UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-05749
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THE CHINA FUND, INC.
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(Exact name of registrant as specified in charter)
C/O STATE STREET BANK & TRUST
2 AVENUE DE LAFAYETTE, 2ND FLOOR
P.O. BOX 5049
BOSTON, MA 02206-5049
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(Address of principal executive offices)(Zip code)
Copy to:
Mary Moran Zeven Leonard B. Mackey, Jr., Esq.
Secretary Clifford Chance US LLP
The China Fund, Inc. 31 West 52nd Street
2 Avenue de Lafayette, 2nd Floor New York, New York 10019-6131
Boston, MA 02111
(Name and Address of Agent for Service)
Registrant's telephone number, including area code: (888) 246-2255
Date of fiscal year end: October 31
Date of reporting period: April 30, 2008
ITEM 1. REPORT TO STOCKHOLDERS.
2
THE CHINA FUND, INC.
SEMI-ANNUAL REPORT
APRIL 30, 2008
(UNAUDITED)
THE CHINA FUND, INC.
TABLE OF CONTENTS
PAGE
----
Key Highlights 1
Asset Allocation 2
Industry Allocation 3
Chairman's Statement 4
Investment Manager's Statement 6
About the Portfolio Manager 8
Schedule of Investments 9
Financial Statements 16
Notes to Financial Statements 21
Other Information 27
Dividends and Distributions;
Dividend Reinvestment
and Cash Purchase Plan 29
THE CHINA FUND, INC.
KEY HIGHLIGHTS (UNAUDITED)
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FUND DATA
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NYSE STOCK SYMBOL CHN
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LISTING DATE JULY 10, 1992
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SHARES OUTSTANDING 18,153,741
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TOTAL NET ASSETS (04/30/08) US$732.7 MILLION
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NET ASSET VALUE PER SHARE (04/30/08) $40.36
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MARKET PRICE PER SHARE (04/30/08) $35.06
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TOTAL RETURN(1)
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PERFORMANCE AS OF
04/30/08: NET ASSET VALUE MARKET PRICE
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6-Months (9.89)% (8.35)%
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3-Year Cumulative 165.82% 114.37%
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3-Year Annualized 38.53% 28.94%
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5-Year Cumulative 378.16% 334.12%
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5-Year Annualized 36.75% 34.13%
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10-Year Cumulative 546.86% 577.03%
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10-Year Annualized 20.53% 21.08%
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DIVIDEND HISTORY
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RECORD DATE INCOME CAPITAL GAINS
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12/21/07 $0.2800 $11.8400
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12/21/06 $0.2996 $3.7121
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12/21/05 $0.2172 $2.2947
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12/22/04 $0.1963 $3.3738
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12/31/03 $0.0700 $1.7100
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12/26/02 $0.0640 $0.1504
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12/31/01 $0.1321 --
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12/31/00 -- --
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12/31/99 $0.1110 --
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12/31/98 $0.0780 --
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12/31/97 -- $0.5003
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12/31/96 $0.0834 --
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12/29/95 $0.0910 --
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12/30/94 $0.0093 $0.6006
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12/31/93 $0.0853 $0.8250
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12/31/92 $0.0434 $0.0116
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(1) Total investment returns reflect changes in net asset value per share or
market price, as the case may be, during each period and assume that dividends
and capital gains distributions, if any, were reinvested in accordance with the
dividend reinvestment plan. The net asset value per share percentages are not an
indication of the performance of a shareholder's investment in the Fund, which
is based on market price. Total investment returns are historical and do not
guarantee future results.
1
THE CHINA FUND, INC.
ASSET ALLOCATION AS OF APRIL 30, 2008 (UNAUDITED)
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TEN LARGEST LISTED EQUITY INVESTMENTS *
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1. Chaoda Modern Agriculture (Holdings), Ltd. 4.05%
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2. Far Eastern Department Stores, Ltd. 4.05%
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3. Yuanta Financial Holdings Co., Ltd. 3.43%
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4. Uni-President Enterprises Corp. 2.76%
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5. China Metal Products Co., Ltd. 2.45%
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6. China Development Financial Holding Corp. 2.36%
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7. Xinao Gas Holdings, Ltd. 2.33%
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8. Daqin Railway Co., Ltd. Access Product 2.22%
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9. Cathay Financial Holding Co., Ltd. 2.19%
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10. Fubon Financial Holdings Co., Ltd. 2.05%
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DIRECT INVESTMENTS *
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1. Qingdao Bright Moon 0.96%
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2. China Silicon Corp., Series A Preferred 0.89%
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3. Highlight Tech Corp. 0.82%
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4. Wuxi PAIHO 0.50%
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5. Sino Twinwood Pte Ltd. 0.42%
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6. teco Optronics Corp. 0.00%
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* Percentages based on net assets at April 30, 2008.
2
INDUSTRY ALLOCATION (UNAUDITED)
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(Pie Chart)
Consumer Discretionary 19.20
Financials 16.50
Consumer Staples 13.40
Industrials 12.90
Health Care 9.00
Information Technology 6.90
Materials 6.10
Energy 5.10
Utilities 2.30
Telecommunications 1.30
Others 7.30
Fund holdings are subject to change and percentages shown above are based on
total net assets as of April 30, 2008. A complete list of holdings as of April
30, 2008 is contained in the Schedule of Investments included in this report.
The most current available data regarding portfolio holdings can be found on our
website, www.chinafundinc.com. You may also obtain holdings by calling 1-800-
246-2255.
3
THE CHINA FUND, INC.
CHAIRMAN'S STATEMENT (UNAUDITED)
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Dear Stockholders,
Over the past six months, the Fund's net asset value declined by 9.89%. This
represented a considerable degree of outperformance relative to the benchmark
MSCI Golden Dragon index, which fell 17.7% over the period. The Fund also
remains well ahead of its benchmark over longer periods since the Fund's
inception in June 1992. Including a record cash distribution of US$53 million,
the Fund's total net asset value decreased by US$149.2 million, to US$732.7
million during the period.
The net asset value of the Fund has fallen as a result of the effect of the US
sub-prime crisis on international capital flows, as well as the looming impact
of a slowdown in global trade. However, the Fund's manager has been able to
limit the fall through a well-timed reduction in the Fund's heavy exposure to
the A-share market, as well as through its emphasis on Taiwan, which is starting
to enjoy the fruits of positive political change.
The Fund distributed a record dividend for 2007 (US$12.12/share). The Fund's
Board decided to offer a choice of both a cash and stock dividend, with a view
to improving stock liquidity and controlling the expense ratio.
Since the appointment last April of Martin Currie to manage the unlisted portion
of the Fund as well as the listed portion, the Fund has been increasingly active
in private equity. Five transactions have been concluded since August, and the
unlisted portfolio has increased to 3.6% of the Fund. The Fund's private equity
investments focus on late-stage/pre-IPO opportunities in entrepreneurial
companies.
The Fund's investment guidelines have been simplified, so that a minimum of 80%
of assets must be invested in the securities of companies that are organized in
China or that are principally traded in or derive at least 50% of their income
from China markets. For this purpose, China includes Taiwan and Hong Kong. This
gives the manager more leeway to invest in attractive China companies, wherever
they are listed. We note that 34.4% of the portfolio is now in Taiwan-listed
companies, as well as 4.3% and 4.4% in China companies listed in New York and
Singapore, respectively.
In recent months, China has been affected by two natural disasters -- the
snowstorms at Chinese New Year and the recent earthquake in Sichuan. In contrast
to the extent of the human tragedy, the economy has proved resilient so far. The
manager expects the forthcoming Olympics to have a similarly limited real
effect.
Cost inflation has emerged as the main problem facing the Chinese. The manager
believes that food inflation has already peaked, but the need gradually to lift
price controls on such items as fuel and electricity will probably mean that the
rate of inflation will not decrease swiftly, despite the global economic
slowdown. As the year wears on, the manager expects worries to turn from
inflation to growth. In this context, the renminbi should have relatively
limited room for further appreciation against the US dollar.
The Fund will continue to focus on management-owned companies catering to the
growth in domestic consumption. Sectors of emphasis are healthcare, agriculture,
non-bank finance and infrastructure.
4
THE CHINA FUND, INC.
CHAIRMAN'S STATEMENT (CONTINUED) (UNAUDITED)
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Finally, we are pleased to announce the appointment of William Kirby as a new
director of the Fund. William is the Geisinger Professor of History at Harvard,
and the director of that university's Fairbank Center for East Asian Research.
He is also a visiting professor at Peking University, Nanjing University and the
Free University of Berlin, and has written extensively on the development of
business and the economy in modern China.
For monthly updates detailing the Fund's investments, please consult
www.chinafundinc.com.
Yours truly,
J. Lightburn
Chairman
5
THE CHINA FUND, INC.
INVESTMENT MANAGER'S STATEMENT (UNAUDITED)
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REVIEW OF LISTED AND DIRECT INVESTMENTS
Over the past six months the Fund returned -9.89%. In so doing, it outperformed
the MSCI Golden Dragon index, which fell 17.7% over the period.
A high level of volatility characterized the period. This culminated in January,
when both the A-share and H-share markets saw massive sell-offs. By early April,
the A-share market had fallen almost 50% from its peak in October. In part,
Chinese markets were victims of their own success; as the best-performing
markets of 2007, Hong Kong and China offered the most attractive profits to
investors, who were increasingly concerned about the prospect of a slowdown in
the US economy.
Many of our strongest contributors came from Taiwan, where the portfolio is
overweight. After a long period of stagnation, the Kuomintang's successive
victories in the island's legislative and presidential elections catalyzed a
revival in March, on hopes of a rapprochement with the mainland. Here we saw
good returns from domestically oriented stocks such as FAR EASTERN DEPARTMENT
STORE, financials such as FUBON FINANCIAL HOLDINGS and YUANTA FINANCIAL
HOLDINGS, and TAIWAN SECOM, which makes security systems. Steel exporter CHINA
METAL PRODUCTS also did well, as did DATA SYSTEMS CONSULTING.
Outside Taiwan, we benefited from holding Hong Kong's CHAODA MODERN AGRICULTURE,
which exports rice and fruit, and from avoiding index heavyweights such as
PETROCHINA, CHINA LIFE and HONG KONG EXCHANGES & CLEARING.
Conversely, our relative returns were dampened by our avoidance of some of the
largest Taiwanese index components. In this regard, we suffered from not holding
TAIWAN SEMICONDUCTOR, CHUNGHWA TELECOM or CHINA STEEL CORPORATION. Negatives
among our holdings included YANGZIJIANG SHIPBUILDING, FAR EAST ENERGY CORP and
ZIJING MINING, which was hit by profit-taking after its strong run in 2007.
The Fund's unlisted investments continue to perform satisfactorily. During the
period we added a new unlisted holding in QINGDAO BRIGHT MOON, the world's
largest processor of seaweed, the by-products of which are used in a
surprisingly wide range of food and pharmaceutical applications. The company is
seeking an A-share listing within three years. The other unlisted investments
are in CHINA SILICON, which should benefit from rising polysilicon prices, SINO
TWINWOOD, which produces ERP (enterprise resource planning) software, HIGHLIGHT
TECH, which makes vacuum systems and components, and WUXI PAIHO, which makes
velcro. All of these companies plan market listings in the next couple of years.
At the end of April, the Fund was 92.8% invested in 72 companies. The reason for
the relatively high cash level at quarter-end was a substantial pre-IPO
investment in HUIYIN, an electrical retailer targeting rural consumers.
We remain overweight in Taiwan, and have increased our exposure to the A-share
market. The real deposit rate in China remains negative 5% and we estimate that
the earnings growth of our A-share portfolio will reach 35% this year, so we
expect a sharp rebound in the next few months.
6
THE CHINA FUND, INC.
INVESTMENT MANAGER'S STATEMENT (CONTINUED) (UNAUDITED)
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REVIEW OF LISTED AND DIRECT INVESTMENTS
Over the summer we think China will stop worrying about inflation and start
worrying about growth. Our company meetings reveal exporters pedaling hard to
cope with increasing material, labor and environmental costs. The story is not
wholly negative -- economic pressures are forcing another round of Western
companies to seek the 'China price'. But as Western companies squeeze inventory
to the bare minimum, even the winners are seeing smaller, albeit more frequent,
orders. As the complaints of exporters escalate, coincident with a likely rally
in the US dollar, we expect renminbi appreciation against this currency to slow
and stop. Added to this, we see the first signs of a loosening of the purse
strings as a couple of companies we visited struggled to secure reasonably
priced loans in the first quarter, but have now been able to get them.
7
THE CHINA FUND, INC.
ABOUT THE PORTFOLIO MANAGER (UNAUDITED)
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LISTED AND DIRECT INVESTMENT MANAGER
Mr. Chris Ruffle serves as the portfolio manager for the Fund's portfolio of
listed and direct securities. Mr. Ruffle joined Martin Currie in 1994. He is a
Chinese and Taiwanese equity specialist with over 15 years investment experience
in Asia. Fluent in Mandarin and Japanese, Mr. Ruffle has worked in the Far East
since 1983. He worked originally in Beijing and Shanghai and then in Australia
for a metal trading company. He then moved to Warburg Securities in 1987 as an
analyst in Tokyo, before establishing Warburg's office in Taiwan. Mr. Ruffle
also manages The Martin Currie China Hedge Fund and the China "A" Share Fund.
8
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS
APRIL 30, 2008 (UNAUDITED)
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NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ------ --------------
COMMON STOCK AND OTHER EQUITY INTERESTS
CHINA
FINANCIALS -- (1.0%)
Shanghai Lujiazui Finance & Trade Zone
Development Co., Ltd. ........................ 4,459,405 $ 7,366,937
------------
TOTAL CHINA -- (Cost $6,334,582) 1.0% 7,366,937
----- ------------
HONG KONG
CONSUMER DISCRETIONARY -- (6.4%)
China Travel International Investment Hong Kong,
Ltd. ......................................... 10,982,000 4,902,741
Huabao International Holdings, Ltd. ............ 12,790,000 11,485,420
Intime Department Store Group Co., Ltd.*........ 8,778,000 6,553,856
Ports Design, Ltd. ............................. 2,678,500 8,624,694
Shangri-La Asia, Ltd. .......................... 4,141,555 11,423,001
Yorkey Optical International Cayman, Ltd.#...... 16,424,000 4,003,233
------------
46,992,945
------------
CONSUMER STAPLES -- (5.4%)
Chaoda Modern Agriculture (Holdings), Ltd.(1)... 20,633,998 29,646,929
China Huiyuan Juice Group, Ltd.(1)*............. 13,000,500 10,006,671
------------
39,653,600
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ENERGY -- (0.5%)
China Rare Earth Holdings, Ltd.#................ 15,254,000 3,463,661
------------
FINANCIALS -- (1.7%)
SPG Land (Holdings), Ltd.(1)*#.................. 10,924,000 5,535,503
Tianjin Development Holdings, Ltd. ............. 8,440,000 6,821,208
------------
12,356,711
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HEALTH CARE -- (3.8%)
China Shineway Pharmaceutical Group, Ltd.#...... 11,184,000 7,431,992
Golden Meditech Co., Ltd.(1)#................... 35,040,000 12,136,855
Natural Beauty Bio-Technology, Ltd.#............ 32,780,000 7,989,891
------------
27,558,738
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INDUSTRIALS -- (1.2%)
TPV Technology, Ltd. ........................... 12,728,000 8,849,888
------------
INFORMATION TECHNOLOGY -- (0.4%)
Arcontech Corp.(2)*#............................ 18,386,000 --
Chinasoft International, Ltd.#.................. 19,230,000 3,330,361
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3,330,361
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See notes to financial statements and notes to schedule of investments.
9
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2008 (UNAUDITED)
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--------------------------------------------------------------------------------
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ------ --------------
COMMON STOCK AND OTHER EQUITY INTERESTS (CONTINUED)
HONG KONG (CONTINUED)
MATERIALS -- (0.1%)
Ocean Grand Chemicals Holdings, Ltd.(2)*#....... 17,379,000 $ 691,138
------------
UTILITIES -- (2.3%)
Xinao Gas Holdings, Ltd.(1)#.................... 9,286,000 17,082,685
------------
TOTAL HONG KONG -- (Cost $91,097,409) 21.8% 159,979,727
----- ------------
HONG KONG -- "H" SHARES
CONSUMER STAPLES -- (1.8%)
Wumart Stores, Inc.#............................ 15,126,000 13,098,036
------------
ENERGY -- (2.7%)
China Oilfield Services, Ltd.(1)................ 7,132,000 13,138,448
China Shenhua Energy Co., Ltd.(1)............... 1,450,000 6,659,312
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19,797,760
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HEALTH CARE -- (1.8%)
Shandong Weigao Group Medical Polymer Co.,
Ltd.#......................................... 8,180,000 13,117,215
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INDUSTRIALS -- (0.3%)
China Railway Group, Ltd.(1)*................... 2,450,800 2,342,299
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MATERIALS -- (1.3%)
Zijin Mining Group Co., Ltd.(1)*................ 10,408,000 9,479,904
------------
TELECOMMUNICATIONS -- (1.3%)
ZTE Corp.(1).................................... 2,236,360 9,338,369
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TOTAL HONG KONG -- "H" SHARES -- (Cost
$48,154,974) 9.2% 67,173,583
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TOTAL HONG KONG (INCLUDING "H"
SHARES) -- (Cost $139,252,383) 31.0% 227,153,310
----- ------------
SINGAPORE
CONSUMER DISCRETIONARY -- (1.0%)
China Hongxing Sports, Ltd. .................... 15,307,000 7,665,336
------------
CONSUMER STAPLES -- (1.9%)
China Fishery Group, Ltd.#...................... 6,068,000 7,507,357
Hsu Fu Chi International, Ltd.#................. 8,409,000 6,192,651
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13,700,008
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See notes to financial statements and notes to schedule of investments.
10
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2008 (UNAUDITED)
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NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ------ --------------
COMMON STOCK AND OTHER EQUITY INTERESTS (CONTINUED)
SINGAPORE (CONTINUED)
INDUSTRIALS -- (1.0%)
Yangzijiang Shipbuilding Holdings, Ltd.*........ 9,546,000 $ 7,522,071
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INFORMATION TECHNOLOGY -- (0.4%)
CDW Holding, Ltd.#+............................. 60,000,000 3,093,011
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TOTAL SINGAPORE -- (Cost $34,681,148) 4.3% 31,980,426
----- ------------
TAIWAN
CONSUMER DISCRETIONARY -- (9.5%)
FamilyMart Co., Ltd.#........................... 3,557,652 6,496,607
Far Eastern Department Stores, Ltd. ............ 17,630,080 29,646,444
HannStar Display Corp.*......................... 17,900,000 8,289,350
Merry Electronics Co., Ltd. .................... 3,584,340 9,500,164
Synnex Technology International Corp. .......... 4,738,050 12,682,522
Wintek Corp. ................................... 3,148,000 2,853,594
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69,468,681
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CONSUMER STAPLES -- (4.3%)
Lien Hwa Industrial Corp. ...................... 15,161,855 11,527,940
Uni-President Enterprises Corp. ................ 14,137,220 20,244,118
------------
31,772,058
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FINANCIALS -- (11.5%)
Cathay Financial Holding Co., Ltd. ............. 5,708,370 16,029,744
China Development Financial Holding Corp. ...... 36,871,940 17,256,758
Fubon Financial Holdings Co., Ltd. ............. 12,603,000 15,025,500
Ruentex Development Co., Ltd. .................. 9,477,000 10,427,112
Yuanta Financial Holdings Co., Ltd.*............ 26,413,545 25,157,823
------------
83,896,937
------------
INDUSTRIALS -- (1.1%)
Wah Lee Industrial Corp.#....................... 3,998,856 8,405,510
------------
INFORMATION TECHNOLOGY -- (4.8%)
Powertech Technology Inc. ...................... 3,581,100 14,407,907
Taiwan Secom#................................... 4,738,000 10,348,206
Tripod Technology Corp. ........................ 3,163,083 10,752,249
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35,508,362
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See notes to financial statements and notes to schedule of investments.
11
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2008 (UNAUDITED)
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NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ------ --------------
COMMON STOCK AND OTHER EQUITY INTERESTS (CONTINUED)
TAIWAN (CONTINUED)
MATERIALS -- (3.2%)
China Metal Products Co., Ltd. ................. 8,392,675 $ 17,916,869
Yieh United Steel Corp.#........................ 11,379,600 5,232,430
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23,149,299
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TOTAL TAIWAN -- (Cost $147,158,235) 34.4% 252,200,847
----- ------------
UNITED KINGDOM
HEALTH CARE -- (1.0%)
China Medical System Holdings, Ltd.#+........... 3,623,188 7,442,055
------------
TOTAL UNITED KINGDOM -- (Cost $9,940,990) 1.0% 7,442,055
----- ------------
UNITED STATES
CONSUMER DISCRETIONARY -- (1.1%)
The9, Ltd., ADR(1)*#............................ 356,200 7,647,614
------------
ENERGY -- (0.8%)
Far East Energy Corp.*#+........................ 11,111,111 6,100,000
------------
HEALTH CARE -- (2.4%)
Mindray Medical International, Ltd., ADR(1)..... 367,000 12,478,000
WuXi PharmaTech Cayman Inc., ADR(1)*............ 287,041 5,293,036
------------
17,771,036
------------
TOTAL UNITED STATES -- (Cost $34,604,886) 4.3% 31,518,650
----- ------------
TOTAL COMMON STOCK AND OTHER EQUITY
INTERESTS -- (Cost $371,972,224) 76.0% 557,662,225
----- ------------
EQUITY LINKED SECURITIES
CONSUMER DISCRETIONARY -- (1.2%)
Wuliangye Yibin Co., Ltd. Access Product
(expiration 01/20/10) 144A,(2)(3)............. 2,200,000 8,940,800
------------
ENERGY -- (1.1%)
China Yangtze Power Co., Ltd. Access Product
(expiration 10/26/10) 144A,(2)(4)............. 4,169,077 8,346,492
------------
See notes to financial statements and notes to schedule of investments.
12
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2008 (UNAUDITED)
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--------------------------------------------------------------------------------
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ------ --------------
EQUITY LINKED SECURITIES (CONTINUED)
FINANCIALS -- (2.3%)
Financial Street Holding Co., Ltd. Access
Product (expiration 02/13/12) 144A,(2)(4)*.... 3,191,059 $ 9,088,136
Ping An Insurance (Group) Company of China, Ltd.
Access Product (expiration 04/01/13)
144A,(2)(4)................................... 773,600 7,638,527
------------
16,726,663
------------
INDUSTRIALS -- (7.0%)
China Vanke Co., Ltd. Access Product (expiration
01/20/10) 144A,(2)(3)......................... 2,833,650 9,863,936
Daqin Railway Co., Ltd. Access Product
(expiration 11/02/11) 144A,(2)(4)............. 6,907,000 16,300,520
Shanghai International Airport Co., Ltd. Access
Product (expiration 01/20/10) 144A,(2)(3)..... 1,816,700 5,829,790
Shanghai Tunnel Engineering Co., Ltd. Access
Product (expiration 01/17/12) 144A,(2)(3)..... 4,439,247 8,301,392
Shanghai Zhenhua Port Machinery Co., Ltd. Access
Product (expiration 10/26/10) 144A,(2)(4)..... 4,462,752 10,652,589
------------
50,948,227
------------
MATERIALS -- (1.5%)
Qinghai Salt Lake Potash Co., Ltd. Access
Product (expiration 10/26/10) 144A,(2)(4)..... 887,909 11,054,467
------------
TOTAL EQUITY LINKED SECURITIES -- (Cost
$57,513,293) 13.1% 96,016,649
----- ------------
DIRECT INVESTMENTS
INDUSTRIALS -- (2.3%)
Highlight Tech Corp., (acquired
09/11/07)(2)(5)*#+............................ 3,366,893 5,993,069
Qingdao Bright Moon, (acquired
02/28/08)(2)(5)*#+............................ 31,827,172 7,001,976
Wuxi PAIHO, (acquired 09/17/07)(2)(5)*#......... 11,734,701 3,680,000
------------
16,675,045
------------
See notes to financial statements and notes to schedule of investments.
13
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2008 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
--------------------------------- ------ --------------
DIRECT INVESTMENTS (CONTINUED)
INFORMATION TECHNOLOGY -- (1.3%)
China Silicon Corp. Warrants (expiration
11/30/10)(2)(5)*#+............................ 27,418 $ --
China Silicon Corp., Series A Preferred
(acquired 11/30/07)(2)(5)*#+.................. 27,418 6,525,484
Sino Twinwood Pte Ltd., (acquired
05/02/07)(2)(5)*#+............................ 500,000 3,050,000
teco Optronics Corp., (acquired
04/26/04)(2)(5)*#+............................ 1,861,710 --
------------
9,575,484
------------
TOTAL DIRECT INVESTMENTS -- (Cost
$26,874,796) 3.6% 26,250,529
----- ------------
PRINCIPAL
AMOUNT
-----------
COLLATERAL FOR SECURITIES ON LOAN -- (10.3%)
SHORT TERM -- (10.3%)
Securities Lending Quality Trust................ $75,213,615 75,213,615
------------
TOTAL COLLATERAL FOR SECURITIES ON
LOAN -- (Cost $75,213,615) 10.3% 75,213,615
----- ------------
SHORT TERM INVESTMENTS
UNITED STATES
Repurchase Agreement with State Street Bank and
Trust,
0.15%, 05/01/08++............................. 26,881,000 26,881,000
------------
TOTAL UNITED STATES -- (Cost $26,881,000) 3.7% 26,881,000
----- ------------
TOTAL INVESTMENTS -- (Cost $558,454,928) 106.7% 782,024,018
----- ------------
OTHER ASSETS AND LIABILITIES (6.7)% (49,282,010)
----- ------------
NET ASSETS 100.0% $732,742,008
===== ============
See notes to financial statements and notes to schedule of investments.
14
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2008 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Notes to Schedule of Investments
* Denotes non-income producing security.
# Illiquid security.
+ Affiliated issuer (see Note F).
++ Repurchase agreement, dated 04/30/2008, due 05/01/2008 with repurchase
proceeds of $26,881,112 is collateralized by US Treasury Bill, 1.43% due
09/18/2008 with a market value of $27,419,490.
(1) A portion or all of the security was held on loan. As of April 30, 2008, the
market value of the securities loaned was $71,893,805.
(2) Security valued at fair value using methods determined in good faith by or
at the direction of the Board of Directors.
(3) Equity linked securities issued by Citigroup Global Markets Holdings.
(4) Equity linked securities issued by Credit Lyonnais (CLSA).
(5) Direct investments are generally restricted as to resale and do not have a
readily available resale market. On the date of acquisition of each direct
investment, there were no market quotations on similar securities, and such
investments were therefore valued in good faith by the Board of Directors at
fair market value.
144A Securities restricted for resale to Qualified Institutional Buyers.
ADR American Depositary Receipt.
See notes to financial statements and notes to schedule of investments.
15
THE CHINA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2008 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $438,341,498) (Note A).. $667,604,807
Investments in affiliated securities, at value (cost $44,899,815)
(Notes A and F)................................................ 39,205,596
Collateral for securities loaned.................................. 75,213,615
Cash.............................................................. 696
Foreign currency, at value (cost $8,914,986)...................... 8,873,936
Receivable for investments sold................................... 16,724,760
Receivable for securities lending income.......................... 116,757
Dividends receivable.............................................. 1,538,120
Interest receivable............................................... 112
Prepaid expenses.................................................. 19,709
Miscellaneous assets.............................................. 153,256
------------
TOTAL ASSETS........................................................ 809,451,364
------------
LIABILITIES
Payable upon return of collateral for securities loaned........... 75,213,615
Investment management fee payable (Note B)........................ 412,972
Administration and custodian fees payable (Note B)................ 213,350
Directors fee payable (Note B).................................... 11,194
Contingent liability (Note A)..................................... 717,795
Accrued expenses and other liabilities............................ 140,430
------------
TOTAL LIABILITIES................................................... 76,709,356
------------
TOTAL NET ASSETS.................................................... $732,742,008
============
COMPOSITION OF NET ASSETS:
Paid in capital (Note C).......................................... 380,196,385
Undistributed net investment income............................... 389,759
Accumulated net realized gain on investments and foreign currency
transactions................................................... 128,626,455
Net unrealized appreciation on investments and foreign currency
translation.................................................... 223,529,409
------------
TOTAL NET ASSETS.................................................... $732,742,008
============
NET ASSET VALUE PER SHARE
($732,742,008/18,153,741 shares of common stock outstanding)...... $40.36
======
See notes to financial statements.
16
THE CHINA FUND, INC.
STATEMENT OF OPERATIONS
FOR SIX MONTHS ENDED APRIL 30, 2008 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend income -- (including dividends of $362,319 from non-
controlled affiliates)........................................ $ 2,654,421
Interest income.................................................. 646,441
Securities lending income........................................ 845,963
-------------
TOTAL INVESTMENT INCOME....................................... 4,146,825
-------------
EXPENSES
Investment Management fees (Note B).............................. 2,250,975
Custodian fees (Note B).......................................... 628,798
Administration fees (Note B)..................................... 310,986
Directors' fees and expenses (Note B)............................ 168,859
Stock dividend tax expense....................................... 166,789
Legal fees....................................................... 116,353
Printing and postage............................................. 67,431
Shareholder service fees......................................... 40,951
Chief Compliance Officer fee..................................... 30,561
Insurance........................................................ 23,786
Audit and tax service fees....................................... 27,621
Stock exchange listing fee....................................... 15,272
Transfer agent fees.............................................. 25,361
Miscellaneous expenses........................................... 12,413
-------------
TOTAL EXPENSES................................................ 3,886,156
-------------
Expense reduction................................................ (187,405)
-------------
NET EXPENSES.................................................. 3,698,751
-------------
NET INVESTMENT INCOME.............................................. 448,074
-------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain on investment transactions..................... 127,503,021
Net realized gain on foreign currency transactions............... 1,143,143
-------------
128,646,164
-------------
Net change in unrealized depreciation on investments and foreign
currency transactions......................................... (225,195,391)
-------------
(225,195,391)
-------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS............................................ (96,549,227)
-------------
NET DECREASE IN NET ASSETS FROM OPERATIONS......................... $ (96,101,153)
=============
See notes to financial statements.
17
THE CHINA FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2008 OCTOBER 31, 2007
---------------- ----------------
(UNAUDITED)
(DECREASE)/INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................................ $ 448,074 $ 4,118,400
Net realized gain on investments and foreign currency
transactions...................................... 128,646,164 172,697,839
Net (decrease)/increase in unrealized
(depreciation)/appreciation on investments and
foreign currency translations..................... (225,195,391) 305,398,733
------------- ------------
Net (decrease)/increase in net assets from
operations........................................ (96,101,153) 482,214,972
------------- ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................ (4,081,269) (4,343,068)
Capital gains........................................ (172,579,378) (53,811,419)
------------- ------------
Total dividends and distributions to shareholders.... (176,660,647) (58,154,487)
------------- ------------
CAPITAL SHARE TRANSACTIONS:
Fund shares sold (Note C)............................ -- --
Reinvestment of dividends and distributions
(3,577,780 and 79,741 shares, respectively)....... 123,648,061 2,589,184
------------- ------------
Net increase in net assets from capital share
transactions...................................... 123,648,061 2,589,184
------------- ------------
NET (DECREASE)/INCREASE IN NET ASSETS.................. (149,113,739) 426,649,669
NET ASSETS:
Beginning of year.................................... 881,855,747 455,206,078
------------- ------------
End of period........................................ $ 732,742,008 $881,855,747
============= ============
Undistributed net investment income, end of period..... $ 389,759 $ 4,022,954
============= ============
See notes to financial statements.
18
THE CHINA FUND, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2008 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH -
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations............. $ (96,101,153)
Adjustments to reconcile net decrease in net assets from
operations to net cash provided from operating activities:
Purchases of investment securities............................ (177,684,018)
Proceeds from investments sold................................ 248,027,838
Net maturities of short-term investments...................... (26,881,000)
Decrease in collateral for securities loaned.................. 74,864,825
Increase in dividends and interest receivable................. (995,452)
Increase in receivable for securities lending income.......... (6,837)
Increase in receivable for investments sold................... (12,918,800)
Decrease in equity on foreign currency contracts.............. (160,414)
Increase in prepaid expenses and miscellaneous assets......... (18,064)
Decrease in payable for securities purchased.................. (280,617)
Decrease in payable upon return of collateral for securities (74,864,825)
loaned......................................................
Decrease in accrued expenses and other liabilities............ (590,958)
Unrealized appreciation/depreciation on securities and 225,195,391
currencies..................................................
Net realized gain/loss from investments and currencies........ (128,646,164)
-------------
Net cash provided from operating activities................. 28,939,752
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid....................................... (53,012,584)
-------------
Net cash used for financing activities...................... (53,012,584)
-------------
NET INCREASE IN CASH............................................... (24,072,832)
CASH AT BEGINNING OF PERIOD........................................ 32,947,464
-------------
CASH AT END OF PERIOD.............................................. $ 8,874,632
=============
Noncash financing activities not included herein consist of:
Reinvestment of distributions................................. $ 123,648,063
19
THE CHINA FUND, INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING FOR THE PERIOD(S)
INDICATED
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SIX
MONTHS
ENDED
APRIL 30,
2008 2007 2006 2005 2004* 2003*
----------- -------- -------- -------- -------- --------
(UNAUDITED)
PER SHARE OPERATION PERFORMANCE
Net asset value, beginning of
year............................. $ 60.50 $ 31.40 $ 23.25 $ 26.27 $ 26.93 $ 14.92
Net investment income.............. 0.03 0.28 0.30 0.21 0.21 0.06
Net realized and unrealized
gain/(loss) on investments and
foreign currency transactions.... (6.56) 32.83 10.36 0.34 0.91 12.16
-------- -------- -------- -------- -------- --------
Total gain/(loss) from investment
operations....................... (6.53) 33.11 10.66 0.55 1.12 12.22
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Dividend from net investment
income........................ (0.28) (0.30) (0.22) (0.20) (0.07) (0.06)
Distributions from net realized
capital gains.................... (11.84) (3.71) (2.29) (3.37) (1.71) (0.15)
-------- -------- -------- -------- -------- --------
Total dividends and distributions.. (12.12) (4.01) (2.51) (3.57) (1.78) (0.21)
-------- -------- -------- -------- -------- --------
Capital Share Transactions:
(Dilution) to net asset value,
resulting from issuance of shares
in stock dividend................ (1.49) 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------- --------
Net asset value, end of period..... $ 40.36 $ 60.50 $ 31.40 $ 23.25 $ 26.27 $ 26.93
======== ======== ======== ======== ======== ========
Per share market price, end of
period........................... $ 35.06 $ 51.67 $ 30.40 $ 24.55 $ 29.15 $ 34.74
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN
(BASED ON MARKET PRICE).......... (8.35)%(1) 90.97% 37.20% (5.50)% (12.16)% 179.41%
======== ======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's).. $732,742 $881,856 $455,206 $334,496 $264,886 $271,278
Ratio of net expenses to average
net assets....................... 1.04%(2) 1.08% 1.26% 1.44% 1.41% 1.76%
Ratio of gross expenses to average
net assets....................... 1.08%(2) 1.08% 1.26% 1.44% 1.41% 1.76%
Ratio of net expenses to average
net assets, excluding stock
dividend tax expense............. 0.99%(2) 1.04% 1.23% 1.38% 1.34% 1.68%
Ratio of net investment income to
average net assets............... 0.13%(2) 0.67% 1.09% 1.04% 0.78% 0.32%
Portfolio turnover rate............ 25% 46% 50% 26% 40% 55%
* Financial highlights were audited by a previous audit firm.
(1) Not Annualized
(2) Annualized
See notes to financial statements.
20
THE CHINA FUND, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2008 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The China Fund, Inc. (the "Fund") was incorporated under the laws of the State
of Maryland on April 28, 1992, and is a non-diversified, closed-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund's investment objective is long-term capital
appreciation through investments in the equity securities of companies engaged
in a substantial amount of business in the People's Republic of China. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
USE OF ESTIMATES: The preparation of financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses for the period. Actual results could differ from these
estimates. The significant estimates made as of, and for the six months ended,
April 30, 2008 relate to the contingent liability resulting from the sale of
Captive Finance in March 2007. A reserve of 10% of the net sale proceeds was
established to cover any potential liabilities from the representation and
warranties provided by the Fund in the transaction.
SECURITY VALUATION: Portfolio securities listed on recognized United States or
foreign securities exchanges are valued at the last quoted sales price in the
principal market where they are traded. Listed securities with no such sales
price and unlisted securities are valued at the mean between the current bid and
asked prices, if any, of two brokers. Short-term investments having maturities
of sixty days or less are valued at amortized cost (original purchase cost as
adjusted for amortization of premium or accretion of discount) which when
combined with accrued interest approximates market value. Open end investment
companies are valued at net asset value per share. Securities for which market
quotations are readily available are valued at current market value. Securities
for which market quotations are not readily available are valued in good faith
at fair value using methods determined by the Board of Directors. Direct
investments not traded on an exchange are valued at fair value as determined by
the Board of Directors.
REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, it is the Fund's policy that its custodian take possession of the
underlying collateral securities, the fair value of which exceeds the principal
amount of the repurchase transaction, including accrued interest, at all times.
If the seller defaults, and the fair value of the collateral declines,
realization of the collateral by the Fund may be delayed or limited.
SECURITIES LENDING: The Fund may lend any of its securities held by State
Street Bank and Trust Company ("State Street") as custodian to certain qualified
brokers, except those securities which the Fund or the Investment Manager
specifically identifies as not being available. By lending its investment
securities, the Fund attempts to increase its net investment income through the
receipt of interest on the loan. Any gain or loss in the market price of the
securities loaned that might occur and any interest or dividends declared during
the term of the loan would accrue to the account of the Fund. Risks of delay in
recovery of the securities or even loss of rights in the collateral may occur
should the borrower of the securities fail financially. Risks may also arise to
the extent that the value of the collateral decreases below the value of the
securities loaned.
21
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Upon entering into a securities lending transaction, the Fund receives cash or
other securities as collateral in an amount equal to or exceeding 100% of the
current market value of the loaned securities with respect to securities of the
U.S. government or its agencies, 102% of the current market value of the loaned
securities with respect to U.S. securities and 105% of the current market value
of the loaned securities with respect to foreign securities. Any cash received
as collateral is generally invested by State Street, acting in its capacity as
securities lending agent (the "Agent"), in the Securities Lending Quality Trust.
A portion of the dividends received on the collateral is rebated to the borrower
of the securities and the remainder is split between the Agent and the Fund.
As of April 30, 2008, the Fund had loaned securities which were collateralized
by cash and short term investments. The value of the security on loan and the
value of the related collateral were as follows:
VALUE OF VALUE OF
VALUE OF CASH NON-CASH TOTAL
SECURITY COLLATERAL COLLATERAL* COLLATERAL
----------- ----------- ----------- -----------
$71,893,805 $75,213,615 $881,783 $76,095,398
* The Fund cannot repledge or resell this collateral. The non-cash collateral is
comprised of government securities.
FOREIGN CURRENCY TRANSLATIONS: The records of the Fund are maintained in U.S.
dollars. Foreign currencies, investments and other assets and liabilities are
translated into U.S. dollars at the current exchange rates. Purchases and sales
of investment securities and income and expenses are translated on the
respective dates of such transactions. Net realized gains and losses on foreign
currency transactions represent net gains and losses from the disposition of
foreign currencies, currency gains and losses realized between the trade dates
and settlement dates of security transactions, and the difference between the
amount of net investment income accrued and the U.S. dollar amount actually
received. The effects of changes in foreign currency exchange rates on
investments in securities are not segregated in the Statement of Operations from
the effects of changes in market prices of those securities, but are included in
realized and unrealized gain or loss on investments.
OPTION CONTRACTS: The Fund may purchase and write (sell) call options and put
options provided the transactions are for hedging purposes and the initial
margin and premiums do not exceed 5% of total assets. Option contracts are
valued daily and unrealized gains or losses are recorded based upon the last
sales price on the principal exchange on which the options are traded. The Fund
will realize a gain or loss upon the expiration or closing of the option
contract. When an option is exercised, the proceeds on sales of the underlying
security for a written call option, the purchase cost of the security for a
written put option, or the cost of the security for a purchased put or call
option is adjusted by the amount of premium received or paid.
The risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. Risks may also arise from an illiquid secondary market or from the
inability of counter parties to meet the terms of the contract.
22
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY LINKED SECURITIES: The Fund may invest in equity-linked securities such
as linked participation notes, equity swaps and zero-strike options and
securities warrants. Equity-linked securities currently held by the Fund,
identified as "Access Products" in the Schedule of Investments, are privately
issued securities whose investment results are designed to correspond generally
to the performance of a specified stock index or "basket" of stocks, or a single
stock. Access Products may be used by the Fund to gain exposure to countries
that place restrictions on investments by foreigners. To the extent that the
Fund invests in Access Products whose return corresponds to the performance of a
foreign securities index or one or more foreign stocks, investing in Access
Products will involve risks similar to the risks of investing in foreign
securities. In addition, the Fund bears the risk that the issuer of an Access
Product may default on its obligation under the terms of the arrangement with
the counterparty. Access Products are often used for many of the same purposes
as, and share many of the same risks with, derivative instruments. In addition,
Access Products may be considered illiquid.
At April 30, 2008, the Fund held equity-linked Access Product warrants through
Credit Lyonnais ("CLSA") and Citigroup Global Markets Holdings, the issuers.
Under the terms of the agreements, each warrant entitles the Fund to receive
from the issuers an amount in U.S. dollars linked to the performance of specific
equity shares.
DIRECT INVESTMENTS: The Fund may invest up to 25% of the net proceeds from its
offering of its outstanding common stock in direct investments. Direct
investments are generally restricted and do not have a readily available resale
market. The value of these securities at April 30, 2008 was $26,250,529 or 3.6%
of the Fund's net asset value. The table below details the acquisition date,
cost, and value of the Fund's direct investments as determined by the Board of
Directors of the Fund. The Fund does not have the right to demand that such
securities be registered.
SECURITY ACQUISITION DATE COST MARKET
-------- ---------------- ----------- -----------
China Silicon Corp., Series A Preferred*........ 11/30/2007 $ 6,525,484 $ 6,525,484
Highlight Tech. Corp. .......................... 09/11/2007 $ 6,000,000 $ 5,993,069
Qingdao Bright Moon............................. 02/28/2008 $ 6,937,718 $ 7,001,976
Sino Twinwood Pte Ltd. ......................... 05/02/2007 $ 3,164,274 $ 3,050,000
teco Optronics Corp. ........................... 04/26/2004 $ 567,320 $ --
Wuxi PAIHO...................................... 09/17/2007 $ 3,680,000 $ 3,680,000
----------- -----------
$26,874,796 $26,250,529
=========== ===========
* The purchase of China Silicon Corp., Series A Preferred resulted in the
Fund receiving 27,418 shares of China Silicon Corp. common stock warrants.
Each warrant entitles the Fund to purchase twenty five shares of common
stock at an exercise price of $2.98 USD per share, subject to adjustment.
INDEMNIFICATION OBLIGATIONS
Under the Fund's organizational documents, its Directors and Officers are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business the Fund
enters into contracts that provide general indemnifications to other parties.
The Fund's maximum exposure under these
23
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are recorded
as of the trade date. Realized gains and losses from securities sold are
recorded on the identified cost basis. Dividend income is recorded on the ex-
dividend date, or, in the case of dividend income on foreign securities, on the
ex-dividend date or when the Fund becomes aware of its declaration. Interest
income is recorded on the accrual basis. All premiums and discounts are
amortized/accreted for both financial reporting and federal income tax purposes.
Dividend and interest income generated in Taiwan is subject to a 20% withholding
tax. Stock dividends received (except those which have resulted from
capitalization of capital surplus) are taxable at 20% of the par value of the
stock dividends received. The Fund records the taxes paid on stock dividends as
an operating expense.
DIVIDENDS AND DISTRIBUTIONS: The Fund intends to distribute to its
shareholders, at least annually, substantially all of its net investment income
and any net realized capital gains. Income and capital gains distributions are
determined in accordance with U.S. income tax regulations, which may differ from
generally accepted accounting principles. These differences are primarily due to
differing book and tax treatments for foreign currency transactions.
The Fund made distributions of $45,476,998 from Ordinary Income and $131,183,649
from Long-Term Capital Gains during the six months ended April 30, 2008. For the
year ended October 31, 2007 the Fund made distributions of $18,566,759 from
Ordinary Income and $39,587,728 from Long-Term Capital Gains.
FEDERAL INCOME TAXES: The Fund has qualified and intends to qualify in the
future as a regulated investment company by complying with the provisions of
Subchapter M of the Internal Revenue Code available to certain investment
companies, including making distributions of taxable income and capital gains
sufficient to relieve it from all, or substantially all, federal income and
excise taxes.
NOTE B -- ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Martin Currie Inc., the investment manager for the Fund receives a fee, computed
weekly and payable monthly, at the following annual rates: 0.70% of the first
US$315 million of the Fund's average weekly net assets invested in listed
assets; and 0.50% of the Fund's average weekly net assets invested in listed
assets in excess of US$315 million. They also receive a fee computed weekly and
payable monthly, at an annual rate of 2.0% of the average weekly value of the
Fund's assets invested in direct investments.
No director, officer or employee of the investment manager or any affiliate will
receive any compensation from the Fund for serving as an officer or director of
the Fund. The Fund pays the Chairman of the Board and each of the directors (who
is not a director, officer or employee of the investment manager or any
affiliate thereof) an annual fee of $27,500 and $15,000 respectively, plus
$3,000 for each Board of Directors', Audit and Nominating Committee meetings
attended, $2,000 for each telephonic meeting attended and $1,000 for each
Valuation Committee teleconference attended. In addition, the Fund will
reimburse each of the directors for travel and out-of-pocket expenses incurred
in connection with attending Board of Directors' meetings.
24
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
State Street provides, or arranges for the provision of certain administrative
services for the Fund, including preparing certain reports and other documents
required by federal and/or state laws and regulations. The Fund pays State
Street a fee at an annual rate of 0.13% of the Fund's average daily net assets
up to $150 million, 0.11% of the next $150 million and 0.06% of those assets in
excess of $300 million subject to certain minimum requirements for fund
administration services. On March 6, 2008 the Board approved an amendment to the
fee schedule as follows: the Fund pays State Street a fee at an annual rate of
0.13% of the Fund's average daily net assets up to $150 million, 0.11% of the
next $150 million, 0.06% of the next $400 million and 0.05% of those in excess
of $400 million subject to certain minimum requirements for fund administration
services. The Fund also pays State Street $100,000 per year for certain legal
administration services, including corporate secretarial services and preparing
regulatory filings.
The Fund also has a contract with State Street to provide custody and fund
accounting services to the Fund. For these services, the Fund pays State Street
asset-based fees that vary according to the number of positions and transactions
plus out of pocket expenses.
NOTE C -- CAPITAL STOCK
The Board of Directors of the Fund has approved a share repurchase plan. Under
the program, the Fund will repurchase shares at management's discretion at times
when it considers the repurchase to be consistent with the objectives of the
program. For the six months ended April 30, 2008, the Fund did not purchase any
shares under this program. At April 30, 2008, 100,000,000 shares of $.01 par
value common stock were authorized.
NOTE D -- INVESTMENT TRANSACTIONS
For the six months ended April 30, 2008, the Fund's cost of purchases and
proceeds from sales of investment securities, other than short-term securities,
were $177,748,277 and $246,891,208, respectively. At April 30, 2008, the cost of
investments for federal income tax purposes was $483,241,313. Gross unrealized
appreciation of investments was $254,525,987, while gross unrealized
depreciation of investments was $30,956,897, resulting in net unrealized
appreciation of investments of $223,569,090.
NOTE E -- INVESTMENTS IN CHINA
The Fund's investments in China companies involve certain risks not typically
associated with investments in securities of U.S. companies or the U.S.
Government, including risks relating to (1) social, economic and political
uncertainty; (2) price volatility, lesser liquidity and smaller market
capitalization of securities markets in which securities of China companies
trade; (3) currency exchange fluctuations, currency blockage and higher rates of
inflation; (4) controls on foreign investment and limitations on repatriation of
invested capital and on the Fund's ability to exchange local currencies for U.S.
dollars; (5) governmental involvement in and control over the economy; (6) risk
of nationalization or expropriation of assets; (7) the nature of the smaller,
less seasoned and newly organized China companies, particularly in China; and
(8) the absence of uniform accounting, auditing and financial reporting
standards, practices and disclosure requirements and less government supervision
and regulation.
25
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE F -- INVESTMENTS IN NON-CONTROLLED AFFILIATES*:
DIVIDENDS
BALANCE OF GROSS GROSS BALANCE OF INCLUDED IN
SHARES HELD PURCHASES SALES SHARES HELD VALUE DIVIDEND INCOME
OCTOBER 31, AND AND APRIL 30, APRIL 30, NON-CONTROLLED
NAME OF ISSUER 2007 ADDITIONS REDUCTIONS 2008 2008 AFFILIATES
---------------------------- ----------- ---------- ---------- ----------- ---------- ---------------
CDW Holding, Ltd. .......... 60,000,000 -- -- 60,000,000 $3,093,011 $ --
China Medical System
Holdings, Ltd. ........... 3,623,188 -- -- 3,623,188 $7,442,055 $362,319
China Silicon Corp., Series
A Preferred............... -- 27,418 -- 27,418 $6,525,484 $ --
China Silicon Corp.
Warrants.................. -- 27,418 -- 27,418 $ -- $ --
Far East Energy Corp. ...... 11,111,111 -- -- 11,111,111 $6,100,000 $ --
Highlight Tech Corp. ....... 3,366,893 -- -- 3,366,893 $5,993,069 $ --
Qingdao Bright Moon......... -- 31,827,172 -- 31,827,172 $7,001,976 $ --
Sino Twinwood Pte, Ltd. .... 500,000 -- 500,000 $3,050,000 $ --
teco Optronics Corp. ....... 1,861,710 -- -- 1,861,710 $ -- $ --
* Affiliated issuers, as defined in the 1940 Act, include issuers in which
the Fund held 5% or more of the outstanding voting securities.
NOTE G -- NEW ACCOUNTING PRONOUNCEMENTS
In accordance with Securities and Exchange Commission guidance, the Fund
implemented the provisions of Financial Accounting Standards Board
Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, on
April 30, 2008. The Fund has reviewed the tax positions for the open tax period
as of April 30, 2008 and the open tax years of October 31, 2004 through October
31, 2007 and has determined that the implementation of FIN 48 did not have a
material impact on the Fund's financial statements.
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the impact the adoption of SFAS
157 will have on the Fund's financial statement disclosures.
In addition, in March 2008, the Financial Accounting Standards board ("FASB")
issued Statement of Financial Accounting Standards No. 161, "Disclosures about
Derivative Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 is
effective for fiscal years and interim periods beginning after November 15,
2008. SFAS 161 requires enhanced disclosures about the Fund's derivative and
hedging activities. Management is currently evaluating the impact the adoption
of SFAS 161 will have on the Fund's financial statement disclosures.
26
THE CHINA FUND, INC.
OTHER INFORMATION (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RESULTS OF ANNUAL STOCKHOLDER MEETING HELD ON MARCH 6, 2008
1.) Election of Directors -- The stockholders of the Fund elected Nigel
Tulloch and William Kirby as Class III directors to serve for a term
expiring on the date on which the annual meeting of stockholders is
held in 2011.
FOR AGAINST ABSTAIN
--------- ------- ---------
Nigel Tulloch 7,187,567 0 1,779,213
William Kirby 8,765,368 0 201,411
2.) To approve the elimination of the Fund's fundamental investment policy
requiring at least 65% of the Fund's assets to be invested in the
equity securities of China companies.
FOR AGAINST ABSTAIN
--------- ------- -------
6,181,086 236,621 77,023
PRIVACY POLICY
PRIVACY NOTICE
The China Fund, Inc. collects nonpublic personal information about its
shareholders from the following sources:
[ ] Information it receives from shareholders on applications or other
forms; and
[ ] Information about shareholder transactions with the Fund.
THE FUND'S POLICY IS TO NOT DISCLOSE NONPUBLIC PERSONAL INFORMATION ABOUT ITS
SHAREHOLDERS TO NONAFFILIATED THIRD PARTIES (other than disclosures permitted by
law).
The Fund restricts access to nonpublic personal information about its
shareholders to those agents of the Fund who need to know that information to
provide products or services to shareholders. The Fund maintains physical,
electronic and procedural safeguards that comply with federal standards to guard
its shareholders' nonpublic personal information.
27
THE CHINA FUND, INC.
OTHER INFORMATION (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that are used by the Fund's
investment adviser to vote proxies relating to the Fund's portfolio securities
is available (1) without charge, upon request, by calling 1-888-CHN-CALL (246-
2255); and (2) as an exhibit to the Fund's annual report on Form N-CSR which is
available on the website of the Securities and Exchange Commission (the
"Commission") at http://www.sec.gov. Information regarding how the investment
adviser votes its proxies is now available by calling the same number and on the
Commission's website. The Fund has filed its report on Form N-PX covering the
Fund's proxy voting record for the 12 month period ending June 30, 2007.
QUARTERLY PORTFOLIO OF INVESTMENTS
A Portfolio of Investments will be filed as of the end of the first and third
quarter of each fiscal year on Form N-Q and will be available on the
Commission's website at http://www.sec.gov. Form N-Q has been filed as of
January 31, 2008 for the first quarter of this fiscal year and is available on
the Commission's website at http://www.sec.gov. Additionally, the Portfolio of
Investments may be reviewed and copied at the Commission's Public Reference Room
in Washington, DC. Information on the operation of the Public Reference Room may
be obtained by calling 1-800-SEC-0330. The quarterly Portfolio of Investments
will be made available with out charge, upon request, by calling 1-888-246-2255.
CERTIFICATIONS
The Fund's chief executive officer has certified to the New York Stock Exchange
that, as of June 10, 2008, he was not aware of any violation by the Fund of
applicable New York Stock Exchange corporate governance listing standards. The
Fund also has included the certifications of the Fund's chief executive officer
and chief financial officer required by Section 302 and Section 906 of the
Sarbanes-Oxley Act of 2002 in the Fund's Form N-CSR filed with the Securities
and Exchange Commission, for the period of this report.
28
DIVIDENDS AND DISTRIBUTIONS;
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The Fund will distribute to shareholders, at least annually, substantially all
of its net investment income from dividends and interest earnings and expects to
distribute any net realized capital gains annually. Pursuant to the Dividend
Reinvestment and Cash Purchase Plan (the "Plan"), adopted by the Fund, each
shareholder will be deemed to have elected, unless Computershare Trust Company,
N.A., the Plan Administrator, is otherwise instructed by the stockholder in
writing, to have all distributions automatically reinvested by the Plan
Administrator in Fund shares pursuant to the Plan. Shareholders who do not
participate in the Plan will receive all distributions in cash paid by check in
U.S. dollars mailed directly to the stockholder by Computershare Trust Company,
N.A., as paying agent. Shareholders who do not wish to have distributions
automatically reinvested should notify the Fund by contacting Computershare c/o
The China Fund, Inc. at P.O. Box 43010, Providence, Rhode Island 02940-3011.
Phone: 1-800-426-5523.
Computershare Trust Company, N.A. and Computershare Shareholder Services, Inc.
(collectively, "Computershare" or the "Plan Administrator"), acts as Plan
Administrator and Service Agent. If the Directors of the Fund declare an income
dividend or a capital gains distribution payable either in the Fund's Common
Stock or in cash, as shareholders may have elected, non-participants in the Plan
will receive cash and participants in the Plan will receive Common Stock, to be
issued by the Fund. If the market price per share on the valuation date equals
or exceeds net asset value per share on that date, the Fund will issue new
shares to participants at net asset value or, if the net asset value is less
than 95% of the market price on the valuation date, then at 95% of the market
price. The valuation date will be the dividend or distribution payment date or,
if that date is not a trading day on the exchange on which the Fund's shares are
then listed, the next preceding trading day. If net asset value exceeds the
market price of Fund shares at such time, participants in the Plan will be
deemed to have elected to receive shares of stock from the Fund, valued at
market price on the valuation date. If the Fund should declare a dividend or
capital gains distribution payable only in cash, the Plan Administrator will, as
administrator for the participants, buy Fund shares in the open market, on the
New York Stock Exchange or elsewhere, with the cash in respect of such dividend
or distribution, for the participant's account on, or shortly after, the payment
date.
Participants in the Plan have the option of making additional payments to the
Plan Administrator, annually, in any amount from $100 to $3,000 for investment
in the Fund's Common Stock. The Plan Administrator will use all funds received
from participants (as well as any dividends and capital gains distributions
received in cash) to purchase Fund shares in the open market on or about January
15 of each year. Any voluntary cash payments received more than thirty days
prior to such date will be returned by the Plan Administrator, and interest will
not be paid on any uninvested cash payments. To avoid unnecessary cash
accumulations, and also to allow ample time for receipt and processing by the
Plan Administrator, it is suggested that participants send in voluntary cash
payments to be received by the Plan Administrator approximately ten days before
January 15. A participant may withdraw a voluntary cash payment by written
notice, if the notice is received by the Plan Agent not less than 48 hours
before such payment is to be invested.
The Plan Administrator maintains all stockholder accounts in the Plan and
furnishes written confirmations of all transactions in the account, including
information needed by shareholders for personal and tax records. Shares in the
account of each Plan participant will be held by the Plan Administrator in non-
certificated form in the name of the participant, and each stockholder's proxy
will include those shares purchased pursuant to the Plan.
29
DIVIDENDS AND DISTRIBUTIONS;
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
In the case of shareholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Administrator will
administer the Plan on the basis of the number of shares certified from time to
time by the stockholder as representing the total amount registered in the
stockholder's name and held for the account of beneficial owners who are
participating in the Plan.
There is no charge to participants for reinvesting dividends or capital gains
distributions. The Plan Administrator's fees for the handling of the
reinvestment of dividends and distributions will be paid by the Fund. However,
each participant's account will be charged a pro rata share of brokerage
commissions incurred with respect to the Plan Administrator's open market
purchases in connection with the reinvestment of dividends or capital gains
distributions. A participant will also pay brokerage commissions incurred in
purchases from voluntary cash payments made by the participant. Brokerage
charges for purchasing small amounts of stock for individual accounts through
the Plan are expected to be less than the usual brokerage charges for such
transactions, because the Plan Administrator will be purchasing stock for all
participants in blocks and prorating the lower commission thus attainable.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income tax which may be payable on such dividends and
distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payment made and any dividend or distribution paid subsequent to
notice of the change sent to all shareholders at least 90 days before the record
date for such dividend or distribution. The Plan also may be amended or
terminated by the Plan Administrator by at least 90 days' written notice to all
shareholders. All correspondence concerning the Plan should be directed to
Computershare c/o The China Fund, Inc. at P.O. Box 43011, Providence, Rhode
Island 02940-3011.Phone: 1-800-426-5523.
30
DIRECTORS AND OFFICERS (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The following table provides information concerning each of the Directors of the
Fund. The Board of Directors is comprised of Directors who are not interested
persons of the Fund, as that term is defined in Section 2(a)(19) of the 1940
Act. The Directors are divided into three classes, designated as Class I, Class
II and Class III. The Directors in each such class are elected for a term of
three years to succeed the Directors whose term of office expires. Each Director
shall hold office until the expiration of his term and until his successor shall
have been elected and qualified. The Fund Complex consists of one series.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
OFFICE DURING PAST FIVE YEARS AND
NAME (AGE) AND WITH THE DIRECTORSHIPS IN PUBLICLY HELD DIRECTOR
ADDRESS OF DIRECTOR FUND COMPANIES SINCE
------------------- ----------- -------------------------------------- --------
James J. Lightburn Chairman of Chairman of the Board of the Fund; 1992
(64).............. the Board Attorney, Nomos, (2004-present);
13, Rue Alphonse and Attorney, member of Hughes Hubbard &
de Neuville Director Reed (1993-2004).
75017 Paris,
France
Michael F. Holland Director Chairman, Holland & Company L.L.C. 1992
(63).............. (1995- present); Director, The Holland
375 Park Avenue Balanced Fund, Inc., Reaves Utility
New York, New York Income Fund, Scottish Widows
10152 Investment Partnership Trust and The
Taiwan Fund, Inc.; Trustee, State
Street Master Funds and State Street
Institutional Investment Trust.
William Kirby (58).. Director Director, John K. Fairbank Center for 2007
Harvard University Chinese Studies Harvard University
CGIS South (2006-present); Chairman, Harvard
Building China Fund (2006-present); Harvard
1730 Cambridge University Distinguished Service
Street Professor (2006-Present); Visiting
Cambridge, MA Professor of Business Administration
02138 Harvard Business School (2006-
Present); Dean of the Faculty of Arts
and Sciences Harvard University (2002-
2006)
Joe O. Rogers (59).. Director The Rogers Team LLC, organizing member 1992
2477 Foxwood Drive (July 2001-present); Manager, The J-
Chapel Hill, NC Squared Team LLC (April 2003-May
27514 2004); Director, The Taiwan Fund, Inc.
(1986-present).
Nigel S. Tulloch Director Chief Executive, HSBC Asset Management 1992
(62).............. Bahamas Limited (1986-1992); Director,
7, Circe Circle The HSBC China Fund Limited (1992-
Dalkeith 2005).
WA6009
Australia
Paul Hahesy (35).... Chief Compliance Manager, Foreside
Foreside Compliance Compliance Services, LLC. (2005-
Compliance Officer of present); Compliance Consultant,
Services, LLC. the Fund Metlife (2002-2005)
Two Portland
Square
Portland, ME 04101
Gary L. French President Senior Vice President, State Street
(56).............. Bank and Trust Company (2002 -
2 Avenue de present); Managing Director, Deutsche
Lafayette Asset Management, Inc. and Zurich
Boston, MA 02111 Scudder Investments (acquired by
Deutsche Bank in 2002) (2001-2002).
31
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
OFFICE DURING PAST FIVE YEARS AND
NAME (AGE) AND WITH THE DIRECTORSHIPS IN PUBLICLY HELD DIRECTOR
ADDRESS OF DIRECTOR FUND COMPANIES SINCE
------------------- ----------- -------------------------------------- --------
William C. Cox Treasurer Vice President, State Street Bank and
(41).............. Trust Company.
2 Avenue de
Lafayette
Boston, MA 02111
Mary Moran Zeven Secretary Senior Vice President and Senior
(46).............. Counsel, State Street Bank and Trust
2 Avenue de Company.
Lafayette
Boston, MA 02111
Alan Tremain (70), Placido Mer 5200 North Flagler #25, West Palm Beach Florida
33408, served as a Director from 1992 until his retirement on March 6, 2008.
32
THE CHINA FUND, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UNITED STATES ADDRESS
The China Fund, Inc.
c/o State Street Bank and Trust Company
2 Avenue de Lafayette, 4th Floor
P.O. Box 5049
Boston, MA 02206-5049
1-888-CHN-CALL (246-2255)
DIRECTORS AND OFFICERS
James J. Lightburn, Chairman of the Board and Director
Michael F. Holland, Director
William Kirby, Director
Joe O. Rogers, Director
Nigel S. Tulloch, Director
Paul Hahesy, Chief Compliance Officer of the Fund
Gary L. French, President
William C. Cox, Treasurer
Mary Moran Zeven, Secretary
INVESTMENT MANAGER
Martin Currie Inc.
SHAREHOLDER SERVICING AGENT
The Altman Group
ADMINISTRATOR AND CUSTODIAN
State Street Bank and Trust Company
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
Computershare Trust Company, N.A.
INDEPENDENT AUDITORS
Deloitte & Touche, LLP
LEGAL COUNSEL
Clifford Chance US LLP
ITEM 2. CODE OF ETHICS.
Not required for this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required for this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required for this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not required for this filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments is included as part of Item 1 of the Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
INVESTMENT COMPANIES.
Not required for this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board of Directors during the period
covered by this Form N-CSR filing.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers have
concluded that the registrant's disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a
date within 90 days of the filing date of this Form N-CSR based on their
evaluation of these controls and procedures required by Rule 30a-3(b)
under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b)
under the 1934 Act (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d))) that occurred during the registrant's second fiscal quarter
that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting.
3
ITEM 12. EXHIBITS.
(a)(1) Not required for this filing.
(a)(2) The certifications required by Rule 30a-2 of the Investment Company Act
of 1940, as amended (the "1940 Act") are attached hereto.
(a)(3) Not required for this filing.
(b) The certifications required by Rule 30a-2(b) of the 1940 Act and Section
906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE CHINA FUND, INC.
By: /s/ Gary L. French
Gary L. French
President of The China Fund, Inc.
Date: July 3, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Gary L. French
Gary L. French
President of The China Fund, Inc.
Date: July 3, 2008
By: /s/ William C. Coz
William C. Cox
Treasurer of The China Fund, Inc.
Date: July 3, 2008
5