EX-99.1 3 b43303cfexv99w1.htm EX-99.1 NEWSLETTER

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In brief... |  | at 30 April, 2002
Net Asset Value per share* |  | US$16.77
Market Price* |  | US$14.87
Premium/Discount* |  | (11.4%)
Fund size* |  | US$169.0m

|  | China Fund NAV |  | MSCI Golden Dragon
1 month return* |  | 3.7 |  | 2.3
1 year return* |  | 16.3 |  | -3.4

* |  | Source: State Street Corporation/Martin Currie Inc

Manager’s commentary

As doubts grew about the pace of US growth in the second half of 2002, Asian stock markets saw a change in April. Stocks in the export-led economies of Taiwan and Korea gave back some of their earlier gains. Meanwhile, money started to flow back into China, a relative laggard this year in terms of its stockmarket performance. This renewed interest is based on the resilience and size of China’s domestic market, as well as the potential pick up in international competitiveness that countries with pegged currencies should enjoy as the US dollar weakens. A weaker currency against non-US currencies may also help in alleviating deflationary pressures in China. In the long-term we still believe that the renminbi will appreciate against the US dollar. But no radical moves are likely to be taken on the currency, or indeed on any other sensitive matters, ahead of the 16th Party Congress in October. Jiang Zemin’s successor as Party Secretary, Hu Jin Tao, has now been introduced to his main counterparts in the US and Europe. However, the leadership’s summer deliberations by the seaside at Beidaiho are still likely to be more fraught than normal.

China’s economic growth accelerated to 7.6% in Q1 2002 from 6.6% in Q4 2001. This was a result of good growth in exports and fixed asset investment. While skepticism of macro numbers from China is justified, the trend is clear. The Q1 2002 statistics for power generation (+9.4% year-on-year), a good proxy for economic activity, tell the same story. Sustained trade surpluses and the inflow of foreign direct investment have now boosted foreign exchange reserves to US$223.5 billion and encouraged a more confident tone in official comments on the economy.

Investment stategy

Your fund is 98.4% invested with holdings in 54 companies. Of the portfolio, 36.3% is invested in Taiwan, where holdings are biased to ‘China plays’ and companies focused on the domestic market, rather than exporters. There is also 5.7% in direct investments, which will increase in May with the investment in an unlisted leasing company, captive.

The main change to the portfolio in April was a decision to buy China Mobile. Your listed investment manager has not invested in telecom stocks since we took over management last year. However, we believe that pessimism on the sector has now peaked and the stock of China’s leader in mobile telephony has fallen to a reasonable level; it should be a prime investment target as large institutional funds increase their weightings in emerging markets. Among the small, entrepreneurial companies, we have taken profits on Chaoda, Euro-Asia and Global Biochem. Meanwhile, we have shifted funds to the fast growing Singapore-listed pork processor, People’s Food, which should receive greater recognition when it lists in Hong Kong. We closed out the NT dollar hedge as the yen appeared to have stabilised against the US dollar.

No new direct investments were closed in April. The direct investment manager is in various stages of due diligence and negotiations regarding several direct investments. These potential investments are in manufacturing, distribution and financial services.

Chris Ruffle

Source: Martin Currie Inc

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at 30 April, 2002

Fund details* |  |
Market cap |  | US $151.1m
Shares outstanding |  | 10,073,173 shares
Exchange listed |  | NYSE
Listing date |  | July 10, 1992
Investment manager |  | Martin Currie Inc
Direct investment manager |  | Asian Direct Capital Management

Asset allocation* (%)

15 largest listed investments* (49.4%)
YanzhoTCL International |  | Information technology |  | 6.7%
Yanzhou Coal Mining |  | Energy |  | 4.5%
Chunghwa Telecom |  | Telecommunications |  | 4.3%
Taipei Bank |  | Financials |  | 4.2%
Phoenixtec Power |  | Consumer staples |  | 4.0%
Zhejiang Expressway |  | Utilities |  | 3.4%
Ho Tung Chemical |  | Materials |  | 2.8%
Pacific Construction |  | Consumer discretionary |  | 2.8%
Chinadotcom |  | Information technology |  | 2.6%
Synnex Technologies |  | Consumer discretionary |  | 2.6%
Brilliance China |  | Consumer discretionary |  | 2.5%
Polaris Securities |  | Financials |  | 2.4%
Shanghai Friendship Group |  | Consumer staples |  | 2.2%
Want Want Holdings |  | Consumer staples |  | 2.2%
Fountain Set Holdings |  | Materials |  | 2.2%

Direct investments* (5.7%)
Kowloon Development |  | Real estate |  | 2.3%
A-S China Plumbing Products |  | Consumer disc |  | 1.9%
Moulin International (2004 CB) |  | Manufacturing |  | 1.2%
New World Sun City |  | Real estate |  | 0.3%

Sector allocation*
|  | % of |  | MSCI Golden
|  | net assets |  | Dragon %
Information technology |  |  | 19.9 |  |  |  | 25.4 |
Consumer discretionary |  |  | 11.5 |  |  |  | 5.5 |
Industrials |  |  | 11.5 |  |  |  | 17.7 |
Consumer staples |  |  | 10.5 |  |  |  | 0.4 |
Financials |  |  | 9.6 |  |  |  | 29.4 |
Utilities |  |  | 8.2 |  |  |  | 6.8 |
Materials |  |  | 6.9 |  |  |  | 4.8 |
Telecommunications |  |  | 6.8 |  |  |  | 8.3 |
Diversified |  |  | 6.0 |  |  |  | — |
Energy |  |  | 4.5 |  |  |  | 1.6 |
Health care |  |  | 3.0 |  |  |  | 0.1 |
Cash |  |  | 1.6 |  |  |  | — |
Total |  |  | 100.0 |  |  |  | 100.0 |

Performance* (in US$ terms)
|  | NAV |  | Market price
|  | % |  | %
One month |  |  | 3.7 | % |  |  | 5.2 | %
Calendar year to date |  |  | 11.1 | % |  |  | 19.7 | %
3 years ** |  |  | 13.5 | % |  |  | 17.2 | %

Fund performance
|  | One |  | Three |  | Year |  | One |  | Three** |  | Five** |  | Since#**
|  | month |  | months |  | to date |  | year |  | years |  | years |  | launch
The China Fund, Inc. |  |  | 3.7 |  |  |  | 7.1 |  |  |  | 11.1 |  |  |  | 16.3 |  |  |  | 13.5 |  |  |  | -0.5 |  |  |  | 3.9 |
MSCI Golden Dragon |  |  | 2.3 |  |  |  | 5.7 |  |  |  | 5.2 |  |  |  | -3.4 |  |  |  | -6.9 |  |  |  | -5.4 |  |  |  | — |
Hang Seng Chinese Enterprise Index |  |  | 1.0 |  |  |  | 7.4 |  |  |  | 16.7 |  |  |  | -0.4 |  |  |  | 1.3 |  |  |  | -15.1 |  |  |  | — |

|  | Source: * State Street Corporation/MC Inc. # The Fund was launched on July 10, 1992 ** Annualized Return

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The portfolio - in full |  |  |  |  |  |  |  |  |  |  |  |  |  | at 30 April, 2002
Sector |  | Company (code) |  | Price |  | Holding |  | Value $ |  | % of
|  |  |  |  |  |  |  |  |  |  | portfolio
Hong Kong 44.7% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
TCL International Holdings Ltd |  | 1070 HK |  | HK$2.35 |  |  | 37,318,000 |  |  |  | 11,244,613 |  |  |  | 6.7 | %
Yanzhou Coal Mining Co. |  | 1171 HK |  | HK$3.15 |  |  | 19,000,000 |  |  |  | 7,613,107 |  |  |  | 4.5 | %
Zhejiang Expressway Co., Ltd |  | 576 HK |  | HK$2.25 |  |  | 19,814,000 |  |  |  | 5,716,273 |  |  |  | 3.4 | %
Brilliance China Automotive Holdings, Ltd |  | 1114 HK |  | HK$1.33 |  |  | 24,300,000 |  |  |  | 4,175,124 |  |  |  | 2.5 | %
Fountain Set (Holdings) Ltd |  | 420 HK |  | HK$1.87 |  |  | 15,250,000 |  |  |  | 3,656,535 |  |  |  | 2.2 | %
TPV Technology, Ltd |  | 903 HK |  | HK$3.13 |  |  | 8,764,000 |  |  |  | 3,511,646 |  |  |  | 2.1 | %
Shangri-La Asia, Ltd |  | 69 HK |  | HK$7.50 |  |  | 3,600,000 |  |  |  | 3,461,960 |  |  |  | 2.0 | %
China Rare Earth Holdings, Ltd |  | 769 HK |  | HK$2.08 |  |  | 12,600,000 |  |  |  | 3,352,331 |  |  |  | 2.0 | %
Chaoda Modern Agriculture |  | 682 HK |  | HK$2.83 |  |  | 8,500,000 |  |  |  | 3,078,901 |  |  |  | 1.8 | %
Asia Satellite Telecommunications Holdings |  | 1135 HK |  | HK$12.10 |  |  | 1,693,000 |  |  |  | 2,615,787 |  |  |  | 1.5 | %
Sinopec Yizheng Chemical |  | 1033 HK |  | HK$1.33 |  |  | 14,694,000 |  |  |  | 2,505,821 |  |  |  | 1.5 | %
Beijing Capital International Airport Co., Ltd |  | 697 HK |  | HK$1.86 |  |  | 10,384,000 |  |  |  | 2,476,486 |  |  |  | 1.4 | %
Wah Sang Gas |  | 8035 HK |  | HK$1.05 |  |  | 16,998,000 |  |  |  | 2,288,471 |  |  |  | 1.4 | %
Geomaxima |  | 702 HK |  | HK$1.22 |  |  | 12,400,000 |  |  |  | 1,939,723 |  |  |  | 1.1 | %
Natural Beauty |  | 157 HK |  | HK$1.07 |  |  | 13,200,000 |  |  |  | 1,827,915 |  |  |  | 1.1 | %
China Overseas Land & Investment, Ltd |  | 688 HK |  | HK$0.94 |  |  | 14,200,000 |  |  |  | 1,711,490 |  |  |  | 1.0 | %
Euro-Asia Agriculture |  | 932 HK |  | HK$2.65 |  |  | 4,900,000 |  |  |  | 1,664,946 |  |  |  | 1.0 | %
Global Bio-chem Technology Group Co., Ltd |  | 809 HK |  | HK$2.73 |  |  | 4,700,000 |  |  |  | 1,657,253 |  |  |  | 1.0 | %
Anhui Expressway |  | 955 HK |  | HK$1.81 |  |  | 6,950,000 |  |  |  | 1,612,953 |  |  |  | 0.9 | %
China Mobile |  | 941 HK |  | HK$25.55 |  |  | 480,000 |  |  |  | 1,572,499 |  |  |  | 0.9 | %
Mainland Headwear Holdings |  | 1100 HK |  | HK$2.65 |  |  | 5,000,000 |  |  |  | 1,554,677 |  |  |  | 0.9 | %
LifeTec Group, Ltd |  | 1180 HK |  | HK$0.20 |  |  | 65,346,000 |  |  |  | 1,499,790 |  |  |  | 0.9 | %
China Travel |  | 308 HK |  | HK$1.66 |  |  | 7,218,000 |  |  |  | 1,443,776 |  |  |  | 0.8 | %
Arcontech, Corp |  | 8097 HK |  | HK$1.16 |  |  | 9,000,000 |  |  |  | 1,396,324 |  |  |  | 0.8 | %
Chen Hsong Holding, Ltd |  | 57 HK |  | HK$1.35 |  |  | 6,630,000 |  |  |  | 1,181,644 |  |  |  | 0.7 | %
Sunway International Holdings |  | 58 HK |  | HK$0.39 |  |  | 12,664,000 |  |  |  | 617,039 |  |  |  | 0.4 | %
Jackin International |  | 630 HK |  | HK$0.28 |  |  | 5,000,000 |  |  |  | 179,509 |  |  |  | 0.1 | %
Automated Systems Holdings, Ltd |  | 771 HK |  | HK$2.33 |  |  | 368,000 |  |  |  | 103,807 |  |  |  | 0.1 | %
Taiwan 36.3% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Chunghwa Telecom Co., Ltd |  | 2412 TT |  | NT$51.50 |  |  | 4,908,000 |  |  |  | 7,290,510 |  |  |  | 4.3 | %
Taipei Bank |  | 2830 TT |  | NT$24.20 |  |  | 10,115,400 |  |  |  | 7,060,648 |  |  |  | 4.2 | %
Phoenixtec Power Co., Ltd |  | 2411 TT |  | NT$32.20 |  |  | 7,595,000 |  |  |  | 6,834,843 |  |  |  | 4.0 | %
Ho Tung Chemical, Corp |  | 1714 TT |  | NT$21.20 |  |  | 7,732,950 |  |  |  | 4,728,542 |  |  |  | 2.8 | %
Pacific Construction Co., Ltd |  | 2506 TT |  | NT$4.98 |  |  | 32,841,000 |  |  |  | 4,717,283 |  |  |  | 2.8 | %
Synnex Technologies International, Corp |  | 2347 TT |  | NT$48.30 |  |  | 3,084,000 |  |  |  | 4,296,429 |  |  |  | 2.6 | %
Polaris Securities Co., Ltd |  | 6011 TT |  | NT$17.30 |  |  | 8,042,000 |  |  |  | 4,012,882 |  |  |  | 2.4 | %
China Synthetic Rubber, Corp |  | 2104 TT |  | NT$12.60 |  |  | 9,919,440 |  |  |  | 3,604,988 |  |  |  | 2.1 | %
Choice Lithograph, Inc |  | 9929 TT |  | NT$19.60 |  |  | 6,273,000 |  |  |  | 3,546,316 |  |  |  | 2.1 | %
Bank Sinopac |  | 2839 TT |  | NT$17.00 |  |  | 7,186,991 |  |  |  | 3,432,362 |  |  |  | 2.0 | %
Advantech Co., Ltd |  | 2395 TT |  | NT$88.00 |  |  | 959,100 |  |  |  | 2,434,404 |  |  |  | 1.5 | %
Tong Yang |  | 1319 TT |  | NT$20.90 |  |  | 3,532,000 |  |  |  | 2,129,184 |  |  |  | 1.3 | %
Ability Enterprise Corp |  | 2374 TT |  | NT$33.30 |  |  | 1,700,000 |  |  |  | 1,632,824 |  |  |  | 1.0 | %
Lian Hwa Foods |  | 1231 TT |  | NT$16.60 |  |  | 3,392,000 |  |  |  | 1,624,090 |  |  |  | 0.9 | %
Cheng Shin Rubber |  | 2105 TT |  | NT$25.00 |  |  | 2,000,000 |  |  |  | 1,517,162 |  |  |  | 0.9 | %
Elan Microelectronics |  | 2458 TT |  | NT$48.00 |  |  | 1,000,000 |  |  |  | 1,263,340 |  |  |  | 0.7 | %
Tainan Enterprises |  | 1473 TT |  | NT$41.80 |  |  | 1,000,000 |  |  |  | 1,246,034 |  |  |  | 0.7 | %
B shares 5.1% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Shanghai Friendship Group Co., Inc |  | 900923 CH |  | US$1.05 |  |  | 3,530,000 |  |  |  | 3,717,090 |  |  |  | 2.2 | %
Luthai Textile Co., Ltd |  | 200726 CH |  | HK$8.93 |  |  | 1,999,869 |  |  |  | 2,289,873 |  |  |  | 1.4 | %
Shanghai Matsuoka, Co |  | 900955 CH |  | US$1.66 |  |  | 981,850 |  |  |  | 1,561,142 |  |  |  | 0.9 | %
Weifu High Technology |  | 200581 CH |  | HK$6.10 |  |  | 1,397,550 |  |  |  | 1,039,330 |  |  |  | 0.6 | %
New York 2.6% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Chinadotcom, Corp |  | China US |  | US$2.48 |  |  | 1,655,600 |  |  |  | 4,387,340 |  |  |  | 2.6 | %
Direct 5.7% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Kowloon Development |  |  |  |  |  |  |  |  |  |  | 6,520,000 |  |  |  | 3,908,297 |  |  |  | 2.3 | %
A-S China Plumbing Products, Ltd |  |  |  |  |  |  |  |  |  |  | 450 |  |  |  | 3,199,999 |  |  |  | 1.9 | %
Moulin International Holdings, Ltd (2004 CB) |  |  |  |  |  |  |  |  |  |  | 2,000,000 |  |  |  | 2,003,922 |  |  |  | 1.2 | %
New World Sun City, Ltd |  |  |  |  |  |  |  |  |  |  | 83 |  |  |  | 449,421 |  |  |  | 0.3 | %
Singapore 4.0% Want Want Holdings, Ltd |  | WANT SP |  | US$1.93 |  |  | 1,900,000 |  |  |  | 3,667,000 |  |  |  | 2.2 | %
People’s Food Holding |  | PFH SP |  | SG$1.02 |  |  | 4,400,000 |  |  |  | 2,476,206 |  |  |  | 1.5 | %
Asia Dekor Holdings, Ltd |  | ADEK SP |  | US$0.10 |  |  | 7,374,000 |  |  |  | 589,920 |  |  |  | 0.3 | %
Cash 1.6% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |