The China Fund Inc Announces Adoption of Conditional Performance Tender Offer Policy

Rhea-AI Summary

The China Fund, Inc. (NYSE: CHN) has announced a new Performance Policy for a potential performance tender offer of up to 25% of its outstanding shares. This offer is contingent on the Fund's performance relative to the MSCI China All Shares Index over the period from January 1, 2023, to December 31, 2027. If the Fund's performance fails to meet the benchmark, the Board will initiate the tender offer on or before March 31, 2028, and subsequently every five years. The Board will exercise discretion on the terms of the offer based on market conditions. This policy does not affect the Fund's existing Discount Management Program, which may be temporarily halted during tender offers.

Positive

• The adoption of a Performance Policy could enhance shareholder value by aligning buyback offers with performance metrics.
• The tender offer could provide liquidity to shareholders if the Fund underperforms.

Negative

• The tender offer is contingent on underperformance, which indicates potential risk for shareholders.
• The need for a tender offer may signal existing performance issues compared to the MSCI China All Shares Index.

BOSTON, Jan. 24, 2023 /PRNewswire/ -- The Board of Directors (the "Board") of The China Fund , Inc. (NYSE: CHN) (the "Fund") announces that it has unanimously approved the adoption of a policy pursuant to which the Fund intends to conduct a performance tender offer for up to twenty-five percent (25%) of the Fund's then-issued and outstanding shares of common stock on or before March 31, 2028, and on each fifth-year anniversary thereafter, if the Fund's investment performance^[1 does not equal or exceed that of the Fund's performance benchmark, the MSCI China All Shares Index², for the period commencing on January 1, 2023 and ending on December 31, 2027 (and for each five-year performance period thereafter) (the "Performance Policy"). The offer size, price at which shares are to be tendered, and other terms and conditions of such performance tender offer would be determined by the Board in its discretion based on its review and consideration of market conditions at that time and any other factors it deems relevant.

The Board would proceed with a performance tender offer pursuant to the Performance Policy only to the extent it would be consistent with the best interests of the Fund and its shareholders under then-current circumstances. The Board will not eliminate or materially modify the Performance Policy without first notifying the Fund's shareholders.  

The Board's adoption of the Performance Policy does not affect the continued administration of the Fund's Discount Management Program.³

The Fund is a closed-end management investment company with the objective of seeking long-term capital appreciation by investing primarily in equity securities (i) of companies for which the principal securities trading market is in the People's Republic of China ("China"), or (ii) of companies for which the principal securities trading market is outside of China, or constituting direct equity investments in companies organized outside of China, that in both cases derive at least 50% of their revenues from goods and services sold or produced, or have at least 50% of their assets, in China. While the Fund is permitted to invest in direct equity investments of companies organized in China, it presently holds no such investments. The Fund is listed on the New York Stock Exchange under the ticker symbol "CHN".  The Fund's investment manager is Matthews International Capital Management, LLC.

For further information regarding the Fund and the Fund's holdings, please call (888)-CHN-CALL or visit the Fund's website at www.chinafundinc.com.

¹ For these purposes, the Fund's investment performance means its total investment returns for the period based on changes in its net asset value.

² The MSCI All Shares Index captures large- and mid-cap representation across China A–shares, B–shares, H–shares, Red–chips, P–chips and foreign listings (e.g., ADRs). The Index aims to reflect the opportunity set of China share classes listed in Hong Kong, Shanghai, Shenzhen and outside of China. It is based on the concept of the integrated MSCI China equity universe with China A-shares included.

³ The Fund's Discount Management Program will be halted temporarily in advance of a dividend payment or in connection with a tender offer and may be halted, from time to time, for other reasons.  With respect to dividend payments, the Discount Management Program will be halted only for the period between the declaration date and ex-date of a dividend.  With respect to tender offers, including any future performance tender offer, the Discount Management Program will be halted only for the period between the announcement of the tender offer and 10 business days after its termination date.  The Fund endeavours to notify stockholders in advance of any such temporary halt to the extent possible.

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SOURCE The China Fund, Inc.

FAQ

What is the Performance Policy announced by The China Fund (CHN)?

The Performance Policy allows for a potential tender offer for up to 25% of shares if the Fund underperforms against the MSCI China All Shares Index from 2023 to 2027.

When will The China Fund (CHN) conduct the tender offer if performance benchmarks are not met?

The tender offer will be conducted on or before March 31, 2028, and subsequently every five years if necessary.

How does the Performance Policy affect current shareholders of The China Fund (CHN)?

The policy may provide liquidity through buyback offers, but it also highlights potential performance issues.

What is the MSCI China All Shares Index in relation to The China Fund (CHN)?

The MSCI China All Shares Index serves as the performance benchmark for The China Fund, and the Fund's performance will be compared against it.

What happens to The China Fund's Discount Management Program during the tender offer?

The Discount Management Program may be temporarily halted around the time of dividend payments or tender offers.