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
November 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 November 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: December 19, 2001
By:/s/ Ann Casey
--------------------------------
Name: Ann Casey
Title: Secretary
3
----------------------
Insight
----------------------
The China Fund, Inc. (CHN)
November 2001
In brief... at 30 November 2001
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Net Asset Value per share* US$14.04 China Fund NAV MSCI Golden Dragon
Market Price* US$11.87 -------------- ------------------
Premium/Discount* -15.5% 1 month return* 6.4% 12.8%
Fund size* US$141.4m 1 year return* 20.7% -17.1%
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*Source: State Street Corporation/Martin Currie Inc
Manager's Comments
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Signs of the effect of the global economic slowdown on China are becoming
clearer. Exports in October grew by only 0.1% y.o.y. Industrial production
actually fell by 3.1% y.o.y. Company visits indicate some cooling in what has
been a hot property market in the coastal cities. Savvy car buyers are holding
off, awaiting price cuts which they anticipate will follow WTO entry. Economic
growth remains more robust than in most parts of the world, and China continues
to be successful in attracting foreign direct investment. But the Chinese
economy needs strong growth to overcome its many structural problems -
particularly if it is to re-employ those laid off in the process of state-owned
enterprise reform, and absorb the overcapacity seen in many industries. For this
reason we expect further fiscal measures to stimulate the economy and another
interest rate cut. Deflation, not inflation, is the enemy.
The Chinese stockmarkets rallied over the past month, except for Hong Kong (HCI
-4.0%) The rally was less pronounced in China (Shanghai A +3.4%) than in Taiwan
(+11.3%), whose many exporters are highly sensitivity to the whims of the US
consumer. The figures from the US have been better than feared in the wake of
September 11th. Interest rates are now exceptionally low across greater China,
and there is plenty of money ready to chase good turn-around stories. In Hong
Kong, a number of small, private sector companies, to which this Fund has a
relatively high weighting, have taken the opportunity to issue new shares, and
one or two state-owned enterprises are attempting IPOs. That probably marks the
close of this particular rally.
Chris Ruffle
Investment strategy:
Your Fund is 89% invested and has holdings in 49 companies. Overall, the
company's portfolio has a bias towards private sector companies and
Taiwan-listed enterprises deriving the bulk of their profit from China.
During November, we took some profits on a few of the best performing smaller
companies such as Xinao Gas, Euro-Asia and TPV. We also halved our remaining
position in the oil sector, Sinopec, on the expectation of weaker crude oil
prices. In Taiwan we sold Teco, whose merger with Sampo has failed to go
through.
We have invested in two companies where we expect earnings to recover strongly
in 2002: V-Tech (cordless phones, electronic toys) and EVA Airlines. In Taiwan,
we have invested in Lian Hwa Foods (its second snack food factory has opened in
Beijing) and the plastic autoparts maker Tong Yang, which now has six plants
around China. We have added to positions in Asia Dekor, which we expect to
benefit from strong home renovation demand in China, and Fountain Set, the
world's leading maker of knitted yarn, which we believe to be trading at under
3X prospective earnings and an estimated cash yield of 9%.
Source: Martin Currie Inc
4
Fund Details* Asset allocation (%)*
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Market cap $185.4m [PIE CHART]
Shares outstanding 10,073,173 shares Hong Kong 41.2%
Exchange listed NYSE Taiwan 31.1%
Listing date July 10, 1992 Cash 10.8%
Investment manager Martin Currie Inc B Shares 6.3%
Direct investment Asian Direct Capital Management Unlisted 4.8%
manager Singapore 3.0%
New York 2.8%
Ten Largest Listed Investments (35.3%)* Direct Investments*
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Taipei Bank Financials 5.0% A-S China Plumbing Products Sanitary Ware 3.0%
TCL International Information Technology 4.3% Moulin International Holdings Optical Frames 1.4%
Yanzhou Coal Mining Energy 4.3% New World Sun City Property 0.4%
Huaneng Power Intl Energy 3.7%
Zhejiang Expressway Utilities 3.4%
Phoenixtec Power Consumer Staples 3.3%
Chungwa Telecom Telecommunications 3.1%
Chinadotcom Information Technology 2.8%
Brilliance China Consumer Discretionary 2.8%
Uni-president Enterprises Consumer Discretionary 2.6%
Sector allocation (%)* Performance (in US$ term)*
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% of net MSCI As at 30 November 2001 NAV % Market Price %
assets Golden
Dragon %
Consumer Discretionary 13.3 5.7 One month 6.41 10.52
Information Technology 12.9 23.5 Calendar year to date 12.61 28.32
Industrials 11.4 21.6 3 years ** 9.86 11.17
Consumer Staples 9.5 0.4
Financials 9.0 28.0 Dividend History*
Energy 8.0 1.0 US$ Ex Date
Telecoms 6.4 10.3 0.1110 12/28/99
Materials 5.7 3.4 0.0780 12/23/98
Utilities 5.1 6.1 0.5003 12/23/97
Other 4.9 0.0 0.0834 12/27/96
Health Care 3.0 0.0 0.0910 12/31/95
Cash 10.8 - 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. 6.4 11.0 12.6 20.7 9.9** 0.5** 2.0**
MSCI Golden Dragon 12.8 0.3 -18.8 -17.1 -5.3 -8.2 -
Hang Seng Chinese Enterprise Index -4.0 -1.7 10.2 11.9 -1.8 -12.8 -
Source: * State Street Corporation / MC Inc. # The Fund was launched on July 10, 1992 ** Annualised Return
5
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The China Fund Inc.
Performance in perspective
--------------------------------------------------------------------------------
The China Fund Inc.
Date vs MSCI Golden Dragon 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
30-Nov-01 -5.62 14.04
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The China Fund, Inc. Premium/Discount
--------------------------------------------------------------------------------
The China Fund, Inc. Premium/discount
07/10/1992 - 11/30/2001
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%
2-Nov-01 -19.58%
9-Nov-01 -15.74%
16-Nov-01 -15.22%
23-Nov-01 -17.39%
30-Nov-01 -15.46%
--------------------------------------------------------------------------------
The performance and premium/discount are based on 30 November 2001
*Source: State Street Corporation
6
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The portfolio - in full at 30 November 2001
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Sector Company Price Holding Value % of
(code) $ portfolio
Hong Kong 41.2%
TCL International Holdings Ltd 1070.HK HK$1.32 39,318,000 6,150,646 4.3%
Yanzhou Coal Mining Co. 1171.HK HK$2.55 19,000,000 6,090,642 4.3%
Huaneng Power International, Inc. 0902.HK HK$4.88 8,218,000 5,163,351 3.7%
Zhejiang Expressway Co., Ltd 0576.HK HK$1.89 19,814,000 4,776,386 3.4%
Brilliance China Automotive Holdings, Ltd 1114.HK HK$1.68 19,300,000 3,934,811 2.8%
China Petroleum & Chemical, Corp 0386.HK HK$1.11 22,700,000 3,230,861 2.3%
China Rare Earth Holdings, Ltd 0769.HK HK$2.18 11,600,000 3,086,352 2.2%
Shangri-La Asia, Ltd 0069.HK HK$5.15 5,000,000 3,061,349 2.2%
TPV Technology, Ltd 0903.HK HK$2.13 11,050,000 2,536,207 2.0%
Beijing Capital International Airport Co., Ltd 0697.HK HK$1.88 10,384,000 2,503,179 1.7%
Asia Satellite Telecommunications Holdings, Ltd 1135.HK HK$12.4 1,693,000 2,420,479 1.7%
Fountain Set (Holdings) Ltd 0420.HK HK$1.2 15,250,000 2,229,175 1.6%
Global Bio-chem Technology Group Co., Ltd 0809.HK HK$2.80 7,000,000 2,423,434 1.6%
China Overseas Land & Investment, Ltd 0688.HK HK$1.05 16,500,000 2,052,226 1.4%
LifeTec Group, Ltd 1180.HK HK$0.26 59,846,000 1,857,034 1.4%
Chaoda 0682.HK HK$2.53 5,000,000 1,522,660 1.1%
Vtech Holdings, Ltd. 0303.HK HK$5.95 2,270,000 1,557,217 1.1%
Chen Hsong Holding, Ltd 0057.HK HK$1.36 6,630,000 1,105,163 0.8%
Arcontech, Corp 8097.HK HK$0.98 9,000,000 1,142,476 0.7%
Xinao Gas Holdings, Ltd 8149.HK HK$2.5 2,350,000 768,382 0.5%
Automated Systems Holdings, Ltd 0771.HK HK$2.45 1,752,000 550,389 0.4%
Jackin International 0630.HK HK$0.41 990,000 41,256 0.0%
Taiwan 31.1%
Taipei Bank 2830.TW NT$20.3 12,115,400 7,110,142 5.0%
Phoenixtech Power Co., Ltd 2411.TW NT$22.4 6,824,000 4,659,036 3.3%
Chunghwa Telecom Co., Ltd 2412.TW NT$51.0 3,276,000 4,387,670 3.1%
Uni-President Enterprises Co. 1216.TW NT$11.1 11,549,760 3,657,536 2.6%
Choice Lithograph, Inc 9929.TW NT$12.5 8,273,000 3,004,431 2.2%
Polaris Securities Co., Ltd 6011.TWO NT$13.1 8,042,000 3,002,316 2.2%
Pacific Construction Co., Ltd 2506.TW NT$3.14 32,841,000 3,015,037 2.0%
Ho Tung Chemical, Corp 1714.TW NT$16.8 6,132,950 2,743,970 1.9%
China Synthetic Rubber, Corp 2104.TW NT$9.3 9,919,440 2,579,285 1.8%
Synnex Technologies International, Corp 2347.TW NT$43.0 2,156,000 2,380,244 1.8%
Advantech Co., Ltd 2395.TW NT$82.5 959,100 2,201,304 1.6%
Taiwan Secom 9917.TW NT$29.9 2,741,500 2,309,805 1.6%
Behavior Technology, Corp 2341.TW NT$12.85 4,000,000 1,493,318 1.0%
Lian Hwa 1231.TW NT$15.7 1,959,000 853,719 0.6%
EVA Airways 2618.TW NT$9.3 1,002,000 247,443 0.2%
Lite-On IT, Corp 8008.TWO NT$77.0 82,000 183,440 0.1%
Tong Yang 1319.TW NT$13.75 412,000 164,585 0.1%
B shares 6.3%
Shanghai Friendship Group Co., Inc 900923.SS US$1.00 2,950,000 2,917,550 2.1%
Eastern Communications Co., Ltd 900941.SS US$1.32 1,729,150 2,206,396 1.6%
Luthai Textile Co., Ltd 200726.SZ HK$9.35 1,999,869 2,169,408 1.5%
Shanghai Matsuoka, Co 900955.SS US$1.69 981,850 1,634,780 1.1%
New York 2.8%
Chinadotcom, Corp China.O US$2.37 1,700,000 3,961,000 2.8%
Direct 4.8%
A-S China Plumbing Products, Ltd 450 4,178,250 3.0%
Moulin International Holdings, Ltd 2,000,000 2,002,750 1.4%
New World Sun City, Ltd 83 608,787 0.4%
Singapore 3.0%
Want Want Holdings, Ltd WANT.SI US$1.93 1,900,000 3,458,000 2.4%
Asia Dekor Holdings, Ltd ADEK.SI US$0.10 7,374,000 774,270 0.6%
Cash 10.8% 10.8%
7
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
--------------------------------------------------------------------------------
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.
8