SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
October 1, 2001
Date of Report (Date of Earliest Event Reported)
The China Fund, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Maryland 811-6651 000000000
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification Number)
225 Franklin Street, Boston, Massachusetts 02110
(Address of Principal Executive Offices) (Zip Code)
(212) 808-0500
(Registrant's Telephone Number, Including Area Code)
Item 9. Regulation FD Disclosure.
Pursuant to Regulation FD Rules 100-103, The China Fund, Inc. (the "Fund")
furnishes the October 2001 Monthly Update on the Fund by the Fund's Investment
Manager.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: November 13, 2001
By: /s/ Ann Casey
-----------------------
Name: Ann Casey
Title: Secretary
3
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Insight
----------
The China Fund, Inc. (CHN)
October 2001
In brief... at 31 October 2001
----------------------------------------------------------------------------------------------------------------
Net Asset Value per share* US$13.19 China Fund NAV MSCI Golden Dragon
Market Price* US$10.74 1 month return* 4.3% 5.7%
Premium/Discount* -18.6% 1 year return* 6.6% -31.5%
Fund size* US$132.9m *Source: State Street Corporation/Martin Currie Inc
Manager's Comments
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Visits made during the month showed those companies concentrating on the
domestic market continuing to report good sales growth. Exporters, on the other
hand, are already being affected by the sharp slowdown in global growth post
"911". After some time lag, we believe weaker external demand will put a brake
on domestic consumption. Sentiment in the local "A" share market is gloomy. A
modest decline in the index is already putting pressure on the weak financial
sector. The government's attitude to the market decline is ambivalent. After
contributing to the market fall in its attempts to crack down on irregular
activities in the stock market, the authorities sought to prop up the market by
announcing a block on the sale of state-owned shares. However, with WTO entry
now only weeks away, and the looming prospect of greater foreign access, the
CSRC knows that local financial markets and institutions need to be cleaned up
and strengthened. The cash requirements of China's social security system also
mean that the block on SOE shares sales can only be temporary.
All is not gloom, however. The continued competitiveness of China's exports, and
its success in attracting foreign direct investment, meant that foreign exchange
reserves topped US$200bn in October. Progress in reform of the housing sector is
impressive. This is stimulating demand for residential property and home-related
products, particularly in coastal cities with higher average incomes. This trend
is being aided by low interest rates and the keenness of local banks to develop
mortgage portfolios. The increase in the number of people owning their own homes
is also being accompanied by the "motorization" of the Chinese middle class and
increased leisure spending. We will aim to concentrate our portfolio in these
areas.
Investment strategy:
Your fund is currently 94.5% invested with holdings in 47 companies. We continue
to believe that the best combination of value and growth can be found amongst
private sector companies listed in Hong Kong and Taiwan-listed enterprises
deriving the bulk of their profits from China. There is a bias towards companies
which can offer a high and relatively secure cash yield in these difficult
times, such as China Petroleum (estimated yield 6.4%*) and Chunghwa Telecom
(12.5%*).
In October we increased holdings in Euro-Asia (orchid grower based in Shenyang),
Life Tech (liver cell re-growth drug maker) and Brilliance China (China's
largest minivan maker. Sedan production will start soon). In the B share market,
we added to holdings in Shanghai Friendship (China's largest convenience store
operator) and Luthai Textile (a beneficiary of WTO entry). In Taiwan we have
shifted some cash into China's leading uninterruptible power supply maker,
Phoenixtec. With the fund's financial year closing at the end of October, your
managers sold a number of loss-making positions, to offset profits taken earlier
in the year. This is to ensure that your fund is as tax efficient for U.S.
investors as possible.
Fund Details* Asset allocation (%)*
------------------------------------------------------------------------------------------------
Market cap US$201m [PIE CHART]
Shares outstanding 10,073,173 shares Cash 5.5%
Exchange listed NYSE Hong Kong 45.3%
Listing date July 10, 1992 Taiwan 32.3%
Investment manager Martin Currie Inc B shares 6.4%
Direct investment Asian Direct Capital Management New York 2.6%
manager Direct 5.1%
Singapore 2.8%
Ten Largest Listed Investments (37.1%)* Direct Investments*
-----------------------------------------------------------------------------------------------------------------------------------
China Petroleum & Chemical Energy 5.1% A-S China Plumbing Products Sanitary Ware 3.1%
Taipei Bank Financials 4.8% Moulin International Holdings Optical Frame 1.5%
Yanzhou Coal Mining Energy 4.4% New World Sun City Real Estate 0.5%
TCL International Information Technology 3.9%
Huaneng Power Intl Energy 3.8%
Zhejiang Expressway Utilities 3.5%
Chunghwa Telecom Telecoms 3.4%
Brilliance China Consumer Discretionary 2.9%
Phoenixtech Consumer Staples 2.7%
Chinadotcom Information Technology 2.6%
Sector allocation (%)* Performance (in US$ term)*
-----------------------------------------------------------------------------------------------------------------------------------
% of net MSCI As at 31 October 2001 NAV % Market Price %
assets Golden
Dragon %
Consumer Discretionary 14.4 5.8 One month 4.33 0.75
Energy 13.4 2.6 Calendar year to date 5.82 16.11
Financials 13.4 29.6 3 years ** 7.47 7.78
Industrials 11.9 17.0
Information Technology 11.4 21.5 Dividend History*
Consumer Staples 9.3 0.5 US$ Ex Date
Telecoms 6.6 10.6 0.1110 12/28/99
Materials 6.1 3.2 0.0780 12/23/98
Utilities 5.4 9.1 0.5003 12/23/97
Other 5.1 0.0 0.0834 12/27/96
Health Care 2.9 0.0 0.0910 12/31/95
Cash 0.1 - 0.6099 12/31/94
0.9103 12/31/93
Total 100.0 100.0 0.0550 12/31/92
Fund Performance
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One Three Year One Three Five Since
Fund performance Month Months To date Year Years Years Launch #
The China Fund, Inc. 4.3 -7.5 5.8 6.6 7.5** 1.4** 1.3**
MSCI Golden Dragon 5.7 -16.5 -28.0 -31.5 -8.5 -9.0 -
Hang Seng Chinese Enterprise Index 8.5 -5.9 14.9 4.1 0.4 -11.7 -
Source: * State Street Corporation / MC Inc. # The Fund was launched on July 10, 1992 ** Annualised Return
Performance in perspective
--------------------------------------------------------------------------------
The China Fund, Inc.
The China Fund Inc.
vs MSCI Golden Dragon
---------------------
Date NAV
---- ---
17-Jul-92 13.83
31-Jul-92 13.17
31-Aug-92 13.20
30-Sep-92 13.17
31-Oct-92 13.51
30-Nov-92 14.23
31-Dec-92 13.00
31-Jan-93 14.25
28-Feb-93 14.80
31-Mar-93 14.97
30-Apr-93 15.55
31-May-93 15.60
30-Jun-93 14.97
31-Jul-93 14.32
31-Aug-93 15.15
30-Sep-93 15.29
31-Oct-93 17.35
30-Nov-93 18.05
27-Dec-93 19.28
31-Dec-93 20.18
31-Jan-94 18.21
28-Feb-94 17.09
31-Mar-94 15.64
30-Apr-94 14.52
31-May-94 14.96
30-Jun-94 14.16
31-Jul-94 14.85
31-Aug-94 15.44
30-Sep-94 15.50
31-Oct-94 15.25
30-Nov-94 13.76
23-Dec-94 12.62
31-Dec-94 12.60
31-Jan-95 11.17
28-Feb-95 11.75
31-Mar-95 11.78
30-Apr-95 11.45
31-May-95 12.36
30-Jun-95 12.21
31-Jul-95 12.65
31-Aug-95 12.31
30-Sep-95 12.49
31-Oct-95 12.87
30-Nov-95 12.41
29-Dec-95 12.23
31-Dec-95 12.23
31-Jan-96 13.44
29-Feb-96 13.49
31-Mar-96 12.82
30-Apr-96 12.70
31-May-96 12.94
30-Jun-96 12.87
31-Jul-96 12.83
31-Aug-96 13.33
30-Sep-96 13.60
31-Oct-96 -4.60 13.24
30-Nov-96 3.37 14.73
31-Dec-96 11.07 16.33
31-Jan-97 1.80 16.55
28-Feb-97 3.16 17.35
31-Mar-97 2.27 16.87
30-Apr-97 6.61 18.57
31-May-97 2.35 20.38
30-Jun-97 -1.21 21.62
31-Jul-97 -0.57 23.00
31-Aug-97 13.03 23.37
30-Sep-97 -5.88 22.02
31-Oct-97 5.05 16.97
30-Nov-97 -10.54 15.03
31-Dec-97 -4.75 14.53
31-Jan-98 -10.98 11.45
28-Feb-98 4.66 14.44
31-Mar-98 0.05 13.99
30-Apr-98 2.52 12.88
31-May-98 2.90 11.63
30-Jun-98 -8.15 10.05
31-Jul-98 -7.95 8.72
31-Aug-98 -3.05 7.54
30-Sep-98 13.76 9.80
31-Oct-98 -12.33 10.84
30-Nov-98 -2.13 10.80
28-Dec-98 0.52 10.28
31-Dec-98 1.07 10.39
31-Jan-99 -7.49 9.05
28-Feb-99 -4.68 8.80
31-Mar-99 -2.99 9.57
30-Apr-99 3.48 11.72
31-May-99 4.21 11.38
30-Jun-99 17.91 15.35
31-Jul-99 -2.38 14.01
31-Aug-99 -3.69 14.12
30-Sep-99 0.04 13.43
31-Oct-99 -9.09 12.74
30-Nov-99 1.71 14.06
28-Dec-99 -5.57 14.41
31-Dec-99 -1.48 14.20
31-Jan-00 -3.64 13.75
29-Feb-00 -4.26 13.37
31-Mar-00 6.65 14.71
30-Apr-00 -4.02 12.71
31-May-00 4.42 12.45
30-Jun-00 5.72 13.53
31-Jul-00 5.43 14.54
31-Aug-00 1.04 14.32
30-Sep-00 3.29 13.07
31-Oct-00 3.31 12.37
30-Nov-00 0.76 11.63
31-Dec-00 5.03 12.47
31-Jan-01 -11.30 12.53
28-Feb-01 11.33 13.23
31-Mar-01 13.53 13.76
30-Apr-01 7.31 14.58
31-May-01 14.53 16.28
30-Jun-01 0.63 15.90
31-Jul-01 -4.32 14.26
31-Aug-01 3.83 13.90
30-Sep-01 8.15 12.64
31-Oct-01 -1.32 13.19
The China Fund, Inc. Premium/discount
--------------------------------------------------------------------------------
The China Fund, Inc. Premium/discount
07/10/1992 - 10/31/2001
DATE Premium/Discount
---- ----------------
31-Jul-92 14.07%
28-Aug-92 -4.54%
25-Sep-92 -13.67%
30-Oct-92 -1.55%
27-Nov-92 1.40%
25-Dec-92 -1.53%
29-Jan-93 -7.02%
26-Feb-93 -7.09%
26-Mar-93 -7.44%
30-Apr-93 7.72%
28-May-93 14.58%
25-Jun-93 14.09%
30-Jul-93 11.31%
27-Aug-93 9.78%
24-Sep-93 5.40%
29-Oct-93 6.63%
26-Nov-93 -0.47%
31-Dec-93 39.99%
28-Jan-94 27.52%
25-Feb-94 20.04%
25-Mar-94 20.87%
29-Apr-94 10.19%
27-May-94 24.92%
24-Jun-94 15.21%
29-Jul-94 13.64%
26-Aug-94 18.85%
30-Sep-94 11.29%
28-Oct-94 12.43%
25-Nov-94 7.45%
30-Dec-94 0.20%
27-Jan-95 11.91%
24-Feb-95 11.11%
31-Mar-95 6.11%
28-Apr-95 6.99%
26-May-95 8.39%
30-Jun-95 2.38%
28-Jul-95 1.94%
25-Aug-95 1.73%
29-Sep-95 2.08%
27-Oct-95 -5.64%
24-Nov-95 -2.66%
29-Dec-95 -3.92%
26-Jan-96 14.58%
23-Feb-96 -1.68%
29-Mar-96 4.33%
26-Apr-96 -3.69%
31-May-96 -5.33%
28-Jun-96 -5.79%
26-Jul-96 -11.89%
30-Aug-96 -10.92%
27-Sep-96 -10.19%
25-Oct-96 -13.92%
29-Nov-96 -10.90%
27-Dec-96 -18.15%
31-Jan-97 -17.67%
28-Feb-97 -21.47%
28-Mar-97 -20.12%
25-Apr-97 -23.57%
30-May-97 -20.26%
27-Jun-97 -20.61%
25-Jul-97 -20.69%
29-Aug-97 -24.05%
26-Sep-97 -17.05%
31-Oct-97 -21.73%
28-Nov-97 -15.59%
26-Dec-97 -16.28%
30-Jan-98 -1.75%
27-Feb-98 -15.17%
27-Mar-98 -18.52%
24-Apr-98 -19.54%
29-May-98 -21.54%
26-Jun-98 -13.16%
31-Jul-98 -14.71%
28-Aug-98 -21.35%
25-Sep-98 -30.42%
30-Oct-98 -19.43%
27-Nov-98 -15.57%
25-Dec-98 -23.53%
29-Jan-99 -22.65%
26-Feb-99 -21.16%
26-Mar-99 -19.23%
30-Apr-99 -19.48%
28-May-99 -19.27%
25-Jun-99 -20.63%
30-Jul-99 -21.93%
27-Aug-99 -24.14%
24-Sep-99 -24.04%
29-Oct-99 -22.00%
26-Nov-99 -20.28%
31-Dec-99 -25.17%
28-Jan-00 -26.63%
25-Feb-00 -23.62%
31-Mar-00 -28.19%
28-Apr-00 -29.20%
26-May-00 -24.45%
30-Jun-00 -29.33%
28-Jul-00 -24.71%
25-Aug-00 -26.60%
29-Sep-00 -27.31%
27-Oct-00 -28.35%
24-Nov-00 -26.14%
29-Dec-00 -25.82%
26-Jan-00 -21.88%
23-Feb-01 -18.80%
30-Mar-01 -21.88%
27-Apr-01 -21.94%
25-May-01 -19.39%
29-Jun-01 -16.54%
27-Jul-01 -19.60%
31-Aug-01 -18.56%
28-Sep-01 -15.66%
26-Oct-01 -17.97%
--------------------------------------------------------------------------------
The performance and premium/discount are based on 31 October 2001
*Source: State Street Corporation
The portfolio - in full at 31 October 2001
----------------------------------------------------------------------------------------------------------------------
Sector Company Price % of portfolio
(code)
Hong Kong 45.3% China Petroleum & Chemical, Corp 0386.HK HK$1.21 5.1%
Yanzhou Coal Mining Co. 1171.HK HK$2.43 4.5%
TCL International Holdings Ltd 1070.HK HK$1.01 3.9%
Huaneng Power International, Inc. 0902.HK HK$4.80 3.8%
Zhejiang Expressway Co., Ltd 0576.HK HK$1.82 3.5%
Brilliance China Automotive Holdings, Ltd 1114.HK HK$1.58 2.9%
China Rare Earth Holdings, Ltd 0769.HK HK$2.20 2.5%
TPV Technology, Ltd 0903.HK HK$1.65 2.3%
Shangri-La Asia, Ltd 0069.HK HK$4.50 2.2%
Euro - Asia Agriculture (Holdings) Co., Ltd 0932.HK HK$1.74 2.0%
Beijing Capital International Airport Co., Ltd 0697.HK HK$1.92 1.9%
Asia Satellite Telecommunications Holdings, Ltd 1135.HK HK$9.95 1.6%
Global Bio-chem Technology Group Co., Ltd 0809.HK HK$2.28 1.5%
Xinao Gas Holdings, Ltd 8149.HK HK$2.23 1.5%
China Overseas Land & Investment, Ltd 0688.HK HK$0.88 1.4%
Life Tech Group, Ltd 1180.HK HK$0.23 1.4%
Fountain Set (Holdings) Ltd 0420.HK HK$0.96 1.3%
Arcontech, Corp 8097.HK HK$0.97 0.8%
Chen Hsong Holding, Ltd 0057.HK HK$1.24 0.8%
Automated Systems Holdings, Ltd 0771.HK HK$2.48 0.4%
Taiwan 32.3% Taipei Bank 2830.TW NT$18.0 4.8%
Chunghwa Telecom Co., Ltd 2412.TW NT$46.9 3.4%
Phoenixtech Power Co., Ltd 2411.TW NT$18.1 2.7%
Uni-President Enterprises Co. 1216.TW NT$10.05 2.5%
Pacific Construction Co., Ltd 2506.TW NT$3.11 2.2%
Premier Image Technology, Corp 2394.TW NT$46.2 2.1%
Ho Tung Chemical, Corp 1714.TW NT$15.5 2.1%
Taiwan Secom 9917.TW NT$28.6 2.1%
Polaris Securities Co., Ltd 6011.TW NT$10.9 1.9%
Choice Lithograph, Inc 9929.TW NT$10.15 1.8%
China Synthetic Rubber, Corp 2104.TW NT$3.1 1.8%
Teco Electric & Machinery Co., Ltd 1504.TW NT$9.3 1.6%
Synnex Technologies International, Corp 2347.TW NT$30.6 1.4%
Advantech Co., Ltd 2395.TW NT$65.5 1.4%
Giant Manufacturing Co., Ltd 9921.TW NT$28 0.5%
B shares 6.4% Shanghai Friendship Group Co., Inc 90923.SS US$0.934 2.1%
Eastern Communications Co., Ltd 900941.SS US$1.23 1.6%
Luthai Textile Co., Ltd 2726.SZ HK$8.03 1.5%
Shanghai Matsuoka, Co 900955.SS US$1.61 1.2%
New York 2.6% Chinadotcom, Corp China.O US$1.9999 2.6%
Direct 5.1% A-S China Plumbing Products, Ltd 3.1%
Moulin International Holdings, Ltd 1.5%
New World Sun City, Ltd 0.5%
Singapore 2.8% Want Want Holdings, Ltd WANT.SI US$1.77 2.5%
Asia Dekor Holdings, Ltd ADEK.SI US$0.08 0.3%
Cash 5.5%
Objective
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The investment objective of the Fund is to achieve long term capital
appreciation through investment in companies and other entities with significant
assets, investments, production activities, trading or other business interests
in China or which derive a significant part of their revenue from China.
The Board of Directors of the Fund has adopted an operating policy of the Fund,
effective June 30, 2001, that the Fund will invest at least 80% of its assets in
China companies. For this purpose, "China companies" are (i) companies for which
the principal securities trading market is in China; (ii) companies for which
the principal securities trading market is outside of China or in companies
organised outside of China, that in both cases derive at least 50% of their
revenues from goods or services sold or produced, or have a least 50% of their
assets in China; and (iii) companies organized in China. Under the new policy,
China will mean the People's Republic of China, including Hong Kong, and Taiwan.
The Fund will provide its stockholders with at least 60 days' prior notice of
any change to the policy described above.
The fundamental policy, which applies to not less than 65% of the Fund's assets
as set out in the Fund's prospectus dated July 10, 1992, remains in place. The
fundamental policy is the same as the operating policy set out above, except
that China only includes the People's Republic of China.
Contacts
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The China Fund, Inc.
c/o State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Tel: (1) 888 CHN-CALL (246 2255)
Important Information: This newsletter is issued by Martin Currie Inc, Saltire
Court, 20 Castle Terrace, Edinburgh, Scotland. Regulated by IMRO and registered
with the Securities Exchange Commission as an investment adviser. Information
herein is believed to be reliable but has not been verified by Martin Currie
Inc. Martin Currie Inc makes no representation or warranty and does not accept
any responsibility in relation to such information or for opinion or conclusion
which the reader may draw from the newsletter. This newsletter does not
constitute an offer of shares. Martin Currie Inc, its ultimate and intermediate
holding companies, subsidiaries, affiliates, clients, directors or staff may, at
any time, have a position in the market referred to herein, and may buy or sell
securities, currencies, or any other financial instruments in such markets. The
information or opinion expressed in this newsletter should not be construed to
be a recommendation to buy or sell the securities, commodities, currencies, or
financial instruments referred to herein. Investors are advised that they will
not generally benefit, from the rules and regulations of the United Kingdom
Financial Services Act 1986, the Financial Services Authority and the Securities
and Futures Authority for the protection of investors nor benefit from the
United Kingdom Investors Compensation Scheme nor have access to IMRO's
Investment Ombudsman in the event of a dispute. Investors will also have no
rights of cancellation under the Financial Services (Cancellation) Rules 1989
(as amended) of the United Kingdom. Please remember that past performance is not
necessarily a guide to the future. Market and currency movements may cause the
value of the shares and the income from them to fluctuate and you may get back
less than you invested when you decide to sell your shares.