Attached files
file | filename |
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8-K - CHINA FUND INC | v204347_8k.htm |
THE CHINA FUND, INC.
(CHN)
|
The Martin Currie
Shanghai team |
IN BRIEF
|
||||||||
Net asset value per
share
|
US$35.36
|
At 30 November
2010
|
US$ return
|
||||||
Market
price
|
US$32.94
|
China Fund
NAV
|
MSCI
Golden Dragon*
|
||||||
Premium/(discount)
|
(6.84
|
%)
|
%
|
%
|
|||||
Fund size
|
US$805.6m
|
One month
|
2.6
|
|
(0.3
|
)
|
|||
Source: State Street Bank and
Trust Company.
|
Year to
date
|
18.7
|
9.9
|
||||||
One year
|
24.7
|
13.4
|
|||||||
Three years
%pa
|
5.8
|
(3.2
|
)
|
||||||
Past performance is not a guide to
future returns.
Source: State Street Bank and
Trust Company. NAV performance.
*Source for index data:
MSCI.
|
|||||||||
MANAGER’S COMMENTARY | |
It
has been a while since I played Snakes & Ladders, my children having
long moved on to more vivid games such as Xbox Zombie Massacre IV.
However, managing a fund in China this year has brought this old favorite
back to mind. In November the main snake was inflation; food inflation
above 10% is not something that a Communist politician can ignore.
Although I think there is an understanding in Beijing about the
limitations of any counter-measures, expect crowd-pleasing initiatives –
and the market remaining choppy – until food prices are safely under
control. The reserve-requirement ratio at the big state banks was raised
twice and now stands at an all-time high of 18.5%. The authorities also
increased fees and the cost of margin on domestic commodity markets.
Meanwhile, the State Council has exempted trucks carrying agricultural
products from any highway tolls.
There
were smaller vipers too: Uncle Kim was up to his old tricks again
(according to Chinese papers the exchange of fire between North and South
Korea was simultaneous…). The investment banks are in a lather of
excitement to place out as much paper as the market will bear before
Christmas. Whole new sectors are springing into existence: Chinese
e-commerce; car retailers; baby-formula producers. As for the ladders,
these were the old combination of strong earnings growth, sensible
infrastructure planning and high savings (renminbi deposits in October
rose by 19.8%, despite real deposit rates of about -2% p.a.).
The
managers had a chance to greet many Western fund managers in November.
They arrived depressed and nervous but could be seen, after a couple of
days of decent food and confident corporate presentations, to blossom in
the warmth of the Chinese economic miracle, before heading back to the
economic arctic of London and New York. This gap between Chinese realities
and Western perceptions will continue to throw up investment
opportunities. The Western media continues to feature stories about a
‘China bubble’, which I just don’t see – not yet at least…
November
ended with municipal elections in Taiwan. The result – the KMT won three
of the five main cities – was taken well by the market. However, the KMT
only won 44.9% of the total vote versus the DPP’s 49.8%, which means that
the KMT must improve policy execution, especially in the DPP’s strongholds
in southern Taiwan, if President Ma is to secure re-election in 2012. Now
that the elections are out of the way, expect cross-strait relations to
warm up. The sixth ‘Chiang–Chen’ meeting, in which Taiwan and Chinese
representatives meet to negotiate further free-trade agreements across the
straits, will take place on 15 December and will discuss medical
cooperation. Centaline Property, the famous property agent in Hong Kong,
aims to set up a branch in Taipei to market luxury real estate to Chinese
buyers. Chinese tourists’ contribution to GDP is estimated to reach NT$ 65
billion for 2010 (0.28%). Taiwan intends to accept individual tourists
soon. An increasing number of mainland companies are now listing shares in
Taiwan; the latest was leading electronics distributor and software
developer Digital China.
After a strong start to November,
the Chinese markets and currencies ended the month not far from where they
began. But then it is better to be playing Snakes & Ladders than
Zombie Massacre IV.
|
INVESTMENT STRATEGY
The Fund
is 95% invested with holdings in 60 companies. Investments in Taiwan now account
for 19% of the portfolio, A-shares 15% and direct investments 7%.
In line
with our temporarily more cautious approach to the market, we sold more in
November than we bought. This included profit-taking on highflying, and now
rather expensive, stocks Intime
Department Store, Shineway
Pharmaceutical and Zhejiang
China Commodities City. We also sold Cathay
Financial, which would be hurt by a rising NT dollar, and The9,
which is unwilling to pay us any dividend from its huge, idle cash
pile.
On the
buy side, we took a placing in Asian
Citrus, Asia’s largest orange grower with young orchards, and
participated (briefly) in the IPO of Chinese wealth manager Noah. The miniscule
allocation and strong first-day performance was a disincentive to building a
long-term holding.
On the
positive side, enterprise-resource-planning-software house Hand
Enterprise Solutions has been approved to list on the domestic Chinext
market; this will probably take place in February next year.
Chris
Ruffle, Martin Currie Inc*
*Martin
Currie Ltd and Heartland Capital Management Ltd (HCML) have established MC China
Ltd (MCCL), as a joint venture company, to provide investment management or
investment advisory services to the range of China investment products managed
by Martin Currie.
MCCL has
appointed Martin Currie Investment Management Ltd (MCIM), or its affiliates, as
investment manager of Martin Currie’s China investment products. HCML has
seconded both Chris Ruffle and Shifeng Ke to MCIM, or its affiliates, on a full
time basis with the same roles and responsibilities as if they were full time
employees.
30 NOVEMBER 2010
FUND
DETAILS
|
Market cap
|
US$750.4m
|
Shares
outstanding
|
22,781,762
|
Exchange
listed
|
NYSE
|
Listing
date
|
July 10,
1992
|
Listed and direct investment
manager
|
Martin Currie
Inc
|
Source: State Street Bank and
Trust Company.
|
ASSET ALLOCATION
INDUSTRY
ALLOCATION
|
||||||||
The
China Fund,
|
MSCI
Golden
|
|||||||
Inc
%
|
Dragon
%
|
Healthcare
|
18.9 | 0.4 | ||||||
Consumer
discretionary
|
19.1 | 6.2 | ||||||
Consumer
staples
|
20.3 | 3.3 | ||||||
Financials
|
15.0 | 37.2 | ||||||
Industrials
|
6.1 | 7.4 | ||||||
Information
technology
|
6.2 | 19.6 | ||||||
Materials
|
3.8 | 6.5 | ||||||
Energy
|
2.4 | 8.8 | ||||||
Utilities
|
1.8 | 3.5 | ||||||
Telecommunications
|
1.5 | 7.0 | ||||||
Other assets &
liabilities
|
4.9 | — | ||||||
*Source: State Street Bank and
Trust Company. Source for index data: MSCI
|
PERFORMANCE
|
(US$ RETURNS) | |||||||
NAV
|
Market
price
|
|||||||
%
|
%
|
One month
|
2.6 | (1.5 | ) | |||||
Year to
date
|
18.7 | 16.7 | ||||||
Three years
%pa
|
5.8 | 8.5 | ||||||
Past performance is not a guide to
future returns.
|
||||||||
Three year returns are
annualized.
|
||||||||
Source: State Street Bank and
Trust Company
|
15
LARGEST HOLDINGS (49.1%)
|
|||||
Fund
%
|
China Medical System
Holdings
|
Healthcare
|
6.6 | |||
Huiyin Household
Appliances
|
Consumer
discretionary
|
5.2 | |||
Wumart
Stores
|
Consumer
staples
|
4.7 | |||
Ping An
Insurance
|
Financials
|
4.0 | |||
Far Eastern Department
Stores
|
Consumer
discretionary
|
3.3 | |||
Shandong Weigao
Group
|
Healthcare
|
3.2 | |||
Hsu Fu Chi
International
|
Consumer
staples
|
3.0 | |||
Zhejiang China
Commodities
|
Financials
|
2.8 | |||
Ruentex
Development
|
Financials
|
2.7 | |||
Boshiwa
International
|
Consumer
discretionary
|
2.7 | |||
Sinopharm Medicine
Holding
|
Healthcare
|
2.7 | |||
China Fishery
Group
|
Consumer
staples
|
2.7 | |||
Zong Su
Foods
|
Consumer
staples
|
1.9 | |||
China Bright
|
Healthcare
|
1.8 | |||
WuXi PharmaTech
Cayman
|
Healthcare
|
1.8 |
DIRECT
INVESTMENTS (6.6%)
|
|||||
Fund
%
|
Zong Su
Foods
|
Consumer
staples
|
1.9 | |||
China Bright
|
Healthcare
|
1.8 | |||
Hand Enterprise Solutions
(preffered)
|
Information
technology
|
1.8 | |||
Qingdao Bright
Moon
|
Industrials
|
1.1 | |||
Ugent
Holdings
|
Industrials
|
0.0 | † | ||
China Silicon
|
Information
technology
|
0.0 | |||
Hand Enterprise Solutions (common
stock)
|
Information
technology
|
0.0 |
Source: State Street Bank and Trust
Company.
† Ugent faces an uncertain future with its
parent company pursuing other interests and a lack of working capital to support
its operations at present. Therefore, the value of Ugent has been written down
to zero.
FUND PERFORMANCE (BASED ON NET
ASSET VALUE)
|
(US$
RETURNS)
|
||||||||||
One
month
%
|
Three
months
%
|
Calendar year
to date
%
|
One
year
%
|
Three
years
%pa
|
Five
years
%pa
|
Since
launch
%pa
|
|||||
The China Fund,
Inc.
|
2.6
|
|
12.0
|
18.7
|
24.7
|
5.8
|
27.8
|
12.6
|
|||
MSCI Golden
Dragon
|
(0.3
|
)
|
13.8
|
9.9
|
13.4
|
(3.2
|
)
|
13.3
|
10.7
|
||
Hang Seng Chinese
Enterprise
|
(2.8
|
)
|
12.6
|
0.0
|
(1.5
|
)
|
(9.2
|
)
|
20.5
|
20.0
|
|
Shanghai Stock Exchange
180
|
(7.6
|
)
|
8.8
|
(13.8
|
)
|
(12.2
|
)
|
(12.4
|
)
|
31.0
|
n/a
|
Past performance is not a guide to
future returns. Actual returns to a shareholder of The Fund will be based on
market price and reflect transactions and expenses.
Source: State Street Bank and Trust
Company. Launch date 10 July 1992. Three, five year and since launch returns are
all annualized.
Source for index data: MSCI for the MSCI
Golden Dragon and Copyright 2010 Bloomberg LP for the Hang Seng China Enterprise
and the Shanghai Stock Exchange 180. For a full description of each index please
see the index descriptions section.
PERFORMANCE IN PERSPECTIVE
Past performance is not a guide to
future returns.
Source: Martin Currie Inc as
at 30 November 2010.
THE CHINA FUND INC.
PREMIUM/DISCOUNT
Past performance is not a guide to
future returns.
Source: Martin Currie Inc as
at 30 November 2010.
10 YEAR DIVIDEND HISTORY
CHART
Total
|
0.00 | 0.13 | 0.21 | 1.78 | 3.58 | 2.51 | 4.01 | 12.12 | 5.82 | 0.26 | ||||||||||||||||||||||||||||||
Income
|
0.00 | 0.13 | 0.06 | 0.07 | 0.20 | 0.22 | 0.30 | 0.28 | 0.48 | 0.26 | ||||||||||||||||||||||||||||||
Long-term
capital
|
0.00 | 0.00 | 0.00 | 0.67 | 3.27 | 2.29 | 2.73 | 9.00 | 5.34 | 0.00 | ||||||||||||||||||||||||||||||
Short-term
capital
|
0.00 | 0.00 | 0.15 | 1.04 | 0.11 | 0.00 | 0.98 | 2.84 | 0.00 | 0.00 |
Past performance is not a guide to
future returns.
Source: State Street Bank and Trust
Company.
30 NOVEMBER
2010
|
|||||||
Asset
Allocation
|
Company (BBG
ticker)
|
Price
|
Holding
|
Value US$
|
% of
portfolio
|
||
Hong Kong H
|
24.7
|
||||||
China Medical System
Holdings
|
867
|
HK
|
HK$5.7
|
72,353,760
|
$53,202,665
|
6.6
|
|
Wumart
Stores
|
8277
|
HK
|
HK$20.5
|
12,018,000
|
$37,530,134
|
4.7
|
|
Shandong Weigao Group Medical
Polymer
|
8199
|
HK
|
HK$21.4
|
9,176,000
|
$25,346,434
|
3.2
|
|
Boshiwa International
Holding
|
1698
|
HK
|
HK$6.9
|
24,932,000
|
$22,153,501
|
2.8
|
|
Sinopharm Medicine
Holding
|
297
|
HK
|
HK$28.4
|
6,056,800
|
$22,112,226
|
2.7
|
|
ZTE Corp.
|
763
|
HK
|
HK$28.6
|
3,212,889
|
$11,812,396
|
1.4
|
|
Zijin Mining
Group
|
2899
|
HK
|
HK$7.3
|
12,050,000
|
$11,358,848
|
1.4
|
|
Asian Citrus
Holdings
|
73
|
HK
|
HK$9.3
|
6,677,000
|
$7,996,510
|
1.0
|
|
Fook Woo
|
923
|
HK
|
HK$2.8
|
19,836,000
|
$7,024,622
|
0.9
|
|
Taiwan
|
19.2
|
||||||
Far Eastern Department
Stores
|
2903
|
TT
|
NT$42.0
|
19,543,604
|
$26,895,897
|
3.3
|
|
Ruentex Development
Co
|
9945
|
TT
|
NT$53.6
|
12,694,000
|
$22,320,951
|
2.8
|
|
WPG Holdings
Co
|
3702
|
TT
|
NT$56.7
|
7,457,103
|
$13,870,835
|
1.7
|
|
Uni-President Enterprises
Corp.
|
1216
|
TT
|
NT$42.2
|
10,023,901
|
$13,860,656
|
1.7
|
|
FamilyMart
|
5903
|
TT
|
NT$87.7
|
4,501,652
|
$12,951,526
|
1.6
|
|
China Metal
Products
|
1532
|
TT
|
NT$32.3
|
11,500,347
|
$12,186,048
|
1.5
|
|
Lien Hwa
Industrial
|
1229
|
TT
|
NT$23.1
|
13,411,881
|
$10,141,683
|
1.3
|
|
KGI
Securities
|
6008
|
TT
|
NT$14.1
|
16,984,780
|
$7,828,628
|
1.0
|
|
Synnex
Technology
|
2347
|
TT
|
NT$76.3
|
3,088,006
|
$7,729,512
|
1.0
|
|
Taiwan Life 4percent Conv
Bond*
|
n/a
|
NT$112.6
|
2,000,000
|
$7,384,565
|
0.9
|
||
Chinatrust
Financial
|
2891
|
TT
|
NT$18.4
|
11,376,288
|
$6,848,352
|
0.8
|
|
Yuanta Financial
Holdings
|
2885
|
TT
|
NT$18.7
|
10,520,593
|
$6,436,777
|
0.8
|
|
Fubon Financial
Holdings
|
2881
|
TT
|
NT$37.2
|
5,195,134
|
$6,339,998
|
0.8
|
|
Hong Kong
|
17.0
|
||||||
Huiyin Household
Appliances
|
1280
|
HK
|
HK$2.0
|
160,413,750
|
$41,728,150
|
5.2
|
|
Xinao Gas
Holdings
|
2688
|
HK
|
HK$22.4
|
5,084,000
|
$14,599,789
|
1.8
|
|
Natural Beauty
Bio-Technology
|
157
|
HK
|
HK$2.3
|
47,710,000
|
$14,069,578
|
1.7
|
|
Ports
Design
|
589
|
HK
|
HK$24.0
|
4,549,500
|
$14,060,834
|
1.7
|
|
Intime Department Store
Group
|
1833
|
HK
|
HK$12.1
|
7,054,629
|
$10,919,803
|
1.4
|
|
Chaoda Modern Agriculture
(Holdings)
|
682
|
HK
|
HK$6.3
|
12,619,357
|
$10,270,473
|
1.3
|
|
Fushan International Energy
Group
|
639
|
HK
|
HK$5.4
|
12,018,000
|
$8,295,320
|
1.0
|
|
Shangri-La Asia
|
69
|
HK
|
HK$19.5
|
3,061,555
|
$7,703,761
|
1.0
|
|
China Shineway Pharmaceutical
Group
|
2877
|
HK
|
HK$25.2
|
2,222,000
|
$7,139,220
|
0.9
|
|
Golden Meditech
Co
|
801
|
HK
|
HK$1.5
|
35,040,000
|
$6,948,979
|
0.9
|
|
Yorkey Optical International
Cayman
|
2788
|
HK
|
HK$1.3
|
5,312,926
|
$903,117
|
0.1
|
|
FUJI Food & Catering
Services
|
1175
|
HK
|
HK$0.0
|
5,462,000
|
$0
|
0.0
|
|
Equity Linked Securities ('A'
Shares)
|
14.5
|
||||||
Ping An
Insurance
|
n/a
|
US$8.5
|
3,775,759
|
$32,105,558
|
4.0
|
||
Zhejiang China Commodities City
Group
|
n/a
|
US$5.4
|
2,771,970
|
$14,827,267
|
1.8
|
||
Shanghai
Qiangsheng
|
n/a
|
US$1.1
|
10,482,652
|
$11,792,386
|
1.5
|
||
Shanghai Yuyuan
Tourist
|
n/a
|
US$2.1
|
4,293,036
|
$9,150,147
|
1.1
|
||
Suning
Appliance
|
n/a
|
US$2.1
|
4,311,019
|
$8,936,742
|
1.1
|
||
Wuliangye
Yibin
|
n/a
|
US$5.9
|
1,403,507
|
$8,225,955
|
1.0
|
||
Zhejiang
Guyuelongshan
|
n/a
|
US$2.3
|
3,407,200
|
$7,895,791
|
1.0
|
||
Shanghai International Airport
|
n/a
|
US$1.8
|
4,326,700
|
$7,884,155
|
1.0
|
||
Tangshan Jidong
Cement
|
n/a
|
US$3.1
|
2,354,087
|
$7,393,058
|
0.9
|
||
Citic
Securities
|
n/a
|
US$1.9
|
2,475,000
|
$4,759,185
|
0.6
|
||
China Railway Construction
Group
|
n/a
|
US$1.0
|
3,932,600
|
$3,936,533
|
0.5
|
||
Direct
|
6.6
|
||||||
Zong Su
Foods
|
n/a
|
US$5,603.0
|
2,677
|
$15,000,034
|
1.9
|
||
China Bright
|
n/a
|
HK$7.9
|
14,665,617
|
$14,995,364
|
1.9
|
||
Hand Enterprise Solutions
(preferred)
|
n/a
|
US$1.8
|
8,027,241
|
$14,192,162
|
1.7
|
||
Qingdao Bright
Moon
|
n/a
|
US$0.3
|
31,827,172
|
$9,293,534
|
1.1
|
||
Ugent
Holdings
|
n/a
|
HK$0.0
|
177,000,000
|
$0
|
0.0
|
||
China Silicon
Corp.
|
n/a
|
US$0.0
|
3,014,731
|
$0
|
0.0
|
||
Hand Enterprise Solutions (common
stock)
|
n/a
|
US$0.0
|
500,000
|
$0
|
0.0
|
||
Singapore
|
6.6
|
||||||
Hsu Fu Chi
International
|
HFCI SP
|
SG$3.3
|
9,484,000
|
$24,456,998
|
3.0
|
||
China Fishery
Group
|
CFG SP
|
SG$2.2
|
13,255,000
|
$21,884,202
|
2.7
|
||
Financial One
Corp
|
FIN SP
|
SG$0.4
|
12,030,000
|
$3,735,459
|
0.5
|
||
CDW Holding
|
CDW SP
|
SG$0.1
|
51,323,000
|
$3,303,889
|
0.4
|
*This is an unlisted convertible bond.
Shares in Taiwan Life are listed on the Taiwan Stock
Exchange.
Asset
Allocation
|
Company (BBG
ticker)
|
Price
|
Holding
|
Value US$
|
% of
portfolio
|
USA
|
6.5
|
||||
WuXi PharmaTech
Cayman
|
WX US
|
US$16.8
|
883,490
|
$14,798,458
|
1.8
|
Far East Energy
|
FEEC US
|
US$0.7
|
17,000,259
|
$11,560,176
|
1.4
|
Hollysys Automation
Technologies
|
HOLI US
|
US$13.6
|
808,200
|
$10,999,602
|
1.3
|
Sina Corp.
|
SINA US
|
US$64.0
|
119,800
|
$7,669,596
|
1.0
|
Mindray Medical
International
|
MR US
|
US$26.3
|
291,700
|
$7,657,125
|
1.0
|
Other assets &
liabilities
|
$39,215,306
|
4.9
|
INDEX
DESCRIPTIONS
MSCI Golden Dragon
Index
The MSCI Golden Dragon is a free
float-adjusted market capitalization index that is designed to measure equity
market performance in the China region. As of May 2005 the MSCI Golden
Dragon Index consisted of the following country indices: China, Hong Kong and Taiwan.
Hang Seng China Enterprise Index
The Hang Seng China Enterprise Index is
a capitalization-weighted index comprised of state-owned Chinese companies
(H-shares) listed on the Hong Kong Stock Exchange and included in Hans Seng
Mainland China index.
Shanghai Stock Exchange 180
Index
The Shanghai Stock Exchange 180 'A'
Share Index is a capitalization-weighted index. The index tracks the daily price
performance of the 180 most representative 'A' share stocks listed on the
Shanghai Stock Exchange.
OBJECTIVE
The investment objective of the Fund is
to achieve long term capital appreciation. The Fund seeks to achieve its
objective through investment in the equity securities of companies and other
entities with significant assets, investments, production activities, trading or
other business interests in China or which derive a significant part of
their revenue from China.
The Fund has an operating policy that
the Fund will invest at least 80% of its assets in China companies. For this purpose, 'China
companies' are (i) companies for which the principal securities trading market
is in China; (ii) companies for which the principal securities trading market is
outside of China or in companies organized outside of China, that in both cases
derive at least 50% of their revenues from goods or services sold or produced,
or have a least 50% of their assets in China; or (iii) companies organized in
China. Under the policy, China will mean the People's Republic of
China, including Hong Kong, and Taiwan. The Fund will provide its stockholders
with at least 60 days' prior notice of any change to this
policy.
CONTACTS
The China Fund, Inc.
c/o State Street Bank
and Trust Company
2 Avenue de Lafayette
PO Box 5049
Boston, MA 02206-5049
Tel: (1) 888 CHN-CALL
(246 2255)
www.chinafundinc.com
Important
information: This document
is issued and approved by Martin Currie Inc (MC Inc), as investment adviser of
The China Fund Inc (the Fund). MC Inc is authorised and regulated by the
Financial Services Authority (FSA) and incorporated under limited liability in
New York, USA. Registered in Scotland (No BR2575), registered address
Saltire Court, 20 Castle Terrace, Edinburgh, EH1 2ES. Information herein is believed to be
reliable but has not been verified by MC Inc. MC Inc makes no representation or
warranty and does not accept any responsibility in relation to such information
or for opinion or conclusion which the reader may draw from the newsletter.
Martin Currie Ltd and Heartland Capital
Management Ltd (HCML) have established MC China Ltd (MCCL), as a joint venture
company, to provide investment management or investment advisory services to our
China product. MCCL has appointed Martin
Currie Investment Management Ltd (MCIM), or its affiliates, as investment
manager of our China funds. HMCL has seconded both Chris
Ruffle and Shifeng Ke to MCIM or its affiliates on a full time basis with the
same roles and responsibilities as if they were full time
employees.
The Fund is classified as a
'non-diversified' investment company under the US Investment Company Act of 1940
as amended. It meets the criteria of a closed ended US mutual fund and its shares are listed
on the New York Stock Exchange. MC Inc has been appointed investment adviser to
the Fund.
Investors are advised that they will not
generally benefit from the rules and regulations of the United Kingdom Financial
Services and Markets Act 2000 and the FSA for the protection of investors, nor
benefit from the United Kingdom Financial Services Compensation Scheme, nor have
access to the Financial Services Ombudsman in the event of a dispute. Investors
will also have no rights of cancellation under the FSA's Conduct of Business
Sourcebook of the United
Kingdom.
This newsletter does not constitute an
offer of shares. MC Inc, its ultimate and intermediate holding companies,
subsidiaries, affiliates, clients, directors or staff may, at any time, have a
position in the market referred to herein, and may buy or sell securities,
currencies, or any other financial instruments in such markets. The information
or opinion expressed in this newsletter should not be construed to be a
recommendation to buy or sell the securities, commodities, currencies or
financial instruments referred to herein.
The information provided in this report
should not be considered a recommendation to purchase or sell any particular
security. There is no assurance that any securities discussed herein will remain
in an account's portfolio at the time you receive this report or that securities
sold have not been repurchased.
It should not be assumed that any of the
securities transactions or holdings discussed here were or will prove to be
profitable, or that the investment recommendations or decisions we make in the
future will be profitable or will equal the investment performance of the
securities discussed herein.
Investing in the Fund involves certain
considerations in addition to the risks normally associated with making
investments in securities. The value of the shares issued by the Fund, and the
income from them, may go down as well as up and there can be no assurance that
upon sale, or otherwise, investors will receive back the amount originally
invested. There can be no assurance that you will receive comparable performance
returns, or that investments will reflect the performance of the stock examples
contained in this document. Movements in foreign exchange rates may have a
separate effect, unfavorable as well as favorable, on the gain or loss otherwise
experienced on an investment. Past performance is not a guide to future returns.
Accordingly, the Fund is only suitable for investment by investors who are able
and willing to withstand the total loss of their investment. In particular,
prospective investors should consider the following risks:
à
|
The companies quoted on Greater
Chinese stock exchanges are exposed to the risks of political, social and
religious instability, expropriation of assets or nationalisation, rapid
rates of inflation, high interest rates, currency depreciation and
fluctuations and changes in taxation, which may affect income and the
value of investments.
|
à
|
At present, the securities market
and the regulatory framework for the securities industry in China is at an early stage of
development. The China Securities Regulatory Commission (CSRC) is
responsible for supervising the national securities markets and producing
relevant regulations. The Investment Regulations, under which the Fund
invests in the People's Republic of China (PRC) and which regulate
repatriation and currency conversion, are new. The Investment Regulations
give CSRC and State Administration of Foreign Exchange (SAFE) wide
discretions and there is no precedent or certainty as to how these
discretions might be exercised, either now or in the future. The Fund may,
from time to time, obtain access to the securities markets in China via Access Products. Such
products carry additional risk and may be less liquid than the underlying
securities which they represent.
|
à
|
During the past 15 years, the PRC
government has been reforming the economic and political systems of the
PRC, and these reforms are expected to continue, as evidenced by the
recently announced changes. The Fund's operations and financial results
could be adversely affected by adjustments in the PRC's state plans,
political, economic and social conditions, changes in the policies of the
PRC government such as changes in laws and regulations (or the
interpretation thereof), measures which may be introduced to control
inflation, changes in the rate or method of taxation, imposition of
additional restrictions on currency conversion and the imposition of
additional import
restrictions.
|
à
|
PRC's disclosure and regulatory
standards are in many respects less stringent than standards in certain
Organisation for Economic Co-operation and Development (OECD) countries,
and there may be less publicly available or less reliable information
about PRC companies than is regularly published by or about companies from
OECD countries.
|
à
|
The Shanghai Stock Exchange and
Shenzhen Stock Exchange have lower trading volumes than most OECD
exchanges and the market capitalisations of listed companies are small
compared to those on more developed exchanges in developed markets. The
listed equity securities of many companies in the PRC are accordingly
materially less liquid, subject to greater dealing spreads and experience
materially greater volatility than those of OECD countries. These factors
could negatively affect the Fund's
NAV.
|
à
|
The Fund invests primarily in
securities denominated in other currencies but its NAV will be quoted in
US dollars. Accordingly, a change in the value of such securities against
US dollars will result in a corresponding change in the US dollar
NAV.
|
à
|
The marketability of quoted shares
may be limited due to foreign investment restrictions, wide dealing
spreads, exchange controls, foreign ownership restrictions, the restricted
opening of stock exchanges and a narrow range of investors. Trading volume
may be lower than on more developed stockmarkets, and equities are less
liquid. Volatility of prices can also be greater than in more developed
stockmarkets. The infrastructure for clearing, settlement and registration
on the primary and secondary markets may be underdeveloped. Under certain
circumstances, there may be delays in settling transactions in some of the
markets.
|
Martin Currie Inc, registered in
Scotland (no BR2575)
Registered office: Saltire Court, 20
Castle Terrace, Edinburgh EH11 2ES Tel: 44 (0) 131 229 5252 Fax: 44 (0) 131 228
5959 www.martincurrie.com/china
North American office: 1350 Avenue of
the Americas, Suite 3010, New York, NY 10019, USA Tel: (1) 212 258 1900 Fax: (1)
212 258 1919
Authorised and registered by the
Financial Services Authority and incorporated with limited liability in New
York, USA.
Please note: calls to the above numbers
may be recorded.