
reports about falsified accounts by certain "blue chip" A shares. The
government's plan to reduce the state-owned stake in listed companies also
weighed on market sentiment, as it would create a large share overhang. Despite
China's formal entry into the WTO and Beijing's successful Olympic bid,
sentiment worsened further as the large cap telecom stocks suffered from renewed
concerns about unfavorable regulatory changes and the potential for a cutthroat
tariff war. Although the Chinese shares rebounded somewhat immediately after the
September attacks in New York, as they were considered less sensitive to the US
recession than other Asian stocks, the rebound proved to be short-lived amid
continued worries about corporate governance and policy risks. Although the
Shanghai B, Shenzhen B and the Hang Seng China Enterprises Indices managed to
close the year up 91.5%, 93.0% and 8.3%, respectively, they were down by between
28% and 39% from their peaks at mid-year.
--4--
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JARDINE FLEMING
CHINA REGION FUND, INC.
INVESTMENT REVIEW (CONTINUED)
--------------------------------------------------------------------------------
In Taiwan, the equity market experienced a "roller-coaster" ride during the
year. Share price performance was lackluster throughout the first half of the
year given slowing export growth, worsening domestic demand and continued
volatility in the US and global technology stocks. Sentiment plunged immediately
after the September 11 attacks as investors were worried about a possible
collapse of US business and consumer demand. Given the economy's heavy reliance
on exports to the US in general and sale of electronic value-added products in
particular, the local Taiwan Weighted Index fell to the year low of 3,446 level
in early October. However, the market staged a sharp "V-shaped" recovery during
the fourth quarter amid signals of stability in the US economy. More
importantly, as US technology companies reported resilient customer demand and
provided cautiously optimistic business outlook, foreign investors bought
heavily the electronics stocks in Taiwan as they were perceived to be the prime
beneficiaries of a US technology sector recovery while having had been oversold.
This influx of overseas portfolio flows, coupled with supportive domestic
liquidity, boosted the overall Taiwanese market and in particular the
electronics stocks. Both the local market and the electronics sector ended the
year in positive territory, up 10.6% and 25.6%, respectively.
OUTLOOK
In Hong Kong, the overall economic and corporate environment will continue
to be difficult in the short to medium term. As the economy restructures and
reinvents itself in order to regain competitiveness, deflationary pressure
continues to be severe. While China's continued development and entry into the
WTO present tremendous investment opportunities for the long run, the corporate
sector in Hong Kong will have to adapt and adjust to the new, immediate
challenges, especially on the cost front. Therefore we expect unemployment to
stay high at the current 6% level for a while longer and this may continue to
weigh on consumer demand. While the local property market appears to have
stabilized over the past few months and we notice an increase in primary sales
volume, there is only limited room for price appreciation given the large supply
of flats, continued price deflation and the bottoming of the interest rate
cycle. From a slightly more positive perspective, a US recovery should help
external trade while continued public sector spending should help to alleviate
some of the deflationary pressure. Overall, most economists expect GDP growth
for 2002 to be at a sub-trend, low level of around 2%, having posted virtually
zero growth in 2001.
Mainland China will offer tremendous opportunities as well as real
challenges. While foreign direct investment, public spending and domestic
private consumption can sustain top-line GDP growth at a healthy level of
between 6% and 7% this year, compared with 7.3% in 2001, WTO means more foreign
competition and corporate restructuring in virtually all sectors, especially
among the state-owned enterprises. While this will help the formation of a
rule-based economy in the long run, short-term restructuring pains include
rising unemployment and a cyclical decline in profits. Within the equity market,
while investors should welcome the authorities' recent efforts to crack down on
illegal speculation and improve the standard of corporate governance, share
price momentum seems to have halted for the short term. Indeed, even after the
correction in the second half of 2001, the Chinese shares indices are still
richly overvalued given the poor transparency, low return on equity and high
policy risk. A disruptive burst of this overvalued bubble may lead to unpleasant
consequences. From a positive perspective, however, excess liquidity and low
interest rates should underpin the market's downside while successful
implementation of further market reforms will restore investor's confidence over
the longer term.
--5--
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JARDINE FLEMING
CHINA REGION FUND, INC.
INVESTMENT REVIEW (CONTINUED)
--------------------------------------------------------------------------------
While domestic economic growth momentum within Taiwan is still sluggish,
performance of the equity market hinges upon the fortune of the electronics
stocks, which will benefit from a confirmed US economic recovery. While it is
probably premature to confirm this, it does appear that US business investment
has troughed and consumer confidence there remains resilient, which should bode
well for Taiwanese exporters. On the political front, the ruling DPP Party has
emerged as the largest party in the Legislative Yuan, albeit short of winning a
majority. This should mean a better relationship between the administration and
the Legislative Yuan while improving policy implementation. Therefore, barring
deterioration in the cross strait relationship, political risk in Taiwan seems
to have diminished significantly. As such, selected export-oriented electronics
stocks in Taiwan remain attractive long-term investment candidates and will be
sought after by investors if and when there are clear signals pointing to a
better US economy.
STRATEGY
Given the cyclical and structural challenges within the China Region
economies as mentioned, we see limited upside for the traditional blue chip
stocks and therefore expect the broad market indices to be range bound. In
addition, given the uncertain timing and magnitude of the much expected US
recovery, we intend to adopt a neutral country asset allocation approach. On the
other hand, we continue to seek to add value from our bottom up, stock selection
efforts.
From a stock picking point of view, we believe there are ample investment
opportunities. For instance, we have noticed the rapid emergence of the "private
chips" in Hong Kong and China. These mostly Hong Kong-listed, privately owned
and managed companies derive virtually all of their revenues and profits from
China. They distinguish themselves from the H shares and the red chips by way of
their more flexible management and operations. As they have not been supported
by any state subsidies, but have been subject to and have grown amidst market
competition, they represent some of the most efficient enterprises coming out of
China. Often they are engaged in high value-added industries and services, where
regulatory risk is less, and therefore exhibit high business and profit growth
prospects. We have included a selected few of these "private chips" into the
portfolio and their share price performance since then has been satisfactory.
Admittedly, many of these private companies have only a short track record and
recent sentiment was clouded by a single incident about suspiciously high
profitability. Nonetheless, we maintain that some of these private companies
have solid fundamentals and will eventually emerge as the leaders in their
respective businesses, thereby rewarding long-term investors.
Besides this, we have been gradually building positions in mid cap,
lowly-valued industrial exporters across the China Region markets. While many of
these companies are in the electronics sector, especially those in Taiwan, we
are also focusing on consumer stocks, which will benefit from both the US
recovery and China's expanding consumer market. While many other investors focus
on the large blue chips, we are of the view that many of the under-researched
mid-cap stocks will provide better returns when overall economic and corporate
environment improves. Therefore, we will continue to expand our primary research
coverage to identify these 'blue chips of tomorrow'.
--6--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
INVESTMENT REVIEW (CONTINUED)
--------------------------------------------------------------------------------
To conclude, against a still unclear external picture and as the China
Region economies grapple with their own issues, we will continue to adopt a
flexible investment approach in order to add performance. While market
volatility will likely continue to be high, we believe that our proactive
primary research and stock selection process will enable us to pick the future
long-term winners at an early stage. We are optimistic that this strategy will
continue to provide good returns to our shareholders.
Respectfully submitted,
/S/ A. Douglas Eu
A. Douglas Eu
President
January 22, 2002
--7--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
MAJOR HOLDINGS
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AT DECEMBER 31, 2001
--------------------------------------------------------------------------------
% of Net
Assets
--------------------------------------------------------------------------------
GLOBAL BIO-CHEM TECHNOLOGY GROUP 4.3
Global Bio-chem Technology Group Company Limited manufactures corn
refined and corn based biochemical products in China. The company also
researches and develops corn based biochemical products. The products
mainly comprise corn starch, corn gluten, corn oil, feed, modified
starch, corn sweeteners, and amino acids.
HUTCHISON WHAMPOA 4.2
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.
CHAODA MODERN AGRICULTURE HOLDINGS 4.1
Chaoda Modern Agriculture (Holdings) Limited, through its
subsidiaries, grows and sells crops, breeds and sells livestocks and
sells ancillary food products.
CHINA INSURANCE INTERNATIONAL HOLDINGS 4.1
The company, through its subsidiaries, underwrites treaty and
facultative reinsurance of all classes of general business, including
non-marine and marine, and certain classes of long term business. The
company also carries on reinsurance broking and, to support its
reinsurance activities, invests in securities, money market and
properties.
CHEUNG KONG HOLDINGS 4.1
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.
TAIWAN SEMICONDUCTOR MANUFACTURING 3.9
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 State. TSM benefits from the increase
in outsourcing by major IC companies around the world.
--8--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
MAJOR HOLDINGS (CONTINUED)
--------------------------------------------------------------------------------
AT DECEMBER 31, 2001
--------------------------------------------------------------------------------
% of Net
Assets
--------------------------------------------------------------------------------
CHINA MOBILE (HONG KONG) 3.6
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 significantly. It is the
only listed PRC telecommunications stock in Hong Kong included in the
Hang Seng Index.
DENWAY MOTORS 3.0
The company, through its subsidiaries, manufactures, assembles,
and trades motor vehicles, automotive equipment, and parts in China.
The company also manufactures and trades audio equipment in Hong Kong.
CHINA UNICOM LIMITED 2.9
The company, through its subsidiaries, provides telecommunications
services in the People's Republic of China. The company's services
include cellular, paging, long distance, data, and Internet services.
TEXWINCA HOLDINGS 2.7
The company, through its subsidiaries, produces, dyes, and sells
knitted fabric and yarn. The company also distributes and retails
casual apparel and accessories, provides repair and maintenance
services for motors and generators, and provides franchise services.
--------------------------------------------------------------------------------
TOTAL MAJOR HOLDINGS 36.9
--9--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
INVESTMENT PORTFOLIO
--------------------------------------------------------------------------------
AT DECEMBER 31, 2001
--------------------------------------------------------------------------------
Holdings Market
(in shares Value
Description or par) (in US$)
--------------------------------------------------------------------------------
COMMON STOCKS (UNLESS OTHERWISE NOTED)
--------------------------------------------------------------------------------
CHINA (7.9%)
--------------------------------------------------------------------------------
COMMUNICATION EQUIPMENT (1.2%)
Eastern Communications 'B' 350,000 459,200
--------------------------------------------------------------------------------
CONTAINERS & PACKAGING (1.0%)
China International Marine Container 'B' 210,000 378,643
--------------------------------------------------------------------------------
HOUSEHOLD DURABLES (0.9%)
CSG Technology Holdings 'B' 510,000 330,937
--------------------------------------------------------------------------------
MACHINERY (1.8%)
Shanghai Zhenhua Port Machinery 'B' 599,200 688,481
--------------------------------------------------------------------------------
REAL ESTATE (3.0%)
China Vanke 'B' 500,000 568,747
Shanghai Lujiazui Finance and
Trade Zone Development 'B' 650,000 601,900
--------------------------------------------------------------------------------
1,170,647
--------------------------------------------------------------------------------
TOTAL CHINA 3,027,908
================================================================================
HONG KONG (70.4%)
--------------------------------------------------------------------------------
AIRLINES (2.3%)
China National Aviation 5,300,000 869,983
--------------------------------------------------------------------------------
AUTOMOBILES (3.0%)
Denway Motors 3,650,000 1,135,089
--------------------------------------------------------------------------------
BANKS (4.1%)
Bank of East Asia 270,000 581,699
Hang Seng Bank 90,000 989,696
--------------------------------------------------------------------------------
1,571,395
--------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (2.1%)
Greencool Technology Holdings 3,000,000 788,679
--------------------------------------------------------------------------------
--10--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
AT DECEMBER 31, 2001
--------------------------------------------------------------------------------
Holdings Market
(in shares Value
Description or par) (in US$)
--------------------------------------------------------------------------------
DISTRIBUTORS (2.2%)
China Resources Enterprise 550,000 514,886
* Extrawell Pharmaceutical Holdings 6,500,000 333,425
--------------------------------------------------------------------------------
848,311
--------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS (10.0%)
China Everbright 1,000,000 750,207
Guoco Group 180,000 997,198
Hutchison Whampoa 165,000 1,592,266
JCG Holdings 750,000 466,475
--------------------------------------------------------------------------------
3,806,146
--------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (2.9%)
* China Unicom 1,000,000 1,102,868
--------------------------------------------------------------------------------
ELECTRIC UTILITIES (3.1%)
Beijing Datang Power Generation 'H' 1,450,000 464,872
Huaneng Power International 'H' 1,200,000 723,276
--------------------------------------------------------------------------------
1,188,148
--------------------------------------------------------------------------------
FOOD PRODUCTS (10.3%)
Chaoda Modern Agriculture Holdings 5,600,000 1,579,923
* Euro-Asia Agricultural Holdings 3,000,000 707,887
Global Bio-chem Technology Group 4,750,000 1,659,913
--------------------------------------------------------------------------------
3,947,723
--------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (1.7%)
Hopewell Holdings 1,100,000 652,423
--------------------------------------------------------------------------------
INSURANCE (4.1%)
China Insurance International Holdings 2,550,000 1,561,488
--------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (1.2%)
* Pacific Century CyberWorks+ 1,600,000 441,147
--------------------------------------------------------------------------------
MARINE (1.3%)
China Shipping Development 'H' 3,000,000 477,055
--------------------------------------------------------------------------------
--11--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
AT DECEMBER 31, 2001
--------------------------------------------------------------------------------
Holdings Market
(in shares Value
Description or par) (in US$)
--------------------------------------------------------------------------------
MEDIA (1.2%)
* Clear Media 639,000 467,090
--------------------------------------------------------------------------------
MISCELLANEOUS (0.0%)
* Health Asia MediCentres Beijing++ 1,000,000 0
--------------------------------------------------------------------------------
MULTILINE RETAIL (1.6%)
* Convenience Retail Asia 1,850,000 599,043
--------------------------------------------------------------------------------
OIL & GAS (2.3%)
CNOOC 950,000 895,439
--------------------------------------------------------------------------------
REAL ESTATE (5.5%)
Cheung Kong Holdings 150,000 1,558,122
Wheelock & Company 650,000 554,319
--------------------------------------------------------------------------------
2,112,441
--------------------------------------------------------------------------------
TEXTILES & APPAREL (5.0%)
Fountain Set Holdings 5,400,000 879,473
Texwinca Holdings 2,150,000 1,027,046
--------------------------------------------------------------------------------
1,906,519
--------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE (1.7%)
Beijing Capital International Airport 'H' 2,800,000 660,695
--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (4.8%)
* China Mobile (Hong Kong) 385,000 1,355,277
* SmarTone Telecommunications Holdings 395,000 471,091
--------------------------------------------------------------------------------
1,826,368
--------------------------------------------------------------------------------
TOTAL HONG KONG 26,858,050
================================================================================
--12--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
AT DECEMBER 31, 2001
--------------------------------------------------------------------------------
Holdings Market
(in shares Value
Description or par) (in US$)
--------------------------------------------------------------------------------
TAIWAN (13.4%)
--------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (4.7%)
Asustek Computer 140,213 613,106
Quanta Computer 200,000 651,614
Synnex Technology International 395,000 526,064
--------------------------------------------------------------------------------
1,790,784
--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (1.2%)
Hon Hai Precision Industry 100,120 457,822
--------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (1.6%)
Premier Image Technology 300,000 591,597
--------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS (5.9%)
* Taiwan Semiconductor Manufacturing 600,000 1,500,427
* United Microelectronics 520,000 757,930
--------------------------------------------------------------------------------
2,258,357
--------------------------------------------------------------------------------
TEXTILES & APPAREL (0.0%)
Far Eastern Textile 13 5
--------------------------------------------------------------------------------
TOTAL TAIWAN 5,098,565
================================================================================
UNITED STATES (6.9%)
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (6.9%)
Citibank Time Deposit, 1.60%, 01/02/02 2,650,000 2,650,000
--------------------------------------------------------------------------------
TOTAL UNITED STATES 2,650,000
================================================================================
--13--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
AT DECEMBER 31, 2001
--------------------------------------------------------------------------------
Market
Value
Description (in US$)
--------------------------------------------------------------------------------
TOTAL INVESTMENTS
(98.6% of Net Assets) (Cost $38,129,246) 37,634,523
================================================================================
Other assets less liabilities (1.4% of Net Assets) 535,358
================================================================================
NET ASSETS (100%) 38,169,881
================================================================================
Aggregate cost for Federal income tax purposes is $39,038,061.
The aggregate unrealized loss for all securities is as follows:
Excess of market value over cost 1,604,267
Excess of cost over market value (3,007,805)
--------------------------------------------------------------------------------
Net unrealized loss (1,403,538)
================================================================================
HKD Hong Kong dollar
* Non-income producing security.
+ Passive Foreign Investment Company.
++ At fair value as determined under the supervision of the Board of
Directors.
See accompanying notes to financial statements.
--14--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
AT DECEMBER 31, 2001
--------------------------------------------------------------------------------
(in US$)
--------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------
Investments at value (Note 2) (cost $38,129,246) 37,634,523
Cash (including foreign currencies with a cost of $1,430,975
and value of $1,422,766) 1,511,638
Receivable for securities sold 99,184
Dividends receivable 39,787
Prepaid insurance premiums 12,102
Interest receivable 118
--------------------------------------------------------------------------------
TOTAL ASSETS 39,297,352
--------------------------------------------------------------------------------
LIABILITIES
--------------------------------------------------------------------------------
Payable for securities purchased 817,675
Accrued expenses payable 247,241
Due to Investment Adviser (Note 4) 62,555
--------------------------------------------------------------------------------
TOTAL LIABILITIES 1,127,471
--------------------------------------------------------------------------------
NET ASSETS 38,169,881
================================================================================
NET ASSETS CONSIST OF:
Common stock, $0.01 par value
(100,000,000 shares authorized;
4,688,824 shares issued and outstanding) 46,888
Paid-in capital 97,185,228
Accumulated net investment loss (4,926)
Accumulated net realized loss:
Short-term and foreign currency losses (58,554,383)
Unrealized depreciation (502,926)
--------------------------------------------------------------------------------
NET ASSETS 38,169,881
================================================================================
NET ASSET VALUE PER SHARE ($38,169,881 / 4,688,824) 8.14
================================================================================
See accompanying notes to financial statements.
--15--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2001
--------------------------------------------------------------------------------
(in US$)
--------------------------------------------------------------------------------
INVESTMENT INCOME (LOSS) (Note 2)
--------------------------------------------------------------------------------
Dividend (net of foreign withholding tax of $24,683) 1,005,406
Interest (net of foreign withholding tax of $3,338) 55,520
--------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,060,926
--------------------------------------------------------------------------------
EXPENSES
--------------------------------------------------------------------------------
Investment advisory fees (Note 4) 571,070
Legal fees 272,198
Administration and accounting fees (Note 4) 243,443
Directors' fees and expenses 154,881
Custodian fees 117,417
Shareholder service fees 115,300
Shareholder report and meeting expenses 58,788
Audit fees 41,659
Registration fees 11,157
Other expenses 62,014
--------------------------------------------------------------------------------
TOTAL EXPENSES 1,647,927
--------------------------------------------------------------------------------
NET INVESTMENT LOSS (587,001)
================================================================================
REALIZED AND UNREALIZED LOSS ON INVESTMENTS, FOREIGN CURRENCY
HOLDINGS AND OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES
--------------------------------------------------------------------------------
NET REALIZED LOSS (Note 2)
Investments (4,688,873)
Foreign currency transactions (196,275)
NET CHANGE IN UNREALIZED LOSS (Note 2)
Investments (1,637,893)
Foreign currency holdings and other assets and liabilities
denominated in foreign currencies (9,424)
--------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS,
FOREIGN CURRENCY HOLDINGS AND OTHER ASSETS
AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES (6,532,465)
================================================================================
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (7,119,466)
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
--16--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
---------------------------------------------------------------------------------------------
Year Ended Year Ended
December 31, 2001 December 31, 2000
(in US$) (in US$)
---------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss (587,001) (351,218)
Net realized gain (loss) on investments
transactions (4,688,873) 12,557,051
Net realized loss on foreign
currency transactions (196,275) (170,467)
Net change in unrealized
loss on investments,
foreign currency holdings
and other assets and liabilities
denominated in foreign currencies (1,647,317) (36,458,161)
---------------------------------------------------------------------------------------------
Net decrease in net assets resulting
from operations (7,119,466) (24,422,795)
---------------------------------------------------------------------------------------------
CAPITAL SHARES REPURCHASED (NOTE 5) (10,860,972) (26,677,840)
=============================================================================================
TOTAL DECREASE IN NET ASSETS (17,980,438) (51,100,635)
Net Assets:
Beginning of year 56,150,319 107,250,954
---------------------------------------------------------------------------------------------
End of year 38,169,881 56,150,319
=============================================================================================
See accompanying notes to financial statements.
--17--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2001 2000 1999 1998 1997
(in US$) (in US$) (in US$) (in US$) (in US$)
-------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
-------------------------------------------------------------------------------------------------------
Net asset value,
beginning of year 9.34 11.78 7.50 11.81 14.31
=======================================================================================================
Net investment income
(loss) (0.11) (0.06) 0.03 0.02 (0.01)
Net realized and
unrealized gain (loss)
on investment and
foreign currency-
related transactions (1.31) (2.73) 4.29 (4.33) (2.45)
-------------------------------------------------------------------------------------------------------
Total from investment
operations (1.42) (2.79) 4.32 (4.31) (2.46)
=======================================================================================================
Dividends from net
investment income - - (0.04) - (0.04)
=======================================================================================================
Capital shares repurchased
(Note 5) 0.22 0.35 - - -
=======================================================================================================
NET ASSET VALUE, END OF
YEAR 8.14 9.34 11.78 7.50 11.81
=======================================================================================================
Market value, end of
year 6.57 7.06 8.44 5.50 9.75
=======================================================================================================
TOTAL INVESTMENT RETURN
Per share market value (6.9%) (16.3%) 54.2% (43.6%) (13.9%)
Per share net asset
value (12.8%) (20.7%) 57.6% (36.5%) (17.2%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year 38,169,881 56,150,319 107,250,954 68,288,936 107,494,855
Ratios of total expenses
to average net assets 3.51%+ 2.02% 2.28% 2.49% 1.68%
Ratios of net investment
income (loss) to
average net assets (1.25%) (0.36%) 0.37% 0.24% (0.05%)
Portfolio turnover rate 212.1% 94.8% 90.8% 111.9% 102.6%
Number of shares
outstanding at end of
year (in thousands) 4,689 6,012 9,101 9,101 9,101
+ The ratio of total expenses to average net assets for the year ended December 31, 2001 is relatively
higher than that of previous years as a result of the expenses incurred in relation to a tender offer
and share repurchases that decreased the size of the Fund following similar actions in the previous
year.
See accompanying notes to financial statements.
--18--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
DECEMBER 31, 2001
--------------------------------------------------------------------------------
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 accounting principles generally accepted in 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 accounting
principles generally accepted in the United States of America 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) 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. As of December 31, 2001, the
Fund has capital loss carryforwards for federal income tax purposes of
$57,645,571, of which $42,188,946 expires in 2006 and $11,676,567
expires in 2007 and $3,780,058 expires in 2009. The Fund intends to
retain gains realized in future periods that may be offset by
available capital loss carryforward.
During the year ended December 31, 2001, the Fund reclassified
$263,754 from accumulated net realized loss on investments to
accumulated net invetment loss as a result of permanent book and tax
differences relating primarily to realized foreign currency losses.
The Fund also reclassified $845,828 from accumulated net investment
loss to paid-in capital as a result of permanent tax differences
relating to the net operating loss for the year ended December 31,
2001. Net investment loss and net assets were not affected by the
reclassifications. The Fund's foreign exchange losses incurred after
October 31, 2001, but before December 31, 2001, are deemed to arise on
the first business day of the following year. The Fund incurred and
elected to defer such foreign exchanges losses of $4,926.
--19--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
III)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 investments.
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.
IV) 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.
V) 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.
--20--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
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, 2001, the Fund made purchases of
$95,474,711 and sales of $108,422,282 of investment securities other
than short-term investments. There were no purchases or sales of U.S.
government securities.
4. RELATED PARTY TRANSACTIONS
I) JF International Management Inc. (formerly Jardine Fleming
International Management Inc.) (the "Adviser"), provides investment
advisory services to the Fund under the terms of an investment
advisory agreement. Under the investment advisory agreement, prior to
November 2001, the Adviser was paid a 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.
Effective November 1, 2001, the Advisor was paid a fee, computed
weekly and payable monthly, at the annual rate of 1.00% of the Fund's
weekly net assets.
II) Prior to June 1, 2001, T. Rowe Price Associates, Inc., the former
Administrator provided administrative services to the Fund under an
Administrative Services Agreement. The former Administrator received 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 former Administrator also received an
annual fee of $85,000 for fund accounting services pursuant to an
Accounting Services Agreement.
III)Effective June 1, 2001 PFPC Inc. (the "Administrator") provides
administrative and accounting services to the Fund under an
Administrative and Accounting Services Agreement. The Administrator
receives a fee, payable monthly, at an annual rate of 0.135% of the
first $100 million, 0.095% of the next $50 million, 0.08% of the next
$50 million and 0.065% of the excess over $200 million of the Fund's
average weekly net assets, subject to a minimum annual fee of
$138,000, plus reimbursement for certain out-of-pocket expenses. At
December 31, 2001, $23,062 was payable to the Administrator.
IV) During the year ended December 31, 2001, the Fund paid $109,065 in
brokerage commissions to Jardine Fleming Broking Ltd. and Jardine
Fleming Securities Ltd., affiliated brokers/dealers.
--21--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
5. CAPITAL SHARE TRANSACTIONS
During the year ended December 31, 2001, the Fund's Board of Directors
authorized the Fund to purchase shares of its common stock from Fund
shareholders, as described below. 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 10% of its issued and
outstanding shares in the open market through May 9, 2001. Repurchases
were made only when the Fund's shares were trading at less than net
asset value and at such times and amounts as were believed to be in
the best interest of the Fund's shareholders. On July 23, 2001, the
Fund's Board of Directors authorized the Fund to repurchase up to
469,142 shares in the open market during 2001 and 2002. During the
year ended December 31, 2001, the Fund paid $1,161,805 to repurchase
150,600 shares, at a per-share weighted average discount to net asset
value of 20.03%.
During the year ended December 31, 2000, the Fund paid $4,202,902 to
repurchase 512,400 shares, at a per-share weighted average discount to
net asset value of 24.08%.
II) TENDER OFFER
Pursuant to a tender offer that closed on July 9, 2001, the Fund
purchased 20% of its outstanding common stock at a price equal to 95%
of the Fund's net asset value per share on the closing date. The Fund
acquired 1,172,856 shares for a total cost of $9,699,167 in cash.
Pursuant to a tender offer that closed on December 18, 2000, the Fund
purchased 30% of its outstanding common stock at a price equal to 95%
of the Fund's net asset value per share on the closing date. The Fund
acquired 2,576,692 shares for a total cost of $22,474,938 in cash.
--22--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
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, 2001, and the 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 of America. 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 of America 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, 2001 by correspondence with the custodian, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 2002
--23--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
RESULTS OF THE ANNUAL SHAREHOLDERS MEETING (UNAUDITED)
--------------------------------------------------------------------------------
The Fund held its annual shareholders meeting on May 10, 2001. At this meeting,
shareholders elected each of the nominees proposed for election to the Fund's
Board of Directors. The following tables provide information concerning the
matter voted on at the meeting:
I) ELECTION OF DIRECTORS
NOMINEE VOTES FOR VOTES ABSTAINED TOTAL VOTING SHARES
------- --------- --------------- -------------------
A. Douglas Eu 4,537,243 215,899 4,753,142
Ng Yook Man 4,671,973 81,169 4,753,142
--24--
[LOGO OMITTED]
JARDINE FLEMING
CHINA REGION FUND, INC.
FUND MANAGEMENT
------------------------------------------------------------------------------------------------------------------------------------
Information pertaining to the Directors and officers of the Fund is set forth below. The statement of additional information (SAI)
includes additional information about the Directors and is available without charge, upon request, by calling (800) 426-5523.
------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
TERM OF PORTFOLIOS IN OTHER
OFFICE AND FUND COMPLEX TRUSTEESHIPS/
NAME, (DOB), ADDRESS AND LENGTH OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
POSITION(S) WITH FUND SERVED(1) DURING PAST 5 YEARS DIRECTOR HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
------------------------------------------------------------------------------------------------------------------------------------
The Rt. Hon. The Earl of Cromer Since 1994 Chief Executive Officer of 1 Director of AIHQ.com
(June 3, 1946) Cromer Associates Limited; Inc., Schroder Asia Pacific
6, Sloane Terrace Mansions, Chairman of Loyd George- Fund Limited, and Korea
London, SW1X9DG Standard Chartered China Fund Asia Fund Limited;
United Kingdom Limited and Philippine former Director of
Chairman and Director, Class I Discovery Investment Inchcape Pacific Limited
Company Limited
------------------------------------------------------------------------------------------------------------------------------------
Alexander Reid Hamilton Since 1994 Director of Citic Pacific Limited, 1 See Principal Occupation
(October 4, 1941) The Swank Shop Limited, Cosco
Flat E, 15th Floor, Pacific Limited, Esprit Holdings
Gold Ning Mansion, Limited, Cosco International
5 Tai Hang Drive Holdings Limited, DBS Kwong
Hong Kong On Bank Limited, Man Sang
Director, Class I International Limited, and Boto
InternationalHoldings Limited.
------------------------------------------------------------------------------------------------------------------------------------
Julian M. I. Reid Since 1998 Chief Executive Officer of 3a 2 N/A
(August 7, 1944) Asset Management Limited;
10 Frere Felix de Valois Street Chairman of Jardine Fleming
Port Louis, Mauritius India Fund, Inc.
Director, Class III
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS
------------------------------------------------------------------------------------------------------------------------------------
A. Douglas Eu Since 1997 Chief Operations Officer and 2 Director of Jardine
(August 27, 1961) Secretary of the Investment Fleming India Fund, Inc.;
Hong Kong Parkview, Advisor former Director of
Apartment 0863, Tower 10, JF Asset Management
88 Tai Tam Reservoir Road, Limited.
Hong Kong
President, Treasurer and
Director, Class II
------------------------------------------------------------------------------------------------------------------------------------
OFFICER(S) WHO ARE NOT DIRECTORS
------------------------------------------------------------------------------------------------------------------------------------
Lauren Pan Since 2001 Vice President of JF Asset N/A N/A
(December 20, 1966) Management Ltd. Since July
Secretary 2000. Prior to that Manager of
JF Asset Management Ltd.
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John P. Falco Since 2001 Assistant Vice President and N/A N/A
(January 20, 1973) Manager, Regulatory
Assistant Secretary Administration of PFPC, Inc.
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(1) Number I, II or III below a director's name indicates whether he serves in Class I, II, or III or the Board of Directors. Class
III directors will be elected for three-year terms as of the 2002 Annual Meeting. Class I directors will serve until the 2003
Annual Meeting with the position then becoming one for subsequent three-year terms. Class II directors will serve until the 2004
Annual Meeting with the position then becoming one for subsequent three-year terms.
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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:
EquiServe
(the Plan Agent):
P. O. Box 8200
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.
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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
Alexander R. Hamilton - Director
Julian M. I. Reid - Director
Lauren Pan - Secretary
John P. Falco - Assistant Secretary
INVESTMENT ADVISER JF INTERNATIONAL MANAGEMENT INC.
P.O. Box 3151
Road Town, Tortola
British Virgin Islands
ADMINISTRATOR PFPC INC.
400 Bellevue Parkway
Wilmington, Delaware 19809
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, EQUISERVE
AND DIVIDEND PAYING AGENT P. 0. Box 8200
Boston, Massachusetts 02266-8200
U.S.A.
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.
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