CHN China Fund Inc

PROXY STATEMENT

INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of The China Fund, Inc. (the “Fund”) for use at the Annual Meeting of Stockholders (the “Meeting”), to be held virtually on Thursday, March 9, 2023, at 11:00 A.M. Eastern Time, and at any adjournments thereof.

This Proxy Statement and the form of proxy card are being mailed to stockholders on or about February 10, 2023. Any stockholder giving a proxy has the power to revoke it by executing a superseding proxy by phone, Internet or mail following the process described on the proxy card or by submitting a notice of revocation to the Fund prior to the date of the Meeting or by attending and voting at the Meeting. All properly executed proxies received in time for the Meeting will be voted as specified in the proxy or, if no specification is made, for the election of the director as described in the Proposal of this Proxy Statement.

The presence in person or by proxy of stockholders entitled to cast one third of the votes entitled to be cast thereat constitutes a quorum at all meetings of the stockholders. For purposes of determining the presence of a quorum for transacting business at the Meeting, executed proxies returned without marking a vote on the Proposal will be treated as shares that are present for quorum purposes. Abstentions are included in the determination of the number of shares present at the Meeting for purposes of determining the presence of a quorum. If a stockholder is present in person or by proxy at the Meeting but does not cast a vote, the stockholder’s shares will count towards a quorum but will have no effect on the Proposal. In the event a quorum is not present at the Meeting, or in the event that a quorum is present at the Meeting but sufficient votes to approve the Proposal are not received, the chairman of the Meeting or the holders of a majority of the stock present in person or by proxy have the power to adjourn the Meeting from time to time to a date not more than 120 days after the original Record Date without notice other than announcement at the Meeting. At such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the Meeting as originally notified. The Fund may set a subsequent record date and give notice of it to stockholders, in which case the meeting may be held more than 120 days beyond the original Record Date. A proxy granted by a stockholder as of the original Record Date for the Meeting remains valid with respect to the shares held by such stockholder as of the subsequent record date, unless the proxy is revoked by the stockholder prior to being exercised at the adjourned or postponed meeting, provided that, unless a proxy provides otherwise, it is not valid for more than eleven months after its date. The Fund may postpone or cancel a meeting of stockholders by making a public announcement of such postponement or cancellation prior to the meeting. Notice of the date, time, and place to which the meeting is postponed is required to be given not less than ten days prior to such date and otherwise in the manner set forth in the Fund’s By-Laws.

The Board has fixed the close of business on January 23, 2023, as the record date for the determination of stockholders entitled to notice of and to vote at the Meeting and at any adjournments thereof. Stockholders on the Record Date will be entitled to one vote for each share held, with no shares having cumulative voting rights. As of the Record Date, the Fund had outstanding 10,157,504 shares of common stock.

Management of the Fund knows of no item of business other than that mentioned in the Proposal of the Notice of Meeting that will be presented for consideration at the Meeting. If any other matter is properly presented, it is the intention of the persons named in the enclosed proxy to vote in accordance with their best judgment.

The Fund will furnish, without charge, a copy of its annual report for its fiscal year ended October 31, 2022, to any stockholder requesting such report. Requests for the annual report should be made by writing The China Fund, Inc., c/o Computershare Fund Services, PO Box 5696, Hauppauge, NY 11788-2847, by accessing the Fund’s website at www.chinafundinc.com or by calling (888) 246-2255.

IMPORTANT INFORMATION

The proxy statement discusses important matters affecting the Fund. Please take the time to read the proxy statement, and then cast your vote. You may obtain additional copies of the Notice of Meeting, Proxy Statement and form of proxy card by calling (888) 246-2255 or by accessing https://www.proxy-direct.com/chn-33175. There are multiple ways to vote. Choose the method that is most convenient for you. To vote by telephone or Internet, follow the instructions provided on the proxy card. To vote by mail simply fill out the proxy card and return it in the enclosed postage-paid reply envelope. Please do not return your proxy card if you vote by telephone or Internet.

PROPOSAL

ELECTION OF DIRECTOR

The Fund’s By-Laws provide that the Board is to be divided into three classes: Class I, Class II and Class III. The terms of office of the present directors (each a “Director”) in each class expire at the Annual Meeting of Stockholders in the year indicated or thereafter in each case when their respective successors are elected and qualified: Class I, 2024; Class II, 2025; and Class III, 2026. At each subsequent annual election, Directors chosen to succeed those whose terms are expiring will be identified as being in the same class and will be elected for a three-year term. The effect of these staggered terms is to limit the ability of other entities or persons to acquire control of the Fund by delaying the replacement of a majority of the Board.

The Board has nominated George Iwanicki to serve as a Class III director of the Fund until the Fund’s 2026 Annual Meeting of Stockholders or until his successor is duly elected and qualified.

The persons named in the accompanying form of proxy card intend, in the absence of contrary instructions, to vote all proxies for the election of Mr. Iwanicki to serve for a term expiring on the date on which the Annual Meeting of Stockholders is held in 2026, or until his successor is elected and qualified. Mr. Iwanicki has indicated that he will serve if elected. If Mr. Iwanicki should be unable to serve, an event not now anticipated, the proxies will be voted for such person, if any, as is designated by the Board to replace Mr. Iwanicki. The election of a Director will require the affirmative vote of a majority of the votes cast at the Meeting. Presence at the Meeting, in person or by proxy, of a stockholder who does not cast a vote will have no effect on the outcome of the election.

INFORMATION RELATING TO PROPOSAL

Information Concerning the Nominee and Members of the Board of Directors

The following table provides information concerning the nominee and other members of the Board each of whom is not an “interested person” of the Fund, as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”), and therefore is deemed to be “independent.”

Leadership Structure and Board of Directors

The Board has general oversight responsibility with respect to the business and affairs of the Fund. The Board is responsible for overseeing the operations of the Fund in accordance with the provisions of the 1940 Act, other applicable laws and the Fund’s Articles of Incorporation. The Board is currently composed of four Independent Directors and one of the Independent Directors serves as Chairman of the Board. Generally, the Board acts by majority vote of all of the Directors, including a majority vote of the Independent Directors if required by applicable law. The Fund’s day-to-day operations are managed by Matthews International Capital Management, LLC, the Fund’s Investment Manager, and other service providers who have been approved by the Board. The Board meets periodically throughout the year to oversee the Fund’s activities, review contractual arrangements with service providers, oversee compliance with regulatory requirements and review performance. The Board has determined that its leadership structure is appropriate given the size of the Board, the fact that all of the Directors are not interested persons, and the nature of the Fund.

The Directors were selected to serve and continue on the Board based upon their skills, experience, judgment, analytical ability, diligence, ability to work effectively with other Directors and a commitment to the interests of stockholders and a demonstrated willingness to take an independent and questioning view of management. Each Director also has considerable familiarity with the Fund and its administrator, and their operations, as well as the special regulatory requirements governing regulated investment companies and the special responsibilities of investment company directors as a result of their substantial prior service as a Director or officer of the Fund and, in several cases, as a director or executive of other investment companies. In addition to those qualifications, the following is a brief summary of the specific experience, qualifications or skills that led to the conclusion, as of the date of this Proxy Statement, that each person identified below should serve as a Director for the Fund. References to the qualifications, attributes and skills of the Directors are pursuant to requirements of the Securities and Exchange Commission (“SEC”), and do not constitute a holding out of the Board or any Director as having any special expertise and should not be considered to impose any greater responsibility or liability on any such person or on the Board by reason thereof than the normal responsibility and liability of an investment company board member or board. As required by rules the SEC has adopted under the 1940 Act, the Fund’s Independent Directors select and nominate all candidates for Independent Director positions.

Julian Reid: Mr. Reid has been involved in both US and international investment management for over 50 years and was based in Asia, between Hong Kong and Singapore, for more than half that time making regular business visits to China from 1978. Mr. Reid served inter alia as head of the investment company business for Jardine Fleming, at the time a leading investment management company in Asia subsequently acquired by JP Morgan, and as the chairman and/or a director of numerous investment companies listed across Asia, or in London & New York. He is an Affiliate of the Securities Industry of Australia and has been licensed by the respective regulatory bodies in the United Kingdom, Hong Kong, Singapore and Australia. In 2007, Mr. Reid was named "Small Board Trustee of the Year" by Fund Directions, a U.S. magazine focusing on corporate governance matters, for his work as the independent chairman of The Korea Fund, Inc.

Richard A. Silver: Mr. Silver has more than 30 years of senior executive experience in the investment management industry. Mr. Silver served as treasurer and chief financial officer of all Fidelity Mutual Funds and as executive vice president of Fidelity Investments, during which time he oversaw accounting, financial reporting and related operations for more than 400 mutual funds and 2,300 other investment portfolios. He also served as senior vice president, treasurer and chief financial officer of The Colonial Group, Inc. for nearly 19 years, heading the company's financial services group. In addition, Mr. Silver served as the chairman of the Accounting/Treasurers' Committee of the Investment Company Institute for approximately seven years.

George J. Iwanicki: Mr. Iwanicki has more than 30 years of experience in the financial industry, most recently as a Managing Director at JP Morgan Asset Management ("JPMAM"), serving as an Economist, Investment Strategist, and Portfolio Manager in both Developed and Emerging Markets. Formally trained in Mathematics and Economics, Mr. Iwanicki spent five years on a collaborative sell-side economics research team at Kidder, Peabody & Co. before joining JPMAM as their US Economist in 1992. He spent the next eight years focusing on Developed Markets in a series of roles that evolved from Economics to Investment Strategy and Asset Allocation. In 2000, Mr. Iwanicki accepted the role of Macro Strategist for the Global Emerging Markets Equity effort, responsible for driving asset allocation and investment strategy across the GEM Equity platform. Over the following decade, he built a quantitative research team, which developed a series of quantitative investment models driving a highly successful GEM Equity investment product. As a member of the GEM Operating Committee, from 2014 through 2019 Mr. Iwanicki helped manage an internal merger of the GEM and Asia-Pacific Equity teams within JPMAM, reverting to the Macro Strategist role for the combined entity in the interest of harmonizing research platforms and asset allocation strategies. Simultaneously, from 2016 through 2019, Mr. Iwanicki served on JPMAM’s Investment Strategy Review Committee, which performed internal due diligence across the firm’s funds, vetting methods, benchmarks, performance, and presentation materials.

Yan Hu: Ms. Hu has over 30 years of experience advising and managing international financial services firms. She currently serves as an advisor to Vermilion Partners, an affiliate of Natixis SA providing China related cross-border M&A advisory services. She is also an advisor and a partner in China with Investment & Pension Europe, an institutional investor focused industry publication. Ms. Hu was a Managing Director and head of Vermilion’s Financial Institutions Group during 2012-2016. Prior to joining Vermilion, Ms. Hu was the Country Head and Chief Representative for Sun Life Financial in China from 2007 to 2012 during which she oversaw all of Sun Life group’s China-related activities, including market entry initiatives in pension and investment business and shareholding restructuring of their 50/50 life insurance joint venture with China Everbright Group. Throughout her career, Ms. Hu has provided advisory services to leading international and Chinese domestic financial service institutions on their Asian business strategies. Her experience also expands to North Asian economies and has covered other European countries at the request of her Chinese financial institution client for acquisition opportunity in insurance, asset management and securities sectors. Ms. Hu has recently joined the board of The Korea Fund.

The Fund’s Board has an Audit, Valuation and Compliance Committee (“Audit Committee”), which is responsible for reviewing financial and accounting matters. The Fund’s Audit Committee is comprised of Messrs. Silver, Reid and Iwanicki, and Ms. Hu, all of whom are not interested persons of the Fund (as defined in Section 2(a)(19) of the 1940 Act), and its actions are governed by the Fund’s written Audit Committee Charter. If elected by the Fund’s stockholders at the Meeting, Mr. Iwanicki will be re-elected by the Board to the Audit Committee. All members of the Audit Committee are independent as independence is defined in the New York Stock Exchange, Inc.’s listing standards, as may be modified or supplemented. The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “1934 Act”). The Audit Committee met five times during the fiscal year ended October 31, 2022. The Audit Committee has a charter, which is available on the Fund’s website (www.chinafundinc.com).

The Fund’s Board has a Governance, Nominating and Compensation Committee (“Governance Committee”), which is responsible for nominating candidates to fill any vacancies on the Board. The Fund’s Governance Committee is comprised of Messrs. Silver, Reid and Iwanicki, and Ms. Hu, all of whom are not interested persons of the Fund (as defined in Section 2(a)(19) of the 1940 Act), and its actions are governed by the Fund’s written Governance Committee Charter. All of the members of the Governance Committee are independent as independence is defined in the New York Stock Exchange, Inc.’s listing standards, as may be modified or supplemented and are not interested persons of the Fund. Currently, the Governance Committee does not have a policy to consider nominees recommended by stockholders. The Governance Committee believes that it is not necessary to have such a policy because the Board consists entirely of Directors who are not interested persons of the Fund (as defined in Section 2(a)(19) of the 1940 Act). The Governance Committee evaluates a candidate’s qualifications for Board membership and the candidate’s independence from the Fund’s Investment Manager and other principal service providers. The Governance Committee does not have specific minimum qualifications that must be met by candidates recommended by the Governance Committee and there is not a specific process for identifying such candidates. In nominating candidates, the Governance Committee takes into consideration such factors as it deems appropriate. These factors may include judgment, skill, diversity, experience with businesses or other organizations of comparable size, the interplay of the candidate’s experience with the experience of other Board members, requirements of the New York Stock Exchange and the SEC to maintain a minimum number of independent or non-interested directors, requirements of the SEC as to disclosure regarding persons with financial expertise on the Fund’s Audit Committee and the extent to which the candidate generally would be a desirable addition to the Board and any committees of the Board. The Governance Committee believes the Board generally benefits from diversity of background, experience, and views among its members, and considers this a factor in evaluating the composition of the Board but has not adopted any specific policy in this regard. The Governance Committee met three times during the fiscal year ended October 31, 2022. The Governance Committee has a charter, which is available on the Fund’s website (www.chinafundinc.com).

The Fund’s Board has a Contracts Committee, which is responsible for the review of the Fund’s contractual arrangements with the Fund’s service providers. The Contracts Committee reviews contracts with the Fund’s service providers at least annually and makes recommendations to the Board with respect to service provider contracts. The current members of the Contracts Committee are Messrs. Silver, Reid and Iwanicki, and Ms. Hu, all of whom are not interested persons of the Fund (as defined in Section 2(a)(19) of the 1940 Act), and its actions are governed by the Fund’s written Contracts Committee Charter.

The Fund has an Investment Committee, which is responsible for assisting the Board with all investment manager selection and implementation and for reviewing such investment managers for compliance and performance relative to objectives. The current members of the Investment Committee are Messrs. Silver, Reid and Iwanicki, and Ms. Hu, all of whom are not interested persons of the Fund (as defined in Section 2(a)(19) of the 1940 Act), and its actions are governed by the Fund’s written Investment Committee Charter.

The Fund has a Discount Management Committee, which is responsible for making determinations between meetings of the Board regarding the Fund’s Discount Management Program. The current members of the Discount Management Committee are Messrs. Silver, Reid and Iwanicki and Ms. Hu, all of whom are not interested persons of the Fund (as defined in Section 2(a)(19) of the 1940 Act), and its actions are governed by the Fund’s written Discount Management Committee Charter.

The Fund does not have a specified process for stockholders to send communications to the Board since stockholders may communicate directly with the Board at the Annual Meeting of Stockholders and by way of the Chairman’s contact information disclosed on every report of the Fund. The Board welcomes communication from stockholders.

The Fund does not have a policy regarding Board member’s attendance at the Annual Meeting of Stockholders. However, each Director, other than Ms. Hu, attended the 2022 Annual Meeting of Stockholders. At the time of the 2022 Annual Meeting of Stockholders, Ms. Hu had not yet been elected to the Board.

The Fund’s Board of Directors held four regular meetings during the fiscal year ended October 31, 2022. Each Director, other than Ms. Hu, attended every meeting and of any committee meeting on which he served. Ms. Hu attended every meeting, including committee meetings on which she served after she was elected as a Director of the Fund on May 3, 2022. The Board expects every member to attend each meeting of the Board or a committee either in person or by telephone.

Risk Oversight

The day-to-day operations of the Fund, including the management of risk, is performed by third-party service providers, such as the Fund’s Investment Manager, Administrator (Brown Brothers Harriman & Co.), and Foreside Fund Officer Services, LLC, which provides Chief Compliance Officer and Treasury services for the Fund. The Directors are responsible for overseeing the Fund’s service providers and thus have oversight responsibilities with respect to risk management performed by those service providers. Risk management seeks to identify and address risks, i.e., events or circumstances that could have material adverse effects on the business, operations, stockholder services, investment performance or reputation of the Fund. The Fund and its service providers employ a variety of processes, procedures, and controls to identify certain of those possible events or circumstances, to lessen the probability of their occurrence and/or to mitigate the effects of such events or circumstances if they do occur.

Not all risks that may affect the Fund can be identified nor can controls be developed to eliminate or mitigate their occurrence or effects. It may not be practical or cost effective to eliminate or mitigate certain risks, the processes and controls employed to address certain risks may be limited in their effectiveness, and some risks are simply beyond the reasonable control of the Fund or the Investment Manager or other service providers. Moreover, it is necessary to bear certain risks (such as investment-related risks) to achieve the Fund’s goals. As a result of the foregoing and other factors, the Fund’s ability to manage risk is subject to certain limitations.

Risk oversight forms part of the Board’s general oversight of the Fund and is addressed as part of various Board and Committee activities. As part of its regular oversight of the Fund, the Board, directly or through a Committee, interacts with and reviews reports from, among others, the Investment Manager, the Fund’s Chief Compliance Officer and the Fund’s independent registered public accounting firm, as appropriate, regarding risks faced by the Fund. The Board is responsible for overseeing the nature, extent and quality of the services provided to the Fund by the Investment Manager and receives information about those services at its regular meetings. In addition, on an annual basis, in connection with its consideration of whether to renew the Fund’s advisory agreement, the Board meets with the Investment Manager to review the services provided. Among other things, the Board regularly considers the Investment Manager’s adherence to the Fund’s investment restrictions and compliance with various Fund policies and procedures and with applicable securities regulations. The Board has appointed a Chief Compliance Officer who oversees the implementation and testing of the Fund’s compliance program and reports to the Board regarding compliance matters for the Fund and its service providers. The Board, with the assistance of the Investment Manager, reviews investment policies and risks in connection with its review of the Fund’s performance. In addition, as part of the Board’s oversight of the Fund’s Investment Manager and other service provider agreements, the Board may periodically consider risk management aspects of their operations and the functions for which they are responsible.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the 1934 Act requires the Fund’s officers and Directors, and beneficial owners of more than ten percent of a registered class of the Fund’s equity securities, to file reports of ownership and changes in ownership with the SEC and the New York Stock Exchange, Inc. Section 30(h) of the 1940 Act extends the reporting requirements under Section 16(a) of the 1934 Act to the Investment Manager of the Fund and the Officers and Directors of the Investment Manager. The Fund believes that its Officers and Directors and the Officers of the Investment Manager have complied with all applicable filing requirements for the fiscal year ended October 31, 2022.

Transactions with and Remuneration of Officers and Directors

The aggregate remuneration for Directors was $223,696 during the fiscal year ended October 31, 2022, and, for that period, the aggregate amount of expenses reimbursed by the Fund for Directors’ attendance at Directors’ meetings was $10,890. The Chairman of the Fund, Chairman of the Audit Committee, and all other Directors currently receive an annual fee of $70,000, $64,000, and $56,000, respectively.  In addition to the annual fee, for each special Board or Committee meeting which is held in person, each Director is entitled to a fee of $3,000, and for each special Board or Committee meeting held telephonically, each Director is entitled to a fee of $1,000. Two special Board meetings were held telephonically during the fiscal year ended October 31, 2022.

The following table sets forth the aggregate compensation from the Fund paid to each Director during the fiscal year ended October 31, 2022. The Fund does not compensate the officers of the Fund.

Stockholder Approval

The election of Mr. Iwanicki will require the affirmative vote of the holders of a majority of the shares of common stock of the Fund cast at the Meeting.

THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION OF THE DIRECTOR. 

GENERAL INFORMATION

Investment Manager

Matthews International Capital Management, LLC acts as the Investment Manager to the Fund pursuant to an Investment Advisory and Management Agreement between the Investment Manager and the Fund. The principal business address of the Investment Manager is Four Embarcadero Center Suite 550 San Francisco, Ca 94111.

Fund Administration

Brown Brothers Harriman & Co. acts as Administrator to the Fund pursuant to an Administration Agreement between the Administrator and the Fund. The principal business address of the Administrator is Brown Brothers Harriman & Co., 50 Post Office Square, Boston, Massachusetts 02110.

Independent Registered Public Accounting Firm

Tait Weller served as the Fund’s independent registered public accounting firm for the fiscal years ended October 31, 2021, and October 31, 2022, auditing and reporting on the annual financial statements of the Fund and reviewing certain regulatory reports and the Fund’s federal income tax returns. Tait Weller also performed other professional audit and certain allowable non-audit services, including tax services, when the Fund engaged it to do so. Representatives of Tait Weller are not expected to be available at the Meeting.

The engagement of Tait Weller as the Fund’s independent registered public accounting firm was approved by the Audit Committee of the Board of Directors and ratified by the full Board of Directors.

Audit Fees. The aggregate fees billed by Tait Weller in connection with the annual audit of the Fund for the fiscal years ended October 31, 2021, and October 31, 2022, were $50,000 and $50,000, respectively.

Audit-Related Fees. For the fiscal years ended October 31, 2021, and October 31, 2022, Tait Weller did not bill the Fund any fees for assurances and related services that were reasonably related to the performance of the audit or review of the Fund’s financial statements and were not reported under the section Audit Fees above.

Tax Fees. The aggregate fees billed by Tait Weller for professional services rendered for tax compliance, tax advice and tax planning (consisting of a review of the Fund’s income tax returns and tax distribution requirements) for the fiscal years ended October 31, 2021, and October 31, 2022, were $5,000 and $5,000, respectively.

All Other Fees. For the fiscal years ended October 31, 2021, and October 31, 2022, Tait Weller did not bill the Fund any fees for products and services other than those disclosed above.

Audit Committee Pre-approval. The Audit Committee’s policy is to pre-approve all auditing and non-auditing services to be provided to the Fund by the Fund’s independent registered public accounting firm. All of the audit and the tax services described above for which Tait Weller billed the Fund fees for the fiscal years ended October 31, 2021, and October 31, 2022, were pre-approved by the Audit Committee.

Non-Audit Fees. For the fiscal years ended Oct October 31, 2021, and October 31 2022, Tait Weller did not provide any non-audit services to Matthews International Capital Management, LLC, the Fund’s Investment Manager, or any other entity in the Fund’s Investment Company Complex.