<PAGE>
THE CHINA FUND, INC.
SEMI-ANNUAL REPORT
APRIL 30, 1996
_____________________________________
THE CHINA FUND, INC.
TABLE OF CONTENTS
Page
----
Chairman's Statement 1
Investment Managers' Statement 3
China Economic Review 9
Schedule of Investments 12
Financial Statements 19
Notes to Financial Statements 23
Other Information 27
Dividends and Distributions;
Dividend Reinvestment
and Cash Purchase Plan 28
_____________________________________
<PAGE>
THE CHINA FUND, INC.
CHAIRMAN'S STATEMENT
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Dear Stockholders:
May 20, 1996
I am pleased to present the semi-annual report of The China Fund, Inc. (the
"Fund") for the six months ended April 30, 1996. During the period under
review, the Net Asset Value ("NAV") per share of the Fund decreased 0.59% to
US$12.70 from US$12.87, while the Fund's share price increased 16.82% to
US$13.63 from US$11.75, after adjusting for the US$0.09 dividend per share paid
in January 1996. The China and Hong Kong stock markets experienced considerable
volatility during the period with the Hang Seng Index up 12.1%, the "H" share
index down 3.5% and the Shanghai and Shenzhen "B" share indices declining by
5.6% and 8.1%, respectively.
As of April 30, 1996, approximately 93.5% of the Fund's listed assets were
invested as compared to 98.2% at October 31, 1995. The Fund's listed
investments were allocated as follows: 69.6% in Hong Kong listed companies, 8.5%
in the "H" shares of Chinese companies listed in Hong Kong, 9.2% in Shanghai "B"
shares, 4.3% in Shenzhen "B" shares and 1.9% in the "N" shares of Chinese
companies listed in New York. This compares to 62.3% invested in Hong Kong
shares, 15.7% in "H" shares, 11.0% in Shanghai "B" shares, 3.9% in Shenzhen "B"
shares, and 5.4% in "N" shares as of October 31, 1995.
During the period under review, activity in the primary market picked up
slightly with the offering of five additional "B" share issues bringing the
total number of Shanghai "B" share issues to 38 and the number of Shenzhen "B"
share issues to 34. In addition, the number of "H" share issues rose from 17 to
18.
The Direct Investment Manager reviewed a significant number of China projects
during the first six months, which resulted in the completion of one new direct
investment during the period. In March 1996, the Fund completed an investment
in Road King (China) Infrastructure Limited, a company that holds interests in
and operates ten tollroads in China.
The nine direct investments held by the Fund at April 30, 1996, are involved
in telecommunications, property development, refrigerator manufacturing,
sanitaryware manufacturing and distribution, textiles, glass and tollroad
operations. During the period, the Board of Directors wrote down the
valuation of the Fund's direct investment in Wing Hong Holdings Limited to
zero. At April 30, 1996, valuation of the Fund's direct investment portfolio
represented a premium of approximately 3% over the cost of the portfolio as
compared to a 17% premium as of October 31, 1995.
Approximately 95% of the Fund's direct investment assets were committed for
investments in nine companies at April 30, 1996. The Direct Investment Manager
expects the Fund's direct investment assets to be fully committed during the
second half of the fiscal year.
1
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THE CHINA FUND, INC.
CHAIRMAN'S STATEMENT (CONTINUED)
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In general, the government's tight monetary policy has depressed the Chinese
economy as well as the equity markets. However, the current market valuation
should provide the Fund with some interesting investment opportunities. A
possible easing of credit in the second half of 1996 could lead to earnings
recovery in most sectors. We remain confident that the excellent long term
potential for Chinese economic growth will continue to provide investment
opportunities with significant capital appreciation.
At the regular quarterly meeting of the Board of Directors held on March 16,
1996, Bernard H. Asher, Chairman of HSBC Investment Bank PLC, was elected as
a new Director to fill a vacancy on the Board.
In addition, the Board of Directors has appointed Dewe Rogerson, Inc. as
Shareholder Servicing Agent in order to enhance the Fund's shareholder
services in a cost effective manner.
We thank you for your continuing support and interest in the Fund. Should you
have any questions or comments regarding the Fund, we invite you to call 1-888-
CHN-CALL (246-2255).
Sincerely,
John W. English
Chairman of the Board
2
<PAGE>
THE CHINA FUND, INC.
INVESTMENT MANAGERS' STATEMENT
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Dear Stockholders:
May 20, 1996
REVIEW OF LISTED INVESTMENTS
MARKET REVIEW
The Hong Kong equity market recovered during the six-month period under review,
up 12.1%. Investors' uncertainty relating to US interest rates sent the Hang
Seng Index to a low of 9,259 in late November. Sentiment later improved
following the recovery in the local property market, the US interest rate
reduction in December and the early signals of a "soft landing" in the Chinese
economy. As a result, the Hang Seng Index rose to 11,600 in early February
before profit-taking ensued. Subsequently, the equity market entered a period
of consolidation amid the Taiwan Strait tensions in March and the volatile US
bond market in April. The Hang Seng Index closed at 10,964 on April 30, 1996.
The performance of Chinese equity markets was volatile during the period.
Chinese shares fell to historic lows in late November and December. The
sell-off was triggered by rumors that the government would raise interest
rates on subsidized bank loans and increase the corporate income tax rate to
33% for "H" share companies. The announcement of a 30% tariff cut to be
implemented in 1996 also increased the uncertainty in earnings forecasts for
various sectors. However, Chinese equities rebounded strongly in early 1996.
In January, the "H" share index rose 15.4% while the Shanghai and Shenzhen
"B" share indices rose by 8% and 2.4%, respectively. The recovery in the "H"
share market was mainly attributed to the surge of international funds into
Hong Kong. The increasingly positive sentiment also triggered a strong rally
in Hong Kong "red chip" companies. In March, the "H" share market began to
consolidate in anticipation of poor earnings results. Although petrochemical
companies' earnings results were in line with expectations, showing strong
growth in 1995, their share prices were weak due to the gloomy outlook for
the next twelve months. In the power sector, results were reasonably
satisfactory. Apart from these two major sectors, the government's austerity
program and increased competition caused most companies to suffer from raw
material price hikes, high levels of accounts receivable and lower profit
margins. In general, "H" share companies were the primary victims of the
government's austerity program, posting declines of more than 20% in their
earnings per share.
As of April 30, 1996, the Fund's listed investments were allocated as
follows: Hong Kong listed securities 69.6%, "H" shares 8.5%, Shanghai "B"
shares 9.2%, Shenzhen "B" shares 4.3% and N shares 1.9%, with 6.5% in cash.
During the year, there were a number of companies listed on both the Hong
Kong and China stock markets which offer exposure to China. As of April 30,
1996, there were 72 "B" share listings (38 in Shanghai and 34 in Shenzhen),
18 "H" shares and 6 "N" shares. The recent response to new issues seems to
indicate a return of interest in quality China stocks.
3
<PAGE>
THE CHINA FUND, INC.
INVESTMENT MANAGERS' STATEMENT (continued)
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REVIEW OF LISTED INVESTMENTS (continued)
PORTFOLIO REVIEW
The following table presents the Fund's portfolio allocation of listed
investments between the various sectors by market value as of April 30, 1996 and
October 31, 1995:
<TABLE>
<CAPTION>
4/30/96 10/31/95
------- --------
<S> <C> <C> <C>
Hong Kong Conglomerates 17.5% 19.2%
Industrials 18.4 14.1
Property 21.7 17.2
Services 4.5 4.2
Utilities 4.9 6.3
Transportation 2.6 1.3
----- -------
69.6 62.3
----- -------
H Shares Industrials 8.5 14.2
Utilities 0.0 0.0
Transportation 0.0 1.4
----- -------
8.5 15.6
----- -------
Hong Kong Sub-total 78.1 77.9
----- -------
Shanghai B Shares Industrials 4.8 6.7
Property 1.9 0.0
Services 1.5 3.0
Transportation 1.0 1.3
----- -------
9.2 11.0
----- -------
Shenzhen B Shares Industrials 1.4 1.9
Property 0.9 1.0
Transportation 2.0 1.0
----- -------
4.3 3.9
----- -------
N Shares Power 1.9 2.6
Industrials 0.0 2.8
----- -------
1.9 5.4
----- -------
China Sub-Total 15.4 20.3
----- -------
Cash 6.5 1.8
----- -------
Total 100.0% 100.0%
----- -------
----- -------
</TABLE>
4
<PAGE>
THE CHINA FUND, INC.
INVESTMENT MANAGERS' STATEMENT (continued)
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REVIEW OF LISTED INVESTMENTS (continued)
During the period under review, the Fund continued to increase its weighting
in Hong Kong China plays, bringing the exposure up from 62.3% to 69.6%. The
Fund's weighting in the "H" share sector has been reduced substantially from
15.7% to 8.5%. The exposure to the Shanghai "B" share market was reduced
slightly from 11.0% to 9.2% while the weighting in the Shenzhen "B" share
market was increased from 3.9% to 4.3%. The exposure in "N" shares was
reduced significantly through the sale of China Tire and China Ychai. In
addition, cash was raised to 6.5% for repositioning in new issues.
During the period under review, the Listed Investment Manager continued to
restructure the Hong Kong equity portion of the Fund. As the macroeconomic
conditions in China began to improve, the investment in industrial and property
companies, which have significant earnings and asset exposure to China, was
increased. During the last six months, a few stocks with significant China
exposure and quality earnings were added to the portfolio, including C.P.
Pokphand, China International Marine Containers, China Merchant Shekou Port
Service, China Merchants Hai Hong, China Overseas Land & Investment, China
Chiwan Wharf Holdings, First Sign International, Heilongjiang Power, Henderson
China Holdings, Innovative International, New World Infrastructure, Shanghai
Refrigerator, Tientsin Marine Shipping, Tingyi Holdings, and Wang On Group.
Purchases during the period included Tingyi Holdings, a leading producer and
distributor of instant noodles; New World Infrastructure, a builder and
operator of key infrastructure projects such as tollroads and bridges in
China; Henderson China, the China property investment arm of the Henderson
Land Group, which invests in prime property projects in major cities such as
Beijing, Guangzhou and Shanghai; Ng Fung Hong, a "red chip" foodstuff
producer and distributor; and First Sign, a manufacturer and retailer of high
quality, brandname menswear.
The Fund has reduced its position in blue chip companies such as Hutchinson
following a period of strong performance which sent the share price beyond
its fair valuation level. The Fund also decreased its exposure to China
Light and Power as the company's investment plan in China was delayed and
electricity sales to China slowed as the number of independent power
producers increased. The Fund's exposure to the "H" share sector was reduced
through the sale of Yizheng Chemical, the largest polyester producer in
China, because of the expected cyclical downturn in product prices. Slight
profit-taking also took place in Zhenai Refining, as it had substantially
outperformed the "H" share sector. The elimination of Shanghai Hai Xing
Shipping was based on the expectation of disappointing results.
During the period, the Fund sold its positions in the following stocks;
Leefung-Asco Printers, China Yuchai, Henderson Investment, Hopewell Holdings,
Huaneng Power International, Lam Soon, Phoenix, Shanghai Hai Xing Shipping,
Shanghai Haixin, Shanghai Industrial Sewing Machine, Shanghai Narcissus
Electric, Shenzhen Textile, Sing Tao Holdings, and Siu Chong Holdings.
5
<PAGE>
THE CHINA FUND, INC.
INVESTMENT MANAGERS' STATEMENT (continued)
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REVIEW OF LISTED INVESTMENTS (continued)
The following is a summary of the Fund's Top Ten Listed Investments:
<TABLE>
<CAPTION>
4/30/96
Number Market Percent
of Shares Value (US$) of NAV
---------- ----------- -------
<S> <C> <C> <C>
Citic Pacific Ltd. 585,000 6,228,944 4.52%
New World Development Co.,
Ltd. 1,035,000 4,642,816 3.37%
Cheung Kong Holdings Ltd. 560,000 3,999,741 2.90%
Sun Hung Kai Properties,
Ltd. 355,300 3,387,418 2.46%
Hutchinson Whampoa Ltd. 540,000 3,350,785 2.43%
Wharf Holdings Ltd. 740,000 2,740,741 1.99%
Cosco Pacific Ltd. 3,700,000 2,606,813 1.89%
Ng Fung Hong Ltd. 5,200,000 2,487,234 1.81%
Swire Pacific Ltd. 266,500 2,273,803 1.65%
Tingyi Holdings Corp. 8,110,000 2,254,088 1.64%
</TABLE>
6
<PAGE>
THE CHINA FUND, INC.
INVESTMENT MANAGERS' STATEMENT (continued)
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REVIEW OF DIRECT INVESTMENTS
At April 30, 1996, approximately 95% of the Fund's direct investment assets were
committed for investment in nine companies. A description of the direct
investments is set out below.
NEW WORLD SUN CITY LIMITED ("NWSC")
NWSC owns a property development project in Dongguan, Guandong Province China.
Dongguan New World Gardens (the "Project") is engaged in the development and
sale of 10,000 units of detached houses, semi-detached houses, low-rise and
high-rise apartments and 93,000 square meters of commercial and retail space on
a site of 466,666 square meters. The Project, part of Fucheng New Town, is
situated close to the city center, and will be developed in phases over a period
of six to eight years. Phases I and II have been completed and 100% of the
Phase I and over 90% of Phase II units have been sold. Construction of Phase
III has commenced and over 50% of the units have been pre-sold.
HINCA INTERNATIONAL HOLDINGS LIMITED ("HINCA")
Hinca is engaged in the manufacture and sale of refrigerators in Shunde,
Guangdong Province. Hinca manufactures a series of household electric
refrigerators principally for sale through an established distribution network
throughout China consisting of more than 600 major wholesalers and retailers.
Hinca's parent company, Guangdong Kelon Electrical Holding Company Limited
("Kelon") has obtained approval in principle from the China Securities
Regulatory Commission to list its shares on The Stock Exchange of Hong Kong
Limited.
CM TELECOM INTERNATIONAL LIMITED ("CHINA MOTION")
China Motion is engaged in the marketing of telecommunications related products
including paging systems, pagers, transmitters and cables, and the provision of
paging services in Hong Kong. China Motion owns a 30% interest in an associated
company which operates a cross-border paging service between Hong Kong and the
Province of Guangdong.
A-S CHINA PLUMBING PRODUCTS LIMITED ("ASPPL")
ASPPL was established to produce and distribute the complete line of high
quality sanitaryware of American Standard Inc., ("ASI"), a US-based world leader
in the manufacturing of plumbing products, through the acquisition of majority
equity stakes in operating and newly established joint ventures in China. ASI
provides management support, technology know-how and the use of the American
Standard trade name.
SIU FUNG CERAMICS CONCEPT COMPANY LIMITED ("SIU FUNG")
Siu Fung is an investment holding company which owns a group of joint ventures
in China engaged in the manufacture and sale of ceramic products, including
tiles and sanitaryware. The company's 32 joint ventures are located in 12
provinces. Siu Fung's major shareholder is Siu Fung Ceramics Holdings Limited,
a listed company on The Stock Exchange of Hong Kong Limited, which is engaged
primarily in marketing and manufacturing production equipment for ceramic
products.
WING HONG HOLDINGS LIMITED ("WING HONG")
Wing Hong is a vertically integrated cashmere yarn and knitwear manufacturer.
Wing Hong exports private-label knitwear through importers and wholesalers to
up-market retailers. During its financial year to March 31, 1996, Wing Hong
experienced a substantial downturn in sales. In view of the deterioration of
this investment, the Board of Directors wrote down the value of this
investment to zero.
7
<PAGE>
THE CHINA FUND, INC.
INVESTMENT MANAGERS' STATEMENT (continued)
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REVIEW OF DIRECT INVESTMENTS (continued)
CHINA SOUTHERN GLASS HOLDING COMPANY LIMITED ("CHINA SOUTHERN GLASS")
China Southern Glass is one of the leading processed glass manufacturers in
China and one of the first to issue B shares to foreign investors for trading on
the Shenzhen Stock Exchange in 1992. The company is expanding through the
establishment of a float glass production plant utilizing western technologies
and equipment.
WAI KEE CHINA INVESTMENTS (BVI) COMPANY LIMITED ("WAI KEE")
Wai Kee is an investment holding company which owns a group of companies and
joint ventures (the "Group") in China engaged in tollroad operations, building
materials manufacturing and trading, construction equipment trading and quarry
concession operation. The Group has concessions to operate ten tollroads in
China. Wai Kee's major shareholder is Wai Kee Holdings Limited, a listed
company on The Stock Exchange of Hong Kong Limited, which is engaged in
quarrying, civil engineering and dredging in Hong Kong.
ROAD KING (CHINA) INFRASTRUCTURE LIMITED ("RKC")
Road King holds interests in and operates ten tollroads located in Southern and
Eastern China with a combined length of approximately 320 kilometers. Road King
is a 60% subsidiary of Wai Kee China Investments (BVI) Company Limited in which
the Fund has an existing investment. The company has submitted an application
for the listing of its Ordinary shares on The Stock Exchange of Hong Kong
Limited. The IPO of the Company's shares is expected to take place in the
second half of 1996.
Sincerely,
Stella S.M. Yiu, Listed Investment Manager
David F.J. Paterson, Direct Investment Manager
LISTED INVESTMENT MANAGER DIRECT INVESTMENT MANAGER
Ms. Stella S.M. Yiu has Mr. David F.J. Paterson has
served as the portfolio served as the portfolio
manager for the Fund's manager for the Fund's direct
portfolio of listed investment portfolio since
securities since December the Fund's inception. Mr.
1993. Ms. Yiu holds a Paterson holds a MA (Hons.)
Bachelor of Arts degree in degree from Oriel College,
economics from Saint Oxford, England. In addition
Catharine's College, to being a director of the
Cambridge University. She Fund, he is a director and
is currently an executive 25% owner of HSBC Private
director of HSBC Asset Equity Management Hong Kong
Management Hong Kong Limited and has served as
Limited responsible for Managing Director of HSBC
managing investments and Private Equity Management
formulating strategies for Limited since 1988. Over his
the Asia-Pacific equity 26 years of business
markets. She has had over experience, he has also
eleven years of experience served as Managing Director
in portfolio management in of Bond Corporation
Asia. Prior to joining International Limited,
HSBC Asset Management Hong Managing Director of Arabian
Kong Limited, Ms. Yiu held Gulf Investments (Far East)
a senior investment Limited, Finance Director of
position at GT Management, Swire Properties Limited,
with responsibilities for Finance Director of E.C.
Asian regional equity funds (Holdings) Limited, a
and dedicated country corporate finance executive
portfolios. with Samuel Montagu & Co.
Limited and a chartered
accountant with Price
Waterhouse & Co. Mr.
Paterson is also a Fellow of
the Institute of Chartered
Accountants in England and
Wales and a Fellow of the
Hong Kong Society of
Accountants
8
<PAGE>
THE CHINA FUND, INC.
CHINA ECONOMIC REVIEW
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ECONOMIC GROWTH REMAINS STRONG
China enjoyed strong economic growth and falling inflation over the last six
months with an estimated real GDP growth of 10.9% in the last quarter of 1995,
and a growth of 10.2% in the first quarter, which was the same as for 1995.
Industrial value-added growth was 13.6% in the first quarter and 13.7% in April
of 1996, similar to the 13.4% for the fourth quarter and the whole of 1995. On
the demand side, investment growth was moderate and retail sales growth was
strong. State fixed-asset investments grew 16.2% in the first quarter and 16.5%
in April of 1996, up from the 13.6% in the fourth quarter of 1995, but similar
to the average 16% growth for the whole of 1995. The moderate growth reflected
the still relatively tight control over investment. Real growth in retail sales
of consumer goods was a robust 14.8% in the first quarter, up from the 14.1% in
the last quarter of 1995, but the growth slowed to 10.5% in April. However, the
high growth in the half year to March has not caused inflationary problems
because of growing inventories. Inflation continued to fall: retail price and
consumer price increases averaged 7.7% and 9.4% respectively in the first
quarter, down from their respective 9.3% and 11.1% in the last quarter of 1995.
In April, retail inflation fell slightly to 7.4% from 7.7% in March while
consumer price inflation remained about the same at 9.7%. Keeping inflation
below 10% in 1996 is possible but it will require a great effort by the
Government. The possibility of an inflation rebound in the second half of the
year can not be ruled out because of scheduled price adjustments for grain and
other items, and other cost pressures such as wage growth.
Money supply growth remained under control in the first quarter. By the end of
March, growth in the broad money, M2, had slowed to 28.4% from 29.5% at the end
of 1995. The increase in the outstanding state bank loans mainly reflects the
need to assist poorly performing state enterprises rather than a signal of an
overall relaxation of credit.
Major advances in monetary reform have been witnessed in 1996, which will
promote better macroeconomic control by the Government and the development of
money markets. A national renminbi interbank market began formal operation on
January 3, and the People's Bank of China (PBOC) open-market operation started
on April 9. The interbank market will facilitate the standardization of
interbank lending and borrowing, and open-market operation by the PBOC. Open-
market operation, in turn, will provide the PBOC with an indirect and market-
oriented means of macro-economic control. It will also foster the development
of securities and money markets, and a more flexible and market-based interest
rate setting mechanism.
EXTERNAL SECTOR ADJUSTS TO POLICY CHANGES
China's trade balance had a small surplus of US$0.27 billion in the last quarter
of 1995 but turned to a deficit of US$0.7 billion in the first four months of
1996 because of poor export performance. Imports grew by 18.1% in the first
four months following an increase of 10.2% in the last quarter of 1995. Exports
declined by 7.7% in the first four months following very low growth of 0.3% in
the last quarter of 1995. April's drop in exports (of 5.5%) was the sixth
consecutive monthly decline. The problem lies with domestic exporters who are
being hit hard by successive cuts in the export tax rebate, the latest of which
was in January, and the withdrawal of other subsidies. Domestic exporters will
probably need to make adjustments before returning to positive growth.
In the last quarter of 1995, contracted foreign investment jumped 66.7% to
US$42.67 billion while utilized investment grew 15.5% to US$7.66 billion.
Continuing the trend, contracted foreign investment jumped again in the first
quarter of 1996, by 86.8% to US$27.43 billion, as foreign investors sought to
beat the April 1, 1996, deadline for the phased withdrawal of duty and tax
exemptions on foreign investment-related imports. With this
9
<PAGE>
THE CHINA FUND, INC.
CHINA ECONOMIC REVIEW (continued)
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- --------------------------------------------------------------------------------
deadline now past, however, foreign capital inflow is expected to slow because
of the Government's greater selectiveness in approving foreign investment and
the ongoing withdrawal of investment privileges and incentives. Utilized
investment grew a healthy 17% to US$7.66 billion in the first quarter, up from
the 11.6% average growth in 1995. Overall, the external sector is undergoing
adjustment as a result of the many policy changes affecting it.
After almost a year of stability, the renminbi weakened slightly in early March
with the exchange rate moving to RMB8.33/US$1 (from RMB8.30/US$1) by mid-March,
although it remained at this level throughout April. The currency's weakening
reflects change in underlying factors, such as the negative export growth in
recent months. Further weakening is expected, with the rate falling to around
RMB8.7/US$1 by year end. A devaluation of this magnitude would not be large but
it could help China's export performance to some extent.
INTEREST RATES ARE LOWERED
In response to falling inflation, the PBOC canceled the inflation subsidy for
household term deposits on April 1, and lowered interest rates by an average of
0.75% for loans and 0.98% for deposits on May 1, the first time interest rates
have been cut since July 1993. However, the rate reduction does not signal a
general monetary relaxation as credit in China is largely controlled by quota
and the quotas remain tightly controlled. The Government has stressed that the
cut does not portend any change in its relatively tight monetary policy. Hence,
the interest rate cut is not expected to stimulate the economy (i.e., by raising
growth and inflation) to any significant degree. Rather, its overall impact is
to redirect the flow of financial resources towards banks and enterprises and
away from depositors. It will benefit enterprises (by reducing their debt
servicing burden) and banks (by increasing their profit margins). Depositors
will see their interest income fall, but they are unlikely to withdraw their
money from banks to buy goods on a large scale because of the lower and
stabilizing inflation rate.
POLITICAL TRENDS
In domestic politics, the Government continues to stress the need to maintain
social stability. The anticorruption campaign initiated in 1995 appears to have
lulled, but a new campaign was implemented in late April to improve law and
order by cracking down on criminal activities.
Externally, China's relations with Taiwan and the USA continue to be troubled.
In the period since Lee Teng-hui's election in Taiwan, both Taiwan and China
have taken unilateral measures to promote economic links, but real progress is
unlikely until official cross-Strait dialogue resumes. Lee Teng-hui's inaugural
speech on May 20, offered little to allay China's concerns. While Lee said
Taiwan would not pursue independence and offered, for the first time, to go to
the mainland on a mission of peace, he also said he would continue to seek
greater international recognition for Taiwan and urged China to accept the
reality of Taiwan's separate political status. China's reaction to Lee's speech
has not been positive and the near term prospects for either a commercial or
political breakthrough in cross-Strait ties do not look good.
In US-China relations, several potential conflicts have been resolved recently.
The US Administration announced that it would not sanction China for sales of
nuclear weapons related equipment to Pakistan, and President Clinton announced
that he would renew China's Most Favored Nation status. The US Congress is not
expected to mount a vigorous effort to veto Clinton's decision. However,
conflict over intellectual property rights (IPR) has heightened; the US has once
again published a preliminary list of punitive tariffs on Chinese goods in
protest against China's failure to meet its commitments under a 1995 IPR
agreement and its alleged pirating of copyrighted US goods worth US$2.3 billion.
China has responded with its own list of punitive tariffs on US imports and
promises to
10
<PAGE>
THE CHINA FUND, INC.
CHINA ECONOMIC REVIEW (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
penalize US investors in a number of areas if the US acts. China still has up
to two months in which to meet US demands and if past conflicts over the IPR
issue are any guide, a last minute resolution should be found. If this happens
commercial relations with the US could be restored to a positive track.
On the external front, export growth should slow further as a result of more
export rebate cuts expected in 1996. In contrast, import growth may rise in
1996 because of a major tariff cut starting in January. The planned cuts in
export tax rebates and the removal of tax and duty exemptions for foreign
investment related imports are also likely to slow the growth of foreign capital
inflow. Over time this should weaken the upward pressure on the renminbi
exchange rate thus raising the likelihood of the currency's depreciation.
Whether this will materialize within 1996 is unclear. Meanwhile, uncertainty
has been raised by the reported statements of Chinese leaders and officials on
achieving renminbi current account convertibility much earlier than the
scheduled year 2000. The introduction of convertibility could see weakness in
the exchange rate.
China's determination to phase out gradually selected trade and investment
incentives will put pressure on domestic and foreign traders and foreign
investors. The major tariff cuts will also put competitive pressure on many
local enterprises and foreign-invested enterprises. All these moves are
generally welcome as they end discriminatory practices which impede market
forces. As such, they will no doubt be seen favorably by the WTO members
negotiating China's entry to that body.
LONG-TERM PLANNING
The 5th plenum of the Communist Party's Central Committee held in late September
approved guidelines for the 9th Five Year Plan (1996-2000) and the 15-year plan
(1996-2010) for national development. Overall the guidelines call for steady
and more balanced growth and reform in contrast to the headlong pace that
prevailed in 1992 and 1993. The guidelines also give priority to the
development of agriculture, infrastructure, basic and high-tech industries, and
to reducing regional economic disparity.
Sincerely,
HongkongBank China Services, Limited
11
<PAGE>
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE (NOTE A)
------------------ ------ -------------
COMMON STOCK AND OTHER EQUITY INTERESTS
CHINA - SHANGHAI "B" SHARES
CEMENT - (0.5%)
Shanghai Huaxin Cement *. . . . . . . . . . . . . . 2,417,600 $643,082
----------
COMMUNICATION SERVICES - (0.7%)
Shanghai Posts & Telecom, EQ *. . . . . . . . . . . 1,818,640 974,791
----------
CONTAINERS & PACKAGING - (0.7%)
China International Marine Containers, Ltd. *.. . . 1,150,000 944,024
----------
ELECTRIC UTILITIES - (0.7%)
Heilongjiang Electric * . . . . . . . . . . . . . . 3,694,500 997,515
----------
ELECTRICAL EQUIPMENT - (0.6%)
Shanghai Refrigerator Compressor *. . . . . . . . . 1,660,800 853,651
----------
HOTELS - (1.1%)
Shanghai New Asia Group * . . . . . . . . . . . . . 2,545,000 1,501,550
----------
HOUSEHOLD APPLIANCES - (0.2%)
Shanghai Shangling Electrical Appliances, Ltd.. . . 405,700 262,894
----------
INDUSTRIALS - (0.5%)
Shanghai Diesel Engine Co., Ltd.. . . . . . . . . . 1,227,800 699,846
----------
RETAIL - (0.3%)
Shanghai Friendship Co., Ltd. . . . . . . . . . . . 882,120 423,418
----------
TEXTILE - (1.0%)
Erdos Cashmere Products * . . . . . . . . . . . . . 2,963,600 1,404,746
----------
TRANSPORTATION - (0.5%)
Shanghai Dazhong Taxi Co., Ltd. . . . . . . . . . . 763,900 588,203
----------
TOTAL SHANGHAI "B" SHARES - (COST $9,126,765). . 6.8% 9,293,720
----- ----------
See notes to financial statements
12
<PAGE>
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE (NOTE A)
------------------ ------ -------------
COMMON STOCK AND OTHER EQUITY INTERESTS (CONTINUED)
CHINA - SHENZHEN "B" SHARES
DRUGS & HEALTH CARE - (0.9%)
China Pharmaceutical Ent. . . . . . . . . . . . . . 8,300,000 $1,115,894
Shenzhen Lizhu Pharmaceutical, Ltd. . . . . . . . . 232,700 69,189
----------
1,185,083
----------
INDUSTRIALS - (1.0%)
China Southern Glass Co., Ltd.. . . . . . . . . . . 3,117,400 1,370,197
----------
PROPERTY DEVELOPER - (0.6%)
Shenzhen Vanke Co., Ltd.. . . . . . . . . . . . . . 2,340,497 907,697
----------
TRANSPORTATION - (0.8%)
China Merchant Shekou Port Services Co., Ltd. . . . 567,600 220,128
Shenzhen Chiwan Wharf Holdings, Ltd.. . . . . . . . 1,066,200 417,631
Shenzhen North Jianshe *. . . . . . . . . . . . . . 1,310,000 472,484
----------
1,110,243
----------
TOTAL SHENZHEN "B" SHARES - (Cost $6,309,205). . 3.3% 4,573,220
---- ----------
TOTAL CHINA - (Cost $15,435,970) . . . . . . . . 10.1% 13,866,940
---- ----------
HONG KONG
AGRICULTURAL - (0.5%)
C.P. Pokphand Co. . . . . . . . . . . . . . . . . . 1,500,000 635,059
----------
APPAREL & TEXTILES - (2.9%)
First Sign International Holdings, Ltd. . . . . . . 11,000,000 1,877,060
Fountain Set Holdings, Ltd. . . . . . . . . . . . . 6,848,000 1,203,966
Hai Hong Holdings Co., Ltd.*. . . . . . . . . . . . 2,950,000 915,261
----------
3,996,287
----------
AUTO PARTS - (0.7%)
Innovative International Holdings, Ltd. . . . . . . 3,000,000 911,383
----------
CHEMICALS - (0.5%)
Yip's Hang Cheung Holdings, Ltd.. . . . . . . . . . 4,904,000 652,979
----------
See notes to financial statements
13
<PAGE>
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE (NOTE A)
------------------ ------ -------------
COMMON STOCK AND OTHER EQUITY INTERESTS (continued)
HONG KONG (continued)
CONGLOMERATES - (4.1%)
Hutchison Whampoa, Ltd. . . . . . . . . . . . . . . 540,000 $3,350,785
Swire Pacific, Ltd. . . . . . . . . . . . . . . . . 266,500 2,273,803
----------
5,624,588
----------
CONSTRUCTION & MINING EQUIPMENT - (2.1%)
New World Infrastructure, Ltd.* . . . . . . . . . . 800,000 1,778,812
Siu Fung Ceramics Holdings, Ltd.. . . . . . . . . . 5,597,540 933,466
Wang On Group, Ltd. . . . . . . . . . . . . . . . . 1,750,000 226,230
----------
2,938,508
----------
CONTAINERS & PACKAGING - (3.8%)
Cosco Pacific, Ltd... . . . . . . . . . . . . . . . 3,700,000 2,606,813
M C Packaging (Hong Kong), Ltd. . . . . . . . . . . 4,000,000 1,331,523
Sinocan Holdings, Ltd.. . . . . . . . . . . . . . . 3,000,000 1,318,596
----------
5,256,932
----------
DIVERSIFIED - (9.0%)
China Resources Enterprise. . . . . . . . . . . . . 2,301,000 1,420,370
Citic Pacific, Ltd. . . . . . . . . . . . . . . . . 1,585,000 6,228,944
Guangdong Investment, Ltd.. . . . . . . . . . . . . 3,250,000 2,006,173
Guangzhou Investment Co., Ltd.. . . . . . . . . . . 5,830,000 1,447,043
Henderson Investment, Ltd.. . . . . . . . . . . . . 1,500,000 1,308,901
----------
12,411,431
----------
ELECTRIC UTILITIES - (2.9%)
China Light & Power Co., Ltd. . . . . . . . . . . . 300,000 1,415,551
Consolidated Electric Power Asia. . . . . . . . . . 870,037 1,439,658
Northeast Electrical T & T *. . . . . . . . . . . . 6,108,000 1,097,553
----------
3,952,762
----------
ELECTRONICS - (2.1%)
Kingboard Chemical Holdings . . . . . . . . . . . . 3,000,000 422,726
Leading Spirit Holdings Co., Ltd. . . . . . . . . . 6,399,800 2,192,421
Legend Holdings, Ltd. . . . . . . . . . . . . . . . 3,970,000 238,647
----------
2,853,794
----------
See notes to financial statements
14
<PAGE>
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE (NOTE A)
------------------ ------ -------------
COMMON STOCK AND OTHER EQUITY INTERESTS (continued)
HONG KONG (continued)
FOODS - (2.3%)
China Food Holdings, Ltd. . . . . . . . . . . . . . 4,500,000 $ 680,629
Ng Fung Hong, Ltd. *. . . . . . . . . . . . . . . . 5,200,000 2,487,234
----------
3,167,863
----------
HOTELS - (1.5%)
Shangri-La Asia, Ltd. . . . . . . . . . . . . . . . 1,500,000 2,065,154
----------
HOUSEHOLD APPLIANCES - (0.7%)
Hualing, Ltd. . . . . . . . . . . . . . . . . . . . 7,100,000 936,203
----------
OFFICE FURNISHINGS & SUPPLIES - (0.8%)
Lamex Holdings, Ltd.. . . . . . . . . . . . . . . . 3,600,000 1,047,120
----------
PRINTING - (0.5%)
Hung Hing Printing Group. . . . . . . . . . . . . . 2,494,000 701,241
----------
PROPERTY DEVELOPER - (8.7%)
Cheung Kong Holdings, Ltd.. . . . . . . . . . . . . 560,000 3,999,741
New World Development Co., Ltd. . . . . . . . . . . 1,035,000 4,642,816
Sun Hung Kai Properties, Ltd. . . . . . . . . . . . 355,300 3,387,418
----------
12,029,975
----------
REAL ESTATE - (3.7%)
China Overseas Land & Investment, Ltd.. . . . . . . 4,300,000 1,017,258
Henderson China Holding, Ltd. * . . . . . . . . . . 505,500 1,401,716
Wharf Holdings, Ltd.. . . . . . . . . . . . . . . . 740,000 2,740,741
----------
5,159,715
----------
RETAIL TRADE - (1.3%)
Goldlion Holdings, Ltd. . . . . . . . . . . . . . . 2,138,000 1,796,523
----------
TELECOMMUNICATIONS - (1.5%)
Hong Kong Telecommunications, Ltd.. . . . . . . . . 1,100,000 2,097,473
----------
TOTAL HONG KONG - (Cost $59,646,462) . . . . . . 49.6% 68,234,990
----- ----------
See notes to financial statements
15
<PAGE>
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE (NOTE A)
------------------ ------ -------------
COMMON STOCK AND OTHER EQUITY INTERESTS (continued)
HONG KONG - "H" SHARES
CHEMICALS - (4.0%)
Jilin Chemical Industrial * . . . . . . . . . . . . 2,234,000 $ 447,638
Shanghai Petrochemical Co., Ltd.. . . . . . . . . . 6,258,000 1,860,694
Tianjin Bohai Chemical. . . . . . . . . . . . . . . 3,442,000 307,023
Yizheng Chemical Fibre Co., Ltd.. . . . . . . . . . 3,854,000 1,033,812
Zhenhai Refining & Chemical . . . . . . . . . . . . 7,184,000 1,880,628
----------
5,529,795
----------
COMMUNICATION SERVICES - (0.3%)
Chengdu Telecom Cable Co. . . . . . . . . . . . . . 3,360,000 477,797
----------
CONSTRUCTION & MINING EQUIPMENT - (1.1%)
Luoyang Glass Co., Ltd. . . . . . . . . . . . . . . 5,743,000 1,469,995
----------
TOTAL HONG KONG - "H" SHARES - (Cost $9,975,968) 5.4% 7,477,587
---- ----------
TOTAL HONG KONG (INCLUDING
"H" SHARES - (Cost $69,622,430) 55.0% 75,712,577
---- ----------
UNITED STATES - "N" SHARES
ELECTRIC UTILITIES - (1.4%)
Shandong Huaneng Power Development, Ltd.. . . . . . 209,000 1,933,250
----------
FOODS - (1.6%)
Tingyi (Cayman Island) Holding Co. *. . . . . . . . 8,110,000 2,254,088
----------
TRANSPORTATION - (0.7%)
Tientsin Marine Shipping B *. . . . . . . . . . . . 3,463,000 935,010
----------
TOTAL UNITED STATES - (Cost $4,767,043) 3.7% 5,122,348
---- ----------
TOTAL COMMON STOCK AND OTHER
EQUITY INTERESTS - (Cost $89,825,443) 68.8% 94,701,865
---- ----------
16
<PAGE>
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME OF ISSUER PAR VALUE/
AND TITLE OF ISSUE SHARES VALUE (NOTE A)
------------------ ------ -------------
DIRECT INVESTMENTS
INDUSTRIALS - (1.8%)
China Southern Glass Co., Ltd., convertible bond,
5.25%, 7/17/00 (acquired 4/7/95) (#) . . . . . . . 2,500,000 $2,500,000
----------
TEXTILE - (0.0%)
Wing Hong Holdings Ltd. (acquired 5/31/95) (#). . . 150 0
----------
CERAMIC PRODUCTS - (5.8%)
Siu Fung Ceramics Concept Co., Ltd.
(acquired 11/30/94) * (#) . . . . . . . . . . . . 8,000 8,000,000
----------
CONSTRUCTION - (3.4%)
Road King (China) Infrastructure Ltd.
(acquired 3/29/96)* (#) . . . . . . . . . . . . . 7,800,000 1,987,063
Wai Kee China Investments (BVI) Company Ltd.
(acquired 10/23/95) (#) . . . . . . . . . . . . . 180 2,717,000
----------
4,704,063
----------
ELECTRICAL EQUIPMENT - (5.1%)
Hinca International Holdings Ltd.
(acquired 12/1/94) (#). . . . . . . . . . . . . . 41,311 7,000,000
----------
PLUMBING - (3.3%)
A-S China Plumbing Products Ltd.
(acquired 4/14/94) * (#). . . . . . . . . . . . . 450 4,500,300
----------
REAL ESTATE - (2.1%)
New World Sun City Ltd. (acquired 12/12/92) * (#) . 83 2,958,000
----------
TELECOMMUNICATIONS - (4.3%)
CM Telecom International Ltd.
(acquired 1/11/94) (#). . . . . . . . . . . . . . 77,006 5,918,175
----------
TOTAL DIRECT INVESTMENTS - (Cost $34,525,166) . 25.8% 35,580,538
----- ----------
See notes to financial statements
17
<PAGE>
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME OF ISSUER CURRENT MATURITY PRINCIPAL
AND TITLE OF ISSUE YIELD (MM/DD/YY) AMOUNT VALUE (NOTE A)
- ------------------ ------- ---------- --------- --------------
<S> <C> <C> <C> <C>
SHORT TERM INVESTMENTS
UNITED STATES
U.S. GOVERNMENT SECURITY - (3.1%)
United States Treasury Bill . . . . . . . 5.096% 05/02/96 3,703,000 $3,702,483
United States Treasury Bill . . . . . . . 4.968% 06/06/96 570,000 567,207
------------
4,269,690
------------
REPURCHASE AGREEMENT - (0.5%)
State Street Bank and Trust Co.
maturity value of $749,042 . . . . . . . 2.000% 05/01/96 749,000 749,000
(Dated 04/30/96, collateralized by ------------
$760,000 United States Treasury
Note, 5.50%, 11/15/98,
with a value of $761,399)
TOTAL UNITED STATES - (Cost $5,018,690) 3.6% 5,018,690
------ ------------
TOTAL INVESTMENTS - (Cost $129,369,299) 98.2% 135,301,093
OTHER ASSETS AND LIABILITIES (NOTE C) 1.8% 2,416,975
------ ------------
NET ASSETS 100.0% $137,718,068
------ ------------
------ ------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
* Denotes non-income producing security.
(#) 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 initially valued at acquisition cost. The Fund
can invest up to 25% of the proceeds from any offering of fund shares in
direct investments. Direct investments are valued at fair value as
determined by the Board of Directors as discussed in Note A to the
financial statements. Also see Note F.
See notes to financial statements.
18
<PAGE>
THE CHINA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS
Investments in listed investments, at value
(cost $94,844,133) (Notes A and E). . . . . . . . . . . . . $ 99,720,555
Investments in direct investments, at value
(cost $34,525,166) (Notes A and E). . . . . . . . . . . . . 35,580,538
Cash, including foreign currency, at value . . . . . . . . . 1,287,834
Receivable for currency sold . . . . . . . . . . . . . . . . 956,443
Receivable for investments sold (note f) . . . . . . . . . . 1,764,181
Dividends and interest receivable. . . . . . . . . . . . . . 210,202
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . 84,498
Deferred organization expenses . . . . . . . . . . . . . . . 36,375
------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . 139,640,626
------------
LIABILITIES
Payable for investments purchased. . . . . . . . . . . . . . 502,965
Payable for currency purchased. . . . . . . . . . . . . . . 956,443
Advisory fee payable (Note B). . . . . . . . . . . . . . . . 172,715
Administration, custodian and transfer agent fees payable. . 170,556
Shareholder services fee payable . . . . . . . . . . . . . . 13,895
Economic advisory fee payable (Note B) . . . . . . . . . . . 11,115
Accrued expenses and other liabilities . . . . . . . . . . . 94,869
------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . 1,922,558
------------
TOTAL NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . $137,718,068
------------
------------
COMPOSITION OF NET ASSETS:
Common stock, at par value . . . . . . . . . . . . . . . . . $ 108,449
Capital paid in excess of par. . . . . . . . . . . . . . . . 145,826,351
Distributions in excess of net investment income . . . . . . (335,321)
Accumulated net realized loss on investments and
foreign currency transactions . . . . . . . . . . . . . . . (13,812,972)
Net unrealized appreciation on investments
and foreign currency transactions . . . . . . . . . . . . . 5,931,561
------------
TOTAL NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . $137,718,068
------------
------------
NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . $12.70
($137,718,068 / 10,844,937 shares of common stock outstanding) ------
------
- --------------------------------------------------------------------------------
See notes to financial statements
19
<PAGE>
THE CHINA FUND, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividend income -- listed investments . . . . . . . . . . $ 813,014
Dividend income -- direct investments . . . . . . . . . . 457,199
Interest income -- listed investments . . . . . . . . . . 107,242
Interest income -- direct investments . . . . . . . . . . 59,427
------------
TOTAL INVESTMENT INCOME . . . . . . . . . . . . . . . . 1,436,882
------------
EXPENSES
Advisory fee . . . . . . . . . . . . . . . . . . . . . . . 1,039,543
Administration, custodian and transfer agent fees. . . . . 294,697
Directors' fees and expenses . . . . . . . . . . . . . . . 99,454
Shareholder services fee . . . . . . . . . . . . . . . . . 86,629
Economic advisory fee. . . . . . . . . . . . . . . . . . . 69,303
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . 49,726
Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 35,803
Printing and postage . . . . . . . . . . . . . . . . . . . 34,809
Audit and tax service fees . . . . . . . . . . . . . . . . 29,835
Amortization of deferred organization expenses . . . . . . 14,919
Miscellaneous expenses . . . . . . . . . . . . . . . . . . 13,245
------------
TOTAL EXPENSES. . . . . . . . . . . . . . . . . . . . . 1,767,963
------------
NET INVESTMENT LOSS . . . . . . . . . . . . . . . . . . . . . (331,081)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
Net realized loss on listed security transactions. . . . . . (1,335,473)
Net realized loss on foreign currency transactions . . . . . (2,220)
Net change in unrealized appreciation on listed investment
and foreign currency transactions . . . . . . . . . . . . . 5,351,525
Net change in unrealized appreciation on direct investment
transactions. . . . . . . . . . . . . . . . . . . . . . . . (4,533,438)
------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT
AND FOREIGN CURRENCY TRANSACTIONS . . . . . . . . . . . . . . (519,606)
------------
NET DECREASE IN NET ASSETS FROM OPERATIONS. . . . . . . . . . $ (850,687)
------------
------------
- --------------------------------------------------------------------------------
See notes to financial statements
20
<PAGE>
THE CHINA FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1996 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1995
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ (331,081) $ 1,042,160
Net realized gain (loss) on security transactions. . . . . . . . . . . . . . . (1,335,473) (12,272,422)
Net realized gain (loss) on foreign currency transactions. . . . . . . . . . . (2,220) (23,524)
Net change in unrealized appreciation on investments
and foreign currency transactions. . . . . . . . . . . . . . . . . . . . . . 818,087 (8,014,550)
------------ -------------
Net decrease in net assets resulting from operations . . . . . . . . . . . . . (850,687) (19,268,336)
------------ -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (986,629) (100,614)
Net realized gain on investments and foreign
currency transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . - (6,497,711)
------------ -------------
Total dividends and distributions to shareholders. . . . . . . . . . . . . . . (986,629) (6,598,325)
------------ -------------
CAPITAL SHARE TRANSACTIONS (NOTE C):
Reinvestment of distributions to shareholders. . . . . . . . . . . . . . . . . 42,382 277,488
------------ -------------
Total increase in net assets from capital stock transactions . . . . . . . . . 42,382 277,488
------------ -------------
NET DECREASE IN NET ASSETS (1,794,934) (25,589,173)
------------ -------------
NET ASSETS:
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,513,002 165,102,175
------------ -------------
End of period, including accumulated undistributed
(distributions in excess of) net investment income of
$(335,320) and $982,389, respectively. . . . . . . . . . . . . . . . . . . . $137,718,068 $ 139,513,002
------------ -------------
------------ -------------
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements
21
<PAGE>
THE CHINA FUND, INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING FOR THE PERIOD INDICATED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED APRIL YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
30, 1996 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
(UNAUDITED) 1995 1994 1993 1992 (1)
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE (2)
Net asset value, beginning of period . . . . . . . $ 12.87 $ 15.26 $ 17.35 $ 14.22 $ 13.83(3)
Net investment income (loss) . . . . . . . . . . . (.03) .10 (.03) .04 .02
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions. . . . . . . . . . . . . . . . . . (.05) (1.88) (.39) 3.14 .37
-------- -------- -------- -------- --------
Total from investment operations . . . . . . . . . (.08) (1.78) (.42) 3.18 .39
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income . . . . . . (.09) (.01) (.02) (.04) --
Dividends in excess of net investment income -- -- (.07) -- --
Distributions from net realized capital gains. . -- (.60) (.82) (.01) --
-------- -------- -------- -------- --------
Total distributions. . . . . . . . . . . . . . . . (.09) (.61) (.91) (.05) --
-------- -------- -------- -------- --------
Dilution due to rights offering. . . . . . . . . . -- -- (.76) -- --
-------- -------- -------- -------- --------
Net asset value, end of period . . . . . . . . . . $ 12.70 $ 12.87 $ 15.26 $ 17.35 $ 14.22
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Per share market value, end of period. . . . . . . $ 13.63 $ 11.75 $ 17.25 $ 18.50 $ 14.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN
(BASED ON MARKET VALUE). . . . . . . . . . . . . 16.82% (28.39)% 5.38% 32.66% (6.67)%
----- ------ ---- ----- -----
----- ------ ---- ----- -----
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's). . . . . . . . . $ 137,718 $ 139,513 $165,102 $138,932 $ 113,825
Ratio of expenses to average net assets. . . . . . 2.55%(4) 2.55% 2.49% 2.67% 2.34%(4)
Ratio of net investment income (loss)
to average net assets. . . . . . . . . . . . . . (0.48)%(4) 0.78% (0.11)% 0.24% 0.55%(4)
Portfolio turnover rate. . . . . . . . . . . . . . 19% 43% 58% 85% 18%
Average commission rate(5) . . . . . . . . . . . . $ 0.002 -- -- -- --
</TABLE>
(1) The Fund commenced investment operations on July 17, 1992.
(2) Based on average shares outstanding during the period.
(3) Net of offering costs of ($.12).
(4) Annualized.
(5) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
________________________________________________________________________________
See notes to financial statements.
22
<PAGE>
THE CHINA FUND, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 (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 following is a summary of significant accounting policies followed
by the Fund in the preparation of its financial statements.
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 reputable 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. Other 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 are valued at fair value as determined by the
Board of Directors based on advice from the Investment Manager and Direct
Investment Manager. The original cost is considered to be fair value unless the
Board of Directors, based on such advice, concludes there has been a material
change of a long-term nature and sufficient reliable information is available to
revalue these investments. All portfolio securities not denominated in United
States (U.S.) dollars are valued in the relevant foreign currency and that value
is translated into U.S. dollars at the prevailing foreign exchange rate.
FOREIGN CURRENCY TRANSLATIONS: The records of the Fund are maintained in U.S.
dollars. Foreign currencies, investments and other assets and liabilities are
translated at the current rate 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 in
securities.
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.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS: The Fund intends to distribute to its
stockholders, at least annually, all of its net investment income and will
distribute any net realized capital gains annually. Income and capital gains
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments of foreign currency transactions, losses
deferred due to wash sales and holding of passive foreign investment companies.
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 the
Internal Revenue Code available to certain investment companies, and to make
distributions of taxable income and capital gains sufficient to relieve it from
all, or substantially all, federal income and excise taxes.
DEFERRED ORGANIZATION EXPENSES: Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged to
operations ratably over a period of 60 months from the date that the Fund
commenced its investment operations.
NOTE B -- ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
HSBC Asset Management Hong Kong Limited (the "Investment Manager") serves as
investment manager pursuant to an investment advisory and management agreement
with the Fund. The Fund pays the Investment Manager a fee for its services at
an annual rate of 1.50% of the Fund's average weekly net assets. HSBC Private
Equity Management Hong Kong Limited (the "Direct Investment Manager") serves as
investment manager for the direct investment portfolio pursuant to a direct
investment management agreement. For its services, the Direct Investment
Manager is paid a fee from the Investment Manager.
Under the terms of an economic advisory agreement, the Fund pays HongkongBank
China Services, Limited. (the "Economic Adviser") an economic advisory fee at an
annual rate of 0.10% of the average weekly net assets of the Fund. The Economic
Adviser is an affiliate of the Investment Manager and the Direct Investment
Manager. The Economic Adviser provides research services regarding China's
economic, political and industrial developments.
For the six months ended April 30, 1996, the Fund incurred commissions on the
purchase and sale of securities of $192,860, of which $569 was paid to
affiliates of the Investment Manager and the Direct Investment Manager.
No director, officer or employee of the Investment Manager or Direct Investment
Manager or any affiliates of those entities will receive any compensation from
the Fund for serving as an officer or director of the Fund. The Fund pays each
of its directors who is not a director, officer or employee of the Investment
Manager or Direct Investment Manager or any affiliate thereof an annual fee of
$7,500 plus $1,000 for each Board of Directors' meeting 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
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE C -- CAPITAL STOCK
The Fund issued 2,855 shares valued at $42,382 to shareholders reinvesting their
dividends in the Fund's Dividend Reinvestment and Cash Purchase Plan. At April
30, 1996, 100,000,000 shares of $.01 par value common stock were authorized, of
which 10,844,937 shares were issued and outstanding.
NOTE D -- INVESTMENT TRANSACTIONS
For the six months ended April 30, 1996, the Fund had purchases and sales of
investment securities, other than short-term securities, of $25,325,293 and
$29,361,481, respectively. At April 30, 1996, the cost of investments for
federal income tax purposes was $129,476,737. Accordingly, gross unrealized
appreciation of investments was $19,224,329, while gross unrealized depreciation
of investments was $13,399,973, resulting in net unrealized appreciation of
investments of $5,824,356. In addition, the Fund has a capital loss
carryforward of $12,260,937 which may be utilized to offset capital gains
through December 31, 2003.
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.
NOTE F -- INSTALLMENT SALE
On September 23, 1994, the Fund entered into an agreement to sell its direct
investment in Hollco International Holdings, Ltd. ("Hollco") on an installment
basis over a 27-month period. Under the terms of the agreement, the Fund has
received proceeds and dividends totaling HK$7,521,875 (US$972,383) through April
30, 1996. The Fund is scheduled to receive the remaining proceeds of the sale,
in Hong Kong Dollars, as follows:
June 1996 HK$ 1,937,500
December 1996 1,073,563
---------------
Total HK$ 3,011,063
---------------
---------------
Utilizing the Hong Kong Dollar to US dollar exchange rate on April 30, 1996, the
remaining proceeds from the sale equate to US$389,253. In addition, the Fund is
entitled to dividends on the outstanding proceeds if Hollco has sufficient
surplus to pay such dividends. For accounting purposes, the Fund recorded no
gain on the sale and the resulting receivable is carried at the net investment
cost of US$54,579, after the reduction for proceeds and dividends received to
date. The Fund will utilize future proceeds and dividends to reduce the value
of this receivable at April 30, 1996, prior to recognizing any income or gains
from this transaction. However, the Fund is entitled to exercise an option to
retain 25% of its original investment prior to December 31, 1996.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE G -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NET REALIZED
AND UNREALIZED NET INCREASE
GAIN (LOSS) ON (DECREASE)
NET INVESTMENTS AND IN NET ASSETS
INVESTMENT INVESTMENT FOREIGN CURRENCY FROM MARKET PRICE
INCOME INCOME (LOSS) TRANSACTIONS OPERATIONS ON NYSE
_______________________________________________________________________________________________________________________________
Total Per Total Per Total Per Total Per
(000) Share (000) Share (000) Share (000) Share High Low
----- ----- ----- ----- ----- ----- ----- ----- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
July 31, 1992 $ 88 $ .01 $ (3) $ .00 $ 106 $ .02 $ 103 $ .02 $15.000 $14.000
October 31, 1992 850 .11 181 .02 2,716 .35 2,897 .37 14.625 11.750
------ ------- ------- ------- -------- ------- -------- -------
$ 938 $ .12 $ 178 $ .02 $ 2,822 $ .37 $ 3,000 $ .39
------ ------- ------- ------- -------- ------- -------- -------
------ ------- ------- ------- -------- ------- -------- -------
January 31, 1993 $ 751 $ .09 $ 82 $ .01 $ 638 $ .08 $ 720 $ .09 $14.750 $13.000
April 30, 1993 736 .09 24 .00 10,363 1.29 10,387 1.29 16.750 13.250
July 31, 1993 975 .12 130 .02 (9,981) (1.25) (9,851) (1.23) 18.125 15.375
October 31, 1993 1,013 .13 55 .01 24,236 3.02 24,291 3.03 18.750 15.250
------ ------- ------- ------- -------- ------- -------- -------
$3,475 $ .43 $ 291 $ .04 $ 25,256 $ 3.14 $ 25,547 $ 3.18
------ ------- ------- ------- -------- ------- -------- -------
------ ------- ------- ------- -------- ------- -------- -------
January 31, 1994 $ 756 $ .09 $ (182) $ (.02) $ 14,285 $ 1.78 $ 14,103 $ 1.76 $28.250 $17.750
April 30, 1994 386 .05 (444) (.05) (23,099) (2.88) (23,543) (2.93) 23.125 15.250
July 31, 1994 1,238 .12 272 .02 3,392 .32 3,664 .34 19.375 15.250
October 31, 1994 1,227 .11 180 .02 4,265 .39 4,445 .41 19.000 16.500
------ ------- ------- ------- -------- ------- -------- -------
$3,607 $ .37 $ (174) $ (.03) $ (1,157) $ (.39) $ (1,331) $ (.42)
------ ------- ------- ------- -------- ------- -------- -------
------ ------- ------- ------- -------- ------- -------- -------
January 31, 1995 $ 838 $ .08 $ (77) $ (.01) $(37,646) $ (3.48) $(37,723) $ (3.49) $17.000 $11.750
April 30, 1995 796 .07 (4) .00 2,361 .22 2,357 .22 13.375 11.625
July 31, 1995 1,873 .17 1,014 .09 12,579 1.16 13,592 1.25 14.625 11.875
October 31, 1995 966 .09 110 .02 2,395 .22 2,505 .24 13.000 11.625
------ ------- ------- ------- -------- ------- -------- -------
$4,473 $ .41 $ 1,043 $ .10 $(20,311) $ (1.88) $(19,269) $ (1.78)
------ ------- ------- ------- -------- ------- -------- -------
------ ------- ------- ------- -------- ------- -------- -------
January 31, 1996 $ 596 $ .05 $ (280) $ (.02) $ 7,461 $ .69 $ 7,181 $ .67 $15.750 $11.625
April 30, 1996 841 .08 (51) (.01) (7,981) (.74) (8,032) (.75) 15.000 12.000
------ ------- ------- ------- -------- ------- -------- -------
$1,437 $ .13 $ (331) $ (.03) $ (520) $ (.05) $ (851) $ (.08)
------ ------- ------- ------- -------- ------- -------- -------
------ ------- ------- ------- -------- ------- -------- -------
</TABLE>
26
<PAGE>
THE CHINA FUND, INC.
OTHER INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RESULTS OF ANNUAL STOCKHOLDER MEETING VOTING
1) ELECTION OF DIRECTORS - The shareholders of the Fund elected Joe O. Rogers,
Alan Tremain and Nigel S. Tulloch to the board of directors to hold
office until the annual meeting of stockholders held in 1999.
2) RATIFICATION OR REJECTION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -
The stockholders of the Fund ratified the selection of KPMG Peat Marwick
L.L.P. as independent public accountants of the Fund for the fiscal
year ending October 31, 1996.
27
<PAGE>
THE CHINA FUND, INC.
DIVIDENDS AND DISTRIBUTIONS;
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund will distribute to stockholders, 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
stockholder will be deemed to have elected, unless State Street Bank and Trust
Company, the Plan Agent, is otherwise instructed by the stockholder in writing,
to have all distributions automatically reinvested by the Plan Agent in Fund
shares pursuant to the Plan. Stockholders 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 State Street Bank and Trust Company, as paying
agent. Stockholders who do not wish to have distributions automatically
reinvested should notify the Fund, c/o the Plan Agent for The China Fund, Inc.
at P.O. Box 8200, Boston, Massachusetts 02266-8200.
The Plan Agent will serve as agent for the stockholders in administering the
Plan. 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
stockholders 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 Agent will, as agent 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 Agent, annually, in any amount from $100 to $3,000 for investment in the
Fund's Common Stock. The Plan Agent 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 Agent, 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 Agent, it is
suggested that participants send in voluntary cash payments to be received by
the Plan Agent 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.
28
<PAGE>
THE CHINA FUND, INC.
DIVIDENDS AND DISTRIBUTIONS;
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
(CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Plan Agent maintains all stockholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by stockholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each stockholder's proxy will include those
shares purchased pursuant to the Plan.
In the case of stockholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent 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 Agent'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 Agent'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 Agent 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 Agent by at least 90 days' written notice to all
shareholders. All correspondence concerning the Plan should be directed to the
Plan Agent for The China Fund, Inc. at P.O. Box 8200, Boston, Massachusetts
02266-8200.
29
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
THE CHINA FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES ADDRESS
The China Fund, Inc.
250 Park Avenue
New York, NY 10177
1-212-808-0500
1-888-CHN-CALL (246-2255)
DIRECTORS AND OFFICERS
John W. English, Director and Chairman of the Board
Bernard Asher, Director
Sir Alan Donald KCMG, Director
Michael F. Holland, Director
Burton Levin, Director
James J. Lightburn, Director
David F. J. Paterson, Director
Joe O. Rogers, Director
Alan Tremain, O.B.E., Director
Nigel S. Tulloch, Director
Thomas R. Callahan, Vice President, Treasurer and Secretary
Leonard B. Mackey, Jr., Assistant Secretary
INVESTMENT MANAGER
HSBC Asset Management Hong Kong Limited
DIRECT INVESTMENT MANAGER
HSBC Private Equity Management Hong Kong Limited
SHAREHOLDER SERVICING AGENT
Dewe Rogerson, Inc.
ADMINISTRATOR, CUSTODIAN, TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
State Street Bank and Trust Company
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
LEGAL COUNSEL
Rogers & Wells
