EX-99 2 fp0007334_ex99.htm fp0007334_ex99.htm
 
Apr 30, 2013
  
Monthly Insight
 
The China Fund, Inc. (CHN)
 
Investment Objective
 
The investment objective of the Fund is to achieve long term capital appreciation. The Fund seeks to achieve its objective through investment in the equity securities of 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 Fund has an operating policy 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 organized 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; or (iii) companies organized in China. Under the 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 this policy.
 
Performance Overview
 
Performance History
 1 month
 3 months
 YTD
 1 Year
 3 Years
(p.a.)
5 Years
(p.a.)
10 Years
(p.a.)
Since
Inception
NAV (%)
1.59
0.04
4.69
8.99
1.02
2.78
18.56
10.82
Market price (%)
0.29
-6.23
-1.59
6.45
1.65
3.31
17.72
9.77
Benchmark (%)
2.31
-2.52
0.83
9.72
5.16
0.60
13.92
 N/A
 
Performance History
2012
2011
2010
2009
2008
2007
2006
2005
NAV (%)
12.07
-24.37
27.25
72.82
-46.95
86.20
57.10
6.09
Market price (%)
20.46
-27.51
23.60
72.19
-40.65
50.24
65.67
-21.51
Benchmark (%)
22.65
-18.36
13.60
67.12
-49.37
37.97
39.50
10.27
 
Source: State Street Bank and Trust Company. Source for index data: MSCI as at April 30, 2013.
 
Portfolio Analysis
 
Sector allocation (%)
Country allocation (%)
 
Source: State Street Bank and Trust Company as at April 30, 2013.
 
* China includes A-shares (6.2%), A-share equity linked securities (7.4%),
B-shares (0.0%), H-shares (13.0%) and Red-chips (16.1%).
 
 
 
 
 
 
The China Fund, Inc. (CHN)
 
Portfolio Analysis (continued)
 
Top 10 Holdings Sector %
HAND ENTERPRISE SOLUTIONS CO., LTD.
I.T.
6.2
TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD.
I.T.
6.1
INDUSTRIAL & COMMERCIAL BANK OF CHINA
FINANCIALS
5.7
CHINA EVERBRIGHT INTERNATIONAL, LTD.
INDUSTRIALS
5.6
SUN HUNG KAI PROPERTIES, LTD.
FINANCIALS
4.9
ENN ENERGY HOLDINGS, LTD.
UTILITIES
3.4
CHINA MOBILE, LTD.
TELECOM
3.3
CHINA MEDICAL SYSTEM HOLDINGS, LTD.
HEALTHCARE
3.1
CHINA RESOURCES LAND, LTD.
FINANCIALS
2.6
DIGITAL CHINA HOLDINGS, LTD.
I.T.
2.5
Total   43.4
 
Direct Investments
Sector
%
GOLDEN MEDITECH HOLDINGS, LTD. 15.0%, 5/16/13
OTHERS
1.5
GOLDEN MEDITECH HOLDINGS, LTD. 15.0%, 11/16/13
OTHERS
1.5
     
     
     
     
     
     
     
     
Total
3.0
 
Source: State Street Bank and Trust Company as at April 30, 2013.
 
 
Fund Details
 
NAV
$23.64
Market price
$21.07
Premium/Discount
-10.87%
Market cap
US$330.4m
Shares outstanding
15,682,029
Exchange listed
NYSE
Listing date
July 10, 1992
Benchmark
MSCI Golden Dragon Index (Total Return)
Fund Manager
Christina Chung
Listed and direct investment manager
RCM Asia Pacific Limited
 
Source: State Street Bank and Trust Company as at April 30, 2013.
 
 
Dividend History (10 years)
 
Declaration
date
Ex-dividend
date
Record
date
Payable
date
Dividend/
Share
Income
Long-term Capital
Short-term Capital
10 Dec 2012
20 Dec 2012
24 Dec 2012
28 Dec 2012
3.2517
0.3473
2.9044
0.0000
8 Dec 2011
21 Dec 2011
23 Dec 2011
29 Dec 2011
2.9964
0.1742
2.8222
0.0000
8 Dec 2010
21 Dec 2010
24 Dec 2010
29 Dec 2010
2.2742
0.3746
1.8996
0.0000
9 Dec 2009
22 Dec 2009
24 Dec 2009
29 Dec 2009
0.2557
0.2557
0.0000
0.0000
8 Dec 2008
22 Dec 2008
24 Dec 2008
23 Jan 2009
5.8174
0.4813
5.3361
0.0000
7 Dec 2007
19 Dec 2007
21 Dec 2007
25 Jan 2008
12.1200
0.2800
9.0000
2.8400
8 Dec 2006
19 Dec 2006
21 Dec 2006
29 Dec 2006
4.0117
0.2996
2.7309
0.9812
9 Dec 2005
19 Dec 2005
21 Dec 2005
29 Dec 2005
2.5119
0.2172
2.2947
0.0000
13 Dec 2004
20 Dec 2004
22 Dec 2004
7 Jan 2005
3.5701
0.1963
3.2664
0.1074
19 Dec 2003
29 Dec 2003
31 Dec 2003
15 Jan 2004
1.7800
0.0700
0.6700
1.0400
 
Source : State Street Bank and Trust Company as at December 31, 2012
 
 
2
 
 
The China Fund, Inc. (CHN)
 
The China Fund Inc.  NAV  Performance of USD $10,000 since inception (with dividends reinvested at NAV price)
 
 
Past performance is not a guide to future returns.
Source: State Street Bank and Trust Company as at April 30, 2013.

The China Fund Inc.  Premium /  Discount
 
 
Past performance is not a guide to future returns.
Source: State Street Bank and Trust Company as at April 30, 2013.
 
 
3
 
 
The China Fund, Inc. (CHN)
 
Manager’s Commentary
 
Market Review
 
In April, the Hong Kong equity market continued to consolidate in the first half of the month. The market was mostly driven by China’s macroeconomic data and the reversion of sentiment, globally. Investors were also disappointed by China’s lower-than-expected 1Q13 GDP of 7.7%. Geopolitical concerns in the Korean peninsula, spreading bird flu in Shanghai areas, and a substantial sell-off in global commodities also dampened market sentiment. However, market sentiment was later lifted by the global stimulus package adopted in Japan with the intent to double the monetary base, and Korea unveiled its fiscal stimulus package alongside with housing easing measures, as well as the positive news flow around a new batch of RMB Qualified Foreign Institutional Investors (RQFIIs), and widely reported discussions between the China Securities Regulatory Commission and MSCI on the eventual inclusion of A-shares in the MSCI Emerging Market index. Yet, a broader re-rating of the market still hinges on the structural reform agenda in China.
 
In Taiwan, the MSCI Taiwan  rose 4.0%, outperforming both the MSCI APAC ex-Japan (2.4%) and MSCI EM indices (0.4%). The local index, the Taiwan Stock Exchange Weighted Index, rose 2.2% and closed at 8,094, up 5.1% year to date. Major drivers of the month included the  return  of the manufacturing  sector’s  total  inventory  to  an  upward  trend  and  a  pick-up in gross fixed capital investment. Expectations rose that export growth will pick up gradually on the back of a recovery of demand from China and the United States.
 
Fund review
 
The Fund underperformed relative to the benchmark in April, mainly due to stock selection. Our stock selection in the financials, consumer discretionary, and staples sectors hurt the performance by partially offsetting the contributions from our stock selection in the industrials sector.
 
The top contributor for the month continued to be China Everbright International. The share price held up in April, driven by high revenue visibility of its new projects. Another contributor was Advantech, as the company released strong first quarter results, supporting the share price performance. On the negative side, one of the top detractors was Gree Electrical Appliances. Its share price was undermined by weaker than expected sales figures; however, the valuations were only at a low double-digit level.
 
Outlook
 
After a period of consolidation, the market appears oversold and we feel we should see some share price recovery in the short-term. In the absence of news flow relating to reform initiatives in China, we believe the China equity market will remain in a trading range.
 
For the Taiwan market, as first quarter GDP came in way below expectations, we continue to be cautious on macro risks. We will focus on selective opportunities in the sectors which can benefit from rising 3G penetration in emerging markets and the increasing popularity of low-end smartphones.
 
 
Source : RCM Asia Pacific Limited as at April 30, 2013.
 
 
4
 
 
The China Fund, Inc. (CHN)
 
Portfolio Holdings
 
CUSIP
 Security Description
 Cost Base
 Base MV
 Shares
 Percentage of
Net Assets
  
B3VN92906
 HAND Enterprise Solutions Co., Ltd.
1,793,494.00
22,864,849.00
6,369,715
6.2
  
688910900
 Taiwan Semiconductor Manufacturing Co., Ltd.
16,072,090.00
22,573,801.00
6,084,000
6.1
  
B1G1QD902
 Industrial & Commercial Bank of China
20,739,449.00
20,986,172.00
29,829,000
5.7
  
663094902
 China Everbright International, Ltd.
12,183,629.00
20,665,795.00
26,730,000
5.6
  
685992000
 Sun Hung Kai Properties, Ltd.
17,289,798.00
18,362,985.00
1,269,000
4.9
  
633393905
 Enn Energy Holdings, Ltd.
606,420.00
12,765,658.00
2,204,000
3.4
  
607355906
 China Mobile, Ltd.
11,683,974.00
12,086,294.00
1,103,500
3.3
  
B6WY99909
 China Medical System Holdings, Ltd.
853,792.00
11,442,775.00
11,669,300
3.1
  
619376908
 China Resources Land, Ltd.
6,196,840.00
9,572,600.00
3,168,000
2.6
  
635186901
 Digital China Holdings, Ltd.
13,205,899.00
9,144,038.00
7,256,000
2.5
  
913BMZ902
 Ping An Insurance (Group) Company of China, Ltd. Access Product (expiration 04/01/13)
9,494,980.00
9,074,792.00
1,418,047
2.4
  
B01CT3905
 Tencent Holdings, Ltd.
7,312,795.00
8,983,603.00
262,100
2.4
  
674842901
 Ruentex Development Co., Ltd.
3,423,335.00
8,649,437.00
4,416,301
2.3
  
644094906
 Taiwan FamilyMart Co., Ltd.
1,313,077.00
8,232,599.00
1,741,652
2.2
  
671815900
 Qingling Motors Co., Ltd.
8,718,221.00
8,172,305.00
28,960,000
2.2
  
B00G0S903
 CNOOC, Ltd.
8,859,687.00
7,866,908.00
4,228,000
2.1
  
626073902
 Delta Electronics, Inc.
4,550,608.00
7,743,376.00
1,615,000
2.1
  
17313A533
 Gree Electric Appliances, Inc. Access Product (expiration 01/17/14)
6,453,442.00
7,685,122.00
1,838,546
2.1
  
B3WH02907
 Hermes Microvision Inc.
6,943,556.00
7,278,395.00
240,000
2.0
  
637248907
 MediaTek Inc.
6,194,126.00
6,818,921.00
559,000
1.8
  
B2R2ZC908
 CSR Corp., Ltd.
7,466,211.00
6,512,818.00
9,930,000
1.8
  
B15456906
 Bank of China, Ltd.
6,465,433.00
6,437,097.00
13,762,000
1.7
  
959GRNII9
 Taiwan Life Insurance Co., Ltd., 4.0%, 12/28/14
6,178,274.00
6,283,782.00
200,000,000
1.7
  
620267906
 Advantech Co., Ltd.
4,104,778.00
6,134,589.00
1,284,000
1.7
  
B1L8PB906
 Tong Hsing Electronic Industries, Ltd.
5,919,469.00
6,078,883.00
1,380,000
1.6
  
986PLF007
 Golden Meditech Holdings, Ltd. 15.0%, 05/16/13
5,557,209.00
5,550,872.00
58,222,500
1.5
  
986PLG005
 Golden Meditech Holdings, Ltd. 15.0%, 11/16/13
5,557,209.00
5,550,872.00
58,222,500
1.5
  
634007900
 Kunlun Energy Co., Ltd.
4,298,243.00
5,228,495.00
2,666,000
1.4
  
626735906
 Hong Kong Exchanges and Clearing, Ltd.
4,947,274.00
5,153,982.00
306,500
1.4
  
99ZMCS903
 Kweichow Moutai Co., Ltd. Access Product (expiration 10/26/15)
6,129,683.00
4,787,163.00
171,159
1.3
  
B236JB905
 Tiangong International Co., Ltd.
4,747,329.00
4,537,661.00
16,080,000
1.2
  
670039007
 Uni-President Enterprises Corp.
669,016.00
4,464,022.00
2,267,508
1.2
  
643648900
 Shenzhen International Holdings, Ltd.
1,900,271.00
4,163,624.00
31,992,500
1.1
  
658444906
 Merida Industry Co., Ltd.
3,871,743.00
4,141,366.00
679,000
1.1
  
643055908
 Golden Meditech Holdings, Ltd.
4,555,715.00
4,108,728.00
35,040,000
1.1
  
644806002
 Hutchison Whampoa, Ltd.
3,303,627.00
3,968,598.00
366,000
1.1
  
613623909
 Hengan International Group Co., Ltd.
3,889,897.00
3,890,164.00
375,500
1.0
  
651795908
 Natural Beauty Bio-Technology, Ltd.
4,906,910.00
3,873,039.00
47,710,000
1.0
  
665157905
 Comba Telecom Systems Holdings, Ltd.
7,565,579.00
3,741,958.00
10,958,500
1.0
  
B633D9904
 Zhongsheng Group Holdings, Ltd.
3,466,065.00
3,663,374.00
2,662,000
1.0
  
B1CKXF901
 Zhengzhou Yutong Bus Co., Ltd. Access Product (expiration 01/20/15)
3,096,799.00
3,658,479.00
825,469
1.0
  
B3ZVDV905
 Sinopharm Group Co., Ltd.
2,527,529.00
3,599,776.00
1,212,000
1.0
  
B60LZR903
 Agricultural Bank of China, Ltd.
2,895,784.00
2,510,790.00
5,238,000
0.7
  
B1TDQL904
 Ping An Insurance (Group) Company of China, Ltd. Access Product (expiration 01/17/14)
1,566,145.00
1,343,150.00
209,900
0.4
  
B4PTR3906
 Fook Woo Group Holdings, Ltd.
7,974,083.00
1,118,811.00
25,314,000
0.3
  
972ZGS900
 Gree Electric Appliances, Inc. Access Product (expiration 10/14/13)
1,002,105.00
888,455.00
212,549
0.2
  
B04W2V905
 FU JI Food and Catering Services Holdings Ltd.
4,246,696.00
0.00
5,462,000
0.0
  
ACI0090H8
 Zong Su Foods (acquired 09/21/10)
15,000,034.00
0.00
2,677
0.0
  
 
^Nominal value owed in HK dollars.
 
Source: State Street Bank and Trust Company as at April 30, 2013.
 
 
5
 
 
The China Fund, Inc. (CHN)
 

The information contained herein has been obtained from sources believed to be reliable but RCM and its affiliates do not warrant the information to be accurate, complete or reliable. The opinions expressed herein are subject to change at any time and without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Investors should consider the investment objectives, risks, charges and expenses of any mutual fund carefully before investing. This and other information is contained in the fund’s annual and semiannual reports, proxy statement and other fund information, which may be obtained by contacting your financial advisor or visiting the fund’s website at www.chinafundinc.com. This information is unaudited and is intended for informational purposes only. It is presented only to provide information on investment strategies and opportunities. The Fund seeks to achieve its objective through investment in the equity securities of 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. Investing in non-U.S. securities entails additional risks, including political and economic risk and the risk of currency fluctuations, as well as lower liquidity. These risks, which can result in greater price volatility, will generally be enhanced in less diversified funds that concentrate investments in a particular geographic region. The Fund is a closed-end exchange traded management investment company. This material is presented only to provide information and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. After the initial public offering, shares are sold on the open market through a stock exchange, where shares may trade at a premium or a discount. Holdings are subject to change daily.