UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
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 AND TRUST COMPANY
2 AVENUE DE LAFAYETTE, 6TH FLOOR
P.O. BOX 5049
BOSTON, MA 02206-5049
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(Address of principal executive offices)(Zip code)
(Name and Address of Agent for Copy to:
Service)
Mary Moran Zeven Leonard B. Mackey, Jr., Esq.
Secretary Clifford Chance U.S. LLP
The China Fund, Inc. 31 West 52nd Street
2 Avenue de Lafayette New York, New York 10019
Boston, MA 02111
Registrant's telephone number, including area code: (888) 246-2255
Date of fiscal year end: October 31
Date of reporting period: July 31, 2006
ITEM 1. SCHEDULE OF INVESTMENTS.
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS
JULY 31, 2006 (UNAUDITED)
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NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
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COMMON STOCK AND OTHER EQUITY INTERESTS
HONG KONG
CONSUMER DISCRETIONARY -- (5.6%)
China Ting Group Holdings Ltd. ........................ 13,148,000 $ 2,876,395
China Travel International Investment Hong Kong,
Ltd. ................................................ 18,148,000 4,157,082
Parkson Retail Group Ltd. ............................. 1,080,500 3,580,485
Ports Design Ltd. ..................................... 2,678,500 4,067,369
Shangri-La Asia Ltd. .................................. 4,318,000 8,979,742
Yorkey Optical International Cayman Ltd. .............. 176,000 60,926
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23,721,999
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CONSUMER STAPLES -- (5.2%)
Chaoda Modern Agriculture (Holdings) Ltd. ............. 34,089,900 18,425,313
Li Ning Co. Ltd. ...................................... 3,726,000 3,701,690
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22,127,003
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ENERGY -- (0.6%)
China Rare Earth Holdings, Ltd. ....................... 15,254,000 2,767,851
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FINANCIALS -- (4.5%)
China Insurance International Holdings Co., Ltd.*...... 5,502,000 3,490,658
China Life Insurance Co., Ltd. ........................ 7,635,000 12,851,584
Shimao Property Holdings Ltd*.......................... 3,346,000 2,773,011
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19,115,253
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HEALTH CARE -- (4.1%)
China Shineway Pharmaceutical Group Ltd. .............. 7,615,000 5,585,790
Golden Meditech Co., Ltd. ............................. 35,040,000 9,469,417
Natural Beauty Bio-Technology, Ltd. ................... 32,780,000 2,573,230
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17,628,437
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INDEX FUND -- (1.3%)
Ishare Asia Trust...................................... 780,000 5,751,605
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INDUSTRIALS -- (5.5%)
Beiren Printing Machinery Holdings Ltd.+............... 7,000,000 1,549,410
China Fire Safety Enterprise Group Holdings Ltd. ...... 50,380,000 5,899,829
TPV Technology, Ltd. .................................. 9,968,000 9,877,308
Zhejiang Expressway Co. Ltd. .......................... 10,304,000 6,325,052
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23,651,599
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See notes to schedule of investments.
1
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2006 (UNAUDITED)
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NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
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COMMON STOCK AND OTHER EQUITY INTERESTS (CONTINUED)
HONG KONG (CONTINUED)
INFORMATION TECHNOLOGY -- (3.2%)
Arcontech Corp.*(2).................................... 18,386,000 $ 236,607
Digital China Holdings Ltd. ........................... 10,692,000 3,412,326
Lenovo Group Ltd. ..................................... 15,858,000 5,142,672
Solomon Systech Ltd. .................................. 19,892,000 4,863,757
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13,655,362
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MATERIALS -- (4.0%)
Asia Zirconium Ltd. ................................... 12,916,000 1,130,256
Fountain Set (Holdings), Ltd. ......................... 8,204,000 2,354,347
Ocean Grand Chemicals Holdings Ltd.(2)................. 17,379,000 1,386,616
Sinochem Hong Kong Holdings Ltd. ...................... 5,000,000 1,853,115
Zijin Mining Group Co., Ltd. .......................... 19,418,000 10,345,338
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17,069,672
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TELECOMMUNICATIONS -- (2.8%)
China Netcom Group Corp. (Hong Kong) Ltd. ............. 4,078,000 7,431,052
Comba Telecom Systems Holdings Ltd. ................... 16,118,000 4,335,082
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11,766,134
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UTILITIES -- (2.6%)
Xinao Gas Holdings, Ltd. .............................. 11,560,000 11,068,038
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TOTAL HONG KONG -- (Cost $111,207,818) 39.4% 168,322,953
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HONG KONG -- "H" SHARES
CONSUMER DISCRETIONARY -- (0.7%)
Lianhua Supermarket Holdings Co., Ltd. ................ 2,859,000 3,127,324
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ENERGY -- (3.5%)
China Oilfield Services Ltd. .......................... 12,650,000 6,869,780
China Shenhua Energy Co., Ltd. ........................ 4,536,500 8,161,462
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15,031,242
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INDUSTRIALS -- (1.9%)
BYD Co., Ltd.*......................................... 2,708,500 6,566,737
Sinotrans Ltd. ........................................ 4,399,000 1,335,998
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7,902,735
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See notes to schedule of investments.
2
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2006 (UNAUDITED)
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NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
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COMMON STOCK AND OTHER EQUITY INTERESTS (CONTINUED)
HONG KONG -- "H" SHARES (CONTINUED)
UTILITIES -- (2.1%)
Anhui Expressway Co., Ltd. ............................ 12,406,000 $ 9,100,107
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TOTAL HONG KONG -- "H" SHARES --
(Cost $21,755,099) 8.2% 35,161,408
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TOTAL HONG KONG (INCLUDING "H" SHARES) --
(Cost $132,962,917) 47.6% 203,484,361
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SINGAPORE
UTILITIES -- (1.7%)
Bio-Treat Technology Ltd. ............................. 9,799,000 7,321,484
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TOTAL SINGAPORE -- (Cost $4,045,565) 1.7% 7,321,484
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TAIWAN
CONSUMER DISCRETIONARY -- (3.3%)
Merry Electronics Co., Ltd. ........................... 3,260,507 10,503,633
Synnex Technologies International, Corp. .............. 1,078,000 948,011
Taiwan FamilyMart Co., Ltd. ........................... 1,648,592 2,592,522
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14,044,166
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CONSUMER STAPLES -- (1.3%)
Uni-President Enterprises Corp. ....................... 6,729,000 5,301,176
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FINANCIALS -- (4.6%)
Cathay Financial Holding Co., Ltd. .................... 5,438,000 11,623,561
Fubon Financial Holdings Co., Ltd. .................... 3,059,000 2,419,252
Yuanta Core Pacific Securities Co. .................... 8,983,000 5,719,123
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19,761,936
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INDUSTRIALS -- (0.8%)
Cheng Shin Rubber Industry Co., Ltd. .................. 4,129,481 3,391,952
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See notes to schedule of investments.
3
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2006 (UNAUDITED)
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NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
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COMMON STOCK AND OTHER EQUITY INTERESTS (CONTINUED)
TAIWAN (CONTINUED)
INFORMATION TECHNOLOGY -- (8.6%)
Advanced Semiconductor Engineering Inc. ............... 7,838,000 $ 6,868,930
Data Systems Consulting Co., Ltd. ..................... 4,362,043 3,836,051
Novatek Microelectronics Corp., Ltd. .................. 1,021,095 5,019,887
Powertech Technology Inc. ............................. 1,522,000 4,006,119
ShenMao Technology Inc. ............................... 948,000 3,647,379
Taiwan Green Point Enterprises Co., Ltd. .............. 1,348,524 2,997,727
Tripod Technology Corp.*............................... 3,334,095 10,231,657
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36,607,750
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MATERIALS -- (1.9%)
China Metal Products Co., Ltd. ........................ 3,584,000 5,045,113
Yieh United Steel Corp. ............................... 9,483,000 3,185,227
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8,230,340
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TOTAL TAIWAN -- (Cost $63,384,727) 20.5% 87,337,320
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UNITED STATES -- "N" SHARES
CONSUMER DISCRETIONARY -- (1.2%)
Chindex International, Inc.*........................... 69,987 622,884
The9 Ltd. ADR*......................................... 184,861 4,523,549
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5,146,433
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TELECOMMUNICATIONS -- (0.7%)
China Techfaith Wireless Communication Technology Ltd.
ADR*................................................. 290,316 2,949,611
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TOTAL UNITED STATES -- "N" SHARES -- (Cost
$9,441,301) 1.9% 8,096,044
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TOTAL COMMON STOCK AND OTHER EQUITY
INTERESTS -- (Cost $209,834,510) 71.7% 306,239,209
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WARRANTS
CONSUMER DISCRETIONARY -- (1.2%)
Youngor Group Co. Ltd. Access Product (expiration
10/26/10) 144A(2)(4)................................. 7,562,730 5,188,033
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5,188,033
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See notes to schedule of investments.
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THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2006 (UNAUDITED)
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NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
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WARRANTS (CONTINUED)
ENERGY -- (5.8%)
China Petroleum Access Product (expiration 01/20/10)
144A(2)(3)........................................... 5,539,000 $ 4,015,775
China Petroleum Access Product (expiration 01/20/11)
144A(2)(4)........................................... 7,016,997 5,087,323
China Yangtze Power Co. Ltd. Access Product (expiration
1/20/10) 144A(2)(4).................................. 7,577,738 5,887,902
China Yangtze Power Co. Ltd. Access Product (expiration
5/24/07) 144A(2)..................................... 1,136,661 401,753
Huaneng Power International Inc. Access Product
(expiration 1/20/10) 144A(2)(3)...................... 7,476,500 4,246,652
Huaneng Power International Inc. Access Product
(expiration 4/20/11) 144A(2)(4)...................... 9,343,031 5,306,842
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24,946,247
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FINANCIALS -- (1.1%)
China Merchants Bank Co. Ltd. Access Product
(expiration 10/26/10) 144A(2)(4)..................... 5,290,407 4,888,336
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4,888,336
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INDUSTRIALS -- (9.7%)
Baoding Tianwei Baobian Electric Co., Ltd. Access
Product (expiration 01/20/10)(2)(3).................. 1,761,193 3,688,120
Shanghai International Airport Co. Ltd. Access Product
(expiration 1/20/10) 144A*(2)(3)..................... 5,662,300 9,722,169
Shanghai International Airport Co. Ltd. Access Product
(expiration 10/26/10) 144A*(2)(4).................... 2,961,967 5,088,659
Shanghai Zhenhua Port Machinery Co. Ltd. Access Product
(expiration 10/26/10) 144A(2)(4)..................... 13,219,652 15,863,582
Xinjiang Tebian Electric Apparatus Stock Co. Ltd.
Access Product (expiration 10/26/10) 144A*(2)(4)..... 4,676,642 6,832,574
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41,195,104
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See notes to schedule of investments.
5
THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2006 (UNAUDITED)
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NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE (NOTE A)
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WARRANTS (CONTINUED)
MATERIALS -- (1.5%)
Qinghai Salt Lake Potash Co. Ltd. Access Product
(expiration 06/29/07)*(2)(4)......................... 958,449 $ 213,734
Qinghai Salt Lake Potash Co. Ltd. Access Product
(expiration 10/26/10) 144A(2)(4)..................... 2,683,657 6,094,585
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6,308,319
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TOTAL WARRANTS -- (Cost $59,209,001) 19.3% 82,526,039
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DIRECT INVESTMENTS
FINANCIALS -- (0.7%)
Captive Finance, Ltd., (acquired 5/24/02)*+(1)(2)...... 2,000,000 3,045,000
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INFORMATION TECHNOLOGY -- (2.3%)
CDW Holding Ltd., (acquired 1/26/05)+(5)............... 60,000,000 9,497,879
teco Optronics Corp., (acquired 4/26/04)*(1)(2)........ 1,861,710 150,000
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9,647,879
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TOTAL DIRECT INVESTMENTS -- (Cost $5,376,348) 3.0% 12,692,879
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TOTAL INVESTMENTS -- (Cost $274,419,859)** 94.0% 401,458,127
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OTHER ASSETS AND LIABILITIES 6.0% 25,462,542
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NET ASSETS 100.0% $426,920,669
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Notes to Schedule of Investments
* Denotes non-income producing security
(1) 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
procedures applied by the Board of Directors in arriving at its estimate of
value of securities without readily available market values comply with the
China Fund, Inc.'s (the "Fund") policies for valuing Direct Investments at
original cost unless the Board of Directors, based on advice from the Direct
Investment Manager, concludes that there has been a material change of a
long-term nature and sufficient reliable information is available to revalue
these investments. Determination of fair values involves subjective judgment
and, because of the inherent uncertainty of valuation, the Board of
Directors' estimated values may differ significantly from the values that
would have been used had a ready market for the securities existed, and the
differences could be material.
(2) Security valued at fair value using methods determined in good faith by or
at the direction of the Board of Directors (see note (1) above).
(3) Warrants issued by Citigroup Global Markets Holdings.
(4) Warrants issued by Credit Lyonnais (CLSA)
(5) This investment is listed on the Singapore Stock Exchange, however is still
managed by ADCM.
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THE CHINA FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2006 (UNAUDITED)
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+ Affiliated issuer, as defined in the Investment Company Act of 1940,
includes issuers in which the Fund held 5% or more of the outstanding
securities.
(A) 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. 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
based on advice from the Direct Investment Manager, ADCM. The Direct
Investment's 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.
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.
** At July 31, 2006, aggregate gross unrealized appreciation for all securities
for which there was an excess of value over financial reporting cost was
$145,774,442 and aggregate gross unrealized depreciation for all securities
for which there was an excess of financial reporting cost over value was
$18,736,174 and net appreciation for financial reporting purposes was
$127,038,268. At July 31, 2006, aggregate cost for financial reporting
purposes was $274,419,859.
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ITEM 2. 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-Q that includes the
disclosure required by this paragraph based on their evaluation of the
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 Securities Exchange
Act of 1934 (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 last fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 3. EXHIBITS.
The certification required by Rule 30a-2 of the 1940 Act is attached as an
exhibit to this filing.
8
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 and Chief Executive Officer
Date: September 28, 2006
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 and Chief Executive Officer
Date: September 28, 2006
By: /s/ William C. Cox
William C. Cox
Treasurer and Chief Financial Officer
Date: September 27, 2006