Form 485BPOS
Matthews
Asia Funds | Prospectus
April 28,
2022 | matthewsasia.com
INSTITUTIONAL CLASS
SHARES
Matthews Emerging Markets Equity Fund (MIEFX)
Matthews Emerging Markets Small Companies Fund (MISMX)
Matthews Asia Growth Fund (MIAPX)
Matthews Pacific Tiger Fund (MIPTX)
Matthews Asia ESG Fund (MISFX)
Matthews Asia Innovators Fund (MITEX)
Matthews China Fund (MICFX)
Matthews China Small Companies Fund (MICHX)
Matthews India Fund (MIDNX)
Matthews Japan Fund (MIJFX)
Matthews Korea Fund (MIKOX)
Matthews Asian Growth and Income Fund (MICSX)
Matthews Asia Dividend Fund (MIPIX)
Matthews China Dividend Fund (MICDX)
The U.S. Securities and Exchange Commission
(the "SEC") has not approved or disapproved the Funds. Also, the SEC has
not passed upon the adequacy or accuracy of this prospectus. Anyone who informs
you otherwise is committing a crime.
Paper copies of the Funds’ annual and semi-annual
shareholder reports are no longer being sent by mail, unless you specifically
request paper copies of the reports. Instead, the reports will be made available
on the Funds’ website matthewsasia.com, and you will be notified by mail
each time a report is posted and provided with a website link to access the
report. You may elect to receive paper copies of shareholder reports and other
communications from the Funds anytime by contacting your financial intermediary
(such as a broker-dealer or bank) or, if you are a direct investor, by calling
800.789.ASIA (2742).
Your election to receive reports in paper will apply to
all Funds held in your account if you invest through your financial intermediary
or all Funds held directly with Matthews Asia Funds.
Matthews
Asia Funds
matthewsasia.com
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FUND
SUMMARIES |
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GLOBAL EMERGING
MARKETS STRATEGIES |
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1 |
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6 |
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ASIA GROWTH
STRATEGIES |
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12 |
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16 |
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20 |
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25 |
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30 |
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34 |
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39 |
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43 |
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47 |
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ASIA GROWTH AND
INCOME STRATEGIES |
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51 |
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55 |
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59 |
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64 |
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Additional Fund Information |
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78 |
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78 |
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78 |
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81 |
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98 |
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105 |
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105 |
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105 |
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108 |
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108 |
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109 |
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110 |
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113 |
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114 |
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114 |
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Please read this document carefully before you make any
investment decision. If you have any questions, do not hesitate to contact a
Matthews Asia Funds representative at 800.789.ASIA (2742) or visit
matthewsasia.com.
Please
keep this prospectus with your other account documents for future reference.
Matthews
Emerging Markets Equity Fund
FUND SUMMARY
Investment Objective
Long-term
capital appreciation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
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Maximum
Account Fee on Redemptions (for wire redemptions only) |
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$9 |
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ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
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Management
Fees |
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0.66% |
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Distribution
(12b‑1) Fees |
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0.00% |
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Other Expenses1 |
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0.72% |
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Administration
and Shareholder Servicing Fees |
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0.14% |
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Total Annual
Fund Operating Expenses |
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1.38% |
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Fee
Waiver and Expense Reimbursement2 |
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(0.48%) |
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Total Annual Fund Operating Expenses After Fee
Waiver and Expense Reimbursement |
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0.90% |
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1 |
“Other Expenses” are based
on estimated amounts for the current fiscal year and calculated as a
percentage of the Fund’s
assets. |
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2 |
Matthews
has contractually agreed (i) to waive fees and reimburse expenses to
the extent needed to limit Total Annual Fund Operating Expenses (excluding
Rule 12b‑1 fees, taxes, interest, brokerage commissions, short sale
dividend expenses, expenses incurred in connection with any merger or
reorganization or extraordinary expenses such as litigation) of the
Institutional Class to 0.90%. If the operating expenses fall below
the expense limitation within three years after Matthews has made a waiver
or reimbursement, the Fund may reimburse Matthews up to an amount that
does not cause the expenses for that year to exceed the lesser of
(i) the expense limitation applicable at the time of that fee waiver
and/or expense reimbursement or (ii) the expense limitation in effect
at the time of recoupment. This agreement will remain in place until
April 30,
2023 and may be terminated at any time by the Board of
Trustees on behalf of the Fund on 60 days’ written notice to Matthews.
Matthews may decline to renew this agreement by written notice to the
Trust at least 30 days before its annual expiration
date. |
EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The example reflects the fee waiver for the one year period
only. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
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One year: $92 |
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Three years: $390 |
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Five years: $709 |
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Ten years: $1,616 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 89% of the average value of its
portfolio.
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MATTHEWS EMERGING MARKETS EQUITY
FUND |
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Principal Investment
Strategy
Under
normal circumstances, the Matthews Emerging Markets Equity Fund seeks to achieve
its investment objective by investing at least 80% of its net assets, which
include borrowings for investment purposes, in the common and preferred stocks
of companies located in emerging market countries. Emerging market countries
generally include every country in the world except the United States,
Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of
the countries in Western Europe. Certain emerging market countries may also be
classified as “frontier” market countries, which are a subset of emerging market
countries with newer or even less developed economies and markets, such as Sri
Lanka and Vietnam. The list of emerging market countries and frontier market
countries may change from time to time. The Fund may also invest in companies
located in developed countries; however, the Fund may not invest in any company
located in a developed country if, at the time of purchase, more than 20% of the
Fund’s assets are invested in developed market companies. The Fund has
concentrated its investments (meaning more than 25% of its assets) from time to
time in a single country, including China.
A
company or other issuer is considered to be “located” in a country or a region,
and a security or instrument is deemed to be an emerging market (or specific
country) security or instrument, if it has substantial ties to that country or
region. Matthews currently makes that determination based primarily on one or
more of the following criteria: (A) with respect to a company or issuer,
whether (i) it is organized under the laws of that country or any country
in that region; (ii) it derives at least 50% of its revenues or profits
from goods produced or sold, investments made, or services performed, or has at
least 50% of its assets located, within that country or region; (iii) it
has the primary trading markets for its securities in that country or region;
(iv) it has its principal place of business in or is otherwise
headquartered in that country or region; or (v) it is a governmental entity
or an agency, instrumentality or a political subdivision of that country or any
country in that region; and (B) with respect to an instrument or issue,
whether (i) its issuer is headquartered or organized in that country or
region; (ii) it is issued to finance a project with significant assets or
operations in that country or region; (iii) it is principally secured or
backed by assets located in that country or region; (iv) it is a component
of or its issuer is included in a recognized securities index for the country or
region; or (v) it is denominated in the currency of an emerging market
country and addresses at least one of the other above criteria. The term
“located” and the associated criteria listed above have been defined in such a
way that Matthews has latitude in determining whether an issuer should be
included within a region or country. The Fund may also invest in depositary
receipts that are treated as emerging markets investments, including American,
European and Global Depositary Receipts.
The
Fund seeks to invest in companies capable of sustainable growth based on the
fundamental characteristics of those companies, including balance sheet
information; number of employees; size and stability of cash flow; management’s
depth, adaptability and integrity; product lines; marketing strategies;
corporate governance; and financial health. Matthews expects that the companies
in which the Fund invests typically will be of medium or large size, but the
Fund may invest in companies of any size. Matthews measures
a
company’s
size with respect to fundamental criteria such as, but not limited to, market
capitalization, book value, revenues, profits, cash flow, dividends paid and
number of employees. The implementation of the principal investment strategies
of the Fund may result in a significant portion of the Fund’s assets being
invested from time to time in one or more sectors, but the Fund may invest in
companies in any sector.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Foreign Investing Risk: Investments in foreign
securities may involve greater risks than investing in U.S. securities. As
compared to U.S. companies, foreign issuers generally disclose less financial
and other information publicly and are subject to less stringent and less
uniform accounting, auditing and financial reporting standards. Foreign
countries typically impose less thorough regulations on brokers, dealers, stock
exchanges, corporate insiders and listed companies than does the U.S., and
foreign securities markets may be less liquid and more volatile than U.S.
markets. Investments in foreign securities generally involve higher costs than
investments in U.S. securities, including higher transaction and custody costs
as well as additional taxes imposed by foreign governments. In addition,
security trading practices abroad may offer less protection to investors such as
the Fund. Political or social instability, civil unrest, acts of terrorism,
regional economic volatility, and the imposition of sanctions, confiscations,
trade restrictions (including tariffs) and other government restrictions by the
U.S. and/or other governments are other potential risks that could impact an
investment in a foreign security. Settlement of transactions in some foreign
markets may be delayed or may be less frequent than in the U.S., which could
affect the liquidity of the Fund’s
portfolio.
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious diseases such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and materially and adversely impact economic
conditions in ways that cannot be predicted, all of which could result in
substantial investment losses. Containment efforts and related restrictive
actions by governments and businesses have significantly diminished and
disrupted global economic activity across many industries. Less developed
countries and their health systems may be more vulnerable to these impacts. The
ultimate impact of COVID‑19, including new strains of the underlying virus, or
other health emergencies on global economic conditions and businesses is
impossible to predict accurately. Ongoing and potential additional material
adverse economic effects of indeterminate duration and severity are possible.
The resulting adverse impact on the value of an investment in the Fund could be
significant and prolonged. Other public health emergencies that may arise in the
future could have similar or other unforeseen
effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is
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matthewsasia.com | 800.789.ASIA |
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permitted
to hedge currency risks, Matthews does not anticipate doing so at this time.
Additionally, emerging market countries may utilize formal or informal
currency-exchange controls or “capital controls.” Capital controls may impose
restrictions on the Fund’s ability to repatriate investments or income. Such
controls may also affect the value of the Fund’s
holdings.
Risks Associated with Emerging and Frontier
Markets: Emerging and frontier markets are often less stable politically
and economically than developed markets such as the U.S., and investing in these
markets involves different and greater risks. There may be less publicly
available information about companies in many emerging market countries, and the
stock exchanges and brokerage industries in many emerging market countries
typically do not have the level of government oversight as do those in the U.S.
Securities markets of many emerging market countries are also substantially
smaller, less liquid and more volatile than securities markets in the U.S.
Frontier markets, a subset of emerging markets, generally have smaller economies
and even less mature capital markets than emerging markets. As a result, the
risks of investing in emerging market countries are magnified in frontier market
countries. Frontier markets are more susceptible to having abrupt changes in
currency values, less mature markets and settlement practices, and lower trading
volumes, which could lead to greater price volatility and
illiquidity.
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption and
military activity. The economies of many Asian countries differ from the
economies of more developed countries in many respects, such as rate of growth,
inflation, capital reinvestment, resource self-sufficiency, financial system
stability, the national balance of payments position and sensitivity to changes
in global trade.
Growth Stock Risk: Growth stocks may be more
volatile than other stocks because they are more sensitive to investor
perceptions of the issuing company’s growth potential. Growth stocks may go in
and out of favor over time and may perform differently than the market as a
whole.
Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
Volatility Risk: The smaller size and lower
levels of liquidity in emerging markets, as well as other factors, may result in
changes in the prices of emerging market securities that are more volatile than
those of companies in more developed regions. This volatility can cause the
price of the Fund’s shares to go up or down dramatically. Because of this
volatility, this Fund is better suited for long-term investors (typically five
years or longer).
Risks Associated with Medium‑Size Companies:
Medium‑size companies may be subject to a number of risks not associated with
larger, more established companies, potentially making their stock prices more
volatile and increasing the risk of
loss.
Country Concentration Risk: The Fund may invest
a significant portion of its total net assets in the securities of issuers
located in a single country. An investment in the Fund therefore may entail
greater risk than an investment in a fund that does not concentrate its
investments in a single or small number of countries because these securities
may be more sensitive to adverse social, political, economic or regulatory
developments affecting that country or countries. As a result, events affecting
a single or small number of countries may have a significant and potentially
adverse impact on the Fund’s investments, and the Fund’s performance may be more
volatile than that of funds that invest globally. The Fund has concentrated or
may concentrate its investments in
China.
Risks Associated with China: The Chinese
government exercises significant control over China’s economy through its
industrial policies, monetary policy, management of currency exchange rates, and
management of the payment of foreign currency-denominated obligations. Changes
in these policies could adversely impact affected industries or companies in
China. China’s economy, particularly its export-oriented industries, may be
adversely impacted by trade or political disputes with China’s major trading
partners, including the U.S. In addition, as its consumer class continues to
grow, China’s domestically oriented industries may be especially sensitive to
changes in government policy and investment
cycles.
Risks Associated with Europe: The economies of countries in Europe are
in different stages of economic development and are often closely connected and
interdependent, and events in one country in Europe can have an adverse impact
on other European countries. Efforts by the member countries of the European
Union (“EU”) to continue to unify their economic and monetary policies may
increase the potential for similarities in the movements of European markets and
reduce the potential investment benefits of diversification within the region.
However, the substance of these policies may not address the needs of all
European economies. European financial markets have in recent years experienced
increased volatility due to concerns with some countries’ high levels of
sovereign debt, budget deficits and unemployment. Markets have also been
affected by the decision by the UK to withdraw from the EU (an event commonly
known as “Brexit”). There is uncertainty surrounding the ultimate impact of
Brexit on the UK, the EU and the broader global economy. An exit by any member
countries from the EU or the Economic and Monetary Union of the EU, or even the
prospect of such an exit, could lead to increased volatility in European markets
and negatively affect investments both in issuers in the exiting country and
throughout Europe. In addition, while many countries in western Europe are
considered to have developed markets, many eastern European countries are less
developed, and investments in eastern European countries, even if denominated in
Euros, may involve special risks associated with investments in emerging
markets. See “Risks Associated with Emerging
and Frontier Markets” above. In addition, Russia’s recent military
incursions in Ukraine have led to sanctions being levied against Russia by the
United States, EU and other
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MATTHEWS EMERGING MARKETS EQUITY
FUND |
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3 |
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countries,
which could adversely affect European and global energy and financial markets
and thus could affect the value of a Fund’s
investments.
Risks Associated with Latin America: The
economies of Latin American countries have in the past experienced considerable
difficulties, including high inflation rates, high interest rates, high
unemployment, government overspending and political instability. Similar
conditions in the present or future could impact the Fund’s performance. Many
Latin American countries are highly reliant on the exportation of commodities
and their economies may be significantly impacted by fluctuations in commodity
prices and the global demand for certain commodities. Investments in Latin
American countries may be subject to currency risks, such as restrictions on the
flow of money in and out of a country, extreme volatility relative to the U.S.
dollar, and devaluation, all of which could decrease the value of the Fund’s
investments. Other Latin American investment risks may include inadequate
investor protection, less developed regulatory, accounting, auditing and
financial standards, unfavorable changes in laws or regulations, natural
disasters, corruption and military activity. The governments of many Latin
American countries may also exercise substantial influence over many aspects of
the private sector, and any such exercise could have a significant effect on
companies in which the Fund invests. Securities of companies in Latin American
countries may be subject to significant price volatility, which could impact
Fund performance.
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a
particular
sector,
the Fund will be subject to a greater degree to the risks particular to that
sector, including the sector described below. Market conditions, interest rates,
and economic, regulatory, or financial developments could significantly affect a
single sector. By focusing its investments in a particular sector, the Fund may
face more risks than if it were diversified broadly over numerous
sectors.
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Information
Technology Sector Risk: As of December 31, 2021, 27% of the
Fund’s assets were invested in the information technology sector.
Information technology companies may be significantly affected by
aggressive pricing as a result of intense competition and by rapid product
obsolescence due to rapid development of technological innovations and
frequent new product introduction. Other factors, such as short product
cycle, possible loss or impairment of intellectual property rights, and
changes in government regulations, may also adversely impact information
technology
companies. |
Cybersecurity Risk: With the increased use of
technologies such as the internet to conduct business, the Fund is susceptible
to operational, information security, and related risks. Cyber incidents
affecting the Fund or its service providers may cause disruptions and impact
business operations, potentially resulting in financial losses, interference
with the Fund’s ability to calculate its NAV, impediments to trading, the
inability of shareholders to transact business, violations of applicable privacy
and other laws, regulatory fines, penalties, reputational damage, reimbursement
or other compensation costs, or additional compliance
costs.
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matthewsasia.com | 800.789.ASIA |
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Past Performance
The bar chart
below shows the Fund’s performance over certain periods of time and how it has
varied from year to year, reflective of the Fund’s volatility and some
indication of risk. Also shown are the best and worst quarters
for this time period. The table below shows the Fund’s performance over certain
periods of time, along with performance of its benchmark index. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURN FOR YEARS ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
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1 year |
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Since Inception
(4/30/20) |
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Matthews
Emerging Markets Equity Fund |
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Return
before taxes |
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-0.43% |
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32.90% |
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Return
after taxes on distributions1 |
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-3.05% |
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30.09% |
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Return
after taxes on distributions and sale of Fund shares1 |
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0.61% |
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24.82% |
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MSCI
Emerging Markets Index |
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(reflects no deduction for fees, expenses
or taxes) |
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-2.22% |
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21.82% |
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1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager: John Paul Lech has been a
Portfolio Manager of the Matthews Emerging Markets Equity Fund since its
inception in 2020.
Co-Manager: Alex Zarechnak has been a Portfolio
Manager of the Matthews Emerging Markets Equity Fund since 2022.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions. The Lead Manager is supported by and consults with the
Co-Manager, who is not primarily responsible for portfolio management.
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
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MATTHEWS EMERGING MARKETS EQUITY
FUND |
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5 |
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Matthews
Emerging Markets Small Companies Fund
FUND SUMMARY
Investment Objective
Long-term
capital appreciation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
|
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Maximum
Account Fee on Redemptions (for wire redemptions only) |
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$9 |
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ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
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Management
Fees |
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1.00% |
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Distribution
(12b‑1) Fees |
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0.00% |
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Other Expenses |
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0.38% |
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Administration
and Shareholder Servicing Fees |
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0.14% |
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Total Annual
Fund Operating Expenses |
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1.38% |
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Fee
Waiver and Expense Reimbursement1 |
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(0.23%) |
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Total Annual Fund Operating Expenses After Fee
Waiver and Expense Reimbursement2 |
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1.15% |
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1 |
Matthews
has contractually agreed to waive fees and reimburse expenses to the
extent needed to limit Total Annual Fund Operating Expenses (excluding
Rule 12b‑1 fees, taxes, interest, brokerage commissions, short sale
dividend expenses, expenses incurred in connection with any merger or
reorganization or extraordinary expenses such as litigation) of the
Institutional Class to 1.15%. If the operating expenses fall below
the expense limitation within three years after Matthews has made a waiver
or reimbursement, the Fund may reimburse Matthews up to an amount that
does not cause the expenses for that year to exceed the lesser of
(i) the expense limitation applicable at the time of that fee waiver
and/or expense reimbursement or (ii) the expense limitation in effect
at the time of recoupment. This agreement will remain in place until
April 30,
2023 and may be terminated at any time by the Board of
Trustees on behalf of the Fund on 60 days’ written notice to Matthews.
Matthews may decline to renew this agreement by written notice to the
Trust at least 30 days before its annual expiration
date. |
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“Total
Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement”
do not correlate to the corresponding ratio included in the Fund’s
Financial Highlights because the contractual fee waiver/expense
reimbursement was changed during the fiscal year ended December 31, 2021
and was not in effect for that entire fiscal
year. |
EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The example reflects the expense limitation for the one year
period only. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
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One year: $118 |
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Three years: $415 |
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Five years: $734 |
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Ten years: $1,638 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 51% of the average value of its
portfolio.
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Principal Investment
Strategy
Under
normal circumstances, the Matthews Emerging Markets Small Companies Fund seeks
to achieve its investment objective by investing at least 80% of its net assets,
which include borrowings for investment purposes, in the common and preferred
stocks of Small Companies (defined below) located in emerging market countries.
Emerging market countries generally include every country in the world except
the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand,
Singapore and most of the countries in Western Europe. Certain emerging market
countries may also be classified as “frontier” market countries, which are a
subset of emerging market countries with newer or even less developed economies
and markets, such as Sri Lanka and Vietnam. The list of emerging market
countries and frontier market countries may change from time to time. The Fund
may also invest in Small Companies located in developed countries; however, the
Fund may not invest in any company located in a developed country if, at the
time of purchase, more than 20% of the Fund’s assets are invested in developed
market companies. The Fund has concentrated its investments (meaning more than
25% of its assets) from time to time in a single country, including
China.
A
company or other issuer is considered to be “located” in a country or a region,
and a security or instrument is deemed to be an emerging market (or specific
country) security or instrument, if it has substantial ties to that country or
region. Matthews currently makes that determination based primarily on one or
more of the following criteria: (A) with respect to a company or issuer,
whether (i) it is organized under the laws of that country or any
country in that region; (ii) it derives at least 50% of its revenues or
profits from goods produced or sold, investments made, or services performed, or
has at least 50% of its assets located, within that country or region;
(iii) it has the primary trading markets for its securities in that country
or region; (iv) it has its principal place of business in or is otherwise
headquartered in that country or region; or (v) it is a governmental entity
or an agency, instrumentality or a political subdivision of that country or any
country in that region; and (B) with respect to an instrument or issue,
whether (i) its issuer is headquartered or organized in that country or
region; (ii) it is issued to finance a project with significant assets or
operations in that country or region; (iii) it is principally secured or
backed by assets located in that country or region; (iv) it is a component
of or its issuer is included in a recognized securities index for the country or
region; or (v) it is denominated in the currency of an emerging market
country and addresses at least one of the other above criteria. The term
“located” and the associated criteria listed above have been defined in such a
way that Matthews has latitude in determining whether an issuer should be
included within a region or country. The Fund may also invest in depositary
receipts that are treated as emerging markets investments, including American,
European and Global Depositary Receipts.
The
Fund seeks to invest in smaller companies capable of sustainable growth based on
the fundamental characteristics of those companies, including balance sheet
information; number of employees; size and stability of cash flow; management’s
depth, adaptability and integrity; product lines; marketing strategies;
corporate governance; and financial health. Matthews generally determines
whether a company should be considered to be a small company based on
its
market
capitalization (the number of the company’s shares outstanding times the market
price per share for such securities). Under normal circumstances, the Fund
invests at least 80% of its net assets in any company that has a market
capitalization no higher than the greater of $5 billion or the market
capitalization of the largest company included in the Fund’s primary benchmark
index (each, a “Small Company” and together, “Small Companies”) The largest
company in the Fund’s primary benchmark, the MSCI Emerging Markets Small Cap
Index, had a market capitalization of $6.22 billion on December 31,
2021. Companies in which the Fund invests typically operate in growth industries
and possess the potential to expand their scope of business over time. A company
may grow to a market capitalization that is higher than the greater of
$5 billion or the market capitalization of the largest company included in
the Fund’s primary benchmark after the Fund has purchased its securities;
nevertheless, the existing holdings of securities of such a company will
continue to be considered a Small Company. If additional purchases of a security
are made, all holdings (including prior purchases) of that security will be
re‑classified with respect to its market capitalization at the time of the last
purchase. The implementation of the principal investment strategies of the Fund
may result in a significant portion of the Fund’s assets being invested from
time to time in one or more sectors, but the Fund may invest in companies in any
sector. The implementation of the Fund’s principal investment strategies may
also result in high portfolio turnover
rates.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Foreign Investing Risk: Investments in foreign
securities may involve greater risks than investing in U.S. securities. As
compared to U.S. companies, foreign issuers generally disclose less financial
and other information publicly and are subject to less stringent and less
uniform accounting, auditing and financial reporting standards. Foreign
countries typically impose less thorough regulations on brokers, dealers, stock
exchanges, corporate insiders and listed companies than does the U.S., and
foreign securities markets may be less liquid and more volatile than U.S.
markets. Investments in foreign securities generally involve higher costs than
investments in U.S. securities, including higher transaction and custody costs
as well as additional taxes imposed by foreign governments. In addition,
security trading practices abroad may offer less protection to investors such as
the Fund. Political or social instability, civil unrest, acts of terrorism,
regional economic volatility, and the imposition of sanctions, confiscations,
trade restrictions (including tariffs) and other government restrictions by the
U.S. and/or other governments are other potential risks that could impact an
investment in a foreign security. Settlement of transactions in some foreign
markets may be delayed or may be less frequent than in the U.S., which could
affect the liquidity of the Fund’s
portfolio.
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious diseases such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and materially and adversely impact
economic
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MATTHEWS EMERGING MARKETS SMALL COMPANIES FUND |
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conditions
in ways that cannot be predicted, all of which could result in substantial
investment losses. Containment efforts and related restrictive actions by
governments and businesses have significantly diminished and disrupted global
economic activity across many industries. Less developed countries and their
health systems may be more vulnerable to these impacts. The ultimate impact of
COVID‑19, including new strains of the underlying virus, or other health
emergencies on global economic conditions and businesses is impossible to
predict accurately. Ongoing and potential additional material adverse economic
effects of indeterminate duration and severity are possible. The resulting
adverse impact on the value of an investment in the Fund could be significant
and prolonged. Other public health emergencies that may arise in the future
could have similar or other unforeseen
effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time. Additionally, emerging market countries may
utilize formal or informal currency-exchange controls or “capital controls.”
Capital controls may impose restrictions on the Fund’s ability to repatriate
investments or income. Such controls may also affect the value of the Fund’s
holdings.
Risks Associated with Emerging and Frontier
Markets: Emerging and frontier markets are often less stable politically
and economically than developed markets such as the U.S., and investing in these
markets involves different and greater risks. There may be less publicly
available information about companies in many emerging market countries, and the
stock exchanges and brokerage industries in many emerging market countries
typically do not have the level of government oversight as do those in the U.S.
Securities markets of many emerging market countries are also substantially
smaller, less liquid and more volatile than securities markets in the U.S.
Frontier markets, a subset of emerging markets, generally have smaller economies
and even less mature capital markets than emerging markets. As a result, the
risks of investing in emerging market countries are magnified in frontier market
countries. Frontier markets are more susceptible to having abrupt changes in
currency values, less mature markets and settlement practices, and lower trading
volumes, which could lead to greater price volatility and
illiquidity.
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption and
military activity. The economies of many Asian countries differ from the
economies of more developed countries in many respects, such as rate of growth,
inflation, capital reinvestment, resource self-sufficiency, financial system
stability, the national balance of payments position and sensitivity to changes
in global trade.
Risks Associated with Smaller Companies:
Smaller companies may offer substantial opportunities for capital growth; they
also involve substantial risks, and investments in
smaller
companies
may be considered speculative. Such companies often have limited product lines,
markets or financial resources. Smaller companies may be more dependent on one
or few key persons and may lack depth of management. Larger portions of their
stock may be held by a small number of investors (including founders and
management) than is typical of larger companies. Credit may be more difficult to
obtain (and on less advantageous terms) than for larger companies. As a result,
the influence of creditors (and the impact of financial or operating
restrictions associated with debt financing) on smaller companies may be greater
than that of larger or more established companies. The Fund may have more
difficulty obtaining information about smaller companies, making it more
difficult to evaluate the impact of market, economic, regulatory and other
factors on them. Informational difficulties may also make valuing or disposing
of their securities more difficult than it would for larger companies.
Securities of smaller companies may trade less frequently and in lesser volume
than more widely held securities and the securities of smaller companies
generally are subject to more abrupt or erratic price movements than more widely
held or larger, more established companies or the market indices in general. The
value of securities of smaller companies may react differently to political,
market and economic developments than the markets as a whole or than other types
of stocks.
High Portfolio Turnover Risk: The Fund’s
principal investment strategies may result in high portfolio turnover rates,
which may increase the Fund’s brokerage commission costs and negatively impact
the Fund’s performance. Such portfolio turnover also may generate higher taxable
gains for shareholders of the
Fund.
Growth Stock Risk: Growth stocks may be more
volatile than other stocks because they are more sensitive to investor
perceptions of the issuing company’s growth potential. Growth stocks may go in
and out of favor over time and may perform differently than the market as a
whole.
Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
Volatility Risk: The smaller size and lower
levels of liquidity in emerging markets, as well as other factors, may result in
changes in the prices of emerging market securities that are more volatile than
those of companies in more developed regions. This volatility can cause the
price of the Fund’s shares to go up or down dramatically. Because of this
volatility, this Fund is better suited for long-term investors (typically five
years or longer).
Risks Associated with Medium‑Size Companies:
Medium‑size companies may be subject to a number of risks not associated with
larger, more established companies, potentially making their stock prices more
volatile and increasing the risk of
loss.
Country Concentration Risk: The Fund may invest
a significant portion of its total net assets in the securities of issuers
located in a single country. An investment in the Fund therefore may entail
greater risk than an investment in a fund
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that
does not concentrate its investments in a single or small number of countries
because these securities may be more sensitive to adverse social, political,
economic or regulatory developments affecting that country or countries. As a
result, events affecting a single or small number of countries may have a
significant and potentially adverse impact on the Fund’s investments, and the
Fund’s performance may be more volatile than that of funds that invest globally.
The Fund has concentrated or may concentrate its investments in
China.
Risks Associated with China: The Chinese
government exercises significant control over China’s economy through its
industrial policies, monetary policy, management of currency exchange rates, and
management of the payment of foreign currency-denominated obligations. Changes
in these policies could adversely impact affected industries or companies in
China. China’s economy, particularly its export-oriented industries, may be
adversely impacted by trade or political disputes with China’s major trading
partners, including the U.S. In addition, as its consumer class continues to
grow, China’s domestically oriented industries may be especially sensitive to
changes in government policy and investment
cycles.
Risks Associated with India: Government
actions, bureaucratic obstacles and inconsistent economic reform within the
Indian government have had a significant effect on the Indian economy and could
adversely affect market conditions, economic growth and the profitability of
private enterprises in India. Global factors and foreign actions may inhibit the
flow of foreign capital on which India is dependent to sustain its growth. Large
portions of many Indian companies remain in the hands of their founders
(including members of their families). Corporate governance standards of
family-controlled companies may be weaker and less transparent, which increases
the potential for loss and unequal treatment of investors. India experiences
many of the risks associated with developing economies, including relatively low
levels of liquidity, which may result in extreme volatility in the prices of
Indian securities.
Religious,
cultural and military disputes persist in India and between India and Pakistan
(as well as sectarian groups within each country). Both India and Pakistan have
tested nuclear arms, and the threat of deployment of such weapons could hinder
development of the Indian economy, and escalating tensions could impact the
broader region, including China.
Risks Associated with Europe: The
economies of countries in Europe are in different stages of economic development
and are often closely connected and interdependent, and events in one country in
Europe can have an adverse impact on other European countries. Efforts by the
member countries of the European Union (“EU”) to continue to unify their
economic and monetary policies may increase the potential for similarities in
the movements of European markets and reduce the potential investment benefits
of diversification within the region. However, the substance of these policies
may not address the needs of all European economies. European financial markets
have in recent years experienced increased volatility due to concerns with some
countries’ high levels of sovereign debt, budget deficits and unemployment.
Markets have also been affected by the decision by the UK to withdraw from the
EU (an event commonly known as “Brexit”). There is uncertainty surrounding the
ultimate impact of Brexit on the UK, the EU and the broader global economy. An
exit by any
member
countries from the EU or the Economic and Monetary Union of the EU, or even the
prospect of such an exit, could lead to increased volatility in European markets
and negatively affect investments both in issuers in the exiting country and
throughout Europe. In addition, while many countries in western Europe are
considered to have developed markets, many eastern European countries are less
developed, and investments in eastern European countries, even if denominated in
Euros, may involve special risks associated with investments in emerging
markets. See “Risks Associated with Emerging
and Frontier Markets” above. In addition, Russia’s recent military
incursions in Ukraine have led to sanctions being levied against Russia by the
United States, EU and other countries, which could adversely affect European and
global energy and financial markets and thus could affect the value of a Fund’s
investments.
Risks Associated with Latin America: The
economies of Latin American countries have in the past experienced considerable
difficulties, including high inflation rates, high interest rates, high
unemployment, government overspending and political instability. Similar
conditions in the present or future could impact the Fund’s performance. Many
Latin American countries are highly reliant on the exportation of commodities
and their economies may be significantly impacted by fluctuations in commodity
prices and the global demand for certain commodities. Investments in Latin
American countries may be subject to currency risks, such as restrictions on the
flow of money in and out of a country, extreme volatility relative to the U.S.
dollar, and devaluation, all of which could decrease the value of the Fund’s
investments. Other Latin American investment risks may include inadequate
investor protection, less developed regulatory, accounting, auditing and
financial standards, unfavorable changes in laws or regulations, natural
disasters, corruption and military activity. The governments of many Latin
American countries may also exercise substantial influence over many aspects of
the private sector, and any such exercise could have a significant effect on
companies in which the Fund invests. Securities of companies in Latin American
countries may be subject to significant price volatility, which could impact
Fund performance.
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a particular sector, the
Fund will be subject to a greater degree to the risks particular to that sector,
including the sectors described below. Market conditions, interest rates, and
economic, regulatory, or financial developments could significantly affect a
single sector. By focusing its investments in a particular sector, the Fund may
face more risks than if it were diversified broadly over numerous
sectors.
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Industrial
Sector Risk: As of December 31, 2021, 28% of the Fund’s
assets were invested in the industrial sector. Industrial companies are
affected by supply and demand both for their specific product or service
and for industrial sector products in general. Government regulation,
world events, exchange rates and economic conditions, technological
developments and liabilities for environmental damage and general civil
liabilities will likewise affect the performance of these
companies. |
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Information
Technology Sector Risk: As of December 31, 2021, 25% of the
Fund’s assets were invested in the information technology sector.
Information technology companies may be significantly affected by
aggressive pricing as a result
of |
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MATTHEWS EMERGING MARKETS SMALL COMPANIES FUND |
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intense competition and
by rapid product obsolescence due to rapid development of technological
innovations and frequent new product introduction. Other factors, such as
short product cycle, possible loss or impairment of intellectual property
rights, and changes in government regulations, may also adversely impact
information technology
companies. |
Cybersecurity Risk: With the increased use of
technologies such as the internet to conduct business, the Fund
is
susceptible
to operational, information security, and related risks. Cyber incidents
affecting the Fund or its service providers may cause disruptions and impact
business operations, potentially resulting in financial losses, interference
with the Fund’s ability to calculate its NAV, impediments to trading, the
inability of shareholders to transact business, violations of applicable privacy
and other laws, regulatory fines, penalties, reputational damage, reimbursement
or other compensation costs, or additional compliance
costs.
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Past Performance
The bar chart
below shows the Fund’s performance for each full calendar year since its
inception and how it has varied from year to year, reflective of the Fund’s
volatility and some indication of risk. Also shown are the best
and worst quarters for this time period. The table below shows the Fund’s
performance over certain periods of time, along with performance of its
benchmark index. Before April 30, 2021, the Fund was managed with a
materially different investment strategy and may have achieved materially
different performance results under its current investment strategy from the
performance shown for periods before that date. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURN FOR YEARS ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
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1 year |
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5 years |
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Since Inception
(4/30/13) |
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Matthews
Emerging Markets Small Companies Fund |
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Return
before taxes |
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22.39% |
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17.37% |
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9.70% |
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Return
after taxes on distributions1 |
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19.89% |
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15.33% |
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8.58% |
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Return
after taxes on distributions and sale of Fund shares1 |
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13.58% |
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13.28% |
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7.50% |
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MSCI
Emerging Markets Small Cap Index |
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(reflects no deduction for fees, expenses
or taxes) |
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19.29% |
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11.88% |
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5.73% |
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1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager: Vivek Tanneeru has been a
Portfolio Manager of the Matthews Emerging Markets Small Companies Fund since
2020.
Co‑Manager: Jeremy Sutch, CFA, has been a
Portfolio Manager of the Matthews Emerging Markets Small Companies Fund since
2021.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions. The Lead Manager is supported by and consults with the
Co-Manager, who is not primarily responsible for portfolio management.
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
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Matthews
Asia Growth Fund
FUND SUMMARY
Investment Objective
Long-term
capital appreciation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
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Maximum
Account Fee on Redemptions (for wire redemptions only) |
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$9 |
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ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
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Management
Fees |
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0.66% |
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Distribution
(12b‑1) Fees |
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0.00% |
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Other Expenses |
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0.26% |
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Administration
and Shareholder Servicing Fees |
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0.14% |
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Total Annual Fund Operating
Expenses |
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0.92% |
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EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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One year: $94 |
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Three years: $293 |
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Five years: $509 |
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Ten years: $1,131 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 42% of the average value of its
portfolio.
Principal Investment
Strategy
Under
normal circumstances, the Matthews Asia Growth Fund seeks to achieve its
investment objective by investing at least 80% of its net assets, which include
borrowings for investment purposes, in the common and preferred stocks of
companies located in Asia. The Fund may also invest in convertible securities of
any duration or quality, including those that are unrated, or would be below
investment grade (referred to as “junk bonds”) if rated, of Asian companies.
Asia consists of all countries and markets in Asia, and includes developed,
emerging, and frontier countries and markets in the Asian region. Certain
emerging market countries may also be classified as “frontier” market countries,
which are a subset of emerging market countries with newer or even less
developed economies and markets, such as Sri Lanka and Vietnam. A company or
other issuer is considered to be “located” in a country or a region, and a
security or instrument is deemed to be an Asian (or specific country) security
or instrument, if it has substantial ties to that country or region. Matthews
currently makes that determination based primarily on one or more of the
following criteria: (A) with respect to a company or issuer, whether
(i) it is organized under the laws of that country or any country in
that region; (ii) it derives at least 50% of its revenues or profits from
goods produced or sold, investments made, or services performed, or has at least
50% of its assets located, within that country or region; (iii) it has the
primary trading markets for its securities in
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that
country or region; (iv) it has its principal place of business in or is
otherwise headquartered in that country or region; or (v) it is a
governmental entity or an agency, instrumentality or a political subdivision of
that country or any country in that region; and (B) with respect to an
instrument or issue, whether (i) its issuer is headquartered or organized
in that country or region; (ii) it is issued to finance a project with
significant assets or operations in that country or region; (iii) it is
principally secured or backed by assets located in that country or region;
(iv) it is a component of or its issuer is included in a recognized
securities index for the country or region; or (v) it is denominated in the
currency of an Asian country and addresses at least one of the other above
criteria. The term “located” and the associated criteria listed above have been
defined in such a way that Matthews has latitude in determining whether an
issuer should be included within a region or country. The Fund may also invest
in depositary receipts, including American, European, and Global Depositary
Receipts.
The
Fund seeks to invest in companies capable of sustainable growth based on the
fundamental characteristics of those companies, including balance sheet
information; number of employees; size and stability of cash flow; management’s
depth, adaptability and integrity; product lines; marketing strategies;
corporate governance; and financial health. Matthews expects that the companies
in which the Fund invests typically will be of medium or large size, but the
Fund may invest in companies of any size. Matthews measures a company’s size
with respect to fundamental criteria such as, but not limited to, market
capitalization, book value, revenues, profits, cash flow, dividends paid and
number of employees. The implementation of the principal investment strategies
of the Fund may result in a significant portion of the Fund’s assets being
invested from time to time in one or more sectors, but the Fund may invest in
companies in any sector.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption and
military activity. The economies of many Asian countries differ from the
economies of more developed countries in many respects, such as rate of growth,
inflation, capital reinvestment, resource self-sufficiency, financial system
stability, the national balance of payments position and sensitivity to changes
in global trade.
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious diseases such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and materially and adversely impact economic
conditions in ways that cannot be predicted, all of which could result in
substantial investment losses. Containment
efforts
and related restrictive actions by governments and businesses have significantly
diminished and disrupted global economic activity across many industries. Less
developed countries and their health systems may be more vulnerable to these
impacts. The ultimate impact of COVID‑19, including new strains of the
underlying virus, or other health emergencies on global economic conditions and
businesses is impossible to predict accurately. Ongoing and potential additional
material adverse economic effects of indeterminate duration and severity are
possible. The resulting adverse impact on the value of an investment in the Fund
could be significant and prolonged. Other public health emergencies that may
arise in the future could have similar or other unforeseen
effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time. Additionally, Asian countries may utilize
formal or informal currency-exchange controls or “capital controls.” Capital
controls may impose restrictions on the Fund’s ability to repatriate investments
or income. Such controls may also affect the value of the Fund’s
holdings.
Risks Associated with Emerging and Frontier
Markets: Many Asian countries are considered emerging or frontier
markets. Such markets are often less stable politically and economically than
developed markets such as the United States, and investing in these markets
involves different and greater risks. There may be less publicly available
information about companies in many Asian countries, and the stock exchanges and
brokerage industries in many Asian countries typically do not have the level of
government oversight as do those in the United States. Securities markets
of many Asian countries are also substantially smaller, less liquid and more
volatile than securities markets in the United
States.
Growth Stock Risk: Growth stocks may be more
volatile than other stocks because they are more sensitive to investor
perceptions of the issuing company’s growth potential. Growth stocks may go in
and out of favor over time and may perform differently than the market as a
whole.
Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
Volatility Risk: The smaller size and lower
levels of liquidity in emerging markets, as well as other factors, may result in
changes in the prices of Asian securities that are more volatile than those of
companies in more developed regions. This volatility can cause the price of the
Fund’s shares to go up or down dramatically. Because of this volatility, this
Fund is better suited for long-term investors (typically five years or
longer).
Convertible Securities Risk: The Fund may
invest in convertible preferred stocks, and convertible bonds and debentures.
The risks of convertible bonds and debentures include repayment risk and
interest rate risk. Many Asian
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convertible
securities are not rated by rating agencies. The Fund may invest in convertible
debt securities of any maturity and in those that are unrated, or would be below
investment grade (referred to as “junk bonds”) if rated. Therefore, credit risk
may be greater for the Fund than for other funds that invest in higher-grade
securities. These securities are also subject to greater liquidity risk than
many other securities.
Risks Associated with Smaller Companies:
Smaller companies may offer substantial opportunities for capital growth; they
also involve substantial risks, and investments in smaller companies may be
considered speculative. Such companies often have limited product lines, markets
or financial resources. Securities of smaller companies may trade less
frequently and in lesser volume than more widely held securities and the
securities of smaller companies generally are subject to more abrupt or erratic
price movements than more widely held or larger, more established companies or
the market indices in general.
Risks Associated with Medium‑Size Companies:
Medium‑size companies may be subject to a number of risks not associated
with larger, more established companies, potentially making their stock prices
more volatile and increasing the risk of
loss.
Risks Associated with Japan: The Japanese
economy has only recently emerged from a prolonged economic downturn. Since the
year 2000, Japan’s economic growth rate has remained relatively low. The
Japanese economy is characterized by an aging demographic, declining population,
large government debt and highly regulated labor market. Economic growth in
Japan is dependent on domestic consumption, deregulation and consistent
government policy. International trade, particularly with the U.S., also impacts
growth of the Japanese economy, and adverse economic conditions in the U.S. or
other trade partners may affect
Japan.
Risks Associated with China and Hong Kong: The
Chinese government exercises significant control over China’s economy through
its industrial policies, monetary policy, management of currency exchange rates,
and management of the payment of foreign currency-denominated obligations.
Changes in these policies could adversely impact affected industries or
companies in China. China’s economy, particularly its export-oriented
industries, may be adversely impacted by trade or political disputes with
China’s major
trading
partners, including the U.S. In addition, as its consumer class continues to
grow, China’s domestically oriented industries may be especially sensitive to
changes in government policy and investment cycles. As demonstrated by Hong Kong
protests in recent years over political, economic, and legal freedoms, and the
Chinese government’s response to them, considerable political uncertainty
continues to exist within Hong Kong. Due to the interconnected nature of the
Hong Kong and Chinese economies, this instability in Hong Kong may cause
uncertainty in the Hong Kong and Chinese markets. If China were to exert its
authority so as to alter the economic, political or legal structures or the
existing social policy of Hong Kong, investor and business confidence in Hong
Kong could be negatively affected and have an adverse effect on the Fund’s
investments.
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a particular sector, the
Fund will be subject to a greater degree to the risks particular to that sector,
including the sector described below. Market conditions, interest rates, and
economic, regulatory, or financial developments could significantly affect a
single sector. By focusing its investments in a particular sector, the Fund may
face more risks than if it were diversified broadly over numerous
sectors.
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Health Care
Sector Risk: As of December 31, 2021, 31% of the Fund’s
assets were invested in the health care sector. Companies in the health
care sector may be affected by various factors, including extensive
government regulations, heavy dependence on patent protection, pricing
pressure, increased cost of medical products and services, and product
liability claims. Health care companies may be thinly capitalized and may
be susceptible to product
obsolescence. |
Cybersecurity Risk: With the increased use of
technologies such as the internet to conduct business, the Fund is susceptible
to operational, information security, and related risks. Cyber incidents
affecting the Fund or its service providers may cause disruptions and impact
business operations, potentially resulting in financial losses, interference
with the Fund’s ability to calculate its NAV, impediments to trading, the
inability of shareholders to transact business, violations of applicable privacy
and other laws, regulatory fines, penalties, reputational damage, reimbursement
or other compensation costs, or additional compliance
costs.
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Past Performance
The bar chart
below shows the Fund’s performance for the past 10 years and how it has varied
from year to year, reflective of the Fund’s volatility and some indication of
risk. Also shown are the best and worst quarters for this time
period. The table below shows the Fund’s performance over certain periods of
time, along with performance of its benchmark index. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURNS FOR YEARS ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
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1 year |
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5 years |
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10 years |
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Since Inception
(10/29/10) |
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Matthews
Asia Growth Fund |
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Return
before taxes |
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-14.55% |
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13.21% |
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10.42% |
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8.23% |
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Return
after taxes on distributions1 |
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-15.73% |
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12.07% |
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9.72% |
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7.56% |
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Return
after taxes on distributions and sale of Fund shares1 |
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-8.07% |
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10.39% |
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8.47% |
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6.61% |
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MSCI
All Country Asia Pacific Index |
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(reflects no deduction for fees, expenses
or taxes) |
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-1.19% |
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10.23% |
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8.29% |
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6.46% |
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1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager: Taizo Ishida has been a Portfolio
Manager of the Matthews Asia Growth Fund since 2007.
Co-Manager: Michael J. Oh, CFA, has been a
Portfolio Manager of the Matthews Asia Growth Fund since 2020.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions. The Lead Manager is supported by and consults with the
Co‑Manager, who is not primarily responsible for portfolio management.
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
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MATTHEWS ASIA GROWTH FUND |
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Matthews
Pacific Tiger Fund
FUND SUMMARY
Investment Objective
Long-term
capital appreciation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
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Maximum
Account Fee on Redemptions (for wire redemptions only) |
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$9 |
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ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
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Management
Fees |
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0.66% |
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Distribution
(12b‑1) Fees |
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0.00% |
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Other Expenses |
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0.26% |
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Administration
and Shareholder Servicing Fees |
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0.14% |
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Total Annual
Fund Operating Expenses |
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0.92% |
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Fee
Waiver and Expense Reimbursement1 |
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(0.02%) |
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Total Annual Fund Operating Expenses After Fee
Waiver and Expense Reimbursement |
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0.90% |
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1 |
Matthews
has contractually agreed to waive a portion of its advisory fee and
administrative and shareholder services fee if the Fund’s average daily
net assets are over $3 billion, as follows: for every
$2.5 billion average daily net assets of the Fund that are over
$3 billion, the advisory fee rate and the administrative and
shareholder services fee rate for the Fund with respect to such excess
average daily net assets will be each reduced by 0.01%, in each case
without reducing such fee rate below 0.00%. Any amount waived by Matthews
pursuant to this agreement may not be recouped by Matthews. This agreement
will remain in place until April 30,
2023 and may be terminated (i) at any time by the
Board of Trustees upon 60 days’ prior written notice to Matthews; or
(ii) by Matthews at the annual expiration date of the agreement upon
60 days’ prior written notice to the Trust, in each case without payment
of any penalty. |
EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The example reflects the fee waiver for the one year period
only. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
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One year: $92 |
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Three years: $291 |
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Five years: $507 |
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Ten years: $1,129 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 47% of the average value of its
portfolio.
Principal Investment
Strategy
Under
normal circumstances, the Matthews Pacific Tiger Fund seeks to achieve its
investment objective by investing at least 80% of its net assets, which include
borrowings for investment purposes, in the common and preferred stocks of
companies located in Asia ex Japan, which consists of all countries and markets
in Asia excluding Japan, but including all other developed, emerging, and
frontier countries and markets in the Asian region. Certain emerging market
countries may also be classified as “frontier” market countries, which are a
subset of emerging market countries with newer or even less developed economies
and markets, such as Sri Lanka and Vietnam. A company
or
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other
issuer is considered to be “located” in a country or a region, and a security or
instrument is deemed to be an Asian (or specific country) security or
instrument, if it has substantial ties to that country or region. Matthews
currently makes that determination based primarily on one or more of the
following criteria: (A) with respect to a company or issuer, whether
(i) it is organized under the laws of that country or any country in
that region; (ii) it derives at least 50% of its revenues or profits from
goods produced or sold, investments made, or services performed, or has at least
50% of its assets located, within that country or region; (iii) it has the
primary trading markets for its securities in that country or region;
(iv) it has its principal place of business in or is otherwise
headquartered in that country or region; or (v) it is a governmental entity
or an agency, instrumentality or a political subdivision of that country or any
country in that region; and (B) with respect to an instrument or issue,
whether (i) its issuer is headquartered or organized in that country or
region; (ii) it is issued to finance a project with significant assets or
operations in that country or region; (iii) it is principally secured or
backed by assets located in that country or region; (iv) it is a component
of or its issuer is included in a recognized securities index for the country or
region; or (v) it is denominated in the currency of an Asian country and
addresses at least one of the other above criteria. The term “located” and the
associated criteria listed above have been defined in such a way that Matthews
has latitude in determining whether an issuer should be included within a region
or country. The Fund may also invest in depositary receipts, including American,
European and Global Depositary
Receipts.
The
Fund seeks to invest in companies capable of sustainable growth based on the
fundamental characteristics of those companies, including balance sheet
information; number of employees; size and stability of cash flow; management’s
depth, adaptability and integrity; product lines; marketing strategies;
corporate governance; and financial health. Matthews expects that the companies
in which the Fund invests typically will be of medium or large size, but the
Fund may invest in companies of any size. Matthews measures a company’s size
with respect to fundamental criteria such as, but not limited to, market
capitalization, book value, revenues, profits, cash flow, dividends paid and
number of employees. The implementation of the principal investment strategies
of the Fund may result in a significant portion of the Fund’s assets being
invested from time to time in one or more sectors, but the Fund may invest in
companies in any sector.
Matthews
may also take into consideration environmental, social and governance (ESG)
characteristics of companies in selecting portfolio investments as part of the
investment process for this Fund in an effort to reduce what it regards as the
sustainability risks of its investments. Through these efforts, Matthews also
hopes to promote the sustainability practices of those companies. For example,
it may view favorably companies that have a commitment to mitigating climate
change through reducing their carbon footprint and those with sound governance
practices. Not all investments will demonstrate those characteristics, and there
could be instances where Matthews is unable to assess whether companies have
such a commitment or follow good governance practices. Matthews’ investment
process in this regard is carried out through a combination of exclusionary ESG
screens and the use of ESG data. Matthews uses various sources of information,
including but not limited to third-party ESG rating firms and
Matthews’
own
analysis, in assessing a company’s ESG characteristics. In addition, once
invested in a company, Matthews may engage with its portfolio companies on
sustainability and governance matters through active dialogue, exercising
shareholder rights and by encouraging enhanced ESG disclosure and
implementation.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption and
military activity. The economies of many Asian countries differ from the
economies of more developed countries in many respects, such as rate of growth,
inflation, capital reinvestment, resource self-sufficiency, financial system
stability, the national balance of payments position and sensitivity to changes
in global trade.
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious diseases such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and materially and adversely impact economic
conditions in ways that cannot be predicted, all of which could result in
substantial investment losses. Containment efforts and related restrictive
actions by governments and businesses have significantly diminished and
disrupted global economic activity across many industries. Less developed
countries and their health systems may be more vulnerable to these impacts. The
ultimate impact of COVID‑19, including new strains of the underlying virus, or
other health emergencies on global economic conditions and businesses is
impossible to predict accurately. Ongoing and potential additional material
adverse economic effects of indeterminate duration and severity are possible.
The resulting adverse impact on the value of an investment in the Fund could be
significant and prolonged. Other public health emergencies that may arise in the
future could have similar or other unforeseen
effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time. Additionally, Asian countries may utilize
formal or informal currency-exchange controls or “capital controls.” Capital
controls may impose restrictions on the Fund’s ability to repatriate investments
or income. Such controls may also affect the value of the Fund’s
holdings.
Risks Associated with Emerging and Frontier Markets:
Many Asian countries are considered emerging or frontier markets. Such
markets are often less stable politically and economically than developed
markets such as the United States, and investing in these markets involves
different and
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greater
risks. There may be less publicly available information about companies in many
Asian countries, and the stock exchanges and brokerage industries in many Asian
countries typically do not have the level of government oversight as do those in
the United States. Securities markets of many Asian countries are also
substantially smaller, less liquid and more volatile than securities markets in
the United States.
Growth Stock Risk: Growth stocks may be more
volatile than other stocks because they are more sensitive to investor
perceptions of the issuing company’s growth potential. Growth stocks may go in
and out of favor over time and may perform differently than the market as a
whole.
Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
Volatility Risk: The smaller size and lower
levels of liquidity in emerging markets, as well as other factors, may result in
changes in the prices of Asian securities that are more volatile than those of
companies in more developed regions. This volatility can cause the price of the
Fund’s shares to go up or down dramatically. Because of this volatility, this
Fund is better suited for long-term investors (typically five years or
longer).
Risks Associated with Medium‑Size Companies:
Medium‑size companies may be subject to a number of risks not associated
with larger, more established companies, potentially making their stock prices
more volatile and increasing the risk of
loss.
Risks Associated with China and Hong Kong: The
Chinese government exercises significant control over China’s economy through
its industrial policies, monetary policy, management of currency exchange rates,
and management of the payment of foreign currency-denominated obligations.
Changes in these policies could adversely impact affected industries or
companies in China. China’s economy, particularly its export-oriented
industries, may be adversely impacted by trade or political disputes with
China’s major trading partners, including the U.S. In addition, as its consumer
class continues to grow, China’s domestically oriented industries may be
especially sensitive to changes in government policy and investment cycles. As
demonstrated by Hong Kong protests in recent years over political, economic, and
legal freedoms, and the Chinese government’s response to them, considerable
political uncertainty continues to exist within Hong Kong. Due to the
interconnected nature of the Hong Kong and Chinese economies, this instability
in Hong Kong may cause uncertainty in the Hong Kong and Chinese markets. If
China were to exert its authority so as to alter the economic, political or
legal structures or the existing social policy of Hong Kong, investor and
business confidence in Hong Kong could be negatively affected and have an
adverse effect on the Fund’s
investments.
Sustainability Risk: Sustainability risk means
an environmental, social or governance (ESG) event or condition that, if it
occurs, could cause an actual or a potential material negative impact on the
value of the investments made by the Fund. ESG events could result from climate
change (so-called physical risks) or from society’s response to climate
change
(so-called
transition risks), social events (e.g., inequality, inclusiveness, labor
relations, investment in human capital, accident prevention, changing customer
behavior, etc.) or governance shortcomings (e.g., diversity and inclusion
issues, recurrent significant breach of international agreements, bribery
issues, products quality and safety, selling practices, etc.), which may result
in unanticipated potential or actual material negative impact on the Fund’s
investments and, therefore, would have an adverse impact on the value of the
Fund.
ESG Investing Risk: Because the Fund may take
into consideration the environmental, social and governance characteristics of
portfolio companies in which it may invest, the Fund may select or exclude
securities of certain issuers for reasons other than potential performance. The
Fund’s consideration of ESG characteristics in making its investment decisions
may affect the Fund’s exposure to certain issuers, industries, sectors, regions
or countries, and the Fund’s performance will likely differ—positively or
negatively—as compared to funds that do not utilize these considerations,
depending on whether the Fund’s investments made according to considerations of
ESG characteristics are in or out of favor in the market. The consideration of
ESG characteristics is qualitative and subjective by nature, and there is no
guarantee that the ESG characteristics used by Matthews or any judgment
exercised by Matthews will reflect the opinions of any particular investor.
Although an investment by the Fund in a company may satisfy one or more ESG
factors in the view of the portfolio managers, there is no guarantee that such
company actually promotes positive environmental, social or economic
developments, and that same company may also fail to satisfy other ESG factors.
Funds with ESG investment strategies are generally suited for long-term rather
than short-term investors.
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a particular sector, the
Fund will be subject to a greater degree to the risks particular to that sector,
including the sector described below. Market conditions, interest rates, and
economic, regulatory, or financial developments could significantly affect a
single sector. By focusing its investments in a particular sector, the Fund may
face more risks than if it were diversified broadly over numerous
sectors.
– |
|
Information
Technology Sector Risk: As of December 31, 2021, 27% of the
Fund’s assets were invested in the information technology sector.
Information technology companies may be significantly affected by
aggressive pricing as a result of intense competition and by rapid product
obsolescence due to rapid development of technological innovations and
frequent new product introduction. Other factors, such as short product
cycle, possible loss or impairment of intellectual property rights, and
changes in government regulations, may also adversely impact information
technology
companies. |
Cybersecurity Risk: With the increased use of
technologies such as the internet to conduct business, the Fund is susceptible
to operational, information security, and related risks. Cyber incidents
affecting the Fund or its service providers may cause disruptions and impact
business operations, potentially resulting in financial losses, interference
with the Fund’s ability to calculate its NAV, impediments to trading, the
inability of shareholders to transact business, violations of applicable privacy
and other laws, regulatory fines, penalties, reputational damage, reimbursement
or other compensation costs, or additional compliance
costs.
|
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|
18 |
|
matthewsasia.com | 800.789.ASIA |
|
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|
Past Performance
The bar chart
below shows the Fund’s performance for the past 10 years and how it has varied
from year to year, reflective of the Fund’s volatility and some indication of
risk. Also shown are the best and worst quarters for this time
period. The table below shows the Fund’s performance over certain periods of
time, along with performance of its benchmark index. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURNS FOR YEARS ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
|
|
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|
|
|
|
|
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|
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|
|
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|
|
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|
1 year |
|
|
5 years |
|
|
10 years |
|
|
Since Inception
(10/29/10) |
|
Matthews
Pacific Tiger Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
before taxes |
|
|
-4.29% |
|
|
|
11.31% |
|
|
|
9.07% |
|
|
|
6.99% |
|
Return
after taxes on distributions1 |
|
|
-8.38% |
|
|
|
9.56% |
|
|
|
7.71% |
|
|
|
5.78% |
|
Return
after taxes on distributions and sale of Fund shares1 |
|
|
0.27% |
|
|
|
8.93% |
|
|
|
7.26% |
|
|
|
5.55% |
|
MSCI
All Country Asia ex Japan Index |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(reflects no deduction for fees, expenses
or taxes) |
|
|
-4.46% |
|
|
|
11.61% |
|
|
|
8.32% |
|
|
|
6.00% |
|
|
1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager: Sharat Shroff, CFA, has been a
Portfolio Manager of the Matthews Pacific Tiger Fund since 2008.
Lead Manager: Inbok Song has been a Portfolio
Manager of the Matthews Pacific Tiger Fund since 2019.
Co‑Manager: Winnie Chwang has been a Portfolio
Manager of the Matthews Pacific Tiger Fund since 2021.
Co-Manager: Andrew Mattock has been a Portfolio
Manager of the Matthews Pacific Tiger Fund since 2022.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions (and jointly responsible with the other Lead Manager). The
Lead Manager is supported by and consults with the the Co-Managers, who are not
primarily responsible for portfolio management.
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
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|
MATTHEWS PACIFIC TIGER FUND |
|
|
19 |
|
Matthews
Asia ESG Fund
FUND SUMMARY
Investment Objective
Long-term
capital appreciation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
|
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|
Maximum
Account Fee on Redemptions (for wire redemptions only) |
|
|
|
|
|
|
$9 |
|
ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
|
|
|
|
|
|
|
|
|
Management
Fees |
|
|
|
|
|
|
0.66% |
|
Distribution
(12b‑1) Fees |
|
|
|
|
|
|
0.00% |
|
Other Expenses |
|
|
|
|
|
|
0.41% |
|
|
|
|
Administration
and Shareholder Servicing Fees |
|
|
0.14% |
|
|
|
|
|
Total Annual
Fund Operating Expenses |
|
|
|
|
|
|
1.07% |
|
Fee
Waiver and Expense Reimbursement1 |
|
|
|
|
|
|
0.13% |
|
Total Annual Fund Operating Expenses After Fee
Waiver and Expense Reimbursement |
|
|
|
|
|
|
1.20% |
|
|
1 |
Matthews
has contractually agreed to waive fees and reimburse expenses to the
extent needed to limit Total Annual Fund Operating Expenses (excluding
Rule 12b‑1 fees, taxes, interest, brokerage commissions, short sale
dividend expenses, expenses incurred in connection with any merger or
reorganization or extraordinary expenses such as litigation) of the
Institutional Class to 1.20%. The amount shown reflects a recoupment
of expenses previously waived under the expense cap for the Institutional
Class. If the operating expenses fall below the expense limitation within
three years after Matthews has made a waiver or reimbursement, the Fund
may reimburse Matthews up to an amount that does not cause the expenses
for that year to exceed the lesser of (i) the expense limitation
applicable at the time of that fee waiver and/or expense reimbursement or
(ii) the expense limitation in effect at the time of recoupment. This
agreement will remain in place until April 30,
2023 and may be terminated at any time by the Board of
Trustees on behalf of the Fund on 60 days’ written notice to Matthews.
Matthews may decline to renew this agreement by written notice to the
Trust at least 30 days before its annual expiration
date. |
EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The example reflects the expense limitation for the one year
period only. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
|
|
|
|
|
|
|
One year: $122 |
|
Three years: $353 |
|
Five years: $603 |
|
Ten years: $1,317 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 66% of the average value of its
portfolio.
Principal Investment
Strategy
Under
normal circumstances, the Matthews Asia ESG Fund seeks to achieve its investment
objective by investing at least 80% of its net assets, which include borrowings
for investment purposes, in the common and preferred stocks of companies of any
market
|
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20 |
|
matthewsasia.com | 800.789.ASIA |
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|
capitalization
located in Asia that Matthews believes satisfy one or more of its environmental,
social and governance (“ESG”) standards. Up to 20% of the Fund’s net assets may
be invested in companies that do not satisfy these ESG standards. The Fund may
also invest in convertible securities and fixed-income securities, of any
duration or quality, including high yield securities (also known as “junk
bonds”), of Asian companies. Asia consists of all countries and markets in Asia
and includes developed, emerging, and frontier countries and markets in the
Asian region. Certain emerging market countries may also be classified as
“frontier” market countries, which are a subset of emerging market countries
with newer or even less developed economies and markets, such as Sri Lanka and
Vietnam. A company or other issuer is considered to be “located” in a country or
a region, and a security or instrument is deemed to be an Asian (or specific
country) security or instrument, if it has substantial ties to that country or
region. Matthews currently makes that determination based primarily on one or
more of the following criteria: (A) with respect to a company or issuer,
whether (i) it is organized under the laws of that country or any
country in that region; (ii) it derives at least 50% of its revenues or
profits from goods produced or sold, investments made, or services performed, or
has at least 50% of its assets located, within that country or region;
(iii) it has the primary trading markets for its securities in that country
or region; (iv) it has its principal place of business in or is otherwise
headquartered in that country or region; or (v) it is a governmental entity
or an agency, instrumentality or a political subdivision of that country or any
country in that region; and (B) with respect to an instrument or issue,
whether (i) its issuer is headquartered or organized in that country or
region; (ii) it is issued to finance a project with significant assets or
operations in that country or region; (iii) it is principally secured or
backed by assets located in that country or region; (iv) it is a component
of or its issuer is included in a recognized securities index for the country or
region; or (v) it is denominated in the currency of an Asian country and
addresses at least one of the other above criteria. The term “located” and the
associated criteria listed above have been defined in such a way that Matthews
has latitude in determining whether an issuer should be included within a region
or country. The Fund may also invest in depositary receipts, including American,
European, and Global Depositary
Receipts.
The
Fund’s primary focus is long-term capital appreciation. In achieving this
objective, the Fund seeks to invest in companies that Matthews believes to be
undervalued but of high quality and run by management teams with good operating
and governance track records. While the Fund may invest in companies across the
market capitalization spectrum, it has in the past invested, and may continue to
invest, a substantial portion of Fund assets in smaller companies. In addition,
the Fund seeks to invest in those Asian companies that have the potential to
profit from the long-term opportunities presented by global environmental and
social challenges as well as those Asian companies that proactively manage
long-term risks presented by these
challenges.
In
addition to traditional financial data, the stock selection process takes into
consideration ESG factors that the portfolio managers believe help identify
companies with superior business models. There are no universally agreed upon
objective standards for assessing ESG factors for companies. Rather, these
factors tend to have many subjective characteristics,
can
be
difficult to analyze, and frequently involve a balancing of a company’s business
plans, objectives, actual conduct and other factors. ESG standards can vary over
different periods, can evolve over time and tend to be stated broadly and
applied flexibly. They may also be difficult to apply consistently across
regions, countries, industries or sectors. In some cases, Matthews will consider
an investment to be eligible for the Fund where a company has expressed a goal
or objective and has started to take actions that, if successful, would satisfy
the Fund’s ESG standards in the judgment of Matthews. In implementing its ESG
strategy, Matthews will use any one or more of the following key ESG standards
to evaluate potential investments: whether the issuer has adopted and followed
(i) sustainable environmental practices, responsible resource management
and energy efficiency practices, (ii) policies related to social
responsibility, employee welfare, diversity and inclusion, or (iii) sound
governance practices that align interests of shareholders and management and
demonstrate a commitment to the integration of ESG standards. Businesses that
meet one or more of the Fund’s ESG standards are generally businesses that
currently engage in practices or have business goals or objectives that, in the
judgment of Matthews, if continued to be followed or if successfully implemented
would make human or business activity less destructive to the environment, or
businesses that promote positive social and economic developments. Matthews uses
various sources of information, including but not limited to third-party ESG
rating firms, in analyzing whether a company satisfies its ESG standards.
However, it is Matthews’ determination, based on its own analysis, as to whether
a company satisfies those standards and is eligible for investment by the Fund.
There can be no guarantee that a company that Matthews believes to meet one or
more of the Fund’s ESG standards will actually conduct its affairs in a manner
that is less destructive to the environment, or will actually promote positive
social and economic developments. The Fund engages its portfolio companies on
ESG matters primarily through active dialogue and proxy voting, which will be
voted according to these ESG standards, and by encouraging enhanced ESG
disclosure. The implementation of the principal investment strategies of the
Fund may result in a significant portion of the Fund’s assets being invested
from time to time in one or more sectors, but the Fund may invest in companies
in any sector.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption and
military activity. The economies of many Asian countries differ from the
economies of more developed countries in many respects, such as rate of growth,
inflation, capital reinvestment, resource self-sufficiency, financial system
stability, the national balance of payments position and sensitivity to changes
in global trade.
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|
MATTHEWS ASIA ESG FUND |
|
|
21 |
|
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious diseases such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and materially and adversely impact economic
conditions in ways that cannot be predicted, all of which could result in
substantial investment losses. Containment efforts and related restrictive
actions by governments and businesses have significantly diminished and
disrupted global economic activity across many industries. Less developed
countries and their health systems may be more vulnerable to these impacts. The
ultimate impact of COVID‑19, including new strains of the underlying virus, or
other health emergencies on global economic conditions and businesses is
impossible to predict accurately. Ongoing and potential additional material
adverse economic effects of indeterminate duration and severity are possible.
The resulting adverse impact on the value of an investment in the Fund could be
significant and prolonged. Other public health emergencies that may arise in the
future could have similar or other unforeseen
effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time. Additionally, Asian countries may utilize
formal or informal currency-exchange controls or “capital controls.” Capital
controls may impose restrictions on the Fund’s ability to repatriate investments
or income. Such controls may also affect the value of the Fund’s
holdings.
Risks Associated with Emerging and Frontier
Markets: Many Asian countries are considered emerging or frontier
markets. Such markets are often less stable politically and economically than
developed markets such as the United States, and investing in these markets
involves different and greater risks. There may be less publicly available
information about companies in many Asian countries, and the stock exchanges and
brokerage industries in many Asian countries typically do not have the level of
government oversight as do those in the United States. Securities markets of
many Asian countries are also substantially smaller, less liquid and more
volatile than securities markets in the United
States.
ESG Investing Risk: The Fund’s ESG strategy may
select or exclude securities of certain issuers for reasons other than potential
performance. The Fund’s consideration of ESG standards in making its investment
decisions may affect the Fund’s exposure to certain issuers, industries,
sectors, regions or countries, and the Fund’s performance will likely
differ—positively or negatively—as compared to funds that do not utilize an ESG
strategy, depending on whether the Fund’s ESG investments are in or out of favor
in the market. ESG investing is qualitative and subjective by nature, and there
is no guarantee that the criteria used by Matthews or any judgment exercised by
Matthews will reflect the opinions of any particular investor. Although an
investment by the Fund in a company may satisfy one or more ESG standards in the
view of the portfolio managers, there is no guarantee that such company actually
promotes positive environmental, social or economic developments, and that same
company may also fail to satisfy other ESG standards, in some cases
even
egregiously.
Funds with ESG investment strategies are generally suited for long-term rather
than short-term investors.
Growth Stock Risk: Growth stocks may be more
volatile than other stocks because they are more sensitive to investor
perceptions of the issuing company’s growth potential. Growth stocks may go in
and out of favor over time and may perform differently than the market as a
whole.
Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
Volatility Risk: The smaller size and lower
levels of liquidity in emerging markets, as well as other factors, may result in
changes in the prices of Asian securities that are more volatile than those of
companies in more developed regions. This volatility can cause the price of the
Fund’s shares to go up or down dramatically. Because of this volatility, this
Fund is better suited for long-term investors (typically five years or
longer).
Convertible Securities Risk: The Fund may
invest in convertible preferred stocks, and convertible bonds and debentures.
The risks of convertible bonds and debentures include repayment risk and
interest rate risk. Many Asian convertible securities are not rated by rating
agencies. The Fund may invest in convertible debt securities of any maturity and
in those that are unrated, or would be below investment grade (referred to as
“junk bonds”) if rated. Therefore, credit risk may be greater for the Fund than
for other funds that invest in higher-grade securities. These securities are
also subject to greater liquidity risk than many other
securities.
Credit Risk: Credit risk refers to the risk
that an issuer may default in the payment of principal and/or interest on an
instrument.
Interest Rate Risk: Fixed-income securities may
decline in value because of changes in interest rates. Bond prices generally
rise when interest rates decline and generally decline when interest rates
rise.
High Yield Securities Risk: High yield
securities or unrated securities of similar credit quality (commonly known as
“junk bonds”) are more likely to default than higher rated securities. These
securities typically entail greater potential price volatility and are
considered predominantly speculative. Issuers of high yield securities may also
be more susceptible to adverse economic and competitive industry conditions than
those of higher-rated securities.
Risks Associated with Smaller Companies:
Smaller companies may offer substantial opportunities for capital growth; they
also involve substantial risks, and investments in smaller companies may be
considered speculative. Such companies often have limited product lines, markets
or financial resources. Securities of smaller companies may trade less
frequently and in lesser volume than more widely held securities and the
securities of smaller companies generally are subject to more abrupt or erratic
price movements than more widely held or larger, more established companies or
the market indices in general.
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22 |
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matthewsasia.com | 800.789.ASIA |
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Risks Associated with Medium-Size Companies:
Medium‑size companies may be subject to a number of risks not associated with
larger, more established companies, potentially making their stock prices more
volatile and increasing the risk of
loss.
Risks Associated with China and Hong Kong: The
Chinese government exercises significant control over China’s economy through
its industrial policies, monetary policy, management of currency exchange rates,
and management of the payment of foreign currency-denominated obligations.
Changes in these policies could adversely impact affected industries or
companies in China. China’s economy, particularly its export-oriented
industries, may be adversely impacted by trade or political disputes with
China’s major trading partners, including the U.S. In addition, as its consumer
class continues to grow, China’s domestically oriented industries may be
especially sensitive to changes in government policy and investment cycles. As
demonstrated by Hong Kong protests in recent years over political, economic, and
legal freedoms, and the Chinese government’s response to them, considerable
political uncertainty continues to exist within Hong Kong. Due to the
interconnected nature of the Hong Kong and Chinese economies, this instability
in Hong Kong may cause uncertainty in the Hong Kong and Chinese markets. If
China were to exert its authority so as to alter the economic, political or
legal structures or the existing social policy of Hong Kong, investor and
business confidence in Hong Kong could be negatively affected and have an
adverse effect on the Fund’s
investments.
Risks Associated with India: Government
actions, bureaucratic obstacles and inconsistent economic reform within the
Indian government have had a significant effect on the Indian economy and could
adversely affect market conditions, economic growth and the profitability of
private enterprises in India. Global factors and foreign actions may inhibit the
flow of foreign capital on which India is dependent to sustain its growth. Large
portions of many Indian companies remain in the hands of their founders
(including members of their families). Corporate governance standards of
family-controlled companies may be weaker and less transparent, which increases
the potential for loss and unequal treatment of investors. India experiences
many of the risks associated with developing economies, including relatively low
levels of liquidity, which may result in extreme volatility in the prices of
Indian securities.
Religious,
cultural and military disputes persist in India and between India and Pakistan
(as well as sectarian groups within each country). Both India and Pakistan have
tested nuclear arms, and the threat of deployment of such weapons could hinder
development of the Indian economy, and escalating tensions could impact the
broader region, including China.
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a particular sector, the
Fund will be subject to a greater degree to the risks particular to that sector,
including the sectors described below. Market conditions, interest rates, and
economic, regulatory, or financial developments could significantly affect a
single sector. By focusing its investments in a particular sector, the Fund may
face more risks than if it were diversified broadly over numerous
sectors.
– |
|
Industrial
Sector Risk: As of December 31, 2021, 23% of the Fund’s
assets were invested in the industrial sector. Industrial companies are
affected by supply and demand both for their specific product or service
and for industrial sector products in general. Government regulation,
world events, exchange rates and economic conditions, technological
developments and liabilities for environmental damage and general civil
liabilities will likewise affect the performance of these
companies. |
– |
|
Information
Technology Sector Risk: As of December 31, 2021, 22% of the
Fund’s assets were invested in the information technology sector.
Information technology companies may be significantly affected by
aggressive pricing as a result of intense competition and by rapid product
obsolescence due to rapid development of technological innovations and
frequent new product introduction. Other factors, such as short product
cycle, possible loss or impairment of intellectual property rights, and
changes in government regulations, may also adversely impact information
technology companies. |
– |
|
Financial
Services Sector Risk: As of December 31, 2021, 21% of the
Fund’s assets were invested in the financial services sector. Financial
services companies are subject to extensive government regulation and can
be significantly affected by the availability and cost of capital funds,
changes in interest rates, the rate of corporate and consumer debt
defaults, price competition and other sector-specific
factors. |
Cybersecurity Risk: With the increased use of
technologies such as the internet to conduct business, the Fund is susceptible
to operational, information security, and related risks. Cyber incidents
affecting the Fund or its service providers may cause disruptions and impact
business operations, potentially resulting in financial losses, interference
with the Fund’s ability to calculate its NAV, impediments to trading, the
inability of shareholders to transact business, violations of applicable privacy
and other laws, regulatory fines, penalties, reputational damage, reimbursement
or other compensation costs, or additional compliance
costs.
|
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|
MATTHEWS ASIA ESG FUND |
|
|
23 |
|
Past Performance
The bar chart
below shows the Fund’s performance for each full calendar year since its
inception and how it has varied from year to year, reflective of the Fund’s
volatility and some indication of risk. Also shown are the best
and worst quarters for this time period. The table below shows the Fund’s
performance over certain periods of time, along with performance of its
benchmark index. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURN FOR YEARS ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
1 year |
|
|
5 years |
|
|
Since Inception (4/30/2015) |
|
Matthews
Asia ESG Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Return
before taxes |
|
|
11.98% |
|
|
|
17.00% |
|
|
|
11.05% |
|
Return
after taxes on distributions1 |
|
|
9.25% |
|
|
|
15.43% |
|
|
|
9.83% |
|
Return
after taxes on distributions and sale of Fund shares1 |
|
|
8.03% |
|
|
|
13.29% |
|
|
|
8.54% |
|
MSCI
All Country Asia ex Japan Index |
|
|
|
|
|
|
|
|
|
|
|
|
(reflects no deduction for fees, expenses
or taxes) |
|
|
-4.46% |
|
|
|
11.61% |
|
|
|
6.09% |
|
|
1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Manager
Lead Manager: Vivek Tanneeru has been a
Portfolio Manager of the Matthews Asia ESG Fund since its inception in
2015.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions.
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
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Matthews
Asia Innovators Fund
FUND SUMMARY
Investment Objective
Long-term
capital appreciation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
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Maximum
Account Fee on Redemptions (for wire redemptions only) |
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$9 |
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ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
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Management
Fees |
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0.66% |
|
Distribution
(12b‑1) Fees |
|
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|
|
|
|
0.00% |
|
Other Expenses |
|
|
|
|
|
|
0.27% |
|
|
|
|
Administration
and Shareholder Servicing Fees |
|
|
0.14% |
|
|
|
|
|
Total Annual Fund Operating
Expenses |
|
|
|
|
|
|
0.93% |
|
EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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One year: $95 |
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Three years: $296 |
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Five years: $515 |
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Ten years: $1,143 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 220% of the average value of its
portfolio.
Principal Investment
Strategy
Under
normal circumstances, the Matthews Asia Innovators Fund seeks to achieve its
investment objective by investing at least 80% of its net assets, which include
borrowings for investment purposes, in the common and preferred stocks of
companies located in Asia that Matthews believes are innovators in their
products, services, processes, business models, management, use of technology,
or approach to creating, expanding or servicing their markets. Asia consists of
all countries and markets in Asia, including developed, emerging, and frontier
countries and markets in the Asian region. Certain emerging market countries may
also be classified as “frontier” market countries, which are a subset of
emerging market countries with newer or even less developed economies and
markets, such as Sri Lanka and Vietnam. A company or other issuer is considered
to be “located” in a country or a region, and a security or instrument is deemed
to be an Asian (or specific country) security or instrument, if it has
substantial ties to that country or region. Matthews currently makes that
determination based primarily on one or more of the following criteria:
(A) with respect to a company or issuer, whether (i) it is
organized under the laws of that country or any country in that region;
(ii) it derives at least 50% of its revenues or profits from goods produced
or sold, investments made, or services performed, or has at least 50% of its
assets located, within that country or region; (iii) it has the primary
trading markets for its securities in that country or
region;
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MATTHEWS ASIA INNOVATORS FUND |
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(iv) it
has its principal place of business in or is otherwise headquartered in that
country or region; or (v) it is a governmental entity or an agency,
instrumentality or a political subdivision of that country or any country in
that region; and (B) with respect to an instrument or issue, whether
(i) its issuer is headquartered or organized in that country or region;
(ii) it is issued to finance a project with significant assets or
operations in that country or region; (iii) it is principally secured or
backed by assets located in that country or region; (iv) it is a component
of or its issuer is included in a recognized securities index for the country or
region; or (v) it is denominated in the currency of an Asian country and
addresses at least one of the other above criteria. The term “located” and the
associated criteria listed above have been defined in such a way that Matthews
has latitude in determining whether an issuer should be included within a region
or country. The Fund may also invest in depositary receipts, including American,
European and Global Depositary
Receipts.
It
is important to note that there are no universally agreed upon objective
standards for assessing innovators. Innovative companies can be both old and new
companies. Innovative companies can exist in any industries, old and new, and in
any countries, emerging or developed. Companies perceived as innovators in one
country or one industry might not be perceived as innovators in another country
or another industry. For these reasons, the term innovators may be aspirational
and tend to be stated broadly and applied
flexibly.
The
Fund seeks to invest in companies capable of sustainable growth based on the
fundamental characteristics of those companies, including balance sheet
information; number of employees; size and stability of cash flow; management’s
depth, adaptability and integrity; product lines; marketing strategies;
corporate governance; and financial health. The Fund may invest in companies of
any size, including smaller size companies. Matthews measures a company’s size
with respect to fundamental criteria such as, but not limited to, market
capitalization, book value, revenues, profits, cash flow, dividends paid and
number of employees. The implementation of the principal investment strategies
of the Fund may result in a significant portion of the Fund’s assets being
invested from time to time in one or more sectors, but the Fund may invest in
companies in any sector. The implementation of the Fund’s principal investment
strategies may also result in high portfolio turnover
rates.
The
Fund has a fundamental policy to invest at least 25% of its net assets, which
include borrowings for investment purposes, in the common and preferred stocks
of companies that derive more than 50% of their revenues from the sale of
products or services in science- and technology-related industries and services,
which Matthews considers to be the following, among others: telecommunications,
telecommunications equipment, computers, semiconductors, semiconductor capital
equipment, networking, Internet and online service companies, media, office
automation, server hardware producers, software companies (e.g., design, consumer and industrial),
biotechnology and medical device technology companies, pharmaceuticals and
companies involved in the distribution and servicing of these
products.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption and
military activity. The economies of many Asian countries differ from the
economies of more developed countries in many respects, such as rate of growth,
inflation, capital reinvestment, resource self-sufficiency, financial system
stability, the national balance of payments position and sensitivity to changes
in global trade.
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious diseases such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and materially and adversely impact economic
conditions in ways that cannot be predicted, all of which could result in
substantial investment losses. Containment efforts and related restrictive
actions by governments and businesses have significantly diminished and
disrupted global economic activity across many industries. Less developed
countries and their health systems may be more vulnerable to these impacts. The
ultimate impact of COVID‑19, including new strains of the underlying virus, or
other health emergencies on global economic conditions and businesses is
impossible to predict accurately. Ongoing and potential additional material
adverse economic effects of indeterminate duration and severity are possible.
The resulting adverse impact on the value of an investment in the Fund could be
significant and prolonged. Other public health emergencies that may arise in the
future could have similar or other unforeseen
effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time. Additionally, Asian countries may utilize
formal or informal currency-exchange controls or “capital controls.” Capital
controls may impose restrictions on the Fund’s ability to repatriate investments
or income. Such controls may also affect the value of the Fund’s
holdings.
Risks Associated with Emerging and Frontier
Markets: Many Asian countries are considered emerging or frontier
markets. Such markets are often less stable politically and economically than
developed markets such as the United States, and investing in these markets
involves different and greater risks. There may be less publicly available
information about companies in many Asian countries, and the stock exchanges and
brokerage industries in many Asian countries typically do not have the level of
government oversight as do those in the United States. Securities markets of
many Asian
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countries
are also substantially smaller, less liquid and more volatile than securities
markets in the United States.
Risks Associated with Investing in Innovative
Companies: The standards for assessing innovative companies tend to have
many subjective characteristics, can be difficult to analyze, and frequently
involve a balancing of a company’s business plans, objectives, actual conduct
and other factors. The definition of innovators can vary over different periods
and can evolve over time. They may also be difficult to apply consistently
across regions, countries, industries or
sectors.
High Portfolio Turnover Risk: The Fund’s
principal investment strategies may result in high portfolio turnover rates,
which may increase the Fund’s brokerage commission costs and negatively impact
the Fund’s performance. Such portfolio turnover also may generate higher taxable
gains for shareholders of the
Fund.
Growth Stock Risk: Growth stocks may be more
volatile than other stocks because they are more sensitive to investor
perceptions of the issuing company’s growth potential. Growth stocks may go in
and out of favor over time and may perform differently than the market as a
whole.
Science and Technology Companies Risk: As a
fund that invests in science and technology companies, the Fund is subject to
the risks associated with these industries. This makes the Fund more vulnerable
to the price changes of securities issuers in science- and technology-related
industries and to factors that affect these industries, relative to a broadly
diversified fund. Certain science- and technology-related companies may face
special risks because their products or services may not prove to be
commercially successful. Many science and technology companies have limited
operating histories and experience in managing adverse market conditions,
and are also strongly affected by worldwide scientific or technological
developments and global demand cycles. As a result, their products may rapidly
become obsolete, which could cause a dramatic decrease in the value of their
stock. Such companies are also often subject to governmental regulation and may
therefore be adversely affected by changes in governmental policies. The
possible loss or impairment of intellectual property rights may also negatively
impact science and technology
companies.
Concentration Risk: By focusing on a group of
industries, the Fund carries much greater risks of adverse developments and
price movements in such industries than a fund that invests in a wider variety
of industries. Because the Fund concentrates in a group of industries, there is
also the risk that the Fund will perform poorly during a slump in demand for
securities of companies in such
industries.
Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
Volatility Risk: The smaller size and lower
levels of liquidity in emerging markets, as well as other factors, may result in
changes in the prices of Asian securities that are more volatile than those of
companies in more developed regions. This
volatility
can cause the price of the Fund’s shares to go up or down dramatically. Because
of this volatility, this Fund is better suited for long-term investors
(typically five years or longer).
Risks Associated with Smaller Companies:
Smaller companies may offer substantial opportunities for capital growth; they
also involve substantial risks, and investments in smaller companies may be
considered speculative. Such companies often have limited product lines, markets
or financial resources. Securities of smaller companies may trade less
frequently and in lesser volume than more widely held securities and the
securities of smaller companies generally are subject to more abrupt or erratic
price movements than more widely held or larger, more established companies or
the market indices in general.
Risks Associated with Medium‑Size Companies:
Medium‑size companies may be subject to a number of risks not associated with
larger, more established companies, potentially making their stock prices more
volatile and increasing the risk of
loss.
Risks Associated with China and Hong Kong: The
Chinese government exercises significant control over China’s economy through
its industrial policies, monetary policy, management of currency exchange rates,
and management of the payment of foreign currency-denominated obligations.
Changes in these policies could adversely impact affected industries or
companies in China. China’s economy, particularly its export-oriented
industries, may be adversely impacted by trade or political disputes with
China’s major trading partners, including the U.S. In addition, as its consumer
class continues to grow, China’s domestically oriented industries may be
especially sensitive to changes in government policy and investment cycles. As
demonstrated by Hong Kong protests in recent years over political, economic, and
legal freedoms, and the Chinese government’s response to them, considerable
political uncertainty continues to exist within Hong Kong. Due to the
interconnected nature of the Hong Kong and Chinese economies, this instability
in Hong Kong may cause uncertainty in the Hong Kong and Chinese markets. If
China were to exert its authority so as to alter the economic, political or
legal structures or the existing social policy of Hong Kong, investor and
business confidence in Hong Kong could be negatively affected and have an
adverse effect on the Fund’s
investments.
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a particular sector, the
Fund will be subject to a greater degree to the risks particular to that sector,
including the sectors described below. Market conditions, interest rates, and
economic, regulatory, or financial developments could significantly affect a
single sector. By focusing its investments in a particular sector, the Fund may
face more risks than if it were diversified broadly over numerous
sectors.
– |
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Consumer Discretionary Sector Risk: As of December 31, 2021, 28% of the
Fund’s assets were invested in the consumer discretionary sector. The
success of consumer product manufacturers and retailers is tied closely to
the performance of the overall local and international economies, interest
rates, competition and consumer confidence. Success of companies in the
consumer discretionary sector depends heavily on disposable household
income and consumer spending.
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MATTHEWS ASIA INNOVATORS FUND |
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Changes in demographics
and consumer tastes can also affect the demand for, and success of,
consumer products and services in the
marketplace. |
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Information
Technology Sector Risk: As of December 31, 2021, 20% of the
Fund’s assets were invested in the information technology sector.
Information technology companies may be significantly affected by
aggressive pricing as a result of intense competition and by rapid product
obsolescence due to rapid development of technological innovations and
frequent new product introduction. Other factors, such as short product
cycle, possible loss or impairment of intellectual property rights, and
changes in government regulations, may also adversely impact information
technology companies. |
Cybersecurity Risk: With the increased use of technologies
such as the internet to conduct business, the Fund is susceptible to
operational, information security, and related risks. Cyber incidents affecting
the Fund or its service providers may cause disruptions and impact business
operations, potentially resulting in financial losses, interference with the
Fund’s ability to calculate its NAV, impediments to trading, the inability of
shareholders to transact business, violations of applicable privacy and other
laws, regulatory fines, penalties, reputational damage, reimbursement or other
compensation costs, or additional compliance costs.
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Past Performance
The bar chart
below shows the Fund’s performance for each full calendar year since its
inception and how it has varied from year to year, reflective of the Fund’s
volatility and some indication of risk. Also shown are the best
and worst quarters for this time period. The table below shows the Fund’s
performance over certain periods of time, along with performance of its
benchmark index. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURN FOR YEAR ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
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1 year |
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5 years |
|
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Since Inception (4/30/13) |
|
Matthews
Asia Innovators Fund |
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Return
before taxes |
|
|
-12.97% |
|
|
|
21.42% |
|
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|
15.32% |
|
Return
after taxes on distributions1 |
|
|
-17.48% |
|
|
|
19.36% |
|
|
|
13.43% |
|
Return
after taxes on distributions and sale of Fund shares1 |
|
|
-5.62% |
|
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|
17.10% |
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12.22% |
|
MSCI
All Country Asia ex Japan Index |
|
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(reflects no deduction for fees, expenses
or taxes) |
|
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-4.46% |
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|
11.61% |
|
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6.94% |
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1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager: Michael J. Oh, CFA, has been a
Portfolio Manager of the Matthews Asia Innovators Fund since 2006.
Co-Manager: Tazio Ishida has been a Portfolio
Manager of the Matthews Asia Innovators Fund since 2022.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions. The Lead Manager is supported by and consults with the
Co-Manager, who is not primarily responsible for portfolio management.
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
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MATTHEWS ASIA INNOVATORS FUND |
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Matthews
China Fund
FUND SUMMARY
Investment Objective
Long-term
capital appreciation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
|
|
|
|
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|
Maximum
Account Fee on Redemptions (for wire redemptions only) |
|
|
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$9 |
|
ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
|
|
|
|
|
|
|
|
|
Management
Fees |
|
|
|
|
|
|
0.66% |
|
Distribution
(12b‑1) Fees |
|
|
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|
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|
0.00% |
|
Other Expenses |
|
|
|
|
|
|
0.25% |
|
|
|
|
Administration
and Shareholder Servicing Fees |
|
|
0.14% |
|
|
|
|
|
Total Annual Fund Operating
Expenses |
|
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|
0.91% |
|
EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
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One year: $93 |
|
Three years: $290 |
|
Five years: $504 |
|
Ten years: $1,120 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 92% of the average value of its
portfolio.
Principal Investment
Strategy
Under
normal circumstances, the Matthews China Fund seeks to achieve its investment
objective by investing at least 80% of its net assets, which include borrowings
for investment purposes, in the common and preferred stocks of companies located
in China. China includes its administrative and other districts, such as Hong
Kong. A company or other issuer is considered to be “located” in a country or a
region, and a security or instrument is deemed to be an Asian (or specific
country) security or instrument, if it has substantial ties to that country or
region. Matthews currently makes that determination based primarily on one or
more of the following criteria: (A) with respect to a company or issuer,
whether (i) it is organized under the laws of that country or any
country in that region; (ii) it derives at least 50% of its revenues or
profits from goods produced or sold, investments made, or services performed, or
has at least 50% of its assets located, within that country or region;
(iii) it has the primary trading markets for its securities in that country
or region; (iv) it has its principal place of business in or is otherwise
headquartered in that country or region; or (v) it is a governmental entity
or an agency, instrumentality or a political subdivision of that country or any
country in that region; and (B) with respect to an instrument or issue,
whether (i) its issuer is headquartered or organized in that country or
region; (ii) it is issued to finance a project with significant assets or
operations in that country or region; (iii) it is principally secured
or
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backed
by assets located in that country or region; (iv) it is a component of or
its issuer is included in a recognized securities index for the country or
region; or (v) it is denominated in the currency of an Asian country and
addresses at least one of the other above criteria. The term “located” and the
associated criteria listed above have been defined in such a way that Matthews
has latitude in determining whether an issuer should be included within a region
or country. The Fund may also invest in depositary receipts, including American,
European and Global Depositary
Receipts.
The
Fund seeks to invest in companies capable of sustainable growth based on the
fundamental characteristics of those companies, including balance sheet
information; number of employees; size and stability of cash flow; management’s
depth, adaptability and integrity; product lines; marketing strategies;
corporate governance; and financial health. Matthews expects that the companies
in which the Fund invests typically will be of medium or large size, but the
Fund may invest in companies of any size. Matthews measures a company’s size
with respect to fundamental criteria such as, but not limited to, market
capitalization, book value, revenues, profits, cash flow, dividends paid and
number of employees. The implementation of the principal investment strategies
of the Fund may result in a significant portion of the Fund’s assets being
invested from time to time in one or more sectors, but the Fund may invest in
companies in any sector.
Matthews
may also take into consideration environmental, social and governance (ESG)
characteristics of companies in selecting portfolio investments as part of the
investment process for this Fund in an effort to reduce what it regards as the
sustainability risks of its investments. Through these efforts, Matthews also
hopes to promote the sustainability practices of those companies. For example,
it may view favorably companies that have a commitment to mitigating climate
change through reducing their carbon footprint and those with sound governance
practices. Not all investments will demonstrate those characteristics, and there
could be instances where Matthews is unable to assess whether companies have
such a commitment or follow good governance practices. Matthews’ investment
process in this regard is carried out through a combination of exclusionary ESG
screens and the use of ESG data. Matthews uses various sources of information,
including but not limited to third-party ESG rating firms and Matthews’ own
analysis, in assessing a company’s ESG characteristics. In addition, once
invested in a company, Matthews may engage with its portfolio companies on
sustainability and governance matters through active dialogue, exercising
shareholder rights and by encouraging enhanced ESG disclosure and
implementation.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption
and
military
activity. The economies of many Asian countries differ from the economies of
more developed countries in many respects, such as rate of growth, inflation,
capital reinvestment, resource self-sufficiency, financial system stability, the
national balance of payments position and sensitivity to changes in global
trade.
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious diseases such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and materially and adversely impact economic
conditions in ways that cannot be predicted, all of which could result in
substantial investment losses. Containment efforts and related restrictive
actions by governments and businesses have significantly diminished and
disrupted global economic activity across many industries. Less developed
countries and their health systems may be more vulnerable to these impacts. The
ultimate impact of COVID‑19, including new strains of the underlying virus, or
other health emergencies on global economic conditions and businesses is
impossible to predict accurately. Ongoing and potential additional material
adverse economic effects of indeterminate duration and severity are possible.
The resulting adverse impact on the value of an investment in the Fund could be
significant and prolonged. Other public health emergencies that may arise in the
future could have similar or other unforeseen
effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time. Additionally, China may utilize formal or
informal currency-exchange controls or “capital controls.” Capital controls may
impose restrictions on the Fund’s ability to repatriate investments or income.
Such controls may also affect the value of the Fund’s
holdings.
Risks Associated with Emerging and Frontier
Markets: Many Asian countries are considered emerging markets. Certain
emerging market countries may also be classified as “frontier” market countries,
which are a subset of emerging market countries with newer or even less
developed economies and markets. Such markets are often less stable politically
and economically than developed markets such as the United States, and investing
in these markets involves different and greater risks. There may be less
publicly available information about companies in many Asian countries, and the
stock exchanges and brokerage industries in many Asian countries typically do
not have the level of government oversight as do those in the United States.
Securities markets of many Asian countries are also substantially smaller, less
liquid and more volatile than securities markets in the United
States.
Risks Associated with China and Hong Kong: The
Chinese government exercises significant control over China’s economy through
its industrial policies (e.g.,
allocation of resources and other preferential treatment), monetary policy,
management of currency exchange rates, and management of the payment of foreign
currency- denominated obligations. Changes in these policies could adversely
impact affected industries or companies in China. China’s economy,
partic-
ularly
its export-oriented industries, may be adversely impacted by trade or political
disputes with China’s major trading partners, including the U.S. In addition, as
its consumer class continues to grow, China’s domestically oriented industries
may be especially sensitive to changes in government policy and investment
cycles. As demonstrated by Hong Kong protests in recent years over political,
economic, and legal freedoms, and the Chinese government’s response to them,
considerable political uncertainty continues to exist within Hong Kong. Due to
the interconnected nature of the Hong Kong and Chinese economies, this
instability in Hong Kong may cause uncertainty in the Hong Kong and Chinese
markets. If China were to exert its authority so as to alter the economic,
political or legal structures or the existing social policy of Hong Kong,
investor and business confidence in Hong Kong could be negatively affected and
have an adverse effect on the Fund’s
investments.
Growth Stock Risk: Growth stocks may be more
volatile than other stocks because they are more sensitive to investor
perceptions of the issuing company’s growth potential. Growth stocks may go in
and out of favor over time and may perform differently than the market as a
whole.
Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
Volatility Risk: The smaller size and lower
levels of liquidity in emerging markets, as well as other factors, may result in
changes in the prices of Asian securities that are more volatile than those of
companies in more developed regions. This volatility can cause the price of the
Fund’s shares to go up or down dramatically. Because of this volatility, this
Fund is better suited for long-term investors (typically five years or
longer).
Risks Associated with Medium‑Size Companies:
Medium‑size companies may be subject to a number of risks not associated with
larger, more established companies, potentially making their stock prices more
volatile and increasing the risk of
loss.
Sustainability Risk: Sustainability risk means
an environmental, social or governance (ESG) event or condition that, if it
occurs, could cause an actual or a potential material negative impact on the
value of the investments made by the Fund. ESG events could result from climate
change (so-called physical risks) or from society’s response to climate change
(so-called transition risks), social events (e.g., inequality, inclusiveness,
labor relations, investment in human capital, accident prevention, changing
customer behavior, etc.) or governance shortcomings (e.g., diversity and
inclusion issues, recurrent significant breach of international agreements,
bribery issues, products quality and safety, selling practices, etc.), which may
result in unanticipated potential or actual
material
negative
impact on the Fund’s investments and, therefore, would have an adverse impact on
the value of the Fund.
ESG Investing Risk: Because the Fund may take
into consideration the environmental, social and governance characteristics of
portfolio companies in which it may invest, the Fund may select or exclude
securities of certain issuers for reasons other than potential performance. The
Fund’s consideration of ESG characteristics in making its investment decisions
may affect the Fund’s exposure to certain issuers, industries, sectors, regions
or countries, and the Fund’s performance will likely differ—positively or
negatively—as compared to funds that do not utilize these considerations,
depending on whether the Fund’s investments made according to considerations of
ESG characteristics are in or out of favor in the market. The consideration of
ESG characteristics is qualitative and subjective by nature, and there is no
guarantee that the ESG characteristics used by Matthews or any judgment
exercised by Matthews will reflect the opinions of any particular investor.
Although an investment by the Fund in a company may satisfy one or more ESG
factors in the view of the portfolio managers, there is no guarantee that such
company actually promotes positive environmental, social or economic
developments, and that same company may also fail to satisfy other ESG factors.
Funds with ESG investment strategies are generally suited for long-term rather
than short-term investors.
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a particular sector, the
Fund will be subject to a greater degree to the risks particular to that sector,
including the sector described below. Market conditions, interest rates, and
economic, regulatory, or financial developments could significantly affect a
single sector. By focusing its investments in a particular sector, the Fund may
face more risks than if it were diversified broadly over numerous
sectors.
– |
|
Consumer
Discretionary Sector Risk: As of December 31, 2021, 24% of
the Fund’s assets were invested in the consumer discretionary sector. The
success of consumer product manufacturers and retailers is tied closely to
the performance of the overall local and international economies, interest
rates, competition and consumer confidence. Success of companies in the
consumer discretionary sector depends heavily on disposable household
income and consumer spending. Changes in demographics and consumer tastes
can also affect the demand for, and success of, consumer products and
services in the
marketplace. |
Cybersecurity Risk: With the increased use of
technologies such as the internet to conduct business, the Fund is susceptible
to operational, information security, and related risks. Cyber incidents
affecting the Fund or its service providers may cause disruptions and impact
business operations, potentially resulting in financial losses, interference
with the Fund’s ability to calculate its NAV, impediments to trading, the
inability of shareholders to transact business, violations of applicable privacy
and other laws, regulatory fines, penalties, reputational damage, reimbursement
or other compensation costs, or additional compliance
costs.
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32 |
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Past Performance
The bar chart
below shows the Fund’s performance for the past 10 years and how it has varied
from year to year, reflective of the Fund’s volatility and some indication of
risk. Also shown are the best and worst quarters for this time
period. The table below shows the Fund’s performance over certain periods of
time, along with performance of its benchmark index. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURNS FOR YEARS ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 year |
|
|
5 years |
|
|
10 years |
|
|
Since Inception
(10/29/10) |
|
Matthews
China Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
before taxes |
|
|
-12.07% |
|
|
|
16.38% |
|
|
|
9.10% |
|
|
|
5.95% |
|
Return
after taxes on distributions1 |
|
|
-15.60% |
|
|
|
13.52% |
|
|
|
6.76% |
|
|
|
3.76% |
|
Return
after taxes on distributions and sale of Fund shares1 |
|
|
-5.79% |
|
|
|
12.39% |
|
|
|
6.65% |
|
|
|
4.09% |
|
MSCI
China Index |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(reflects
no deduction for fees, expenses or taxes) |
|
|
-21.64% |
|
|
|
9.52% |
|
|
|
7.38% |
|
|
|
4.39% |
|
MSCI
China All Shares Index |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(reflects no deduction for fees, expenses
or taxes) |
|
|
-12.80% |
|
|
|
10.12% |
|
|
|
8.08% |
|
|
|
4.97% |
|
|
1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager: Andrew Mattock, CFA, has been a
Portfolio Manager of the Matthews China Fund since 2015.
Co-Manager: Winnie Chwang has been a Portfolio
Manager of the Matthews China Fund since 2014.
Co-Manager: Sherwood Zhang, CFA, has been a
Portfolio Manager of the Matthews China Fund since 2022.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions. The Lead Manager is supported by and consults with the
Co-Managers, who are not primarily responsible for portfolio management.
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
Matthews
China Small Companies Fund
FUND SUMMARY
Investment Objective
Long-term
capital appreciation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
|
|
|
|
|
Maximum
Account Fee on Redemptions (for wire redemptions only) |
|
|
$9 |
|
ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
|
|
|
|
|
|
|
|
|
Management
Fees |
|
|
|
|
|
|
1.00% |
|
Distribution
(12b‑1) Fees |
|
|
|
|
|
|
0.00% |
|
Other Expenses |
|
|
|
|
|
|
0.31% |
|
|
|
|
Administration
and Shareholder Servicing Fees |
|
|
0.14% |
|
|
|
|
|
Total Annual
Fund Operating Expenses |
|
|
|
|
|
|
1.31% |
|
Fee
Waiver and Expense Reimbursement1 |
|
|
|
|
|
|
(0.11%) |
|
Total Annual Fund Operating Expenses After Fee
Waiver and Expense Reimbursement |
|
|
|
|
|
|
1.20% |
|
|
1 |
Matthews
has contractually agreed to waive fees and reimburse expenses to the
extent needed to limit Total Annual Fund Operating Expenses (excluding
Rule 12b‑1 fees, taxes, interest, brokerage commissions, short sale
dividend expenses, expenses incurred in connection with any merger or
reorganization or extraordinary expenses such as litigation) of the
Institutional Class to 1.20%. If the operating expenses fall below
the expense limitation within three years after Matthews has made a waiver
or reimbursement, the Fund may reimburse Matthews up to an amount that
does not cause the expenses for that year to exceed the lesser of
(i) the expense limitation applicable at the time of that fee waiver
and/or expense reimbursement or (ii) the expense limitation in effect
at the time of recoupment. This agreement will remain in place until
April 30,
2023 and may be terminated at any time by the Board of
Trustees on behalf of the Fund on 60 days’ written notice to Matthews.
Matthews may decline to renew this agreement by written notice to the
Trust at least 30 days before its annual expiration
date. |
EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The example reflects the expense limitation for the one year
period only. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
|
|
|
|
|
|
|
One year: $122 |
|
Three years: $404 |
|
Five years: $708 |
|
Ten years: $1,569 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 120% of the average value of its
portfolio.
Principal Investment
Strategy
Under
normal circumstances, the Matthews China Small Companies Fund seeks to achieve
its investment objective by investing at least 80% of its net assets, which
include borrowings for investment purposes, in the common and preferred stocks
of Small Companies (defined below) located in China. China includes its
administrative
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34 |
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and
other districts, such as Hong Kong. A company or other issuer is considered to
be “located” in a country or a region, and a security or instrument is deemed to
be an Asian (or specific country) security or instrument, if it has substantial
ties to that country or region. Matthews currently makes that determination
based primarily on one or more of the following criteria: (A) with respect
to a company or issuer, whether (i) it is organized under the laws of that
country or any country in that region; (ii) it derives at least 50% of its
revenues or profits from goods produced or sold, investments made, or services
performed, or has at least 50% of its assets located, within that country or
region; (iii) it has the primary trading markets for its securities in that
country or region; (iv) it has its principal place of business in or is
otherwise headquartered in that country or region; or (v) it is a
governmental entity or an agency, instrumentality or a political subdivision of
that country or any country in that region; and (B) with respect to an
instrument or issue, whether (i) its issuer is headquartered or organized
in that country or region; (ii) it is issued to finance a project with
significant assets or operations in that country or region; (iii) it is
principally secured or backed by assets located in that country or region;
(iv) it is a component of or its issuer is included in a recognized
securities index for the country or region; or (v) it is denominated in the
currency of an Asian country and addresses at least one of the other above
criteria. The term “located” and the associated criteria listed above have been
defined in such a way that Matthews has latitude in determining whether an
issuer should be included within a region or country. The Fund may also invest
in depositary receipts, including American, European and Global Depositary
Receipts.
The
Fund seeks to invest in smaller companies capable of sustainable growth based on
the fundamental characteristics of those companies, including balance sheet
information; number of employees; size and stability of cash flow; management’s
depth, adaptability and integrity; product lines; marketing strategies;
corporate governance; and financial health. Matthews generally determines
whether a company should be considered to be a small company based on its market
capitalization (the number of the company’s shares outstanding times the market
price per share for such securities). Under normal circumstances, the Fund
invests at least 80% of its net assets in any company that has a market
capitalization no higher than the greater of $5 billion or the market
capitalization of the largest company included in the Fund’s primary benchmark
index (each, a “Small Company” and together, “Small Companies”). The largest
company in the Fund’s primary benchmark, the MSCI China Small Cap Index, had a
market capitalization of $4.39 billion on December 31, 2021. Companies
in which the Fund invests typically operate in growth industries and possess the
potential to expand their scope of business over time. A company may grow to a
market capitalization that is higher than the greater of $5 billion or the
market capitalization of the largest company included in the Fund’s primary
benchmark after the Fund has purchased its securities; nevertheless, the
existing holdings of securities of such a company will continue to be considered
a Small Company. If additional purchases of a security are made, all holdings
(including prior purchases) of that security will be re‑classified with respect
to its market capitalization at the time of the last purchase. The
implementation of the principal investment strategies of the Fund may result in
a significant portion of the Fund’s assets being invested from time to time in
one or more sectors, but
the
Fund may invest in companies in any sector. The implementation of the Fund’s
principal investment strategies may also result in high portfolio turnover
rates.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption and
military activity. The economies of many Asian countries differ from the
economies of more developed countries in many respects, such as rate of growth,
inflation, capital reinvestment, resource self-sufficiency, financial system
stability, the national balance of payments position and sensitivity to changes
in global trade.
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious diseases such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and materially and adversely impact economic
conditions in ways that cannot be predicted, all of which could result in
substantial investment losses. Containment efforts and related restrictive
actions by governments and businesses have significantly diminished and
disrupted global economic activity across many industries. Less developed
countries and their health systems may be more vulnerable to these impacts. The
ultimate impact of COVID‑19, including new strains of the underlying virus, or
other health emergencies on global economic conditions and businesses is
impossible to predict accurately. Ongoing and potential additional material
adverse economic effects of indeterminate duration and severity are possible.
The resulting adverse impact on the value of an investment in the Fund could be
significant and prolonged. Other public health emergencies that may arise in the
future could have similar or other unforeseen
effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time. Additionally, Asian countries may utilize
formal or informal currency-exchange controls or “capital controls.” Capital
controls may impose restrictions on the Fund’s ability to repatriate investments
or income. Such controls may also affect the value of the Fund’s
holdings.
Risks Associated with Emerging and Frontier
Markets: Many Asian countries are considered emerging markets. Certain
emerging market countries may also be classified as “frontier” market countries,
which are a subset of emerging market countries with newer or even less
developed economies and markets. Such markets are often less stable politically
and economically than developed markets such as the
United
|
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|
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|
MATTHEWS CHINA SMALL COMPANIES
FUND |
|
|
35 |
|
States,
and investing in these markets involves different and greater risks. There may
be less publicly available information about companies in many Asian countries,
and the stock exchanges and brokerage industries in many Asian countries
typically do not have the level of government oversight as do those in the
United States. Securities markets of many Asian countries are also
substantially smaller, less liquid and more volatile than securities markets in
the United States.
Risks Associated with Smaller Companies:
Smaller companies may offer substantial opportunities for capital growth; they
also involve substantial risks, and investments in smaller companies may be
considered speculative. Such companies often have limited product lines, markets
or financial resources. Smaller companies may be more dependent on one or few
key persons and may lack depth of management. Larger portions of their stock may
be held by a small number of investors (including founders and management) than
is typical of larger companies. Credit may be more difficult to obtain (and on
less advantageous terms) than for larger companies. As a result, the influence
of creditors (and the impact of financial or operating restrictions associated
with debt financing) on smaller companies may be greater than that of larger or
more established companies. The Fund may have more difficulty obtaining
information about smaller companies, making it more difficult to evaluate the
impact of market, economic, regulatory and other factors on them. Informational
difficulties may also make valuing or disposing of their securities more
difficult than it would for larger companies. Securities of smaller companies
may trade less frequently and in lesser volume than more widely held securities
and the securities of smaller companies generally are subject to more abrupt or
erratic price movements than more widely held or larger, more established
companies or the market indices in general. The value of securities of smaller
companies may react differently to political, market and economic developments
than the markets as a whole or than other types of
stocks.
Risks Associated with Medium-Size Companies:
Medium-size companies may be subject to a number of risks not associated with
larger, more established companies, potentially making their stock prices more
volatile and increasing the risk of
loss.
Risks Associated with China and Hong Kong: The
Chinese government exercises significant control over China’s economy through
its industrial policies (e.g.,
allocation of resources and other preferential treatment), monetary policy,
management of currency exchange rates, and management of the payment of foreign
currency-denominated obligations. Changes in these policies could adversely
impact affected industries or companies in China. China’s economy, particularly
its export-oriented industries, may be adversely impacted by trade or political
disputes with China’s major trading partners, including the U.S. In addition, as
its consumer class continues to grow, China’s domestically oriented industries
may be especially sensitive to changes in government policy and investment
cycles. As demonstrated by Hong Kong protests in recent years over political,
economic, and legal freedoms, and the Chinese government’s response to them,
considerable political uncertainty continues to exist within Hong Kong. Due to
the interconnected nature of the Hong Kong and Chinese economies, this
instability in Hong Kong may cause uncertainty in the Hong Kong and Chinese
markets. If China were to exert its authority so as
to
alter
the economic, political or legal structures or the existing social policy of
Hong Kong, investor and business confidence in Hong Kong could be negatively
affected and have an adverse effect on the Fund’s
investments.
High Portfolio Turnover Risk: The Fund’s
principal investment strategies may result in high portfolio turnover rates,
which may increase the Fund’s brokerage commission costs and negatively impact
the Fund’s performance. Such portfolio turnover also may generate higher taxable
gains for shareholders of the
Fund.
Growth Stock Risk: Growth stocks may be more
volatile than other stocks because they are more sensitive to investor
perceptions of the issuing company’s growth potential. Growth stocks may go in
and out of favor over time and may perform differently than the market as a
whole.
Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
Volatility Risk: The smaller size and lower
levels of liquidity in emerging markets, as well as other factors, may result in
changes in the prices of Asian securities that are more volatile than those of
companies in more developed regions. This volatility can cause the price of the
Fund’s shares to go up or down dramatically. Because of this volatility, this
Fund is better suited for long-term investors (typically five years or
longer).
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a particular sector, the
Fund will be subject to a greater degree to the risks particular to that sector,
including the sectors described below. Market conditions, interest rates, and
economic, regulatory, or financial developments could significantly affect a
single sector. By focusing its investments in a particular sector, the Fund may
face more risks than if it were diversified broadly over numerous
sectors.
– |
|
Information
Technology Sector Risk: As of December 31, 2021, 27% of the
Fund’s assets were invested in the information technology sector.
Information technology companies may be significantly affected by
aggressive pricing as a result of intense competition and by rapid product
obsolescence due to rapid development of technological innovations and
frequent new product introduction. Other factors, such as short product
cycle, possible loss or impairment of intellectual property rights, and
changes in government regulations, may also adversely impact information
technology companies. |
– |
|
Industrial
Sector Risk: As of December 31, 2021, 24% of the Fund’s
assets were invested in the industrial sector. Industrial companies are
affected by supply and demand both for their specific product or service
and for industrial sector products in general. Government regulation,
world events, exchange rates and economic conditions, technological
developments and liabilities for environmental damage and general civil
liabilities will likewise affect the performance of these
companies. |
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36 |
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matthewsasia.com | 800.789.ASIA |
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|
|
Cybersecurity Risk: With the increased use of
technologies such as the internet to conduct business, the Fund is susceptible
to operational, information security, and related risks. Cyber incidents
affecting the Fund or its service providers may cause disruptions and impact
business operations, potentially resulting in financial losses, interference
with the Fund’s
ability
to calculate its NAV, impediments to trading, the inability of shareholders to
transact business, violations of applicable privacy and other laws, regulatory
fines, penalties, reputational damage, reimbursement or other compensation
costs, or additional compliance costs.
|
|
|
|
|
|
|
|
|
|
|
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|
MATTHEWS CHINA SMALL COMPANIES
FUND |
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|
37 |
|
Past Performance
The bar chart
below shows the Fund’s performance for each full calendar year since its
inception and how it has varied from year to year, reflective of the Fund’s
volatility and some indication of risk. Also shown are the best
and worst quarters for this time period. The table below shows the Fund’s
performance over certain periods of time, along with performance of its
benchmark index. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURN FOR YEAR ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
|
|
|
|
|
|
|
|
|
|
|
1 year |
|
|
Since Inception
(11/30/17) |
|
Matthews
China Small Companies Fund |
|
|
|
|
|
|
|
|
Return
before taxes |
|
|
-3.35% |
|
|
|
19.94% |
|
Return
after taxes on distributions1 |
|
|
-8.26% |
|
|
|
15.98% |
|
Return
after taxes on distributions and sale of Fund shares1 |
|
|
-1.23% |
|
|
|
14.51% |
|
MSCI
China Small Cap Index |
|
|
|
|
|
|
|
|
(reflects no deduction for fees, expenses
or taxes) |
|
|
-6.26% |
|
|
|
1.34% |
|
|
1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager: Winnie Chwang has been a
Portfolio Manager of the Matthews China Small Companies Fund since 2020.
Lead Manager: Andrew Mattock, CFA, has been a
Portfolio Manager of the Matthews China Small Companies Fund since 2020.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions (and jointly responsible with the other Lead
Manager).
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
|
|
|
|
|
|
|
38 |
|
matthewsasia.com | 800.789.ASIA |
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|
Matthews
India Fund
FUND SUMMARY
Investment Objective
Long-term
capital appreciation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
|
|
|
|
|
|
|
Maximum
Account Fee on Redemptions (for wire redemptions only) |
|
|
|
|
$9 |
|
ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
|
|
|
|
|
|
|
|
|
Management
Fees |
|
|
|
|
|
|
0.66% |
|
Distribution
(12b‑1) Fees |
|
|
|
|
|
|
0.00% |
|
Other Expenses |
|
|
|
|
|
|
0.30% |
|
|
|
|
Administration
and Shareholder Servicing Fees |
|
|
0.14% |
|
|
|
|
|
Total Annual Fund Operating
Expenses |
|
|
|
|
|
|
0.96% |
|
EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
One year: $98 |
|
Three years: $306 |
|
Five years: $531 |
|
Ten years: $1,178 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 43% of the average value of its
portfolio.
Principal Investment
Strategy
Under
normal circumstances, the Matthews India Fund seeks to achieve its investment
objective by investing at least 80% of its net assets, which include borrowings
for investment purposes, in publicly traded common stocks, preferred stocks and
convertible securities, of any duration or quality, including those that are
unrated, or would be below investment grade (referred to as “junk bonds”) if
rated, of companies located in India. A company or other issuer is considered to
be “located” in a country or a region, and a security or instrument is deemed to
be an Asian (or specific country) security or instrument, if it has substantial
ties to that country or region. Matthews currently makes that determination
based primarily on one or more of the following criteria: (A) with respect
to a company or issuer, whether (i) it is organized under the laws of
that country or any country in that region; (ii) it derives at least 50% of
its revenues or profits from goods produced or sold, investments made, or
services performed, or has at least 50% of its assets located, within that
country or region; (iii) it has the primary trading markets for its
securities in that country or region; (iv) it has its principal place of
business in or is otherwise headquartered in that country or region; or
(v) it is a governmental entity or an agency, instrumentality or a
political subdivision of that country or any country in that region; and
(B) with respect to an instrument or issue, whether (i) its issuer is
headquartered or organized in that country or region; (ii) it is issued
to
finance
a project with significant assets or operations in that country or region;
(iii) it is principally secured or backed by assets located in that country
or region; (iv) it is a component of or its issuer is included in a
recognized securities index for the country or region; or (v) it is
denominated in the currency of an Asian country and addresses at least one of
the other above criteria. The term “located” and the associated criteria listed
above have been defined in such a way that Matthews has latitude in determining
whether an issuer should be included within a region or country. The Fund may
also invest in depositary receipts, including American, European and Global
Depositary Receipts.
The
Fund seeks to invest in companies capable of sustainable growth based on the
fundamental characteristics of those companies, including balance sheet
information; number of employees; size and stability of cash flow; management’s
depth, adaptability and integrity; product lines; marketing strategies;
corporate governance; and financial health. While the Fund may invest in
companies across the market capitalization spectrum, it has in the past
invested, and may continue to invest, a substantial portion of Fund assets in
smaller companies. Matthews measures a company’s size with respect to
fundamental criteria such as, but not limited to, market capitalization, book
value, revenues, profits, cash flow, dividends paid and number of employees. The
implementation of the principal investment strategies of the Fund may result in
a significant portion of the Fund’s assets being invested from time to time in
one or more sectors, but the Fund may invest in companies in any
sector.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption and
military activity. The economies of many Asian countries differ from the
economies of more developed countries in many respects, such as rate of growth,
inflation, capital reinvestment, resource self-sufficiency, financial system
stability, the national balance of payments position and sensitivity to changes
in global trade.
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious diseases such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and materially and adversely impact economic
conditions in ways that cannot be predicted, all of which could result in
substantial investment losses. Containment efforts and related restrictive
actions by governments and businesses have significantly diminished and
disrupted global economic activity across many industries. Less developed
countries and their health systems may be more vulnerable to these impacts. The
ultimate impact of COVID‑19, including new strains of the underlying virus, or
other health emergen-
cies
on global economic conditions and businesses is impossible to predict
accurately. Ongoing and potential additional material adverse economic effects
of indeterminate duration and severity are possible. The resulting adverse
impact on the value of an investment in the Fund could be significant and
prolonged. Other public health emergencies that may arise in the future could
have similar or other unforeseen
effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time. Additionally, India may utilize formal or
informal currency-exchange controls or “capital controls.” Capital controls may
impose restrictions on the Fund’s ability to repatriate investments or income.
Such controls may also affect the value of the Fund’s
holdings.
Risks Associated with Emerging and Frontier
Markets: Many Asian countries are considered emerging markets. Certain
emerging market countries may also be classified as “frontier” market countries,
which are a subset of emerging market countries with newer or even less
developed economies and markets. Such markets are often less stable politically
and economically than developed markets such as the United States, and
investing in these markets involves different and greater risks. There may be
less publicly available information about companies in many Asian countries, and
the stock exchanges and brokerage industries in many Asian countries typically
do not have the level of government oversight as do those in the
United States. Securities markets of many Asian countries are also
substantially smaller, less liquid and more volatile than securities markets in
the United States.
Risks Associated with India: Government
actions, bureaucratic obstacles and inconsistent economic reform within the
Indian government have had a significant effect on the Indian economy and could
adversely affect market conditions, economic growth and the profitability of
private enterprises in India. Global factors and foreign actions may inhibit the
flow of foreign capital on which India is dependent to sustain its growth. Large
portions of many Indian companies remain in the hands of their founders
(including members of their families). Corporate governance standards of
family-controlled companies may be weaker and less transparent, which increases
the potential for loss and unequal treatment of investors. India experiences
many of the risks associated with developing economies, including relatively low
levels of liquidity, which may result in extreme volatility in the prices of
Indian securities.
Religious,
cultural and military disputes persist in India and between India and Pakistan
(as well as sectarian groups within each country). Both India and Pakistan have
tested nuclear arms, and the threat of deployment of such weapons could hinder
development of the Indian economy, and escalating tensions could impact the
broader region, including China.
Growth Stock Risk: Growth stocks may be more
volatile than other stocks because they are more sensitive to investor
perceptions of the issuing company’s growth potential. Growth stocks may go in
and out of favor over time and may perform differently than the market as a
whole.
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40 |
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matthewsasia.com | 800.789.ASIA |
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Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
Volatility Risk: The smaller size and lower
levels of liquidity in emerging markets, as well as other factors, may result in
changes in the prices of Asian securities that are more volatile than those of
companies in more developed regions. This volatility can cause the price of the
Fund’s shares to go up or down dramatically. Because of this volatility, this
Fund is better suited for long-term investors (typically five years or
longer).
Convertible Securities Risk: The Fund may
invest in convertible preferred stocks, and convertible bonds and debentures.
The risks of convertible bonds and debentures include repayment risk and
interest rate risk. Many Asian convertible securities are not rated by rating
agencies. The Fund may invest in convertible debt securities of any maturity and
in those that are unrated, or would be below investment grade (referred to as
“junk bonds”) if rated. Therefore, credit risk may be greater for the Fund than
for other funds that invest in higher-grade securities. These securities are
also subject to greater liquidity risk than many other
securities.
Risks Associated with Smaller Companies:
Smaller companies may offer substantial opportunities for capital growth; they
also involve substantial risks, and investments in smaller companies may be
considered speculative. Such companies often have limited product lines, markets
or financial resources. Securities of smaller companies may trade less
frequently and in lesser volume than more widely held securities and the
securities of smaller companies generally are subject to more abrupt or erratic
price movements than more widely held or larger, more established companies or
the market indices in general.
Risks Associated with Medium-Size Companies:
Medium‑size companies may be subject to a number of risks not associated with
larger, more established companies, potentially making their stock prices more
volatile and increasing the risk of loss.
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a particular sector, the
Fund will be subject to a greater degree to the risks particular to that sector,
including the sectors described below. Market conditions, interest rates, and
economic, regulatory, or financial developments could significantly affect a
single sector. By focusing its investments in a particular sector, the Fund may
face more risks than if it were diversified broadly over numerous
sectors.
– |
|
Financial
Services Sector Risk: As of December 31, 2021, 33% of the
Fund’s assets were invested in the financial services sector. Financial
services companies are subject to extensive government regulation and can
be significantly affected by the availability and cost of capital funds,
changes in interest rates, the rate of corporate and consumer debt
defaults, price competition and other sector-specific
factors. |
– |
|
Information
Technology Sector Risk: As of December 31, 2021, 21% of the
Fund’s assets were invested in the information technology sector.
Information technology companies may be significantly affected by
aggressive pricing as a result of intense competition and by rapid product
obsolescence due to rapid development of technological innovations and
frequent new product introduction. Other factors, such as short product
cycle, possible loss or impairment of intellectual property rights, and
changes in government regulations, may also adversely impact information
technology
companies |
Cybersecurity Risk: With the increased use of
technologies such as the internet to conduct business, the Fund is susceptible
to operational, information security, and related risks. Cyber incidents
affecting the Fund or its service providers may cause disruptions and impact
business operations, potentially resulting in financial losses, interference
with the Fund’s ability to calculate its NAV, impediments to trading, the
inability of shareholders to transact business, violations of applicable privacy
and other laws, regulatory fines, penalties, reputational damage, reimbursement
or other compensation costs, or additional compliance
costs.
Past Performance
The bar chart
below shows the Fund’s performance for the past 10 years and how it has varied
from year to year, reflective of the Fund’s volatility and some indication of
risk. Also shown are the best and worst quarters for this time
period. The table below shows the Fund’s performance over certain periods of
time, along with performance of its benchmark index. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURNS FOR YEARS ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 year |
|
|
5 years |
|
|
10 years |
|
|
Since Inception
(10/29/10) |
|
Matthews
India Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
before taxes |
|
|
18.28% |
|
|
|
10.91% |
|
|
|
13.08% |
|
|
|
7.01% |
|
Return
after taxes on distributions1 |
|
|
15.79% |
|
|
|
8.86% |
|
|
|
11.86% |
|
|
|
5.96% |
|
Return
after taxes on distributions and sale of Fund shares1 |
|
|
12.68% |
|
|
|
8.34% |
|
|
|
10.76% |
|
|
|
5.51% |
|
S&P
Bombay Stock Exchange 100 Index |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(reflects no deduction for fees, expenses
or taxes) |
|
|
24.08% |
|
|
|
15.39% |
|
|
|
12.13% |
|
|
|
6.34% |
|
|
1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager: Peeyush Mittal, CFA, has been a
Portfolio Manager of the Matthews India Fund since 2018.
Co‑Manager: Sharat Shroff, CFA, has been a
Portfolio Manager of the Matthews India Fund since 2006.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions. The Lead Manager is supported by and consults with the
Co‑Manager, who is not primarily responsible for portfolio management.
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
|
|
|
|
|
|
|
42 |
|
matthewsasia.com | 800.789.ASIA |
|
|
|
|
Matthews
Japan Fund
FUND SUMMARY
Investment Objective
Long-term
capital appreciation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
|
|
|
|
|
|
|
Maximum
Account Fee on Redemptions (for wire redemptions only) |
|
|
|
|
$9 |
|
ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
|
|
|
|
|
|
|
|
|
Management
Fees |
|
|
|
|
|
|
0.66% |
|
Distribution
(12b‑1) Fees |
|
|
|
|
|
|
0.00% |
|
Other Expenses |
|
|
|
|
|
|
0.23% |
|
|
|
|
Administration
and Shareholder Servicing Fees |
|
|
0.14% |
|
|
|
|
|
Total Annual Fund Operating
Expenses |
|
|
|
|
|
|
0.89% |
|
EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
One year: $91 |
|
Three years: $284 |
|
Five years: $493 |
|
Ten years: $1,096 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 70% of the average value of its
portfolio.
Principal Investment
Strategy
Under
normal circumstances, the Matthews Japan Fund seeks to achieve its investment
objective by investing at least 80% of its net assets, which include borrowings
for investment purposes, in the common and preferred stocks of companies located
in Japan. A company or other issuer is considered to be “located” in a country
or a region, and a security or instrument is deemed to be an Asian (or specific
country) security or instrument, if it has substantial ties to that country or
region. Matthews currently makes that determination based primarily on one or
more of the following criteria: (A) with respect to a company or issuer,
whether (i) it is organized under the laws of that country or any
country in that region; (ii) it derives at least 50% of its revenues or
profits from goods produced or sold, investments made, or services performed, or
has at least 50% of its assets located, within that country or region;
(iii) it has the primary trading markets for its securities in that country
or region; (iv) it has its principal place of business in or is otherwise
headquartered in that country or region; or (v) it is a governmental entity
or an agency, instrumentality or a political subdivision of that country or any
country in that region; and (B) with respect to an instrument or issue,
whether (i) its issuer is headquartered or organized in that country or
region; (ii) it is issued to finance a project with significant assets or
operations in that country or region; (iii) it is principally secured or
backed by assets located in that country or region; (iv) it is a component
of or its issuer is included in a recognized securities index for the country or
region; or (v) it is denominated in the currency of an Asian country and
addresses at least one of the other above criteria. The term “located” and the
associated criteria listed above have been defined in such a way that Matthews
has latitude in determining whether an issuer
should
be included within a region or country. The Fund may also invest in depositary
receipts, including American, European and Global Depositary
Receipts.
The
Fund seeks to invest in companies capable of sustainable growth based on the
fundamental characteristics of those companies, including balance sheet
information; number of employees; size and stability of cash flow; management’s
depth, adaptability and integrity; product lines; marketing strategies;
corporate governance; and financial health. The Fund may invest in companies of
any market capitalization. Matthews measures a company’s size with respect to
fundamental criteria such as, but not limited to, market capitalization, book
value, revenues, profits, cash flow, dividends paid and number of employees. The
implementation of the principal investment strategies of the Fund may result in
a significant portion of the Fund’s assets being invested from time to time in
one or more sectors, but the Fund may invest in companies in any
sector.
Matthews
may also take into consideration environmental, social and governance (ESG)
characteristics of companies in selecting portfolio investments as part of the
investment process for this Fund in an effort to reduce what it regards as the
sustainability risks of its investments. Through these efforts, Matthews also
hopes to promote the sustainability practices of those companies. For example,
it may view favorably companies that have a commitment to mitigating climate
change through reducing their carbon footprint and those with sound governance
practices. Not all investments will demonstrate those characteristics, and there
could be instances where Matthews is unable to assess whether companies have
such a commitment or follow good governance practices. Matthews’ investment
process in this regard is carried out through a combination of exclusionary ESG
screens and the use of ESG data. Matthews uses various sources of information,
including but not limited to third-party ESG rating firms and Matthews’ own
analysis, in assessing a company’s ESG characteristics. In addition, once
invested in a company, Matthews may engage with its portfolio companies on
sustainability and governance matters through active dialogue, exercising
shareholder rights and by encouraging enhanced ESG disclosure and
implementation.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption and
military activity. The economies of many Asian countries differ from the
economies of more developed countries in many respects, such as rate of growth,
inflation, capital reinvestment, resource self-sufficiency, financial system
stability, the national balance of payments position and sensitivity to changes
in global trade.
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious
diseases
such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and materially and adversely impact economic
conditions in ways that cannot be predicted, all of which could result in
substantial investment losses. Containment efforts and related restrictive
actions by governments and businesses have significantly diminished and
disrupted global economic activity across many industries. Less developed
countries and their health systems may be more vulnerable to these impacts. The
ultimate impact of COVID‑19, including new strains of the underlying virus, or
other health emergencies on global economic conditions and businesses is
impossible to predict accurately. Ongoing and potential additional material
adverse economic effects of indeterminate duration and severity are possible.
The resulting adverse impact on the value of an investment in the Fund could be
significant and prolonged. Other public health emergencies that may arise in the
future could have similar or other unforeseen
effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time.
Risks Associated with Japan: The Japanese
economy has only recently emerged from a prolonged economic downturn. Since
the year 2000, Japan’s economic growth rate has remained relatively
low. The Japanese economy is characterized by an aging demographic,
declining population, large government debt and highly regulated labor market.
Economic growth in Japan is dependent on domestic consumption, deregulation and
consistent government policy. International trade, particularly with the U.S.,
also impacts growth of the Japanese economy, and adverse economic conditions in
the U.S. or other trade partners may affect Japan. Japan also has a growing
economic relationship with China and other Southeast Asian countries, and
thus Japan’s economy may also be affected by economic, political or social
instability in those countries (whether resulting from local or global
events). Other factors, such as the occurrence of natural disasters and
relations with neighboring countries (including China, South Korea, North Korea
and Russia), may also negatively impact the Japanese
economy.
Growth Stock Risk: Growth stocks may be more
volatile than other stocks because they are more sensitive to investor
perceptions of the issuing company’s growth potential. Growth stocks may go in
and out of favor over time and may perform differently than the market as a
whole.
Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
Risks Associated with Medium‑Size Companies:
Medium‑size companies may be subject to a number of risks not associated with
larger, more established companies, potentially making their stock prices more
volatile and increasing the risk of loss.
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44 |
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Risks Associated with Smaller Companies:
Smaller companies may offer substantial opportunities for capital growth; they
also involve substantial risks, and investments in smaller companies may be
considered speculative. Such companies often have limited product lines, markets
or financial resources. Securities of smaller companies may trade less
frequently and in lesser volume than more widely held securities and the
securities of smaller companies generally are subject to more abrupt or erratic
price movements than more widely held or larger, more established companies or
the market indices in general.
Sustainability Risk: Sustainability risk means
an environmental, social or governance (ESG) event or condition that, if it
occurs, could cause an actual or a potential material negative impact on the
value of the investments made by the Fund. ESG events could result from climate
change (so-called physical risks) or from society’s response to climate change
(so-called transition risks), social events (e.g., inequality, inclusiveness,
labor relations, investment in human capital, accident prevention, changing
customer behavior, etc.) or governance shortcomings (e.g., diversity and
inclusion issues, recurrent significant breach of international agreements,
bribery issues, products quality and safety, selling practices, etc.), which may
result in unanticipated potential or actual material negative impact on the
Fund’s investments and, therefore, would have an adverse impact on the value of
the Fund.
ESG Investing Risk: Because the Fund may take
into consideration the environmental, social and governance characteristics of
portfolio companies in which it may invest, the Fund may select or exclude
securities of certain issuers for reasons other than potential performance. The
Fund’s consideration of ESG characteristics in making its investment decisions
may affect the Fund’s exposure to certain issuers, industries, sectors, regions
or countries, and the Fund’s performance will likely differ—positively or
negatively—as compared to funds that do not utilize these considerations,
depending on whether the Fund’s investments made according to considerations of
ESG characteristics are in or out of favor in the market. The consideration of
ESG characteristics is qualitative and subjective by nature, and there is no
guarantee that the
ESG
characteristics used by Matthews or any judgment exercised by Matthews will
reflect the opinions of any particular investor. Although an investment by the
Fund in a company may satisfy one or more ESG factors in the view of the
portfolio managers, there is no guarantee that such company actually promotes
positive environmental, social or economic developments, and that same company
may also fail to satisfy other ESG factors. Funds with ESG investment strategies
are generally suited for long-term rather than short-term
investors.
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a particular sector, the
Fund will be subject to a greater degree to the risks particular to that sector,
including the sector described below. Market conditions, interest rates, and
economic, regulatory, or financial developments could significantly affect a
single sector. By focusing its investments in a particular sector, the Fund may
face more risks than if it were diversified broadly over numerous
sectors.
– |
|
Industrial
Sector Risk: As of December 31, 2021, 24% of the Fund’s
assets were invested in the industrial sector. Industrial companies are
affected by supply and demand both for their specific product or service
and for industrial sector products in general. Government regulation,
world events, exchange rates and economic conditions, technological
developments and liabilities for environmental damage and general civil
liabilities will likewise affect the performance of these
companies. |
Cybersecurity Risk: With the increased use of
technologies such as the internet to conduct business, the Fund is susceptible
to operational, information security, and related risks. Cyber incidents
affecting the Fund or its service providers may cause disruptions and impact
business operations, potentially resulting in financial losses, interference
with the Fund’s ability to calculate its NAV, impediments to trading, the
inability of shareholders to transact business, violations of applicable privacy
and other laws, regulatory fines, penalties, reputational damage, reimbursement
or other compensation costs, or additional compliance
costs.
Past Performance
The bar chart
below shows the Fund’s performance for the past 10 years and how it has varied
from year to year, reflective of the Fund’s volatility and some indication of
risk. Also shown are the best and worst quarters for this time
period. The table below shows the Fund’s performance over certain periods of
time, along with performance of its benchmark index. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURNS FOR YEARS ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 year |
|
|
5 years |
|
|
10 years |
|
|
Since Inception
(10/29/10) |
|
Matthews
Japan Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
before taxes |
|
|
-1.83% |
|
|
|
11.35% |
|
|
|
11.45% |
|
|
|
10.44% |
|
Return
after taxes on distributions1 |
|
|
-4.41% |
|
|
|
9.51% |
|
|
|
10.45% |
|
|
|
9.42% |
|
Return
after taxes on distributions and sale of Fund shares1 |
|
|
0.79% |
|
|
|
8.96% |
|
|
|
9.49% |
|
|
|
8.60% |
|
MSCI
Japan Index |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(reflects no deduction for fees, expenses
or taxes) |
|
|
2.04% |
|
|
|
8.89% |
|
|
|
8.67% |
|
|
|
7.16% |
|
|
1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager: Taizo Ishida has been a Portfolio
Manager of the Matthews Japan Fund since 2006.
Lead Manager: Shuntaro Takeuchi has been a
Portfolio Manager of the Matthews Japan Fund since 2019.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions (and jointly responsible with the other Lead
Manager).
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
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46 |
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Matthews
Korea Fund
FUND SUMMARY
Investment Objective
Long-term
capital appreciation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
|
|
|
|
|
|
|
Maximum
Account Fee on Redemptions (for wire redemptions only) |
|
|
|
|
$9 |
|
ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
|
|
|
|
|
|
|
|
|
Management
Fees |
|
|
|
|
|
|
0.66% |
|
Distribution
(12b‑1) Fees |
|
|
|
|
|
|
0.00% |
|
Other Expenses |
|
|
|
|
|
|
0.32% |
|
|
|
|
Administration
and Shareholder Servicing Fees |
|
|
0.14% |
|
|
|
|
|
Total Annual Fund Operating
Expenses |
|
|
|
|
|
|
0.98% |
|
EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
One year: $100 |
|
Three years: $312 |
|
Five years: $542 |
|
Ten years: $1,201 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 40% of the average value of its
portfolio.
Principal Investment
Strategy
Under
normal circumstances, the Matthews Korea Fund seeks to achieve its investment
objective by investing at least 80% of its net assets, which include borrowings
for investment purposes, in the common and preferred stocks of companies located
in South Korea. A company or other issuer is considered to be “located” in a
country or a region, and a security or instrument is deemed to be an Asian (or
specific country) security or instrument, if it has substantial ties to that
country or region. Matthews currently makes that determination based primarily
on one or more of the following criteria: (A) with respect to a company or
issuer, whether (i) it is organized under the laws of that country or
any country in that region; (ii) it derives at least 50% of its revenues or
profits from goods produced or sold, investments made, or services performed, or
has at least 50% of its assets located, within that country or region;
(iii) it has the primary trading markets for its securities in that country
or region; (iv) it has its principal place of business in or is otherwise
headquartered in that country or region; or (v) it is a governmental entity
or an agency, instrumentality or a political subdivision of that country or any
country in that region; and (B) with respect to an instrument or issue,
whether (i) its issuer is headquartered or organized in that country or
region; (ii) it is issued to finance a project with significant assets or
operations in that country or region; (iii) it is principally secured or
backed by assets located in that country or region; (iv) it is
a
component
of or its issuer is included in a recognized securities index for the country or
region; or (v) it is denominated in the currency of an Asian country and
addresses at least one of the other above criteria. The term “located” and the
associated criteria listed above have been defined in such a way that Matthews
has latitude in determining whether an issuer should be included within a region
or country. The Fund may also invest in depositary receipts, including American,
European and Global Depositary
Receipts.
The
Fund seeks to invest in companies capable of sustainable growth based on the
fundamental characteristics of those companies, including balance sheet
information; number of employees; size and stability of cash flow; management’s
depth, adaptability and integrity; product lines; marketing strategies;
corporate governance; and financial health. Matthews expects that the companies
in which the Fund invests typically will be of medium or large size, but the
Fund may invest in companies of any size. Matthews measures a company’s size
with respect to fundamental criteria such as, but not limited to, market
capitalization, book value, revenues, profits, cash flow, dividends paid and
number of employees. The implementation of the principal investment strategies
of the Fund may result in a significant portion of the Fund’s assets being
invested from time to time in one or more sectors, but the Fund may invest in
companies in any sector.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption and
military activity. The economies of many Asian countries differ from the
economies of more developed countries in many respects, such as rate of growth,
inflation, capital reinvestment, resource self-sufficiency, financial system
stability, the national balance of payments position and sensitivity to changes
in global trade.
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious diseases such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and materially and adversely impact economic
conditions in ways that cannot be predicted, all of which could result in
substantial investment losses. Containment efforts and related restrictive
actions by governments and businesses have significantly diminished and
disrupted global economic activity across many industries. Less developed
countries and their health systems may be more vulnerable to these impacts. The
ultimate impact of COVID‑19, including new strains of the underlying virus, or
other health emergencies on global economic conditions and businesses is
impossible to predict accurately. Ongoing and potential additional material
adverse economic effects of indeterminate duration and severity are possible.
The resulting adverse impact on the
value
of an investment in the Fund could be significant and prolonged. Other public
health emergencies that may arise in the future could have similar or other
unforeseen effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time. Additionally, South Korea may utilize formal
or informal currency-exchange controls or “capital controls.” Capital controls
may impose restrictions on the Fund’s ability to repatriate investments or
income. Such controls may also affect the value of the Fund’s
holdings.
Risks Associated with Emerging and Frontier
Markets: Many Asian countries are considered emerging markets. Certain
emerging market countries may also be classified as “frontier” market countries,
which are a subset of emerging market countries with newer or even less
developed economies and markets. Such markets are often less stable politically
and economically than developed markets such as the United States, and
investing in these markets involves different and greater risks. There may be
less publicly available information about companies in many Asian countries, and
the stock exchanges and brokerage industries in many Asian countries typically
do not have the level of government oversight as do those in the United States.
Securities markets of many Asian countries are also substantially smaller, less
liquid and more volatile than securities markets in the United
States.
Risks Associated with South Korea: Investing in
South Korean securities has special risks, including those related to political,
economic and social instability in South Korea and the potential for increased
militarization in North Korea. Securities trading on South Korean securities
markets are concentrated in a relatively small number of issuers, which results
in potentially fewer investment opportunities for the Fund. South Korea’s
financial sector has shown certain signs of systemic weakness and illiquidity,
which, if exacerbated, could prove to be a material risk for investments in
South Korea. South Korea is dependent on foreign sources for its energy needs. A
significant increase in energy prices could have an adverse impact on South
Korea’s economy. The South Korean government has historically exercised and
continues to exercise substantial influence over many aspects of the private
sector. The South Korean government from time to time has informally influenced
the prices of certain products, encouraged companies to invest or to concentrate
in particular industries and induced mergers between companies in industries
experiencing excess capacity.
Growth Stock Risk: Growth stocks may be more
volatile than other stocks because they are more sensitive to investor
perceptions of the issuing company’s growth potential. Growth stocks may go in
and out of favor over time and may perform differently than the market as a
whole.
Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
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Volatility Risk: The smaller size and lower
levels of liquidity in emerging markets, as well as other factors, may result in
changes in the prices of Asian securities that are more volatile than those of
companies in more developed regions. This volatility can cause the price of the
Fund’s shares to go up or down dramatically. Because of this volatility, this
Fund is better suited for long-term investors (typically five years or
longer).
Risks Associated with Smaller Companies:
Smaller companies may offer substantial opportunities for capital growth; they
also involve substantial risks, and investments in smaller companies may be
considered speculative. Such companies often have limited product lines, markets
or financial resources. Securities of smaller companies may trade less
frequently and in lesser volume than more widely held securities and the
securities of smaller companies generally are subject to more abrupt or erratic
price movements than more widely held or larger, more established companies or
the market indices in general.
Risks Associated with Medium-Size Companies:
Medium‑size companies may be subject to a number of risks not associated with
larger, more established companies, potentially making their stock prices more
volatile and increasing the risk of
loss.
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a particular sector, the
Fund will be subject to a greater degree to the
risks
particular
to that sector, including the sector described below. Market conditions,
interest rates, and economic, regulatory, or financial developments could
significantly affect a single sector. By focusing its investments in a
particular sector, the Fund may face more risks than if it were diversified
broadly over numerous sectors.
– |
|
Information
Technology Sector Risk: As of December 31, 2021, 45% of the
Fund’s assets were invested in the information technology sector.
Information technology companies may be significantly affected by
aggressive pricing as a result of intense competition and by rapid product
obsolescence due to rapid development of technological innovations and
frequent new product introduction. Other factors, such as short product
cycle, possible loss or impairment of intellectual property rights, and
changes in government regulations, may also adversely impact information
technology
companies. |
Cybersecurity Risk: With the increased use of
technologies such as the internet to conduct business, the Fund is susceptible
to operational, information security, and related risks. Cyber incidents
affecting the Fund or its service providers may cause disruptions and impact
business operations, potentially resulting in financial losses, interference
with the Fund’s ability to calculate its NAV, impediments to trading, the
inability of shareholders to transact business, violations of applicable privacy
and other laws, regulatory fines, penalties, reputational damage, reimbursement
or other compensation costs, or additional compliance
costs.
Past Performance
The bar chart
below shows the Fund’s performance for the past 10 years and how it has varied
from year to year, reflective of the Fund’s volatility and some indication of
risk. Also shown are the best and worst quarters for this time
period. The table below shows the Fund’s performance over certain periods of
time, along with performance of its benchmark index. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURNS FOR YEARS ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 year |
|
|
5 years |
|
|
10 years |
|
|
Since Inception
(10/29/10) |
|
Matthews
Korea Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
before taxes |
|
|
‑0.16% |
|
|
|
10.40% |
|
|
|
9.18% |
|
|
|
8.36% |
|
Return
after taxes on distributions1 |
|
|
-1.49% |
|
|
|
8.55% |
|
|
|
7.71% |
|
|
|
6.98% |
|
Return
after taxes on distributions and sale of Fund shares1 |
|
|
1.28% |
|
|
|
8.09% |
|
|
|
7.32% |
|
|
|
6.69% |
|
Korea
Composite Stock Price Index2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(reflects no deduction for fees, expenses
or taxes) |
|
|
-4.79% |
|
|
|
10.22% |
|
|
|
6.40% |
|
|
|
5.39% |
|
|
1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
|
2 |
Korea
Composite Stock Price Index performance data may be readjusted
periodically by the Korea Exchange due to certain factors, including the
declaration of dividends. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager: Michael J. Oh, CFA, has been a
Portfolio Manager of the Matthews Korea Fund since 2007.
Lead Manager: Elli Lee has been a Portfolio
Manager of the Matthews Korea Fund since 2019.
Co-Manager: Sojung Park has been a Portfolio
Manager of the Matthews Korea Fund since 2022.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions (and jointly responsible with the other Lead Manager). The
Lead Manager is supported by and consults with the Co-Manager, who is not
primarily responsible for portfolio management.
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
|
|
|
|
|
|
|
50 |
|
matthewsasia.com | 800.789.ASIA |
|
|
|
|
Matthews
Asian Growth and Income Fund
FUND SUMMARY
Investment Objective
Long-term
capital appreciation. The Fund also seeks to provide some current
income.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
|
|
|
|
|
|
|
Maximum
Account Fee on Redemptions (for wire redemptions only) |
|
|
|
|
$9 |
|
ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
|
|
|
|
|
|
|
|
|
Management
Fees |
|
|
|
|
|
|
0.66% |
|
Distribution
(12b‑1) Fees |
|
|
|
|
|
|
0.00% |
|
Other Expenses |
|
|
|
|
|
|
0.28% |
|
|
|
|
Administration
and Shareholder Servicing Fees |
|
|
0.14% |
|
|
|
|
|
Total Annual
Fund Operating Expenses |
|
|
|
|
|
|
0.94% |
|
EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
One year: $96 |
|
Three years: $300 |
|
Five years: $520 |
|
Ten years: $1,155 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 38% of the average value of its
portfolio.
Principal Investment
Strategy
Under
normal circumstances, the Matthews Asian Growth and Income Fund seeks to achieve
its investment objective by investing at least 80% of its net assets, which
include borrowings for investment purposes, in dividend-paying common stock,
preferred stock and other equity securities, and convertible securities as well
as fixed-income securities, of any duration or quality, including high yield
securities (also known as “junk bonds”), of companies located in Asia, which
consists of all countries and markets in Asia, including developed, emerging,
and frontier countries and markets in the Asian region. Certain emerging market
countries may also be classified as “frontier” market countries, which are a
subset of emerging market countries with newer or even less developed economies
and markets, such as Sri Lanka and Vietnam. A company or other issuer is
considered to be “located” in a country or a region, and a security or
instrument is deemed to be an Asian (or specific country) security or
instrument, if it has substantial ties to that country or region. Matthews
currently makes that determination based primarily on one or more of the
following criteria: (A) with respect to a company or issuer, whether
(i) it is organized under the laws of that country or any country in
that region; (ii) it derives at least 50% of its revenues or profits from
goods produced or sold, investments made, or services performed, or has at least
50% of its
|
|
|
|
|
|
|
|
|
|
|
|
|
MATTHEWS ASIAN GROWTH AND INCOME
FUND |
|
|
51 |
|
assets
located, within that country or region; (iii) it has the primary trading
markets for its securities in that country or region; (iv) it has its
principal place of business in or is otherwise headquartered in that country or
region; or (v) it is a governmental entity or an agency, instrumentality or
a political subdivision of that country or any country in that region; and
(B) with respect to an instrument or issue, whether (i) its issuer is
headquartered or organized in that country or region; (ii) it is issued to
finance a project with significant assets or operations in that country or
region; (iii) it is principally secured or backed by assets located in that
country or region; (iv) it is a component of or its issuer is included in a
recognized securities index for the country or region; or (v) it is
denominated in the currency of an Asian country and addresses at least one of
the other above criteria. The term “located” and the associated criteria listed
above have been defined in such a way that Matthews has latitude in determining
whether an issuer should be included within a region or country. The Fund may
also invest in depositary receipts, including American, European, and Global
Depositary Receipts.
The
Fund attempts to offer investors a relatively stable means of participating in a
portion of the Asian region’s growth prospects, while providing some downside
protection, in comparison to a portfolio that invests purely in common stocks.
The strategy of owning convertible bonds and dividend-paying equities is
designed to help the Fund to meet its investment objective while helping to
reduce the volatility of its portfolio. Matthews expects that the companies in
which the Fund invests typically will be of medium or large size, but the Fund
may invest in companies of any size. Matthews measures a company’s size with
respect to fundamental criteria such as, but not limited to, market
capitalization, book value, revenues, profits, cash flow, dividends paid and
number of employees. The implementation of the principal investment strategies
of the Fund may result in a significant portion of the Fund’s assets being
invested from time to time in one or more sectors, but the Fund may invest in
companies in any sector.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption and
military activity. The economies of many Asian countries differ from the
economies of more developed countries in many respects, such as rate of growth,
inflation, capital reinvestment, resource self-sufficiency, financial system
stability, the national balance of payments position and sensitivity to changes
in global trade.
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious diseases such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has
resulted
and may continue to result in market volatility and disruption, and materially
and adversely impact economic conditions in ways that cannot be predicted, all
of which could result in substantial investment losses. Containment efforts and
related restrictive actions by governments and businesses have significantly
diminished and disrupted global economic activity across many industries. Less
developed countries and their health systems may be more vulnerable to these
impacts. The ultimate impact of COVID‑19, including new strains of the
underlying virus, or other health emergencies on global economic conditions and
businesses is impossible to predict accurately. Ongoing and potential additional
material adverse economic effects of indeterminate duration and severity are
possible. The resulting adverse impact on the value of an investment in the Fund
could be significant and prolonged. Other public health emergencies that may
arise in the future could have similar or other unforeseen
effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time. Additionally, Asian countries may utilize
formal or informal currency-exchange controls or “capital controls.” Capital
controls may impose restrictions on the Fund’s ability to repatriate investments
or income. Such controls may also affect the value of the Fund’s
holdings.
Risks Associated with Emerging and Frontier
Markets: Many Asian countries are considered emerging or frontier
markets. Such markets are often less stable politically and economically than
developed markets such as the United States, and investing in these markets
involves different and greater risks. There may be less publicly available
information about companies in many Asian countries, and the stock exchanges and
brokerage industries in many Asian countries typically do not have the level of
government oversight as do those in the United States. Securities markets
of many Asian countries are also substantially smaller, less liquid and more
volatile than securities markets in the United
States.
Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
Volatility Risk: The smaller size and lower
levels of liquidity in emerging markets, as well as other factors, may result in
changes in the prices of Asian securities that are more volatile than those of
companies in more developed regions. This volatility can cause the price of the
Fund’s shares to go up or down dramatically. Because of this volatility, this
Fund is better suited for long-term investors (typically five years or
longer).
Convertible Securities Risk: The Fund may
invest in convertible preferred stocks, and convertible bonds and debentures.
The risks of convertible bonds and debentures include repayment risk and
interest rate risk. Many Asian convertible securities are not rated by rating
agencies. The
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Fund
may invest in convertible debt securities of any maturity and in those that are
unrated, or would be below investment grade (referred to as “junk bonds”) if
rated. Therefore, credit risk may be greater for the Fund than for other funds
that invest in higher-grade securities. These securities are also subject to
greater liquidity risk than many other
securities.
Growth Stock Risk: Growth stocks may be more
volatile than other stocks because they are more sensitive to investor
perceptions of the issuing company’s growth potential. Growth stocks may go in
and out of favor over time and may perform differently than the market as a
whole.
Dividend-Paying Securities Risk: The Fund may
invest in dividend-paying equity securities. There can be no guarantee that
companies that have historically paid dividends will continue to pay them or pay
them at the current rates in the future. The prices of dividend-paying equity
securities (and particularly of those issued by Asian companies) can be highly
volatile. In addition, dividend-paying equity securities, in particular those
whose market price is closely related to their yield, may exhibit greater
sensitivity to interest rate changes. The Fund’s investment in such securities
may also limit its potential for appreciation during a broad market
advance.
Credit Risk: Credit risk refers to the risk
that an issuer may default in the payment of principal and/or interest on an
instrument.
Interest Rate Risk: Fixed-income securities may
decline in value because of changes in interest rates. Bond prices generally
rise when interest rates decline and generally decline when interest rates
rise.
High Yield Securities Risk: High yield
securities or unrated securities of similar credit quality (commonly known as
“junk bonds”) are more likely to default than higher rated securities. These
securities typically entail greater potential price volatility and are
considered predominantly speculative. Issuers of high yield securities may also
be more susceptible to adverse economic and competitive industry conditions than
those of higher-rated securities.
Risks Associated with Medium-Size Companies:
Medium‑size companies may be subject to a number of risks not associated with
larger, more established companies, potentially making their stock prices more
volatile and increasing the risk of
loss.
Risks Associated with Smaller Companies:
Smaller companies may offer substantial opportunities for capital growth; they
also involve substantial risks, and investments in smaller companies may be
considered speculative. Such companies often have limited product lines, markets
or financial resources. Securities of smaller companies may trade less
frequently and in lesser volume than more widely held securities and the
securities of smaller companies generally are subject to more abrupt or erratic
price movements than more widely held or larger, more established companies or
the market indices in general.
Risks Associated with China and Hong Kong: The
Chinese government exercises significant control over China’s economy through
its industrial policies, monetary policy, management of currency exchange rates,
and management of the payment of foreign currency-denominated obligations.
Changes in these policies could adversely impact affected industries or
companies in China. China’s economy, particularly its export-oriented
industries, may be adversely impacted by trade or political disputes with
China’s major trading partners, including the U.S. In addition, as its consumer
class continues to grow, China’s domestically oriented industries may be
especially sensitive to changes in government policy and investment cycles. As
demonstrated by Hong Kong protests in recent years over political, economic, and
legal freedoms, and the Chinese government’s response to them, considerable
political uncertainty continues to exist within Hong Kong. Due to the
interconnected nature of the Hong Kong and Chinese economies, this instability
in Hong Kong may cause uncertainty in the Hong Kong and Chinese markets. If
China were to exert its authority so as to alter the economic, political or
legal structures or the existing social policy of Hong Kong, investor and
business confidence in Hong Kong could be negatively affected and have an
adverse effect on the Fund’s
investments.
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a particular sector, the
Fund will be subject to a greater degree to the risks particular to that sector,
including the sector described below. Market conditions, interest rates, and
economic, regulatory, or financial developments could significantly affect a
single sector. By focusing its investments in a particular sector, the Fund may
face more risks than if it were diversified broadly over numerous
sectors.
– |
|
Information
Technology Sector Risk: As of December 31, 2021, 21% of the
Fund’s assets were invested in the information technology sector.
Information technology companies may be significantly affected by
aggressive pricing as a result of intense competition and by rapid product
obsolescence due to rapid development of technological innovations and
frequent new product introduction. Other factors, such as short product
cycle, possible loss or impairment of intellectual property rights, and
changes in government regulations, may also adversely impact information
technology
companies. |
Cybersecurity Risk: With the increased use of
technologies such as the internet to conduct business, the Fund is susceptible
to operational, information security, and related risks. Cyber incidents
affecting the Fund or its service providers may cause disruptions and impact
business operations, potentially resulting in financial losses, interference
with the Fund’s ability to calculate its NAV, impediments to trading, the
inability of shareholders to transact business, violations of applicable privacy
and other laws, regulatory fines, penalties, reputational damage, reimbursement
or other compensation costs, or additional compliance
costs.
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MATTHEWS ASIAN GROWTH AND INCOME
FUND |
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Past Performance
The bar chart
below shows the Fund’s performance for the past 10 years and how it has varied
from year to year, reflective of the Fund’s volatility and some indication of
risk. Also shown are the best and worst quarters for this time
period. The table below shows the Fund’s performance over certain periods of
time, along with performance of its benchmark index. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURNS FOR YEARS ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
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1 year |
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5 years |
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10 years |
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Since Inception
(10/29/10) |
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Matthews
Asian Growth and Income Fund |
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Return
before taxes |
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0.18% |
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8.26% |
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6.73% |
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5.18% |
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Return
after taxes on distributions1 |
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-2.72% |
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6.58% |
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5.20% |
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3.68% |
|
Return
after taxes on distributions and sale of Fund shares1 |
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1.78% |
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6.26% |
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5.10% |
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3.85% |
|
MSCI
All Country Asia ex Japan Index |
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(reflects no deduction for fees, expenses
or taxes) |
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-4.46% |
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11.61% |
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8.32% |
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6.00% |
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1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager: Robert Horrocks, PhD, is Chief
Investment Officer at Matthews and has been a Portfolio Manager of the Matthews
Asian Growth and Income Fund since 2009.
Lead Manager: Kenneth Lowe, CFA, has been a
Portfolio Manager of the Matthews Asian Growth and Income Fund since 2011.
Co‑Manager: Satya Patel has been a Portfolio
Manager of the Matthews Asian Growth and Income Fund since 2020.
Co-Manager: Siddharth Bhargava has been a
Portfolio Manager of the Matthews Asian Growth and Income Fund since 2021.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions (and jointly responsible with the other Lead Manager). The
Lead Manager is supported by and consults with the Co‑Managers, who are not
primarily responsible for portfolio management.
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
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Matthews
Asia Dividend Fund
FUND SUMMARY
Investment Objective
Total
return with an emphasis on providing current
income.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
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Maximum
Account Fee on Redemptions (for wire redemptions only) |
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$9 |
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ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
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Management
Fees |
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0.66% |
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Distribution
(12b‑1) Fees |
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0.00% |
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Other Expenses |
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0.26% |
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Administration
and Shareholder Servicing Fees |
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0.14% |
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Total Annual
Fund Operating Expenses |
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0.92% |
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Fee
Waiver and Expense Reimbursement1 |
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(0.01%) |
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Total Annual Fund Operating Expenses After Fee
Waiver and Expense Reimbursement |
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0.91% |
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1 |
Matthews
has contractually agreed to waive a portion of its advisory fee and
administrative and shareholder services fee if the Fund’s average daily
net assets are over $3 billion, as follows: for every
$2.5 billion average daily net assets of the Fund that are over
$3 billion, the advisory fee rate and the administrative and
shareholder services fee rate for the Fund with respect to such excess
average daily net assets will be each reduced by 0.01%, in each case
without reducing such fee rate below 0.00%. Any amount waived by Matthews
pursuant to this agreement may not be recouped by Matthews. This agreement
will remain in place until April 30,
2023 and may be terminated (i) at any time by the
Board of Trustees upon 60 days’ prior written notice to Matthews; or
(ii) by Matthews at the annual expiration date of the agreement upon
60 days’ prior written notice to the Trust, in each case without payment
of any penalty. |
EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The example reflects the fee waiver for the one year period
only. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
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One year: $93 |
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Three years: $292 |
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Five years: $508 |
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Ten years: $1,130 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 47% of the average value of its
portfolio.
Principal Investment
Strategy
Under
normal circumstances, the Matthews Asia Dividend Fund seeks to achieve its
investment objective by investing at least 80% of its net assets, which include
borrowings for investment purposes, in dividend-paying equity securities of
companies located in Asia. The Fund may also invest in convertible debt and
equity securities of any maturity and quality, including those that are unrated,
or would be below investment
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MATTHEWS ASIA DIVIDEND FUND |
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grade
(referred to as “junk bonds”) if rated, of companies located in Asia. Asia
consists of all countries and markets in Asia, and includes developed, emerging,
and frontier countries and markets in the Asian region. Certain emerging market
countries may also be classified as “frontier” market countries, which are a
subset of emerging market countries with newer or even less developed economies
and markets, such as Sri Lanka and Vietnam. A company or other issuer is
considered to be “located” in a country or a region, and a security or
instrument is deemed to be an Asian (or specific country) security or
instrument, if it has substantial ties to that country or region. Matthews
currently makes that determination based primarily on one or more of the
following criteria: (A) with respect to a company or issuer, whether
(i) it is organized under the laws of that country or any country in
that region; (ii) it derives at least 50% of its revenues or profits from
goods produced or sold, investments made, or services performed, or has at least
50% of its assets located, within that country or region; (iii) it has the
primary trading markets for its securities in that country or region;
(iv) it has its principal place of business in or is otherwise
headquartered in that country or region; or (v) it is a governmental entity
or an agency, instrumentality or a political subdivision of that country or any
country in that region; and (B) with respect to an instrument or issue,
whether (i) its issuer is headquartered or organized in that country or
region; (ii) it is issued to finance a project with significant assets or
operations in that country or region; (iii) it is principally secured or
backed by assets located in that country or region; (iv) it is a component
of or its issuer is included in a recognized securities index for the country or
region; or (v) it is denominated in the currency of an Asian country and
addresses at least one of the other above criteria. The term “located” and the
associated criteria listed above have been defined in such a way that Matthews
has latitude in determining whether an issuer should be included within a region
or country. The Fund may also invest in depositary receipts, including American,
European, and Global Depositary
Receipts.
The
Fund seeks to provide a level of current income that is higher than the yield
generally available in Asian equity markets over the long term. The Fund intends
to distribute its realized income, if any, regularly (typically quarterly in
March, June, September and December). There is no guarantee that the Fund will
be able to distribute its realized income, if any, regularly. If the value of
the Fund’s investments declines, the net asset value of the Fund will decline
and investors may lose some or all of the value of their
investments.
The
Fund’s objective is total return with an emphasis on providing current income.
Total return includes current income (dividends and distributions paid to
shareholders) and capital gains (share price appreciation). The Fund measures
total return over longer periods. Because of this objective, under normal
circumstances, the Fund primarily invests in companies that exhibit attractive
dividend yields and the propensity (in Matthews’ judgment) to pay increasing
dividends. Matthews believes that in addition to providing current income,
growing dividend payments by portfolio companies are an important component
supporting capital appreciation. Matthews expects that such companies typically
will be of medium or large size, but the Fund may invest in companies of any
size. Matthews measures a company’s size with respect to fundamental criteria
such as, but not limited to, market capitalization, book value, revenues,
profits, cash flow,
dividends
paid and number of employees. The implementation of the principal investment
strategies of the Fund may result in a significant portion of the Fund’s assets
being invested from time to time in one or more sectors, but the Fund may invest
in companies in any sector.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption and
military activity. The economies of many Asian countries differ from the
economies of more developed countries in many respects, such as rate of growth,
inflation, capital reinvestment, resource self-sufficiency, financial system
stability, the national balance of payments position and sensitivity to changes
in global trade.
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious diseases such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and materially and adversely impact economic
conditions in ways that cannot be predicted, all of which could result in
substantial investment losses. Containment efforts and related restrictive
actions by governments and businesses have significantly diminished and
disrupted global economic activity across many industries. Less developed
countries and their health systems may be more vulnerable to these impacts. The
ultimate impact of COVID‑19, including new strains of the underlying virus, or
other health emergencies on global economic conditions and businesses is
impossible to predict accurately. Ongoing and potential additional material
adverse economic effects of indeterminate duration and severity are possible.
The resulting adverse impact on the value of an investment in the Fund could be
significant and prolonged. Other public health emergencies that may arise in the
future could have similar or other unforeseen
effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time. Additionally, Asian countries may utilize
formal or informal currency-exchange controls or “capital controls.” Capital
controls may impose restrictions on the Fund’s ability to repatriate investments
or income. Such controls may also affect the value of the Fund’s
holdings.
Risks Associated with Emerging and Frontier
Markets: Many Asian countries are considered emerging or frontier
markets. Such markets are often less stable politically and economically than
developed markets such as the United States, and investing in these markets
involves different and
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greater
risks. There may be less publicly available information about companies in many
Asian countries, and the stock exchanges and brokerage industries in many Asian
countries typically do not have the level of government oversight as do those in
the United States. Securities markets of many Asian countries are also
substantially smaller, less liquid and more volatile than securities markets in
the United States.
Dividend-Paying Securities Risk: The Fund will
invest in dividend-paying equity securities. There can be no guarantee that
companies that have historically paid dividends will continue to pay them or pay
them at the current rates in the future. The prices of dividend-paying equity
securities (and particularly of those issued by Asian companies) can be highly
volatile. In addition, dividend-paying equity securities, in particular those
whose market price is closely related to their yield, may exhibit greater
sensitivity to interest rate changes. The Fund’s investment in such securities
may also limit its potential for appreciation during a broad market
advance.
Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
Volatility Risk: The smaller size and lower
levels of liquidity in emerging markets, as well as other factors, may result in
changes in the prices of Asian securities that are more volatile than those of
companies in more developed regions. This volatility can cause the price of the
Fund’s shares to go up or down dramatically. Because of this volatility, this
Fund is better suited for long-term investors (typically five years or
longer).
Convertible Securities Risk: The Fund may
invest in convertible preferred stocks, and convertible bonds and debentures.
The risks of convertible bonds and debentures include repayment risk and
interest rate risk. Many Asian convertible securities are not rated by rating
agencies. The Fund may invest in convertible debt securities of any maturity and
in those that are unrated, or would be below investment grade (referred to as
“junk bonds”) if rated. Therefore, credit risk may be greater for the Fund than
for other funds that invest in higher-grade securities. These securities are
also subject to greater liquidity risk than many other types of
securities.
Risks Associated with Medium‑Size Companies:
Medium‑size companies may be subject to a number of risks not associated
with larger, more established companies, potentially making their stock prices
more volatile and increasing the risk of
loss.
Risks Associated with Smaller Companies:
Smaller companies may offer substantial opportunities for capital growth; they
also involve substantial risks, and investments in smaller companies may be
considered speculative. Such companies often have limited product lines, markets
or financial resources. Securities of smaller companies may trade less
frequently and in lesser volume than more widely held securities and the
securities of smaller companies generally are subject to more abrupt or erratic
price movements than more widely held or larger, more established companies or
the market indices in general.
Risks Associated with China and Hong Kong: The
Chinese government exercises significant control over
China’s
economy
through its industrial policies, monetary policy, management of currency
exchange rates, and management of the payment of foreign currency-denominated
obligations. Changes in these policies could adversely impact affected
industries or companies in China. China’s economy, particularly its
export-oriented industries, may be adversely impacted by trade or political
disputes with China’s major trading partners, including the U.S. In addition, as
its consumer class continues to grow, China’s domestically oriented industries
may be especially sensitive to changes in government policy and investment
cycles. As demonstrated by Hong Kong protests in recent years over political,
economic, and legal freedoms, and the Chinese government’s response to them,
considerable political uncertainty continues to exist within Hong Kong. Due to
the interconnected nature of the Hong Kong and Chinese economies, this
instability in Hong Kong may cause uncertainty in the Hong Kong and Chinese
markets. If China were to exert its authority so as to alter the economic,
political or legal structures or the existing social policy of Hong Kong,
investor and business confidence in Hong Kong could be negatively affected and
have an adverse effect on the Fund’s
investments.
Risks Associated with Japan: The Japanese
economy has only recently emerged from a prolonged economic downturn. Since
the year 2000, Japan’s economic growth rate has remained relatively
low. The Japanese economy is characterized by an aging demographic,
declining population, large government debt and highly regulated labor market.
Economic growth in Japan is dependent on domestic consumption, deregulation and
consistent government policy. International trade, particularly with the U.S.,
also impacts growth of the Japanese economy, and adverse economic conditions in
the U.S. or other trade partners may affect
Japan.
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a particular sector, the
Fund will be subject to a greater degree to the risks particular to that sector,
including the sector described below. Market conditions, interest rates, and
economic, regulatory, or financial developments could significantly affect a
single sector. By focusing its investments in a particular sector, the Fund may
face more risks than if it were diversified broadly over numerous
sectors.
– |
|
Consumer
Discretionary Risk: As of December 31, 2021, 27% of the
Fund’s assets were invested in the consumer discretionary sector. The
success of consumer product manufacturers and retailers is tied closely to
the performance of the overall local and international economies, interest
rates, competition and consumer confidence. Success of companies in the
consumer discretionary sector depends heavily on disposable household
income and consumer spending. Changes in demographics and consumer tastes
can also affect the demand for, and success of, consumer products and
services in the
marketplace. |
Cybersecurity Risk: With the increased use of
technologies such as the internet to conduct business, the Fund is susceptible
to operational, information security, and related risks. Cyber incidents
affecting the Fund or its service providers may cause disruptions and impact
business operations, potentially resulting in financial losses, interference
with the Fund’s ability to calculate its NAV, impediments to trading, the
inability of shareholders to transact business, violations of applicable privacy
and other laws, regulatory fines, penalties, reputational damage, reimbursement
or other compensation costs, or additional compliance
costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
MATTHEWS ASIA DIVIDEND FUND |
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|
57 |
|
Past Performance
The bar chart
below shows the Fund’s performance for the past 10 years and how it has varied
from year to year, reflective of the Fund’s volatility and some indication of
risk. Also shown are the best and worst quarters for this time
period. The table below shows the Fund’s performance over certain periods of
time, along with performance of its benchmark index. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURNS FOR YEARS ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 year |
|
|
5 years |
|
|
10 years |
|
|
Since Inception
(10/29/10) |
|
Matthews
Asia Dividend Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
before taxes |
|
|
-2.67% |
|
|
|
10.87% |
|
|
|
9.42% |
|
|
|
7.66% |
|
Return
after taxes on distributions1 |
|
|
-6.12% |
|
|
|
9.24% |
|
|
|
8.21% |
|
|
|
6.54% |
|
Return
after taxes on distributions and sale of Fund shares1 |
|
|
0.57% |
|
|
|
8.47% |
|
|
|
7.51% |
|
|
|
6.07% |
|
MSCI
All Country Asia Pacific Index |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(reflects no deduction for fees, expenses
or taxes) |
|
|
-1.19% |
|
|
|
10.23% |
|
|
|
8.29% |
|
|
|
6.46% |
|
|
1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager: Yu Zhang, CFA, has been a
Portfolio Manager of the Matthews Asia Dividend Fund since 2011.
Lead Manager: S. Joyce Li, CFA, has been a
Portfolio Manager of the Matthews Asia Dividend Fund since 2020.
Co‑Manager: Robert Horrocks, PhD, is Chief
Investment Officer at Matthews and has been a Portfolio Manager of the Matthews
Asia Dividend Fund since 2013.
Co‑Manager: Sherwood Zhang, CFA, has been a
Portfolio Manager of the Matthews Asia Dividend Fund since 2018.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions (and jointly responsible with the other Lead Manager). The
Lead Manager is supported by and consults with the Co‑Managers, who are not
primarily responsible for portfolio management.
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
|
|
|
|
|
|
|
58 |
|
matthewsasia.com | 800.789.ASIA |
|
|
|
|
Matthews
China Dividend Fund
FUND SUMMARY
Investment Objective
Total
return with an emphasis on providing current
income.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of this Fund.
SHAREHOLDER
FEES
(fees paid directly from your investment)
|
|
|
|
|
|
|
|
|
Maximum
Account Fee on Redemptions (for wire redemptions only) |
|
|
|
|
|
|
$9 |
|
ANNUAL
OPERATING EXPENSES
(expenses that you pay each year as a percentage of
the value of your investment)
|
|
|
|
|
|
|
|
|
Management
Fees |
|
|
|
|
|
|
0.66% |
|
Distribution
(12b‑1) Fees |
|
|
|
|
|
|
0.00% |
|
Other Expenses |
|
|
|
|
|
|
0.31% |
|
|
|
|
Administration
and Shareholder Servicing Fees |
|
|
0.14% |
|
|
|
|
|
Total Annual Fund Operating
Expenses |
|
|
|
|
|
|
0.97% |
|
EXAMPLE
OF FUND EXPENSES
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
One year: $99 |
|
Three years: $309 |
|
Five years: $536 |
|
Ten years: $1,190 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example of fund expenses, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 68% of the average value of its
portfolio.
Principal Investment
Strategy
Under
normal circumstances, the Matthews China Dividend Fund seeks to achieve its
investment objective by investing at least 80% of its net assets, which include
borrowings for investment purposes, in dividend-paying equity securities of
companies located in China. The Fund may also invest in convertible debt and
equity securities of any maturity and quality, including those that are unrated,
or would be below investment grade (referred to as “junk bonds”) if rated, of
companies located in China. China also includes its administrative and other
districts, such as Hong Kong. A company or other issuer is considered to be
“located” in a country or a region, and a security or instrument is deemed to be
an Asian (or specific country) security or instrument, if it has substantial
ties to that country or region. Matthews currently makes that determination
based primarily on one or more of the following criteria: (A) with respect
to a company or issuer, whether (i) it is organized under the laws of
that country or any country in that region; (ii) it derives at least 50% of
its revenues or profits from goods produced or sold, investments made, or
services performed, or has at least 50% of its assets located, within that
country or region; (iii) it has the primary trading markets for its
securities in that country or region; (iv) it has its principal place of
business in or is otherwise headquartered in that country or region; or
(v) it is a governmental entity or an
agency,
|
|
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|
|
|
|
|
|
|
|
|
|
MATTHEWS CHINA DIVIDEND FUND |
|
|
59 |
|
instrumentality
or a political subdivision of that country or any country in that region; and
(B) with respect to an instrument or issue, whether (i) its issuer is
headquartered or organized in that country or region; (ii) it is issued to
finance a project with significant assets or operations in that country or
region; (iii) it is principally secured or backed by assets located in that
country or region; (iv) it is a component of or its issuer is included in a
recognized securities index for the country or region; or (v) it is
denominated in the currency of an Asian country and addresses at least one of
the other above criteria. The term “located” and the associated criteria listed
above have been defined in such a way that Matthews has latitude in determining
whether an issuer should be included within a region or country. The Fund may
also invest in depositary receipts, including American, European and Global
Depositary Receipts.
The
Fund seeks to provide a level of current income that is higher than the yield
generally available in Chinese equity markets over the long term. The Fund
intends to distribute its realized income, if any, regularly (typically
semi-annually in June and December). There is no guarantee that the Fund will be
able to distribute its realized income, if any, regularly. If the value of the
Fund’s investments declines, the net asset value of the Fund will decline and
investors may lose some or all of the value of their
investments.
The
Fund’s objective is total return with an emphasis on providing current income.
Total return includes current income (dividends and distributions paid to
shareholders) and capital gains (share price appreciation). The Fund measures
total return over longer periods. Because of this objective, under normal
circumstances, the Fund primarily invests in companies that exhibit attractive
dividend yields and the propensity (in Matthews’ judgment) to pay increasing
dividends. Matthews believes that in addition to providing current income,
growing dividend payments by portfolio companies are an important component
supporting capital appreciation. Matthews expects that such companies typically
will be of small or medium size, but the Fund may invest in companies of any
size. Matthews measures a company’s size with respect to fundamental criteria
such as, but not limited to, market capitalization, book value, revenues,
profits, cash flow, dividends paid and number of employees. The implementation
of the principal investment strategies of the Fund may result in a significant
portion of the Fund’s assets being invested from time to time in one or more
sectors, but the Fund may invest in companies in any
sector.
Principal Risks of
Investment
There
is no guarantee that your investment in the Fund will increase in value.
The value of your investment in the Fund could go down,
meaning you could lose money. The principal risks of investing
in the Fund are:
Political, Social and Economic Risks of Investing in
Asia: The value of the Fund’s assets may be adversely affected by
political, economic, social and religious instability; inadequate investor
protection; changes in laws or regulations of countries within the Asian region
(including countries in which the Fund invests, as well as the broader
region); international relations with other nations; natural disasters;
corruption and military activity. The economies of many Asian countries differ
from the economies of more developed countries in many respects, such as
rate of growth, inflation, capital
reinvestment,
resource self- sufficiency, financial system stability, the national balance of
payments position and sensitivity to changes in global
trade.
Public Health Emergency Risks: Pandemics and
other public health emergencies, including outbreaks of infectious diseases such
as the current outbreak of the novel coronavirus (“COVID‑19”), can result, and
in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and materially and adversely impact economic
conditions in ways that cannot be predicted, all of which could result in
substantial investment losses. Containment efforts and related restrictive
actions by governments and businesses have significantly diminished and
disrupted global economic activity across many industries. Less developed
countries and their health systems may be more vulnerable to these impacts. The
ultimate impact of COVID‑19, including new strains of the underlying virus, or
other health emergencies on global economic conditions and businesses is
impossible to predict accurately. Ongoing and potential additional material
adverse economic effects of indeterminate duration and severity are possible.
The resulting adverse impact on the value of an investment in the Fund could be
significant and prolonged. Other public health emergencies that may arise in the
future could have similar or other unforeseen
effects.
Currency Risk: When the Fund conducts
securities transactions in a foreign currency, there is the risk of the value of
the foreign currency increasing or decreasing against the value of the U.S.
dollar. The value of an investment denominated in a foreign currency will
decline in U.S. dollar terms if that currency weakens against the U.S. dollar.
While the Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time. Additionally, China may utilize formal or
informal currency-exchange controls or “capital controls.” Capital controls may
impose restrictions on the Fund’s ability to repatriate investments or income.
Such controls may also affect the value of the Fund’s
holdings.
Risks Associated with Emerging and Frontier
Markets: Many Asian countries are considered emerging markets. Certain
emerging market countries may also be classified as “frontier” market countries,
which are a subset of emerging market countries with newer or even less
developed economies and markets. Such markets are often less stable politically
and economically than developed markets such as the United States, and investing
in these markets involves different and greater risks. There may be less
publicly available information about companies in many Asian countries, and the
stock exchanges and brokerage industries in many Asian countries typically do
not have the level of government oversight as do those in the
United States. Securities markets of many Asian countries are also
substantially smaller, less liquid and more volatile than securities markets in
the United States.
Dividend-Paying Securities Risk: The Fund will
invest in dividend-paying equity securities. There can be no guarantee that
companies that have historically paid dividends will continue to pay them or pay
them at the current rates in the future. The prices of dividend-paying equity
securities (and particularly of those issued by Asian companies) can be highly
volatile. In addition, dividend-paying equity securities, in particular those
whose market price is closely related to their yield, may exhibit greater
sensitivity to interest rate changes. The Fund’s investment in such securities
may also limit its potential for appreciation during a broad market
advance.
|
|
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|
|
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|
60 |
|
matthewsasia.com | 800.789.ASIA |
|
|
|
|
Risks Associated with China and Hong Kong: The
Chinese government exercises significant control over China’s economy through
its industrial policies (e.g.,
allocation of resources and other preferential treatment), monetary policy,
management of currency exchange rates, and management of the payment of foreign
currency-denominated obligations. Changes in these policies could adversely
impact affected industries or companies in China. China’s economy, particularly
its export-oriented industries, may be adversely impacted by trade or political
disputes with China’s major trading partners, including the U.S. In addition, as
its consumer class continues to grow, China’s domestically oriented industries
may be especially sensitive to changes in government policy and investment
cycles. As demonstrated by Hong Kong protests in recent years over political,
economic, and legal freedoms, and the Chinese government’s response to them,
considerable political uncertainty continues to exist within Hong Kong. Due to
the interconnected nature of the Hong Kong and Chinese economies, this
instability in Hong Kong may cause uncertainty in the Hong Kong and Chinese
markets. If China were to exert its authority so as to alter the economic,
political or legal structures or the existing social policy of Hong Kong,
investor and business confidence in Hong Kong could be negatively affected and
have an adverse effect on the Fund’s
investments.
Depositary Receipts Risk: Although depositary
receipts have risks similar to the securities that they represent, they may also
involve higher expenses and may trade at a discount (or premium) to the
underlying security. In addition, depositary receipts may not pass through
voting and other shareholder rights, and may be less liquid than the underlying
securities listed on an exchange.
Volatility Risk: The smaller size and lower
levels of liquidity, as well as other factors, may result in changes in the
prices of securities that are more volatile than those of companies in more
developed regions. This volatility can cause the price of the Fund’s shares to
go up or down dramatically. Because of this volatility, this Fund is better
suited for long-term investors (typically five years or
longer).
Convertible Securities Risk: The Fund may
invest in convertible preferred stocks, and convertible bonds and debentures.
The risks of convertible bonds and debentures include repayment risk and
interest rate risk. Many Asian convertible securities are not rated by rating
agencies. The Fund may invest in convertible debt securities of any maturity and
in those that are unrated, or would be below investment grade (referred to as
“junk bonds”) if rated. Therefore, credit risk may be greater for the Fund than
for other funds that invest in higher-grade securities. These securities are
also subject to greater liquidity risk than many other types of
securities.
Risks Associated with Smaller Companies:
Smaller companies may offer substantial opportunities for capital growth; they
also involve substantial risks, and investments in smaller companies may be
considered speculative. Such companies often have limited product lines, markets
or financial resources. Securities of smaller companies may trade less
frequently and in lesser volume than more widely held securities and the
securities of smaller companies generally are subject to more abrupt or erratic
price movements than more widely held or larger, more established companies or
the market indices in general.
Risks Associated with Medium-Size Companies:
Medium‑size companies may be subject to a number of risks not associated with
larger, more established companies, potentially making their stock prices more
volatile and increasing the risk of
loss.
Sector Concentration Risk: To the extent that
the Fund emphasizes, from time to time, investments in a particular sector, the
Fund will be subject to a greater degree to the risks particular to that sector,
including the sector described below. Market conditions, interest rates, and
economic, regulatory, or financial developments could significantly affect a
single sector. By focusing its investments in a particular sector, the Fund may
face more risks than if it were diversified broadly over numerous
sectors.
– |
|
Consumer
Discretionary Risk: As of December 31, 2021, 23% of the
Fund’s assets were invested in the consumer discretionary sector. The
success of consumer product manufacturers and retailers is tied closely to
the performance of the overall local and international economies, interest
rates, competition and consumer confidence. Success of companies in the
consumer discretionary sector depends heavily on disposable household
income and consumer spending. Changes in demographics and consumer tastes
can also affect the demand for, and success of, consumer products and
services in the
marketplace. |
Cybersecurity Risk: With the increased use of
technologies such as the internet to conduct business, the Fund is susceptible
to operational, information security, and related risks. Cyber incidents
affecting the Fund or its service providers may cause disruptions and impact
business operations, potentially resulting in financial losses, interference
with the Fund’s ability to calculate its NAV, impediments to trading, the
inability of shareholders to transact business, violations of applicable privacy
and other laws, regulatory fines, penalties, reputational damage, reimbursement
or other compensation costs, or additional compliance
costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
MATTHEWS CHINA DIVIDEND FUND |
|
|
61 |
|
Past Performance
The bar chart
below shows the Fund’s performance for the past 10 years and how it has varied
from year to year, reflective of the Fund’s volatility and some indication of
risk. Also shown are the best and worst quarters for this time
period. The table below shows the Fund’s performance over certain periods of
time, along with performance of its benchmark index. The information presented below
is past performance, before and after taxes, and is not a prediction of future
results. Both the bar chart and performance table assume
reinvestment of all dividends and distributions. For the Fund’s most recent
month‑end performance, please visit matthewsasia.com
or call 800.789.ASIA
(2742).
ANNUAL
RETURNS FOR YEARS ENDED 12/31
AVERAGE
ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 year |
|
|
5 years |
|
|
10 years |
|
|
Since Inception
(10/29/10) |
|
Matthews
China Dividend Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
before taxes |
|
|
-0.38% |
|
|
|
12.15% |
|
|
|
11.73% |
|
|
|
9.30% |
|
Return
after taxes on distributions1 |
|
|
-2.90% |
|
|
|
10.06% |
|
|
|
10.06% |
|
|
|
7.73% |
|
Return
after taxes on distributions and sale of Fund shares1 |
|
|
1.16% |
|
|
|
9.14% |
|
|
|
9.16% |
|
|
|
7.11% |
|
MSCI
China Index |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(reflects no deduction for fees, expenses
or taxes) |
|
|
-21.64% |
|
|
|
9.52% |
|
|
|
7.38% |
|
|
|
4.39% |
|
|
1 |
After‑tax returns are
calculated using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after‑tax
returns depend on an investor’s tax situation and may differ from those
shown. After‑tax returns shown are not relevant to investors who hold
their Fund shares through tax‑deferred arrangements, such as 401(k) plans
or individual retirement
accounts. |
Investment Advisor
Matthews
International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager: Sherwood Zhang, CFA, has been a
Portfolio Manager of the Matthews China Dividend Fund since 2014.
Co‑Manager: Yu Zhang, CFA, has been a Portfolio
Manager of the Matthews China Dividend Fund since 2012.
Co‑Manager: S. Joyce Li, CFA, has been a
Portfolio Manager of the Matthews China Dividend Fund since 2019.
The
Lead Manager is primarily responsible for the Fund’s day‑to‑day investment
management decisions. The Lead Manager is supported by and consults with the
Co‑Managers, who are not primarily responsible for portfolio management.
For
important information about the Purchase and Sale of Fund Shares; Tax
Information; and Payments to Broker-Dealers and Other Financial Intermediaries,
please turn to page 63.
|
|
|
|
|
|
|
62 |
|
matthewsasia.com | 800.789.ASIA |
|
|
|
|
Important
Information
Purchase
and Sale of Fund Shares
You
may purchase and sell Fund shares directly through the Funds’ transfer agent by
calling 800.789.ASIA (2742) or online at matthewsasia.com. Fund shares may
also be purchased and sold through various securities brokers and benefit plan
administrators or their sub‑agents. You may purchase and redeem Fund shares by
electronic bank transfer, check, or wire. The minimum initial and subsequent
investment amounts for various types of accounts offered by the Funds are shown
below.
|
|
|
Minimum Initial Investment |
|
Minimum Subsequent Investments |
$100,000 |
|
$100 |
Minimum
amount may be lower for purchases through certain financial intermediaries and
different minimums may apply for retirement plans and other arrangements subject
to criteria set by Matthews. The minimum investment requirements do not apply to
Trustees, officers and employees of the Funds and Matthews, and their immediate
family members.
Tax
Information
The
Funds’ distributions are taxable, and will be taxed as ordinary income or
capital gains, unless you are investing through a tax‑deferred arrangement, such
as a 401(k) plan or an individual retirement account. Tax‑deferred arrangements
may be taxed later upon withdrawal from those accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase Fund shares through a broker-dealer or other financial intermediary
(such as a bank), Matthews may pay the intermediary for the sale of Fund shares
and related services. Shareholders who purchase or hold Fund shares through an
intermediary may inquire about such payments from that intermediary. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment. Ask your salesperson or visit your financial intermediary’s website
for more information.
Financial Highlights
The
financial highlights tables are intended to help you understand the Funds’
financial performance for the past 5 years or, if shorter, the period of the
applicable Fund’s operations. Certain information reflects financial results for
a single Fund share. The total returns in the tables represent the rate that an
investor would have earned (or lost) on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, the Funds’ independent registered public
accounting firm, whose report, along with the Funds’ financial statements, are
included in the Funds’ annual report, which is available upon request.
Matthews
Emerging Markets Equity Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, 2021 |
|
|
Period Ended
Dec. 31, 20201 |
|
Net
Asset Value, beginning of period |
|
|
$15.77 |
|
|
|
$10.00 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
Net
investment income (loss)2 |
|
|
0.22 |
|
|
|
0.04 |
|
Net
realized gain (loss) and unrealized appreciation/depreciation
on investments, foreign currency related transactions and
foreign capital gains taxes |
|
|
(0.31) |
|
|
|
6.11 |
|
Total
from investment operations |
|
|
(0.09) |
|
|
|
6.15 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.22) |
|
|
|
(0.02) |
|
Net
realized gains on investments |
|
|
(1.12) |
|
|
|
(0.36) |
|
Total
distributions |
|
|
(1.34) |
|
|
|
(0.38) |
|
Net
Asset Value, end of period |
|
|
$14.34 |
|
|
|
$15.77 |
|
Total
return* |
|
|
(0.43%) |
|
|
|
61.55% |
3 |
|
*The total return represents the
rate that an investor would have earned (or lost) on an investment in the
Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of period (in 000s) |
|
|
$36,240 |
|
|
|
$34,941 |
|
Ratio
of expenses to average net assets before any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
1.38% |
|
|
|
2.65% |
4 |
Ratio
of expenses to average net assets after any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
0.90% |
|
|
|
0.90% |
4 |
Ratio
of net investment income (loss) to average net assets |
|
|
1.33% |
|
|
|
0.44% |
4 |
Portfolio
turnover5 |
|
|
88.45% |
|
|
|
62.30% |
3 |
1
Commenced operations on April 30,2020.
2
Calculated using the average daily shares method.
3
Not annualized.
4
Annualized.
5
The portfolio turnover rate is calculated on the Fund as a whole without
distinguishing between classes of shares issued.
|
|
|
|
|
|
|
64 |
|
matthewsasia.com | 800.789.ASIA |
|
|
|
|
Matthews
Emerging Markets Small Companies Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
Net
Asset Value, beginning of year |
|
|
$25.87 |
|
|
|
$18.06 |
|
|
|
$15.46 |
|
|
|
$22.86 |
|
|
|
$19.03 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)1 |
|
|
(0.10) |
|
|
|
0.01 |
|
|
|
0.15 |
|
|
|
0.16 |
|
|
|
0.07 |
|
Net
realized gain (loss) and unrealized appreciation/depreciation on
investments, foreign currency related transactions and foreign capital
gains taxes |
|
|
5.88 |
|
|
|
7.91 |
|
|
|
2.58 |
|
|
|
(4.19) |
|
|
|
5.67 |
|
Total
from investment operations |
|
|
5.78 |
|
|
|
7.92 |
|
|
|
2.73 |
|
|
|
(4.03) |
|
|
|
5.74 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.04) |
|
|
|
(0.09) |
|
|
|
(0.13) |
|
|
|
(0.14) |
|
|
|
(0.15) |
|
Net
realized gains on investments |
|
|
(1.74) |
|
|
|
(0.02) |
|
|
|
— |
|
|
|
(3.23) |
|
|
|
(1.76) |
|
Total
distributions |
|
|
(1.78) |
|
|
|
(0.11) |
|
|
|
(0.13) |
|
|
|
(3.37) |
|
|
|
(1.91) |
|
Paid‑in
capital from redemption fees |
|
|
— |
|
|
|
— |
|
|
|
— |
2 |
|
|
— |
3 |
|
|
— |
3 |
Net
Asset Value, end of year |
|
|
$29.87 |
|
|
|
$25.87 |
|
|
|
$18.06 |
|
|
|
$15.46 |
|
|
|
$22.86 |
|
Total
return* |
|
|
22.39% |
|
|
|
43.90% |
|
|
|
17.65% |
|
|
|
(17.86%) |
|
|
|
30.85% |
|
|
*The total return represents
the rate that an investor would have earned (or lost) on an investment in
the Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of year (in 000s) |
|
|
$221,286 |
|
|
|
$107,569 |
|
|
|
$85,006 |
|
|
|
$74,935 |
|
|
|
$232,954 |
|
Ratio
of expenses to average net assets before any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
1.38% |
|
|
|
1.47% |
|
|
|
1.46% |
|
|
|
1.37% |
|
|
|
1.35% |
|
Ratio
of expenses to average net assets after any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
1.16% |
|
|
|
1.20% |
|
|
|
1.24% |
|
|
|
1.25% |
|
|
|
1.25% |
|
Ratio
of net investment income (loss) to average net assets |
|
|
(0.34%) |
|
|
|
0.08% |
|
|
|
0.85% |
|
|
|
0.73% |
|
|
|
0.34% |
|
Portfolio
turnover4 |
|
|
50.82% |
|
|
|
111.87% |
|
|
|
59.10% |
|
|
|
69.79% |
|
|
|
67.13% |
|
1
Calculated using the average daily shares method.
2
The Fund charged redemption fees through October 31, 2019.
3
Less than $0.01 per share.
4
The portfolio turnover rate is calculated on the Fund as a whole for the entire
year without distinguishing between classes of shares issued.
Matthews
Asia Growth Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
Net
Asset Value, beginning of year |
|
|
$39.82 |
|
|
|
$28.34 |
|
|
|
$22.65 |
|
|
|
$27.45 |
|
|
|
$21.19 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)1 |
|
|
(0.19) |
|
|
|
(0.07) |
|
|
|
— |
2 |
|
|
0.05 |
|
|
|
0.09 |
|
Net
realized gain (loss) and unrealized appreciation/depreciation
on investments, foreign currency related transactions and
foreign capital gains taxes |
|
|
(5.63) |
|
|
|
13.30 |
|
|
|
5.96 |
|
|
|
(4.45) |
|
|
|
8.20 |
|
Total
from investment operations |
|
|
(5.82) |
|
|
|
13.23 |
|
|
|
5.96 |
|
|
|
(4.40) |
|
|
|
8.29 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.02) |
|
|
|
(0.19) |
|
|
|
— |
|
|
|
(0.08) |
|
|
|
(0.21) |
|
Net
realized gains on investments |
|
|
(1.65) |
|
|
|
(1.56) |
|
|
|
(0.27) |
|
|
|
(0.32) |
|
|
|
(1.82) |
|
Total
distributions |
|
|
(1.67) |
|
|
|
(1.75) |
|
|
|
(0.27) |
|
|
|
(0.40) |
|
|
|
(2.03) |
|
Net
Asset Value, end of year |
|
|
$32.33 |
|
|
|
$39.82 |
|
|
|
$28.34 |
|
|
|
$22.65 |
|
|
|
$27.45 |
|
Total
return* |
|
|
(14.55%) |
|
|
|
47.01% |
|
|
|
26.34% |
|
|
|
(16.10%) |
|
|
|
39.64% |
|
|
*The total return represents
the rate that an investor would have earned (or lost) on an investment in
the Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of year (in 000s) |
|
|
$1,186,769 |
|
|
|
$1,269,702 |
|
|
|
$698,797 |
|
|
|
$466,733 |
|
|
|
$296,253 |
|
Ratio
of expenses to average net assets |
|
|
0.92% |
|
|
|
0.95% |
|
|
|
0.94% |
|
|
|
0.93% |
|
|
|
0.93% |
|
Ratio
of net investment income (loss) to average net assets |
|
|
(0.47%) |
|
|
|
(0.23%) |
|
|
|
—% |
3 |
|
|
0.17% |
|
|
|
0.35% |
|
Portfolio
turnover4 |
|
|
42.37% |
|
|
|
42.78% |
|
|
|
38.05% |
|
|
|
12.12% |
|
|
|
23.19% |
|
1
Calculated using the average daily shares method.
2
Less than $0.01 per share.
3
Less than 0.01%
4
The portfolio turnover rate is calculated on the Fund as a whole without
distinguishing between classes of shares issued.
|
|
|
|
|
|
|
66 |
|
matthewsasia.com | 800.789.ASIA |
|
|
|
|
Matthews
Pacific Tiger Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
Net
Asset Value, beginning of year |
|
|
$34.90 |
|
|
|
$28.71 |
|
|
|
$26.83 |
|
|
|
$31.63 |
|
|
|
$22.90 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)1 |
|
|
0.11 |
|
|
|
0.13 |
|
|
|
0.23 |
|
|
|
0.28 |
|
|
|
0.22 |
|
Net
realized gain (loss) and unrealized appreciation/depreciation
on investments, foreign currency related transactions and
foreign capital gains taxes |
|
|
(1.60) |
|
|
|
8.11 |
|
|
|
2.68 |
|
|
|
(3.74) |
|
|
|
8.95 |
|
Total
from investment operations |
|
|
(1.49) |
|
|
|
8.24 |
|
|
|
2.91 |
|
|
|
(3.46) |
|
|
|
9.17 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.05) |
|
|
|
(0.13) |
|
|
|
(0.19) |
|
|
|
(0.26) |
|
|
|
(0.22) |
|
Net
realized gains on investments |
|
|
(5.86) |
|
|
|
(1.92) |
|
|
|
(0.84) |
|
|
|
(1.08) |
|
|
|
(0.22) |
|
Total
distributions |
|
|
(5.91) |
|
|
|
(2.05) |
|
|
|
(1.03) |
|
|
|
(1.34) |
|
|
|
(0.44) |
|
Paid‑in
capital from redemption fees |
|
|
— |
|
|
|
— |
|
|
|
— |
2 |
|
|
— |
|
|
|
— |
2 |
Net
Asset Value, end of year |
|
|
$27.50 |
|
|
|
$34.90 |
|
|
|
$28.71 |
|
|
|
$26.83 |
|
|
|
$31.63 |
|
Total
return* |
|
|
(4.29%) |
|
|
|
28.98% |
|
|
|
10.90% |
|
|
|
(10.94%) |
|
|
|
40.17% |
|
|
*The total return represents
the rate that an investor would have earned (or lost) on an investment in
the Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of year (in 000s) |
|
|
$5,357,198 |
|
|
|
$6,172,995 |
|
|
|
$6,189,015 |
|
|
|
$5,689,079 |
|
|
|
$6,389,242 |
|
Ratio
of expenses to average net assets before any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
0.92% |
|
|
|
0.94% |
|
|
|
0.93% |
|
|
|
0.90% |
|
|
|
0.91% |
|
Ratio
of expenses to average net assets after any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
0.90% |
|
|
|
0.92% |
|
|
|
0.91% |
|
|
|
0.88% |
|
|
|
0.89% |
|
Ratio
of net investment income (loss) to average net assets |
|
|
0.30% |
|
|
|
0.46% |
|
|
|
0.80% |
|
|
|
0.95% |
|
|
|
0.80% |
|
Portfolio
turnover3 |
|
|
46.64% |
|
|
|
38.11% |
|
|
|
17.08% |
|
|
|
11.48% |
|
|
|
9.18% |
|
1
Calculated using the average daily shares method.
2
Less than $0.01 per share.
3
The portfolio turnover rate is calculated on the Fund as a whole without
distinguishing between classes of shares issued.
Matthews
Asia ESG Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
Net
Asset Value, beginning of year |
|
|
$14.92 |
|
|
|
$11.06 |
|
|
|
$9.96 |
|
|
|
$11.50 |
|
|
|
$8.92 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)1 |
|
|
(0.04) |
|
|
|
0.01 |
|
|
|
0.06 |
|
|
|
0.06 |
|
|
|
0.08 |
|
Net
realized gain (loss) and unrealized appreciation/depreciation
on investments, foreign currency related transactions and
foreign capital gains taxes |
|
|
1.85 |
|
|
|
4.72 |
|
|
|
1.21 |
|
|
|
(1.16) |
|
|
|
2.95 |
|
Total
from investment operations |
|
|
1.81 |
|
|
|
4.73 |
|
|
|
1.27 |
|
|
|
(1.10) |
|
|
|
3.03 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
— |
|
|
|
(0.03) |
|
|
|
(0.05) |
|
|
|
(0.01) |
|
|
|
(0.29) |
|
Net
realized gains on investments |
|
|
(1.35) |
|
|
|
(0.84) |
|
|
|
(0.12) |
|
|
|
(0.43) |
|
|
|
(0.16) |
|
Total
distributions |
|
|
(1.35) |
|
|
|
(0.87) |
|
|
|
(0.17) |
|
|
|
(0.44) |
|
|
|
(0.45) |
|
Net
Asset Value, end of year |
|
|
$15.38 |
|
|
|
$14.92 |
|
|
|
$11.06 |
|
|
|
$9.96 |
|
|
|
$11.50 |
|
Total
return* |
|
|
11.98% |
|
|
|
43.13% |
|
|
|
12.74% |
|
|
|
(9.52%) |
|
|
|
34.11% |
|
|
*The total return represents
the rate that an investor would have earned (or lost) on an investment in
the Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of year (in 000s) |
|
|
$87,241 |
|
|
|
$50,642 |
|
|
|
$36,008 |
|
|
|
$23,249 |
|
|
|
$7,359 |
|
Ratio
of expenses to average net assets before any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
1.07% |
|
|
|
1.29% |
|
|
|
1.41% |
|
|
|
2.01% |
|
|
|
2.46% |
|
Ratio
of expenses to average net assets after any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
1.20% |
|
|
|
1.20% |
|
|
|
1.24% |
|
|
|
1.25% |
|
|
|
1.25% |
|
Ratio
of net investment income (loss) to average net assets |
|
|
(0.25%) |
|
|
|
0.09% |
|
|
|
0.54% |
|
|
|
0.55% |
|
|
|
0.71% |
|
Portfolio
turnover2 |
|
|
65.56% |
|
|
|
84.60% |
|
|
|
29.67% |
|
|
|
22.93% |
|
|
|
28.82% |
|
1
Calculated using the average daily shares method.
2
The portfolio turnover rate is calculated on the Fund as a whole without
distinguishing between classes of shares issued.
|
|
|
|
|
|
|
68 |
|
matthewsasia.com | 800.789.ASIA |
|
|
|
|
Matthews
Asia Innovators Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
Net
Asset Value, beginning of year |
|
|
$26.91 |
|
|
|
$14.64 |
|
|
|
$11.32 |
|
|
|
$14.26 |
|
|
|
$10.14 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)1 |
|
|
(0.11) |
|
|
|
(0.09) |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.01 |
|
Net
realized gain (loss) and unrealized appreciation/depreciation
on investments, foreign currency related transactions and
foreign capital gains taxes |
|
|
(3.38) |
|
|
|
12.81 |
|
|
|
3.35 |
|
|
|
(2.62) |
|
|
|
5.33 |
|
Total
from investment operations |
|
|
(3.49) |
|
|
|
12.72 |
|
|
|
3.36 |
|
|
|
(2.61) |
|
|
|
5.34 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.07) |
|
|
|
(0.26) |
|
Net
realized gains on investments |
|
|
(4.34) |
|
|
|
(0.45) |
|
|
|
(0.04) |
|
|
|
(0.26) |
|
|
|
(0.96) |
|
Total
distributions |
|
|
(4.34) |
|
|
|
(0.45) |
|
|
|
(0.04) |
|
|
|
(0.33) |
|
|
|
(1.22) |
|
Net
Asset Value, end of year |
|
|
$19.08 |
|
|
|
$26.91 |
|
|
|
$14.64 |
|
|
|
$11.32 |
|
|
|
$14.26 |
|
Total
return* |
|
|
(12.97%) |
|
|
|
87.01% |
|
|
|
29.71% |
|
|
|
(18.40%) |
|
|
|
53.18% |
|
|
*The total return represents
the rate that an investor would have earned (or lost) on an investment in
the Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of year (in 000s) |
|
|
$930,562 |
|
|
|
$1,094,356 |
|
|
|
$126,911 |
|
|
|
$91,769 |
|
|
|
$30,957 |
|
Ratio
of expenses to average net assets |
|
|
0.93% |
|
|
|
0.95% |
|
|
|
1.05% |
|
|
|
1.02% |
|
|
|
1.05% |
|
Ratio
of net investment income (loss) to average net assets |
|
|
(0.43%) |
|
|
|
(0.44%) |
|
|
|
0.10% |
|
|
|
0.07% |
|
|
|
0.06% |
|
Portfolio
turnover2 |
|
|
220.45% |
|
|
|
119.81% |
|
|
|
80.10% |
|
|
|
85.73% |
|
|
|
66.51% |
|
1
Calculated using the average daily shares method.
2
The portfolio turnover rate is calculated on the Fund as a whole without
distinguishing between classes of shares issued.
Matthews
China Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
Net
Asset Value, beginning of year |
|
|
$26.94 |
|
|
|
$19.08 |
|
|
|
$14.33 |
|
|
|
$22.17 |
|
|
|
$15.44 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)1 |
|
|
0.10 |
|
|
|
0.09 |
|
|
|
0.20 |
|
|
|
0.33 |
|
|
|
0.21 |
|
Net
realized gain (loss) and unrealized appreciation/depreciation
on investments and foreign currency related transactions |
|
|
(3.26) |
|
|
|
8.15 |
|
|
|
4.80 |
|
|
|
(4.93) |
|
|
|
8.84 |
|
Total
from investment operations |
|
|
(3.16) |
|
|
|
8.24 |
|
|
|
5.00 |
|
|
|
(4.60) |
|
|
|
9.05 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.10) |
|
|
|
(0.10) |
|
|
|
(0.25) |
|
|
|
(0.33) |
|
|
|
(0.40) |
|
Net
realized gains on investments |
|
|
(3.15) |
|
|
|
(0.28) |
|
|
|
— |
|
|
|
(2.91) |
|
|
|
(1.92) |
|
Total
distributions |
|
|
(3.25) |
|
|
|
(0.38) |
|
|
|
(0.25) |
|
|
|
(3.24) |
|
|
|
(2.32) |
|
Net
Asset Value, end of year |
|
|
$20.53 |
|
|
|
$26.94 |
|
|
|
$19.08 |
|
|
|
$14.33 |
|
|
|
$22.17 |
|
Total
return* |
|
|
(12.07%) |
|
|
|
43.23% |
|
|
|
34.90% |
|
|
|
(21.32%) |
|
|
|
59.71% |
|
|
*The total return represents
the rate that an investor would have earned (or lost) on an investment in
the Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of year (in 000s) |
|
|
$630,966 |
|
|
|
$546,157 |
|
|
|
$183,762 |
|
|
|
$46,657 |
|
|
|
$61,975 |
|
Ratio
of expenses to average net assets |
|
|
0.91% |
|
|
|
0.93% |
|
|
|
0.91% |
|
|
|
0.91% |
|
|
|
0.93% |
|
Ratio
of net investment income (loss) to average net assets |
|
|
0.38% |
|
|
|
0.40% |
|
|
|
1.17% |
|
|
|
1.53% |
|
|
|
0.99% |
|
Portfolio
turnover2 |
|
|
92.28% |
|
|
|
52.64% |
|
|
|
68.93% |
|
|
|
96.98% |
|
|
|
78.74% |
|
1
Calculated using the average daily shares method.
2
The portfolio turnover rate is calculated on the Fund as a whole without
distinguishing between classes of shares issued.
|
|
|
|
|
|
|
70 |
|
matthewsasia.com | 800.789.ASIA |
|
|
|
|
Matthews
China Small Companies Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, |
|
|
Period Ended
Dec. 31, 20171 |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
Net
Asset Value, beginning of period |
|
|
$19.90 |
|
|
|
$12.86 |
|
|
|
$9.59 |
|
|
|
$11.87 |
|
|
|
$11.90 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)2 |
|
|
0.13 |
|
|
|
0.04 |
|
|
|
0.15 |
|
|
|
0.11 |
|
|
|
(0.01) |
|
Net
realized gain (loss) and unrealized appreciation/depreciation
on investments and foreign currency related transactions |
|
|
(0.80) |
|
|
|
10.42 |
|
|
|
3.26 |
|
|
|
(2.21) |
|
|
|
0.67 |
|
Total
from investment operations |
|
|
(0.67) |
|
|
|
10.46 |
|
|
|
3.41 |
|
|
|
(2.10) |
|
|
|
0.66 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.17) |
|
|
|
(0.18) |
|
|
|
(0.15) |
|
|
|
(0.05) |
|
|
|
(0.13) |
|
Net
realized gain on investments |
|
|
(2.59) |
|
|
|
(3.24) |
|
|
|
— |
|
|
|
(0.16) |
|
|
|
(0.56) |
|
Total
distributions |
|
|
(2.76) |
|
|
|
(3.42) |
|
|
|
(0.15) |
|
|
|
(0.21) |
|
|
|
(0.69) |
|
Paid‑in
capital from redemption fees |
|
|
— |
|
|
|
— |
|
|
|
0.01 |
3 |
|
|
0.03 |
|
|
|
— |
|
Net
Asset Value, end of period |
|
|
$16.47 |
|
|
|
$19.90 |
|
|
|
$12.86 |
|
|
|
$9.59 |
|
|
|
$11.87 |
|
Total
return* |
|
|
(3.35%) |
|
|
|
82.89% |
|
|
|
35.68% |
|
|
|
(17.48%) |
|
|
|
6.19% |
4 |
|
*The total return represents
the rate that an investor would have earned (or lost) on an investment in
the Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of period (in 000s) |
|
|
$162,770 |
|
|
|
$98,052 |
|
|
|
$32,376 |
|
|
|
$20,740 |
|
|
|
$476 |
|
Ratio
of expenses to average net assets before any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
1.31% |
|
|
|
1.37% |
|
|
|
1.51% |
|
|
|
1.79% |
|
|
|
2.09% |
5 |
Ratio
of expenses to average net assets after any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
1.20% |
|
|
|
1.20% |
|
|
|
1.24% |
|
|
|
1.25% |
|
|
|
1.25% |
5 |
Ratios
of net investment income (loss) to average net assets |
|
|
0.63% |
|
|
|
0.20% |
|
|
|
1.34% |
|
|
|
1.05% |
|
|
|
(1.20%) |
5 |
Portfolio
turnover6 |
|
|
119.65% |
|
|
|
152.86% |
|
|
|
68.17% |
|
|
|
76.67% |
|
|
|
67.22% |
4 |
1
Institutional Class commenced operations on November 30, 2017.
2
Calculated using the average daily shares method.
3
The Fund charged redemption fees through October 31, 2019.
4
Not annualized.
5
Annualized.
6
The portfolio turnover rate is calculated on the Fund as a whole without
distinguishing between classes of shares issued.
Matthews
India Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
Net
Asset Value, beginning of year |
|
|
$26.65 |
|
|
|
$23.55 |
|
|
|
$26.56 |
|
|
|
$34.51 |
|
|
|
$25.77 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)1 |
|
|
(0.06) |
|
|
|
0.05 |
|
|
|
0.02 |
|
|
|
0.01 |
|
|
|
(0.03) |
|
Net
realized gain (loss) and unrealized appreciation/depreciation
on investments, foreign currency related transactions and
foreign capital gains taxes |
|
|
4.87 |
|
|
|
3.85 |
|
|
|
(0.23) |
|
|
|
(3.62) |
|
|
|
9.29 |
|
Total
from investment operations |
|
|
4.81 |
|
|
|
3.90 |
|
|
|
(0.21) |
|
|
|
(3.61) |
|
|
|
9.26 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.03) |
|
Net
realized gains on investments |
|
|
(2.82) |
|
|
|
(0.80) |
|
|
|
(2.80) |
|
|
|
(4.34) |
|
|
|
(0.49) |
|
Total
distributions |
|
|
(2.82) |
|
|
|
(0.80) |
|
|
|
(2.80) |
|
|
|
(4.34) |
|
|
|
(0.52) |
|
Net
Asset Value, end of year |
|
|
$28.64 |
|
|
|
$26.65 |
|
|
|
$23.55 |
|
|
|
$26.56 |
|
|
|
$34.51 |
|
Total
return* |
|
|
18.28% |
|
|
|
16.65% |
|
|
|
(0.76%) |
|
|
|
(9.92%) |
|
|
|
36.05% |
|
|
*The total return represents
the rate that an investor would have earned (or lost) on an investment in
the Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of year (in 000s) |
|
|
$128,708 |
|
|
|
$90,053 |
|
|
|
$177,526 |
|
|
|
$463,790 |
|
|
|
$788,388 |
|
Ratio
of expenses to average net assets |
|
|
0.96% |
|
|
|
1.03% |
|
|
|
0.94% |
|
|
|
0.90% |
|
|
|
0.89% |
|
Ratio
of net investment income (loss) to average net assets |
|
|
(0.19%) |
|
|
|
0.24% |
|
|
|
0.09% |
|
|
|
0.02% |
|
|
|
(0.08%) |
|
Portfolio
turnover2 |
|
|
42.50% |
|
|
|
57.38% |
|
|
|
24.00% |
|
|
|
20.87% |
|
|
|
16.81% |
|
1
Calculated using the average daily shares method.
2
The portfolio turnover rate is calculated on the Fund as a whole without
distinguishing between classes of shares issued.
|
|
|
|
|
|
|
72 |
|
matthewsasia.com | 800.789.ASIA |
|
|
|
|
Matthews
Japan Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
Net
Asset Value, beginning of year |
|
|
$25.32 |
|
|
|
$21.55 |
|
|
|
$18.57 |
|
|
|
$24.16 |
|
|
|
$18.86 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)1 |
|
|
0.05 |
|
|
|
0.05 |
|
|
|
0.11 |
|
|
|
0.11 |
|
|
|
0.10 |
|
Net
realized gain (loss) and unrealized appreciation/depreciation
on investments and foreign currency related transactions |
|
|
(0.46) |
|
|
|
6.29 |
|
|
|
4.74 |
|
|
|
(4.91) |
|
|
|
6.14 |
|
Total
from investment operations |
|
|
(0.41) |
|
|
|
6.34 |
|
|
|
4.85 |
|
|
|
(4.80) |
|
|
|
6.24 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.27) |
|
|
|
(0.14) |
|
|
|
(0.13) |
|
|
|
(0.08) |
|
|
|
(0.21) |
|
Net
realized gains on investments |
|
|
(2.51) |
|
|
|
(2.43) |
|
|
|
(1.74) |
|
|
|
(0.71) |
|
|
|
(0.73) |
|
Total
distributions |
|
|
(2.78) |
|
|
|
(2.57) |
|
|
|
(1.87) |
|
|
|
(0.79) |
|
|
|
(0.94) |
|
Net
Asset Value, end of year |
|
|
$22.13 |
|
|
|
$25.32 |
|
|
|
$21.55 |
|
|
|
$18.57 |
|
|
|
$24.16 |
|
Total
return* |
|
|
(1.83%) |
|
|
|
29.85% |
|
|
|
26.10% |
|
|
|
(20.08%) |
|
|
|
33.23% |
|
|
*The total return represents
the rate that an investor would have earned (or lost) on an investment in
the Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of year (in 000s) |
|
|
$1,170,380 |
|
|
|
$548,968 |
|
|
|
$840,476 |
|
|
|
$1,167,472 |
|
|
|
$1,957,214 |
|
Ratio
of expenses to average net assets before any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
0.89% |
|
|
|
0.91% |
|
|
|
0.88% |
|
|
|
0.85% |
|
|
|
0.87% |
|
Ratio
of expenses to average net assets after any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
0.89% |
|
|
|
0.91% |
|
|
|
0.88% |
|
|
|
0.84% |
|
|
|
0.86% |
|
Ratio
of net investment income (loss) to average net assets |
|
|
0.22% |
|
|
|
0.25% |
|
|
|
0.53% |
|
|
|
0.46% |
|
|
|
0.46% |
|
Portfolio
turnover2 |
|
|
70.30% |
|
|
|
62.03% |
|
|
|
25.42% |
|
|
|
46.11% |
|
|
|
44.34% |
|
1
Calculated using the average daily shares method.
2
The portfolio turnover rate is calculated on the Fund as a whole without
distinguishing between classes of shares issued.
Matthews
Korea Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
Net
Asset Value, beginning of year |
|
|
$6.17 |
|
|
|
$4.42 |
|
|
|
$4.61 |
|
|
|
$6.95 |
|
|
|
$5.27 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)1 |
|
|
0.06 |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.04 |
|
|
|
0.10 |
|
Net
realized gain (loss) and unrealized appreciation/depreciation
on investments and
foreign currency related transactions |
|
|
(0.07) |
|
|
|
1.79 |
|
|
|
0.17 |
|
|
|
(1.60) |
|
|
|
2.21 |
|
Total
from investment operations |
|
|
(0.01) |
|
|
|
1.80 |
|
|
|
0.18 |
|
|
|
(1.56) |
|
|
|
2.31 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.11) |
|
|
|
(0.05) |
|
|
|
— |
|
|
|
(0.13) |
|
|
|
(0.30) |
|
Net
realized gains on investments |
|
|
(0.30) |
|
|
|
— |
|
|
|
(0.37) |
|
|
|
(0.65) |
|
|
|
(0.33) |
|
Total
distributions |
|
|
(0.41) |
|
|
|
(0.05) |
|
|
|
(0.37) |
|
|
|
(0.78) |
|
|
|
(0.63) |
|
Net
Asset Value, end of year |
|
|
$5.75 |
|
|
|
$6.17 |
|
|
|
$4.42 |
|
|
|
$4.61 |
|
|
|
$6.95 |
|
Total
return* |
|
|
(0.16%) |
|
|
|
40.76% |
|
|
|
4.01% |
|
|
|
(22.15%) |
|
|
|
44.11% |
|
|
*The total return represents
the rate that an investor would have earned (or lost) on an investment in
the Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of year (in 000s) |
|
|
$14,998 |
|
|
|
$12,192 |
|
|
|
$23,426 |
|
|
|
$19,377 |
|
|
|
$32,587 |
|
Ratio
of expenses to average net assets |
|
|
0.98% |
|
|
|
1.05% |
|
|
|
1.05% |
|
|
|
1.02% |
|
|
|
1.01% |
|
Ratio
of net investment income (loss) to average net assets |
|
|
0.93% |
|
|
|
0.28% |
|
|
|
0.29% |
|
|
|
0.67% |
|
|
|
1.51% |
|
Portfolio
turnover2 |
|
|
40.18% |
|
|
|
39.62% |
|
|
|
36.63% |
|
|
|
35.60% |
|
|
|
25.37% |
|
1
Calculated using the average daily shares method.
2
The portfolio turnover rate is calculated on the Fund as a whole without
distinguishing between classes of shares issued.
|
|
|
|
|
|
|
74 |
|
matthewsasia.com | 800.789.ASIA |
|
|
|
|
Matthews
Asian Growth and Income Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
Net
Asset Value, beginning of year |
|
|
$18.02 |
|
|
|
$15.70 |
|
|
|
$13.89 |
|
|
|
$17.43 |
|
|
|
$14.92 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)1 |
|
|
0.20 |
|
|
|
0.23 |
|
|
|
0.27 |
|
|
|
0.35 |
|
|
|
0.36 |
|
Net
realized gain (loss) and unrealized appreciation/depreciation on
investments, foreign currency related transactions and foreign capital
gains taxes |
|
|
(0.17) |
|
|
|
2.27 |
|
|
|
2.14 |
|
|
|
(2.20) |
|
|
|
2.91 |
|
Total
from investment operations |
|
|
0.03 |
|
|
|
2.50 |
|
|
|
2.41 |
|
|
|
(1.85) |
|
|
|
3.27 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.23) |
|
|
|
(0.18) |
|
|
|
(0.38) |
|
|
|
(0.35) |
|
|
|
(0.49) |
|
Net
realized gains on investments |
|
|
(1.78) |
|
|
|
— |
2 |
|
|
(0.22) |
|
|
|
(1.34) |
|
|
|
(0.27) |
|
Total
distributions |
|
|
(2.01) |
|
|
|
(0.18) |
|
|
|
(0.60) |
|
|
|
(1.69) |
|
|
|
(0.76) |
|
Paid‑in
capital from redemption fees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
2 |
Net
Asset Value, end of year |
|
|
$16.04 |
|
|
|
$18.02 |
|
|
|
$15.70 |
|
|
|
$13.89 |
|
|
|
$17.43 |
|
Total
return* |
|
|
0.18% |
|
|
|
16.18% |
|
|
|
17.46% |
|
|
|
(10.84%) |
|
|
|
22.00% |
|
|
*The total return represents
the rate that an investor would have earned (or lost) on an investment in
the Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of year (in 000s) |
|
|
$551,740 |
|
|
|
$822,179 |
|
|
|
$743,951 |
|
|
|
$596,364 |
|
|
|
$1,310,168 |
|
Ratio
of expenses to average net assets before any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
0.94% |
|
|
|
0.96% |
|
|
|
0.94% |
|
|
|
0.93% |
|
|
|
0.93% |
|
Ratio
of net investment income (loss) to average net assets |
|
|
1.10% |
|
|
|
1.51% |
|
|
|
1.80% |
|
|
|
2.14% |
|
|
|
2.16% |
|
Portfolio
turnover3 |
|
|
37.85% |
|
|
|
36.27% |
|
|
|
21.89% |
|
|
|
32.24% |
|
|
|
23.23% |
|
1
Calculated using the average daily shares method.
2
Less than $0.01 per share.
3
The portfolio turnover rate is calculated on the Fund as a whole without
distinguishing between classes of shares issued.
Matthews
Asia Dividend Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
Net
Asset Value, beginning of year |
|
|
$22.62 |
|
|
|
$17.47 |
|
|
|
$16.04 |
|
|
|
$19.73 |
|
|
|
$15.52 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)1 |
|
|
0.21 |
|
|
|
0.16 |
|
|
|
0.30 |
|
|
|
0.39 |
|
|
|
0.33 |
|
Net
realized gain (loss) and unrealized appreciation/depreciation on
investments, foreign currency related transactions and
foreign capital gains taxes |
|
|
(0.80) |
|
|
|
5.22 |
|
|
|
1.50 |
|
|
|
(2.83) |
|
|
|
5.01 |
|
Total
from investment operations |
|
|
(0.59) |
|
|
|
5.38 |
|
|
|
1.80 |
|
|
|
(2.44) |
|
|
|
5.34 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.22) |
|
|
|
(0.23) |
|
|
|
(0.37) |
|
|
|
(0.33) |
|
|
|
(0.71) |
|
Net
realized gains on investments |
|
|
(2.87) |
|
|
|
— |
|
|
|
— |
|
|
|
(0.92) |
|
|
|
(0.42) |
|
Total
distributions |
|
|
(3.09) |
|
|
|
(0.23) |
|
|
|
(0.37) |
|
|
|
(1.25) |
|
|
|
(1.13) |
|
Paid‑in
capital from redemption fees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
2 |
Net
Asset Value, end of year |
|
|
$18.94 |
|
|
|
$22.62 |
|
|
|
$17.47 |
|
|
|
$16.04 |
|
|
|
$19.73 |
|
Total
return* |
|
|
(2.67%) |
|
|
|
31.29% |
|
|
|
11.35% |
|
|
|
(12.64%) |
|
|
|
34.77% |
|
|
*The total return represents
the rate that an investor would have earned (or lost) on an investment in
the Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of year (in 000s) |
|
|
$3,154,407 |
|
|
|
$2,908,674 |
|
|
|
$3,057,896 |
|
|
|
$3,039,226 |
|
|
|
$3,284,070 |
|
Ratio
of expenses to average net assets before any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
0.92% |
|
|
|
0.93% |
|
|
|
0.93% |
|
|
|
0.91% |
|
|
|
0.92% |
|
Ratio
of expenses to average net assets after any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
0.91% |
|
|
|
0.93% |
|
|
|
0.92% |
|
|
|
0.90% |
|
|
|
0.91% |
|
Ratio
of net investment income (loss) to average net assets |
|
|
0.93% |
|
|
|
0.91% |
|
|
|
1.80% |
|
|
|
2.09% |
|
|
|
1.81% |
|
Portfolio
turnover3 |
|
|
47.41% |
|
|
|
37.73% |
|
|
|
30.32% |
|
|
|
39.75% |
|
|
|
28.11% |
|
1
Calculated using the average daily shares method.
2
Less than $0.01 per share.
3
The portfolio turnover rate is calculated on the Fund as a whole without
distinguishing between classes of shares issued.
|
|
|
|
|
|
|
76 |
|
matthewsasia.com | 800.789.ASIA |
|
|
|
|
Matthews
China Dividend Fund
The
table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec. 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
Net
Asset Value, beginning of year |
|
|
$19.64 |
|
|
|
$16.20 |
|
|
|
$14.32 |
|
|
|
$17.61 |
|
|
|
$14.09 |
|
Income (loss) from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)1 |
|
|
0.53 |
|
|
|
0.31 |
|
|
|
0.35 |
|
|
|
0.42 |
|
|
|
0.37 |
|
Net
realized gain (loss) and unrealized appreciation/depreciation
on investments and foreign currency related transactions |
|
|
(0.58) |
|
|
|
3.55 |
|
|
|
1.81 |
|
|
|
(2.07) |
|
|
|
4.85 |
|
Total
from investment operations |
|
|
(0.05) |
|
|
|
3.86 |
|
|
|
2.16 |
|
|
|
(1.65) |
|
|
|
5.22 |
|
Less distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.52) |
|
|
|
(0.42) |
|
|
|
(0.28) |
|
|
|
(0.43) |
|
|
|
(0.51) |
|
Net
realized gains on investments |
|
|
(1.35) |
|
|
|
— |
|
|
|
— |
|
|
|
(1.21) |
|
|
|
(1.19) |
|
Total
distributions |
|
|
(1.87) |
|
|
|
(0.42) |
|
|
|
(0.28) |
|
|
|
(1.64) |
|
|
|
(1.70) |
|
Net
Asset Value, end of year |
|
|
$17.72 |
|
|
|
$19.64 |
|
|
|
$16.20 |
|
|
|
$14.32 |
|
|
|
$17.61 |
|
Total
return* |
|
|
(0.38%) |
|
|
|
24.37% |
|
|
|
15.16% |
|
|
|
(9.83%) |
|
|
|
37.88% |
|
|
*The total return represents
the rate that an investor would have earned (or lost) on an investment in
the Fund assuming reinvestment of all dividends and distributions. |
|
|
RATIOS/SUPPLEMENTAL DATA |
|
Net
assets, end of year (in 000s) |
|
|
$131,395 |
|
|
|
$115,451 |
|
|
|
$122,630 |
|
|
|
$73,033 |
|
|
|
$54,147 |
|
Ratio
of expenses to average net assets before any reimbursement, waiver or
recapture of expenses by Advisor and Administrator |
|
|
0.97% |
|
|
|
1.02% |
|
|
|
1.01% |
|
|
|
1.01% |
|
|
|
1.04% |
|
Ratio
of net investment income (loss) to average net assets |
|
|
2.65% |
|
|
|
1.85% |
|
|
|
2.25% |
|
|
|
2.44% |
|
|
|
2.25% |
|
Portfolio
turnover2 |
|
|
68.25% |
|
|
|
81.79% |
|
|
|
65.69% |
|
|
|
66.47% |
|
|
|
69.14% |
|
1
Calculated using the average daily shares method.
2
The portfolio turnover rate is calculated on the Fund as a whole without
distinguishing between classes of shares issued.
Matthews has long-term
investment goals, and its process aims to identify potential portfolio
investments that can be held over an indefinite time horizon.
Investment
Objectives of the Funds
Matthews
Asia Funds (the “Trust” or “Matthews Asia Funds”) offers a range of global,
regional and country-specific funds (each a “Fund,” and collectively, the
“Funds”) with the following objectives:
|
|
|
GLOBAL EMERGING MARKETS
STRATEGIES |
|
|
|
|
Matthews
Emerging Markets Equity Fund |
|
Long-term
capital appreciation |
|
|
Matthews Emerging Markets Small Companies
Fund |
|
Long-term capital appreciation |
|
|
ASIA GROWTH STRATEGIES |
|
|
|
|
Matthews Asia
Growth Fund |
|
Long-term
capital appreciation |
|
|
Matthews
Pacific Tiger Fund |
|
Long-term
capital appreciation |
|
|
Matthews Asia
ESG Fund |
|
Long-term
capital appreciation |
|
|
Matthews Asia
Innovators Fund |
|
Long-term
capital appreciation |
|
|
Matthews China
Fund |
|
Long-term
capital appreciation |
|
|
Matthews China
Small Companies Fund |
|
Long-term
capital appreciation |
|
|
Matthews India
Fund |
|
Long-term
capital appreciation |
|
|
Matthews Japan
Fund |
|
Long-term
capital appreciation |
|
|
Matthews Korea Fund |
|
Long-term capital appreciation |
|
|
ASIA GROWTH AND INCOME
STRATEGIES |
|
|
|
|
Matthews Asian
Growth and Income Fund |
|
Long-term
capital appreciation with some current income |
|
|
Matthews Asia
Dividend Fund |
|
Total
return with an emphasis on providing current income |
|
|
Matthews China
Dividend Fund |
|
Total
return with an emphasis on providing current income |
Fundamental
Investment Policies
The
investment objective of each Fund is fundamental. This means that it cannot be
changed without a vote of a majority of the voting securities of each respective
Fund.
The
manner in which Matthews International Capital Management, LLC, the investment
advisor to each Fund (“Matthews”), attempts to achieve each Fund’s investment
objective is not fundamental and may be changed without shareholder approval.
While an investment policy or restriction may be changed by the Board of
Trustees of the Trust (the “Board” or “Board of Trustees”) (which oversees the
management of the Funds) without shareholder approval, you will be notified
before we make any material change.
Matthews’
Investment Approach
Principal Investment
Strategies
The
principal investment strategies for each Fund are described in the Fund Summary
for each Fund.
In
seeking to achieve the investment objectives for the Funds, Matthews also
employs the investment approach and other principal investment strategies as
described below.
Matthews
invests primarily in the Asia Pacific region (as defined on page 74) for those
Funds and other advisory clients with such an investment focus based on its
assessment of the future development and growth prospects of companies located
in the markets of that region. In addition to the Asia Pacific focus for those
Funds and clients, Matthews
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also
invests broadly in emerging countries and markets outside the Asia Pacific
region on behalf of the Matthews Emerging Markets Equity Fund and the Matthews
Emerging Markets Small Companies Fund. Matthews believes that the countries in
these markets are on paths toward economic development and, in general,
deregulation and greater openness to market forces. Matthews believes in the
potential for these economies, and that the intersection of development and
deregulation will give rise to new opportunities for further growth. Matthews
attempts to capitalize on its beliefs by investing in companies it considers to
be well-positioned to participate in the economic evolution of these markets.
Matthews uses a range of approaches to participate in the anticipated growth of
Asian and other foreign markets to suit clients’ differing needs and investment
objectives.
Matthews
researches the fundamental characteristics of individual companies to help to
understand the foundation of a company’s long-term growth, and to assess whether
it is generally consistent with Matthews’ expectations for the economic
evolution of the countries and markets in which the Funds invest. Matthews
evaluates potential portfolio holdings on the basis of their individual merits,
and invests in those companies that it believes are positioned to help a Fund
achieve its investment objective.
Matthews
has long-term investment goals, and its process aims to identify potential
portfolio investments that can be held over an indefinite time horizon. Matthews
regularly tests its beliefs and adjusts portfolio holdings in light of
prevailing market conditions and other factors, including, among other things,
economic, political or market events (e.g., changes in credit conditions or military
action), changes in relative valuation (of a company’s growth prospects relative
to other issuers), liquidity requirements and corporate governance.
Matthews
Seeks to Invest in the Long-Term Growth Potential of Asian and Other Foreign
Markets
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Matthews believes that
the countries in which the Funds invest will continue to benefit from
economic development over longer investment horizons. |
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Matthews seeks to invest
in those companies that it believes will benefit from the long-term
economic evolution of Asian and other foreign markets, and that will help
each Fund achieve its investment objective. |
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Matthews generally does
not hedge currency risks. |
Matthews
and the Funds Believe in Investing for the Long Term
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Matthews constructs
portfolios with long investment horizons—typically five years or
longer. |
Matthews
Is an Active Investor with Strong Convictions
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Matthews uses an active
approach to investment management (rather than relying on passive or index
strategies) because it believes that the current composition of the stock
markets and indices may not be the best guide to the most successful
industries and companies of the future. |
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Matthews invests in
individual companies based on fundamental analysis that aims to develop an
understanding of a company’s long-term business
prospects. |
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Matthews monitors the
composition of benchmark indices but is not constrained by their
composition or weightings, and constructs portfolios independently of
indices. |
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Matthews believes that
investors benefit in the long term when the Funds are fully invested,
subject to market conditions and a Fund’s particular investment
objective. |
Matthews
Is a Fundamental Investor
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Matthews believes that
fundamental investing is based on identifying, analyzing and understanding
basic information about a company or security. These factors may include
matters such as balance sheet information; number of employees; size and
stability of cash flow; management’s depth, adaptability and integrity;
product lines; marketing strategies; corporate governance; and financial
health. |
THE ASIA PACIFIC
REGION IS DIVIDED INTO THE FOLLOWING GROUPS:
ASIA
Consists
of all countries and markets in Asia, including developed, emerging, and
frontier countries and markets in the Asian region
ASIA
EX JAPAN
Includes
all countries and markets in Asia excluding Japan
ASIA
PACIFIC
Includes
all countries and markets in Asia plus all countries and markets in the Pacific
region, including Australia and New Zealand
EMERGING MARKET COUNTRIES
INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING:
AMERICAS
Argentina,
Brazil, Chile, Colombia, Mexico and Peru
AFRICA
Egypt,
Kenya, Nigeria and South Africa
ASIA
Bangladesh,
China, India, Indonesia, Malaysia, Philippines, Pakistan, South Korea, Sri
Lanka, Taiwan, Thailand and Vietnam
EUROPE
Czech
Republic, Greece, Hungary, Poland, Romania, Russia and Turkey
MIDDLE
EAST
Kuwait,
Qatar, Saudi Arabia and the United Arab Emirates
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MATTHEWS’ INVESTMENT APPROACH |
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Matthews
may also consider factors such as: |
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Management: Does management exhibit
integrity? Is there a strong corporate governance culture? What is the
business strategy? Does management exhibit the ability to adapt to change
and handle risk appropriately? |
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Evolution of Industry: Can company
growth be sustained as the industry and environment
evolve? |
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Following
this fundamental analysis, Matthews seeks to invest in companies and
securities that it believes are positioned to help a Fund achieve its
investment objective. |
Matthews
Focuses on Individual Companies
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Matthews
develops views about the course of growth in the region over the long
term. |
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Matthews
then seeks to combine these beliefs with its analysis of individual
companies and their fundamental characteristics. |
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Matthews
then seeks to invest in companies and securities that it believes are
positioned to help a Fund achieve its investment
objective. |
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Each
of the Funds may invest in companies of any equity market capitalization
(the number of shares outstanding times the market price per share).
Except with respect to the Matthews Emerging Markets Small Companies Fund
and the Matthews China Small Companies Fund, a company’s size (including
its market capitalization) is not a primary consideration for Matthews
when it decides whether to include that company’s securities in one or
more of the Funds. Please note the Matthews Emerging Markets Small
Companies Fund and the Matthews China Small Companies Fund invest at least
80% of their assets in Small Companies, as defined in each respective Fund
Summary. |
Non‑Principal Investment
Strategies
In
extreme market conditions, Matthews may sell some or all of a Fund’s securities
and temporarily invest that Fund’s money in U.S. government securities or
money-market instruments backed by U.S. government securities, if it believes it
is in the best interest of Fund shareholders to do so. When a Fund takes a
temporary defensive position, the Fund may not achieve its investment
objective.
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Risks
of Investing in the Funds
The
main risks associated with investing in the Funds are described below and are in
addition to, or describe further, the risks stated in the Fund Summaries at the
front of this prospectus. Additional information is also included in the Funds’
Statement of Additional Information (“SAI”).
General
Risks
There
is no guarantee that a Fund’s investment objective will be achieved or that the
value of the investments of any Fund will increase. If the value of a Fund’s
investments declines, the net asset value per share (“NAV”) of that Fund will
decline, and investors may lose some or all of the value of their
investments.
Foreign
securities held by the Funds may be traded on days and at times when the
New York Stock Exchange (the “NYSE”) is closed, and the NAVs of the Funds
are therefore not calculated. Accordingly, the NAVs of the Funds may be
significantly affected on days when shareholders are not able to buy or sell
shares of the Funds. For additional information on the calculation of the Funds’
NAVs, see page 98.
Your
investment in the Funds is exposed to different risks, many of which are
described below. Because of these risks, your investment in a Fund should
constitute only a portion of your overall investment portfolio, not all of it.
We recommend that you invest in a Fund only for the long term (typically five
years or longer), so that you can better manage volatility in the Fund’s NAV (as
described below). Investing in regionally concentrated, single-country or small
company funds, such as the Funds, may not be appropriate for all
investors.
Risks
Associated with Matthews’ Investment Approach
Matthews
is an active manager, and its investment process does not rely on passive or
index strategies. For this reason, you should not expect that the composition of
the Funds’ portfolios will closely track the composition or weightings of market
indices (including a Fund’s benchmark index) or of the broader markets
generally. As a result, investors should expect that changes in the Funds’ NAVs
and performance (over short and longer periods) will vary from the performance
of such indices and of broader markets. Differences in the performance of the
Funds and any index (or the markets generally) may also result from the Funds’
fair valuation procedures, which the Funds use to value their holdings for
purposes of determining each Fund’s NAV (see page 98).
Principal Risks
Risks
Associated with Developments in Global Credit and Equity Markets
Developments
in global credit and equity markets, such as the credit and valuation problems
experienced by the global capital markets in 2008 and 2009, may adversely and
significantly impact the Funds’ investments. Although market conditions may
start to improve relatively quickly, many difficult conditions may remain for an
extended period of time or may return. Because the scope of these conditions may
be, and in the past have been, expansive, past investment strategies and models
may not be able to identify all significant risks that the Funds may encounter,
or to predict the duration of these events. These conditions could prevent the
Funds from successfully executing their investment strategies, result in future
declines in the market values of the investment assets held by the Funds, or
require the Funds to dispose of investments at a loss while such adverse market
conditions prevail.
Risks
Associated with Foreign Investments
Investments
in foreign securities may involve greater risks than investing in U.S.
securities. As compared to U.S. companies, foreign issuers generally disclose
less financial and other information publicly and are subject to less stringent
and less uniform accounting, auditing and financial reporting standards. Foreign
countries typically impose less thorough regulations on brokers, dealers, stock
exchanges, corporate
There is no guarantee
that your investment in a Fund will increase in value. The value of your
investment in a Fund could go down, meaning you could lose some or all of your
investment.
For additional
information about strategies and risks, see individual Fund descriptions in the
Fund Summary for each Fund and the Funds’ SAI. The SAI is available to you free
of charge. To receive an SAI, please call 800.789.ASIA (2742), visit the
Funds’ website at matthewsasia.com, or visit the website of the Securities and
Exchange Commission (the “SEC”) at sec.gov and access the EDGAR database.
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insiders
and listed companies than does the United States, and foreign securities markets
may be less liquid and more volatile than U.S. markets. Investments in foreign
securities generally involve higher costs than investments in U.S. securities,
including higher transaction and custody costs as well as additional taxes
imposed by foreign governments. In addition, security trading practices abroad
may offer less protection to investors such as the Funds. Political or social
instability, civil unrest, acts of terrorism, regional economic volatility, and
the imposition of sanctions, confiscations, trade restrictions (including
tariffs) and other government restrictions by the U.S. and/or other governments
are other potential risks that could impact an investment in a foreign security.
Settlement of transactions in some foreign markets may be delayed or may be less
frequent than in the United States, which could affect the liquidity of the
Funds’ portfolios.
In
addition, foreign securities may be subject to the risk of nationalization or
expropriation of assets, imposition of currency exchange controls or
restrictions on the repatriation of foreign currency, confiscatory taxation,
political or financial instability and diplomatic developments which could
affect the value of the Funds’ investments in certain foreign countries.
Governments of many countries have exercised and continue to exercise
substantial influence over many aspects of the private sector through the
ownership or control of many companies, including some of the largest in these
countries. As a result, government actions in the future could have a
significant effect on economic conditions which may adversely affect prices of
certain portfolio securities. There is also generally less government
supervision and regulation of stock exchanges, brokers, and listed companies
than in the United States. Dividends or interest on, or proceeds from the sale
of, foreign securities may be subject to foreign withholding taxes, and special
U.S. tax considerations may apply. Moreover, foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
Many
foreign countries are heavily dependent upon exports and, accordingly, have been
and may continue to be adversely affected by trade barriers, managed adjustments
in relative currency values, and other protectionist measures imposed or
negotiated by the United States and other countries with which they trade. These
economies also have been and may continue to be negatively impacted by economic
conditions in the United States and other trading partners, which can lower the
demand for goods produced in those countries.
Currency
Risk
When
a Fund conducts securities transactions in a foreign currency, there is the risk
of the value of the foreign currency increasing or decreasing against the value
of the U.S. dollar. The value of an investment denominated in a foreign currency
will decline in U.S. dollar terms if that currency weakens against the U.S.
dollar. While each Fund is permitted to hedge currency risks, Matthews does not
anticipate doing so at this time.
Additionally,
Asian and emerging market countries may utilize formal or informal
currency-exchange controls or “capital controls.” Capital controls may impose
restrictions on the Fund’s ability to repatriate investments or income. Such
controls may also affect the value of a Fund’s holdings.
Emerging
and Frontier Market Country Risk
Investing
in emerging and frontier market countries involves substantial risk due to,
among other factors, different accounting standards; thinner trading markets as
compared to those in developed countries; the possibility of currency transfer
restrictions; and the risk of expropriation, nationalization or other adverse
political, economic or social developments. Political and economic structures in
some emerging and frontier market countries may be undergoing significant
evolution and rapid development, and such countries may lack the social,
political and economic stability characteristics of developed countries. Some of
these countries have in the past failed to recognize private property rights and
have nationalized or expropriated the assets of private companies.
Among
other risks of investing in less developed markets are the variable quality and
reliability of financial information and related audits of companies. In some
cases, financial information and related audits can be unreliable and not
subject to verification. Auditing firms in some of these markets are not subject
to independent inspection or oversight of audit quality. This can result in
investment decisions being made based on flawed or misleading information.
Additionally, investors may have substantial difficulties bringing legal actions
to enforce or protect investors’ rights, which can increase the risks of
loss.
The
securities markets of emerging and frontier market countries can be
substantially smaller, less developed, less liquid and more volatile than the
major securities markets in the United States and other developed nations. The
limited size of many securities markets in emerging and frontier market
countries and limited trading volume in issuers compared to the volume in U.S.
securities or securities of issuers in other developed countries could cause
prices to be erratic for reasons other than factors that affect the quality of
the securities. In addition, emerging and frontier market countries’ exchanges
and broker-dealers are generally subject to less regulation than their
counterparts in developed countries. Brokerage commissions, custodial expenses
and other transaction costs are generally higher in emerging and frontier market
countries than in developed countries. As a result, funds that invest in
emerging and frontier market countries generally have operating expenses that
are higher than funds investing in other securities markets. Securities markets
in emerging markets may also be susceptible to manipulation or other fraudulent
trade practices, which could disrupt the functioning of these markets or
adversely affect the value of investments traded in these markets, including
investments of the Funds. The Funds’ rights with respect to their investments in
emerging markets will generally be governed by local law, which may make it
difficult or impossible for the Funds to pursue legal remedies or to obtain and
enforce judgments in local courts.
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Many
emerging and frontier market countries have a greater degree of economic,
political and social instability than the United States and other developed
countries. Such social, political and economic instability could disrupt the
financial markets in which the Funds invest and adversely affect the value of
their investment portfolios. In addition, currencies of emerging and frontier
market countries experience devaluations relative to the U.S. dollar from time
to time. A devaluation of the currency in which investment portfolio securities
are denominated will negatively impact the value of those securities in U.S.
dollar terms. Emerging and frontier market countries have and may in the future
impose foreign currency controls and repatriation controls.
The
emerging and frontier market countries in which the Funds invest may become
subject to economic and trade sanctions or embargoes imposed by the United
States, foreign governments or the United Nations. These sanctions or other
actions could result in the devaluation of a country’s currency or a decline in
the value and liquidity of securities of issuers in that country. In addition,
sanctions could result in a freeze on an issuer’s securities, which would
prevent the Funds from selling securities they hold or alternatively could force
the Funds to sell securities they hold at a time Matthews otherwise believes to
be unattractive. The value of the securities issued by companies that operate
in, or have dealings with, these countries may be negatively impacted by any
such sanction or embargo and may reduce Fund returns.
Frontier
markets are a subset of emerging markets and generally have smaller economies
and even less mature capital markets than emerging markets. As a result, the
risks of investing in emerging market countries are magnified in frontier market
countries. Frontier markets are more susceptible to having abrupt changes in
currency values, less mature markets and settlement practices, and lower trading
volumes that could lead to greater price volatility and illiquidity.
Volatility
Risk
The
smaller size and lower levels of liquidity in emerging markets, as well as other
factors, may result in changes in the prices of Asian and emerging market
securities that are more volatile than those of companies in more developed
regions. This volatility can cause the price of a Fund’s shares to go up or down
dramatically. Because of this volatility, this Fund is better suited for
long-term investors (typically five years or longer).
General
Risks Associated with Public Health Emergencies; Impact of the Coronavirus
(COVID‑19)
Pandemics
and other local, national, and international public health emergencies,
including outbreaks of infectious diseases such as SARS, H1N1/09 Flu, the Avian
Flu, Ebola and the current novel coronavirus (“COVID‑19”) pandemic, can result,
and in the case of COVID‑19 has resulted and may continue to result in market
volatility and disruption, and any similar future emergencies may materially and
adversely impact economic production and activity in ways that cannot
be
predicted,
all of which could result in substantial investment losses.
The
COVID‑19 outbreak has caused a worldwide public health emergency, straining
healthcare resources and resulting in extensive and growing numbers of
infections, hospitalizations and deaths. In an effort to contain COVID‑19,
local, regional, and national governments, as well as private businesses and
other organizations, have imposed and continue to impose severely restrictive
measures, including instituting local and regional quarantines, restricting
travel (including closing certain international borders), prohibiting public
activity (including “stay‑at‑home,” “shelter‑in‑place,” and similar orders), and
ordering the closure of a wide range of offices, businesses, schools, and other
public venues. Consequently, COVID‑19 has significantly diminished and disrupted
global economic production and activity of all kinds and has contributed to both
volatility and a severe decline in financial markets.
The
ultimate impact of COVID‑19 (and the resulting precipitous decline and
disruption in economic and commercial activity across many of the world’s
economies), including new strains of the underlying virus, on global economic
conditions, and on the operations, financial condition, and performance of any
particular market, industry or business, is impossible to predict. However,
ongoing and potential additional materially adverse effects, including further
global, regional and local economic downturns (including recessions) of
indeterminate duration and severity, are possible.
The
ongoing COVID‑19 crisis and any other public health emergency could have a
significant adverse impact on the Funds’ investments and result in significant
investment losses.
Equity
Securities Risk
Equity
securities may include common stock, preferred stock or other securities
representing an ownership interest or the right to acquire an ownership interest
in an issuer. Equity risk is the risk that stocks and other equity securities
generally fluctuate in value more than bonds and may decline in value over short
or extended periods. The value of stocks and other equity securities may be
affected by changes in an issuer’s financial condition, factors that affect a
particular industry or industries, such as labor shortages or an increase in
production costs and competitive conditions within an industry, or as a result
of changes in overall market, economic and political conditions that are not
specifically related to a company or industry, such as real or perceived adverse
economic conditions, changes in the general outlook for corporate earnings,
changes in interest or currency rates or generally adverse investor
sentiment.
Preferred
Stocks Risk
Preferred
stock normally pays dividends at a specified rate and has precedence over common
stock in the event the issuer is liquidated or declares bankruptcy. However, in
the event a company is liquidated or declares bankruptcy, the claims
of
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owners
of bonds take precedence over the claims of those who own preferred and common
stock. If interest rates rise, the dividend on preferred stocks may be less
attractive, causing the price of such stocks to decline. Preferred stock may
have mandatory sinking fund provisions, as well as provisions allowing the stock
to be called or redeemed, which can limit the benefit of a decline in interest
rates. Preferred stock is subject to many of the risks to which common stock and
debt securities are subject.
Depositary
Receipts Risk
Although
depositary receipts have risks similar to the securities that they represent,
they may also involve higher expenses and may trade at a discount (or premium)
to the underlying security. In addition, depositary receipts may not pass
through voting and other shareholder rights, and may be less liquid than the
underlying securities listed on an exchange.
Convertible
Securities Risk
As
part of their investment strategies, the Funds may invest in convertible
preferred stocks, bonds and debentures of any maturity and quality, including
those that are unrated, or would be below investment grade (referred to as “junk
bonds”) if rated. Convertible securities may, under specific circumstances, be
converted into the common or preferred stock of the issuing company, and may be
denominated in U.S. dollars, euros or a local currency. The value of convertible
securities varies with a number of factors, including the value and volatility
of the underlying stock, the level and volatility of interest rates, the passage
of time, dividend policy and other variables.
The
risks of convertible bonds and debentures include repayment risk and interest
rate risk. Repayment risk is the risk that a borrower does not repay the amount
of money that was borrowed (or “principal”) when the bond was issued. This
failure to repay the amount borrowed is called a “default” and could result in
losses for a Fund. Interest rate risk is the risk that market rates of interest
may increase over the rate paid by a bond held by a Fund. When interest rates
increase, the market value of a bond paying a lower rate generally will
decrease. If a Fund were to sell such a bond, the Fund might receive less than
it originally paid for it.
Investing
in a convertible security denominated in a currency different from that of the
security into which it is convertible may expose the Fund to currency risk as
well as risks associated with the level and volatility of the foreign exchange
rate between the security’s currency and the underlying stock’s currency.
Convertible securities are subject to greater liquidity risk than many other
securities and may trade less frequently and in lower volumes, or have periods
of less frequent trading. Lower trading volume may also make it more difficult
for the Funds to value such securities.
Dividend-Paying
Securities Risk
Each
of the Funds, including the Matthews Asian Growth and Income Fund, Matthews Asia
Dividend Fund and Matthews China Dividend Fund (each of which seek to provide
current income), may invest in dividend-paying equity securities. There can be
no guarantee that companies that have historically paid dividends will continue
to pay them or pay them at the current rates in the future. A reduction or
discontinuation of dividend payments may have a negative impact on the value of
a Fund’s holdings in these companies. The prices of dividend-paying equity
securities (and particularly of those issued by Asian and emerging market
companies) can be highly volatile. Investors should not assume that a Fund’s
investments in these securities will necessarily reduce the volatility of the
Fund’s NAV or provide “protection,” compared to other types of equity
securities, when markets perform poorly. In addition, dividend-paying equity
securities, in particular those whose market price is closely related to their
yield, may exhibit greater sensitivity to interest rate changes. During periods
of rising interest rates, such securities may decline. A Fund’s investment in
such securities may also limit its potential for appreciation during a broad
market advance.
The
inclusion of Passive Foreign Investment Companies (“PFICs”) in a portfolio can
result in higher variability—both negatively and positively—in the income
distribution.
Risks
Associated with Smaller and Medium‑Size Companies
The
Matthews Emerging Markets Small Companies Fund and the Matthews China Small
Companies Fund invest in securities of smaller companies, and each of the other
Funds may invest in securities of smaller and medium‑size companies. Smaller and
medium‑size companies may offer substantial opportunities for capital growth;
they also involve substantial risks, and investments in smaller and medium‑size
companies may be considered speculative. Such companies often have limited
product lines, markets or financial resources. Smaller and medium‑size companies
may be more dependent on one or few key persons and may lack depth of
management. Larger portions of their stock may be held by a small number of
investors (including founders and management) than is typical of larger
companies. Credit may be more difficult to obtain (and on less advantageous
terms) than for larger companies. As a result, the influence of creditors (and
the impact of financial or operating restrictions associated with debt
financing) may be greater on such companies than that on larger or more
established companies. Both of these factors may dilute the holdings, or
otherwise adversely impact the rights of a Fund and smaller shareholders in
corporate governance or corporate actions. Smaller and medium‑size companies
also may be unable to generate funds necessary for growth or development, or may
be developing or marketing new products or services for which markets are not
yet established and may never become established. The Funds may have more
difficulty obtaining information about smaller and medium‑size companies, making
it more difficult to evaluate the impact of market, economic, regulatory and
other factors on them. Informational difficulties may also make valuing
or
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disposing
of their securities more difficult than it would for larger companies.
Securities of smaller and medium‑size companies may trade less frequently and in
lesser volume than more widely held securities, and securities of smaller and
medium‑size companies generally are subject to more abrupt or erratic price
movements than more widely held or larger, more established companies or the
market indices in general. Among the reasons for the greater price volatility
are the less certain growth prospects of smaller and medium‑size companies, the
lower degree of liquidity in the markets for securities of such companies, and
the greater sensitivity of such companies to changing economic conditions. For
these and other reasons, the value of securities of smaller and medium‑size
companies may react differently to political, market and economic developments
than the markets as a whole or than other types of stocks.
High
Portfolio Turnover Risk
Certain
Funds’ investment strategies may result in high portfolio turnover rates.
Generally, portfolio turnover over 100% is considered high. High portfolio
turnover may increase a Fund’s brokerage commission costs. The performance of a
Fund could be negatively impacted by the increased brokerage commission cost
incurred by that Fund. Rapid portfolio turnover also exposes shareholders to a
higher current realization of short-term capital gains, distributions of which
would generally be taxed to shareholders as ordinary income and thus cause
shareholders to pay higher taxes.
Certain
Risks of Fixed-Income Securities
The
Matthews Asian Growth and Income Fund and Matthews Asia ESG Fund may invest in
fixed-income securities (including high-yield securities) as a principal
strategy. The other Funds may invest in fixed-income securities to a lesser
extent.
The
prices of fixed-income securities respond to economic developments, particularly
interest rate changes, as well as to changes in an issuer’s credit rating or
market perceptions about the creditworthiness of an issuer. Generally
fixed-income securities decrease in value if interest rates rise and increase in
value if interest rates fall, and longer-term and lower rated securities are
more volatile than shorter-term and higher rated securities.
Credit
Risk
Credit
risk refers to the risk that an issuer may default in the payment of principal
and/or interest on an instrument. Financial strength and solvency of an issuer
are the primary factors influencing credit risk. In addition, lack or inadequacy
of collateral or credit enhancement for a debt instrument may affect its credit
risk. Credit risk may change over the life of an investment, and securities that
are rated by rating agencies are often reviewed periodically and may be subject
to downgrade.
Interest
Rate Risk
Interest
rate risk refers to the risks associated with market changes in interest rates.
Interest rate changes may affect the
value
of a debt instrument indirectly (especially in the case of fixed-rate
securities) and directly (especially in the case of instruments whose rates are
adjustable). In general, rising interest rates will negatively impact the price
of a fixed-rate debt instrument and falling interest rates will have a positive
effect on price. Adjustable rate instruments also react to interest rate changes
in a similar manner although generally to a lesser degree (depending, however,
on the characteristics of the reset terms, including, without limitation, the
index chosen, frequency of reset and reset caps or floors). Interest rate
sensitivity is generally more pronounced and less predictable in instruments
with uncertain payment or prepayment schedules.
High
Yield Securities Risk
Securities
rated lower than Baa by Moody’s Investors Service, Inc. (“Moody’s”), or
equivalently rated by S&P Global (“S&P”) or Fitch Ratings, Inc.
(“Fitch”), and unrated securities of similar credit quality are referred to as
“high yield securities” or “junk bonds.” Investing in these securities involves
special risks in addition to the risks associated with investments in
higher-rated fixed income securities. High yield securities typically entail
greater potential price volatility, entail greater levels of credit and
repayment risks and may be less liquid than higher-rated securities.
High
yield securities are considered predominantly speculative with respect to the
issuer’s continuing ability to meet principal and interest payments. They may
also be more susceptible to adverse economic and competitive industry conditions
than higher-rated securities. An economic downturn or a period of rising
interest rates could adversely affect the market for these securities and reduce
a Fund’s ability to sell these securities (liquidity risk). Issuers of
securities in default may fail to resume principal and interest payments, in
which case a Fund may lose its entire investment. Funds that invest in junk
bonds may also be subject to greater levels of credit and liquidity risk than
funds that do not invest in such securities.
Growth
Stock Risk
Growth
stocks may be more volatile than other stocks because they are more sensitive to
investor perceptions of the issuing company’s growth potential. Growth stocks
may go in and out of favor over time and may perform differently than the market
as a whole.
Additional
Sustainability Risk Information
Matthews
collects information and data on sustainability risks and governance from
in-house analysis, direct engagement and interaction with companies and other
issuers, and from third parties. For its in-house analysis, Matthews takes a
top-down as well as bottom-up approach to evaluating the sustainability risks of
its portfolio investments. The top-down approach relies on Matthews’ knowledge
of local markets, which helps to evaluate and prioritize sustainability factors
according to their potential impact on the Matthews Pacific Tiger Fund, the
Matthews Japan Fund, and the Matthews China Fund. The bottom-up approach
includes Matthews’
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proprietary
investment research, which is supplemented with public information, third party
research, and third party environmental, social, and governance (ESG) scores and
reports. Matthews typically considers sustainability factors of issuers such as
the quality, diversity, and composition of its board of directors, and the
company’s management of material environmental and social risks, among other
factors. Matthews reviews these sustainability risks and this governance
information on a regular basis, and where material sustainability risks have
been identified, may integrate them into the investment process of the relevant
Fund.
While
it is expected that each of these Funds may be exposed to a range of
sustainability risks resulting from their individual investment strategies and
exposures to specific sectors, issuers or asset classes, it is not anticipated
that the sustainability risks to which each Fund is exposed would cause a
material impact on its respective returns, given the level of diversification of
the Fund’s portfolio and Matthews’ active consideration of sustainability risk
in its investment process, as described above.
ESG
and Sustainable Investing Risk
The
Matthews Asia ESG Fund takes into consideration ESG factors in making its
investment decisions. The Matthews Pacific Tiger Fund, Matthews China Fund and
Matthews Japan Fund may also take into consideration ESG factors in their
investment decisions. As a result, these Funds may choose to sell, or not
purchase, investments that are otherwise consistent with their investment
objective. Generally, a Fund’s consideration of ESG factors may affect its
exposure to certain issuers, industries, sectors, regions or countries and may
impact its relative investment performance—positively or negatively—depending on
whether such investments are in or out of favor in the market. A Fund’s use of
ESG factors as part of its investment process will likely make it perform
differently from a fund that relies solely or primarily on financial metrics.
ESG investing is qualitative and subjective by nature, and there is no guarantee
that the criteria used by Matthews or any judgment exercised by Matthews will
reflect the opinions of any particular investor. Although an investment by a
Fund in a company may satisfy one or more ESG standards or factors in the view
of the portfolio managers, there is no guarantee that such company actually
promotes positive environmental, social or economic developments, and that same
company may also fail to satisfy other ESG standards or factors, in some cases
even egregiously. Funds with ESG investment strategies are generally suited for
long-term rather than short-term investors.
Risks
Associated with Investing in Innovative Companies
The
standards for assessing innovative companies in which the Matthews Asia
Innovators Fund invests tend to have many subjective characteristics, can be
difficult to analyze, and frequently involve a balancing of a company’s business
plans, objectives, actual conduct and other factors. The definition of
innovators can vary over different periods and can evolve over
time.
They may also be difficult to apply consistently across regions, countries,
industries or sectors.
Risks
of Investing in Science and Technology Companies
Each
of the Funds may, and the Matthews Asia Innovators Fund will, invest in
securities of science and technology companies. Such companies may face special
risks because their products or services may not prove to be commercially
successful and may be affected by rapid product changes and associated
developments. These companies also face the risks that new services, equipment
or technologies will not be accepted by consumers or businesses or will become
rapidly obsolete. Many science and technology companies have limited operating
histories and experience in managing adverse market conditions and are also
strongly affected by worldwide scientific or technological developments and
global demand cycles. Such companies are also often subject to governmental
regulation and greater competitive pressures, such as new market entrants,
aggressive pricing and competition for market share, and potential for falling
profit margins. The possible loss or impairment of intellectual property rights
may also negatively impact science and technology companies. As a result, the
price movements of science and technology company stocks can be abrupt or
erratic (especially over the short term), and historically have been more
volatile than stocks of other types of companies. These factors may also affect
the profitability of science and technology companies and therefore the value of
their securities. Accordingly, the NAV of a Fund may be more volatile,
especially over the short term as a result of such Fund’s investments in science
and technology companies. These risks are especially important when considering
an investment in the Matthews Asia Innovators Fund, which focuses on the science
and technology sectors. The Matthews Asia Innovators Fund is less diversified
than stock funds investing in a broader range of sectors and, therefore, could
experience significant volatility, and the movements in its NAV may follow the
science and technology sectors, as opposed to the general movement of the
economies of the countries where the companies are located under certain
circumstances.
By
focusing on the science and technology industries, the Matthews Asia Innovators
Fund carries much greater risks of adverse developments and price movements in
such industries than a fund that invests in a wider variety of industries.
Because the Matthews Asia Innovators Fund concentrates in a group of industries,
there is also the risk that it will perform poorly during a slump in demand for
securities of companies in such industries.
Sector
Concentration Risk
From
time to time as a result of the implementation of a Fund’s investment
strategies, a Fund may invest a significant portion of its assets in a
particular sector. To the extent that a Fund emphasizes investments in a
particular sector, the Fund will be subject to a greater degree to the risks
particular to that sector. Market conditions, interest rates, and
economic,
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regulatory,
or financial developments could significantly affect a single sector. By
focusing its investments in a particular sector, a Fund may face more risks than
if it were diversified broadly over numerous sectors.
Financial
Services Sector Risk
Certain
of the Funds may invest a significant portion of their assets in the financial
services sector, and therefore the performance of those Funds could be
negatively impacted by events affecting this sector. Financial services
companies are subject to extensive governmental regulation which may limit both
the amounts and types of loans and other financial commitments they can make,
the interest rates and fees they can charge, the scope of their activities, the
prices they can charge and the amount of capital they must maintain.
Profitability is largely dependent on the availability and cost of capital funds
and can fluctuate significantly when interest rates change or due to increased
competition. In addition, deterioration of the credit markets generally may
cause an adverse impact on a broad range of markets, including U.S. and
international credit and interbank money markets generally, thereby affecting a
wide range of financial institutions and markets. Certain events in the
financial sector may cause an unusually high degree of volatility in the
financial markets, both domestic and foreign, and cause certain financial
services companies to incur large losses. Securities of financial services
companies may experience a dramatic decline in value when such companies
experience substantial declines in the valuations of their assets, take actions
to raise capital (such as the issuance of debt or equity securities), or cease
operations. Credit losses resulting from financial difficulties of borrowers and
financial losses associated with investment activities can negatively impact the
sector. Adverse economic, business or political developments affecting real
estate could have a major effect on the value of real estate securities (which
include real estate investment trusts (REITs)). Declining real estate values
could adversely affect financial institutions engaged in mortgage finance or
other lending or investing activities directly or indirectly connected to the
value of real estate.
Industrial
Sector Risk
Certain
of the Funds may invest a significant portion of their assets in the industrial
sector, and therefore the performance of those Funds could be negatively
impacted by events affecting this sector. Industrial companies are affected by
supply and demand both for their specific product or service and for industrial
sector products in general. Government regulation, world events, exchange rates
and economic conditions, technological developments and liabilities for
environmental damage and general civil liabilities will likewise affect the
performance of these companies.
Consumer
Discretionary Sector Risk
Certain
of the Funds may invest a significant portion of their assets in the consumer
discretionary sector, and therefore the performance of those Funds could be
negatively impacted by events affecting this sector. The success of consumer
product
manufacturers
and retailers is tied closely to the performance of the overall local and
international economies, interest rates, competition and consumer confidence.
Success of companies in the consumer discretionary sector depends heavily on
disposable household income and consumer spending. Changes in demographics and
consumer tastes can also affect the demand for, and success of, consumer
products and services in the marketplace.
Consumer
Staples Sector Risk
Certain
of the Funds may invest a significant portion of their assets in the consumer
staples sector, and therefore the performance of those Funds could be negatively
impacted by events affecting this sector. Companies in the consumer staples
sector may be affected by various factors, including demographics and product
trends, competitive pricing, consumer spending and demand, food fads, product
contamination, marketing campaigns, environmental factors, government
regulation, the performance of the overall economy, interest rates, and the cost
of commodities.
Health
Care Sector Risk
Certain
of the Funds may invest a significant portion of their assets in the health care
sector, and therefore the performance of those Funds could be negatively
impacted by events affecting this sector. Companies in the health care sector
may be affected by various factors, including extensive government regulations,
heavy dependence on patent protection, pricing pressure, increased cost of
medical products and services, and product liability claims. Health care
companies may be thinly capitalized and may be susceptible to product
obsolescence.
Information
Technology Sector Risk
Certain
of the Funds may invest a significant portion of their assets in the information
technology sector, and therefore the performance of those Funds could be
negatively impacted by events affecting this sector. Information technology
companies may be significantly affected by aggressive pricing as a result of
intense competition and by rapid product obsolescence due to rapid development
of technological innovations and frequent new product introduction. Other
factors, such as short product cycle, possible loss or impairment of
intellectual property rights, and changes in government regulations, may also
adversely impact information technology companies.
Cybersecurity
Risk
Information
and technology systems relied upon by the Funds, Matthews, the Funds’ service
providers (including, but not limited to, Fund accountants, custodians, transfer
agents, administrators, distributors and other financial intermediaries) and/or
the issuers of securities in which a Fund invests may be vulnerable to damage or
interruption from computer viruses, network failures, computer and
telecommunication failures, infiltration by unauthorized persons, security
breaches, usage errors, power outages and catastrophic events such as fires,
tornadoes, floods, hurricanes and earthquakes. Although Matthews has implemented
measures to manage risks relating
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to
these types of events, if these systems are compromised, become inoperable for
extended periods of time or cease to function properly, significant investment
may be required to fix or replace them. The failure of these systems and/or of
disaster recovery plans could cause significant interruptions in the operations
of the Funds, Matthews, the Funds’ service providers and/or issuers of
securities in which a Fund invests and may result in a failure to maintain the
security, confidentiality or privacy of sensitive data, including personal
information relating to investors (and the beneficial owners of investors). Such
a failure could also harm the reputation of the Funds, Matthews, the Funds’
service providers and/or issuers of securities in which a Fund invests, subject
such entities and their respective affiliates to legal claims or otherwise
affect their business and financial performance.
Asia
Pacific Region—Regional and Country Risks
In
addition to the risks discussed above and elsewhere in this prospectus, there
are specific risks associated with investing in the Asia Pacific region,
including the risk of severe economic, political or military disruption. The
Asia Pacific region comprises countries in all stages of economic development.
Some Asia Pacific economies may experience overextension of credit, currency
devaluations and restrictions, rising unemployment, high inflation,
underdeveloped financial services sectors, heavy reliance on international trade
and prolonged economic recessions. Deflationary factors could also reemerge in
certain Asian markets, the potential effects of which are difficult to forecast.
While certain Asian governments will have the ability to offset deflationary
conditions through fiscal or budgetary measures, others will lack the capacity
to do so. Many Asia Pacific countries are dependent on foreign supplies of
energy. A significant increase in energy prices could have an adverse impact on
these economies and the region as a whole. In addition, some countries in the
region are competing to claim or develop regional supplies of energy or other
other natural resources. This competition could lead to economic, political or
military instability or disruption. Any military action or other instability
could adversely impact the ability of the Fund to achieve its investment
objective.
The
economies of many Asia Pacific countries (especially those whose development has
been export-driven) are dependent on the economies of the United States, Europe
and other Asian countries, and, as seen in the developments in global credit and
equity markets in 2008 and 2009, events in any of these economies could
negatively impact the economies of Asia Pacific countries.
Currency
fluctuations, devaluations and trading restrictions in any one country can have
a significant effect on the entire Asia Pacific region. Increased political and
social instability in any Asia Pacific country could cause further economic and
market uncertainty in the region, or result in significant downturns and
volatility in the economies of Asia Pacific countries. As an example, in the
late 1990s, the economies in the Asian region suffered significant downturns and
increased volatility in their financial markets.
The
development of Asia Pacific economies, and particularly those of China, Japan
and South Korea, may also be affected by political, military, economic and other
factors related to North Korea. Negotiations to ease tensions and resolve the
political division of the Korean peninsula have been carried on from time to
time producing sporadic and inconsistent results. There have also been efforts
to increase economic, cultural and humanitarian contacts among North Korea,
South Korea, Japan and other nations. There can be no assurance that such
negotiations or efforts will continue or will ease tensions in the region. Any
military action or other instability could adversely impact the ability of a
Fund to achieve its investment objective. Lack of available information
regarding North Korea is also a significant risk factor.
Some
companies in the region may have less established shareholder governance and
disclosure standards than in the U.S. Some companies are controlled by family
and financial institutional investors whose investment decisions may be hard to
predict based on standard U.S.- based equity analysis. Consequently, investments
may be vulnerable to unfavorable decisions by the management or shareholders.
Corporate protectionism (e.g., the
adoption of poison pills and restrictions on shareholders seeking to influence
management) appears to be increasing, which could adversely impact the value of
affected companies. Many Asian countries are considered emerging or frontier
markets (newer or less developed emerging markets are also sometimes referred to
as frontier markets), and the governments of these countries may be more
unstable and more likely to impose controls on market prices (including, for
example, limitations on daily price movements), which may negatively impact a
Fund’s ability to acquire or dispose of a position in a timely manner. Emerging
market countries may also impose capital controls, nationalize a company or
industry, place restrictions on foreign ownership and on withdrawing sale
proceeds of securities from the country, and/or impose punitive taxes that could
adversely affect the prices of securities. Additionally, there may be less
publicly available information about companies in many Asian countries, and the
stock exchanges and brokerage industries in many Asian countries typically do
not have the level of government oversight as do those in the
United States. Securities markets of many Asian countries are also less
mature, substantially smaller, less liquid and more volatile than securities
markets in the U.S., and as a result, there may be increased settlement risks
for transactions in local securities.
Economies
in this region may also be more susceptible to natural disasters (including
earthquakes and tsunamis), or adverse changes in climate or weather. The risks
of such phenomena and resulting social, political, economic and environmental
damage (including nuclear pollution) cannot be quantified. These events can
exacerbate market volatility as well as impair economic activity, which can have
both short- and immediate-term effects on the valuations of the companies and
issuers in which a Fund invests. Economies in which agriculture occupies a
prominent position, and countries with
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limited
natural resources (such as oil and natural gas), may be especially vulnerable to
natural disasters and climatic changes.
There
are specific risks associated with a Fund’s concentration of its investments in
a country or group of countries within the Asia Pacific region. Provided below
are risks of investing in various countries within the Asia Pacific region and
are principal risks of a Fund to the extent such Fund’s portfolio is
concentrated in such country or countries.
Risks
Associated with China, Hong Kong and Macau
China. The Chinese government exercises
significant control over China’s economy through its industrial policies (e.g., allocation of resources and other
preferential treatment), monetary policy, management of currency exchange rates,
and management of the payment of foreign currency-denominated obligations. For
over three decades, the Chinese government has been reforming economic and
market practices, providing a larger sphere for private ownership of property,
and interfering less with market forces. While currently contributing to growth
and prosperity, these reforms could be altered or discontinued at any time.
Changes in these policies could adversely impact affected industries or
companies in China. In addition, the Chinese government may actively attempt to
influence the operation of Chinese markets through currency controls, direct
investments, limitations on specific types of transactions (such as short
selling), limiting or prohibiting investors (including foreign institutional
investors) from selling holdings in Chinese companies, or other similar actions.
Such actions could adversely impact the Funds’ ability to achieve their
investment objectives and could result in the Funds limiting or suspending
shareholder redemptions privileges (as legally permitted, see Selling
(Redeeming) Shares, page 101).
Military
conflicts, either in response to internal social unrest or conflicts with other
countries, could disrupt the economic development in China. China’s long-running
conflict over Taiwan remains unresolved and political tensions with Hong Kong
have recently increased, while territorial border disputes persist with several
neighboring countries. While economic relations with Japan have deepened, the
political relationship between the two countries has become more strained in
recent years, which could weaken economic ties. There is also a greater risk
involved in currency fluctuations, currency convertibility, interest rate
fluctuations and higher rates of inflation. The Chinese government also
sometimes takes actions intended to increase or decrease the values of Chinese
stocks. China’s economy, particularly its export oriented sectors, may be
adversely impacted by trade or political disputes with China’s major trading
partners, including the U.S.
U.S.
governmental orders and sanctions with respect to Chinese military-related
companies not only restrict the companies eligible for investment but also may
apply to existing holdings and thus force the Funds to sell those holdings at a
time Matthews otherwise finds unattractive. In addition, any perceived actions
by China to assist Russia in evading sanc-
tions
imposed as a result of the Ukraine invasion may result in new or expanded
sanctions against China and Chinese-related companies. New or existing sanctions
may be complex and difficult to interpret and could adversely affect the
liquidity and value of the Funds’ holdings.
In
addition, as China’s consumer class continues to grow, China’s domestically
oriented industries may be especially sensitive to changes in government policy
and investment cycles. Social cohesion in China is being tested by growing
income inequality and larger scale environmental degradation. Social instability
could threaten China’s political system and economic growth, which could
decrease the value of the Funds’ investments.
After
many years of steady growth, the growth rate of China’s economy slowed prior to
2020, including the once rapidly growing Chinese real estate market, and left
local governments with high debts with few viable means to raise revenue,
especially with the fall in demand for housing. Although these trends reversed
and demand grew within the real estate market during China’s initial recovery
from the COVID-19 pandemic, it remains unclear whether these trends will
continue given global economic uncertainties caused by the pandemic and trade
relations and fears that the Chinese real estate market may be overheating. Any
further stresses in the Chinese real estate sector could adversely affect the
value of a Fund’s holdings.
Accounting,
auditing, financial, and other reporting standards, practices and disclosure
requirements in China are different, sometimes in fundamental ways, from those
in the U.S. and certain Western European countries. Although the Chinese
government adopted a new set of Accounting Standards for Business Enterprises
effective January 1, 2007, which are similar to the International Financial
Reporting Standards, the accounting practices in China continue to be frequently
criticized and challenged. In addition, China does not allow the Public Company
Accounting Oversight Board to inspect the work that auditors perform in China
for Chinese companies in which the Funds may invest. That inspection
organization conducts on‑going reviews of audits by U.S. accounting firms. As a
result, financial reporting by Chinese companies do not have the same degree of
transparency and regulatory oversight as reporting by companies in the U.S.
Because of Chinese governmental disagreements with the Public Company Accounting
Oversight Board concerning the inspection of audits of U.S.-listed Chinese
companies, it is possible those companies could be delisted from trading in the
U.S. if those disagreements are not resolved. Delisting would likely adversely
affect the liquidity and values of those shares.
Hong Kong. Hong Kong has been governed by the
Basic Law, which provides a high degree of autonomy from China in certain
matters until 2047. However, as demonstrated by Hong Kong protests in recent
years over political, economic, and legal freedoms, and the Chinese government’s
response to them, considerable political uncertainty continues to
exist
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within
Hong Kong. Due to the interconnected nature of the Hong Kong and Chinese
economies, this instability in Hong Kong may cause uncertainty in the Hong Kong
and Chinese markets. If China were to exert its authority so as to alter the
economic, political or legal structures or the existing social policy of Hong
Kong, investor and business confidence in Hong Kong could be negatively
affected, which in turn could negatively affect markets and business performance
and have an adverse effect on the Funds’ investments. In addition, the Hong Kong
dollar trades within a fixed trading band rate to (or is “pegged” to) the U.S.
dollar. This fixed exchange rate has contributed to the growth and stability of
the Hong Kong economy. However, some market participants have questioned the
continued viability of the currency peg. It is uncertain what effect any
discontinuance of the currency peg and the establishment of an alternative
exchange rate system would have on capital markets generally and the
Hong Kong economy.
Macau. Although Macau is a Special
Administrative Region (SAR) of China, it maintains a high degree of autonomy
from China in economic matters. Macau’s economy is heavily dependent on the
gaming sector and tourism industries, and its exports are dominated by textiles
and apparel. Accordingly, Macau’s growth and development are highly dependent
upon external economic conditions, particularly those in China.
Variable Interest Entities. Certain of the
Funds (currently including the Matthews Asia Growth Fund, Matthews Asia
Innovators Fund and Matthews China Fund) invest a substantial portion of their
assets, and the other Funds may invest to a lesser extent, in certain operating
companies in China through legal structures known as variable interest entities
(“VIEs”). In China, ownership of companies in certain sectors by foreign
individuals and entities (including U.S. persons and entities such as the Funds)
is prohibited. In order to facilitate foreign investment in these businesses,
many Chinese companies have created VIEs. In such an arrangement, a China-based
operating company typically establishes an offshore shell company in another
jurisdiction, such as the Cayman Islands. That shell company enters into service
and other contracts with the China-based operating company, then issues shares
on a foreign exchange, such as the New York Stock Exchange. Foreign investors
hold stock in the shell company rather than directly in the China-based
operating company. This arrangement allows U.S. investors to obtain economic
exposure to the China-based company through contractual means rather than
through formal equity ownership.
VIEs
are a longstanding industry practice and well known to officials and regulators
in China; however, VIEs are not formally recognized under Chinese law. Recently,
the government of China provided new guidance to and placed restrictions on
China-based companies raising capital offshore, including through VIE
structures. Investors face uncertainty about future actions by the government of
China that could significantly affect an operating company’s finan-
cial
performance and the enforceability of the shell company’s contractual
arrangements. It is uncertain whether Chinese officials or regulators will
withdraw their implicit acceptance of the VIE structure, or whether any new
laws, rules or regulations relating to VIE structures will be adopted or, if
adopted, what impact they would have on the interests of foreign shareholders.
Under extreme circumstances, China might prohibit the existence of VIEs, or
sever their ability to transmit economic and governance rights to foreign
individuals and entities; if so, the market value of the Funds’ associated
portfolio holdings would likely suffer significant, detrimental, and possibly
permanent effects, which could result in substantial investment losses.
Risks
Associated with Taiwan
The
political reunification of China and Taiwan, over which China continues to claim
sovereignty, is a highly complex issue and is unlikely to be settled in the near
future. Although the relationship between China and Taiwan has been improving,
there is the potential for future political or economic disturbances that may
have an adverse impact on the values of investments in either China or Taiwan,
or make investments in China and Taiwan impractical or impossible. Any
escalation of hostility between China and/or Taiwan would likely distort
Taiwan’s capital accounts, as well as have a significant adverse impact on the
value of investments in both countries and the region.
Risks
Associated with Other Asian Countries
India. In India, the government has exercised
and continues to exercise significant influence over many aspects of the
economy. Government actions, bureaucratic obstacles and inconsistent economic
reform within the Indian government have had a significant effect on its economy
and could adversely affect market conditions, economic growth and the
profitability of private enterprises in India. Global factors and foreign
actions may inhibit the flow of foreign capital on which India is dependent to
sustain its growth. Large portions of many Indian companies remain in the hands
of their founders (including members of their families). Corporate governance
standards of family-controlled companies may be weaker and less transparent,
which increases the potential for loss and unequal treatment of investors. India
experiences many of the risks associated with developing economies, including
relatively low levels of liquidity, which may result in extreme volatility in
the prices of Indian securities.
Religious,
cultural and military disputes persist in India, and between India and Pakistan
(as well as sectarian groups within each country). The longstanding border
dispute with Pakistan remains unresolved. Terrorists believed to be based in
Pakistan have struck Mumbai (India’s financial capital) in the past, further
damaging relations between the two countries. If the Indian government is unable
to control the violence and disruption associated with these tensions (including
both domestic and external sources of terrorism), the result may be military
conflict, which could destabilize the economy of India. Both India and Pakistan
have tested nuclear arms, and
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the
threat of deployment of such weapons could hinder development of the Indian
economy, and escalating tensions could impact the broader region, including
China.
Japan. The Japanese yen has shown volatility
over the past two decades and such volatility could affect returns in the
future. The yen may also be affected by currency volatility elsewhere in Asia,
especially Southeast Asia. Depreciation of the yen, and any other currencies in
which the Funds’ securities are denominated, will decrease the value of the
Funds’ holdings. Japan’s economy could be negatively impacted by many factors,
including rising interest rates, tax increases and budget deficits.
In
the longer term, Japan will have to address the effects of an aging population,
such as a shrinking workforce and higher welfare costs. To date, Japan has had
restrictive immigration policies that, combined with other demographic concerns,
appear to be having a negative impact on the economy.
Japan’s
growth prospects appear to be dependent on its export capabilities. Japan’s
neighbors, in particular China, have become increasingly important export
markets. Despite a deepening in the economic relationship between Japan and
China, the countries’ political relationship has at times been strained in
recent years. Should political tension increase, it could adversely affect the
economy, especially the export sector, and destabilize the region as a whole.
Japan also remains heavily dependent on oil imports, and higher commodity prices
could therefore have a negative impact on the economy. Japan is located in a
region that is susceptible to natural disasters, which could also negatively
impact the Japanese economy.
South Korea. Investing in South Korean
securities has special risks, including those related to political, economic and
social instability in South Korea and the potential for increased militarization
in North Korea (see Regional and Country Risks above). Securities trading on
South Korean securities markets are concentrated in a relatively small
number of issuers, which results in potentially fewer investment opportunities
for the Funds. South Korea’s financial sector has shown certain signs of
systemic weakness and illiquidity, which, if exacerbated, could prove to be a
material risk for investments in South Korea. South Korea is dependent on
foreign sources for its energy needs. A significant increase in energy prices
could have an adverse impact on South Korea’s economy,
There
are also a number of risks to the Funds associated with the South Korean
government. The South Korean government has historically exercised and continues
to exercise substantial influence over many aspects of the private sector. The
South Korean government from time to time has informally influenced the prices
of certain products, encouraged companies to invest or to concentrate in
particular industries and induced mergers between companies in industries
experiencing excess capacity.
Vietnam. In 1992, Vietnam initiated the process
of privatization of state-owned enterprises, and expanded that process
in
1996.
However, some Vietnamese industries, including commercial banking, remain
dominated by state-owned enterprises, and for most of the private enterprises, a
majority of the equity is owned by employees and management boards and on
average more than one‑third of the equity is owned by the government with only a
small percentage of the equity being owned by investors. In addition, Vietnam
continues to impose limitations on foreign ownership of Vietnamese companies and
has in the past imposed arbitrary repatriation taxes on foreign owners. Although
Vietnam has experienced significant economic growth in the past three decades,
Vietnam continues to face various challenges, including corruption, lack of
transparency, uniformity and consistency in governmental regulations, heavy
dependence on exports, a growing population, and increasing pollution. Inflation
threatens long-term economic growth and may deter foreign investment in the
country. In addition, foreign currency reserves in Vietnam may not be sufficient
to support conversion into the U.S. dollar (or other more liquid currencies).
Vietnamese markets have relatively low levels of liquidity, which may result in
extreme volatility in the prices of Vietnamese securities. Market volatility may
also be heightened by the actions of a small number of investors.
Risks
Associated with Other Regions
Europe
Investing
in Europe involves risks not typically associated with investments in the United
States. A majority of western European countries and a number of eastern
European countries are members of the European Union (“EU”), an
intergovernmental union aimed at developing economic and political coordination
and cooperation among its member states. European countries that are members of
the Economic and Monetary Union of the European Union (“EMU”) are subject to
restrictions on inflation rates, interest rates, deficits, and debt levels. The
EMU sets out different stages and commitments for member states to follow in an
effort to achieve greater coordination of economic, fiscal and monetary
policies. A member state that participates in the third (and last) stage is
permitted to adopt a common currency, the Euro. EMU member states that have
adopted the Euro are referred to as the “Eurozone.” As a condition to adopting
the Euro, EMU member states must also relinquish control of their monetary
policies to the European Central Bank and become subject to certain monetary and
fiscal controls imposed by the EMU. As economic conditions across member states
may vary widely, it is possible that these controls may not adequately address
the needs of all EMU member states from time to time. These controls remove EMU
member states’ flexibility in implementing monetary policy measures to address
regional economic conditions, which may impair their ability to respond to
crises. In addition, efforts by the EU and the EMU to unify economic and
monetary policies may also increase the potential for similarities in the
movements of European markets and reduce the potential investment benefits of
diversification within the region. Conversely, any failure of these efforts
may
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increase
volatility and uncertainty in European financial markets and negatively affect
the value of the Matthews Emerging Markets Equity Fund’s and the Matthews
Emerging Markets Small Companies Fund’s investments in European issuers.
European
financial markets are vulnerable to volatility and losses arising from concerns
about the potential exit of member countries from the EU and/or the Eurozone
and, in the latter case, the reversion of those countries to their national
currencies. Defaults by EMU member countries on sovereign debt, as well as any
future discussions about exits from the Eurozone, may negatively affect the
Matthews Emerging Markets Equity Fund’s and the Matthews Emerging Markets Small
Companies Fund’s investments in the defaulting or exiting country, in issuers,
both private and governmental, with direct exposure to that country, and in
European issuers generally. The United Kingdom formally withdrew from the EU on
January 31, 2020 (a process commonly referred to as “Brexit”). The
political, economic and legal consequences of Brexit are not yet fully known,
and the ultimate impact of Brexit on the UK, the EU and the broader global
economy may be significant. As a result of the political divisions within the UK
and between the UK and the EU that the referendum vote has highlighted and the
uncertain consequences of Brexit, the UK and European economies and the broader
global economy could be significantly impacted, which may result in increased
volatility and illiquidity and potentially lower economic growth on markets in
the UK, Europe and globally. The consequences of the UK’s or another country’s
exit from the EU and/or Eurozone could also threaten the stability of the Euro
for remaining countries and could negatively affect the financial markets of
other countries in the European region and beyond.
Emerging Market Countries in Europe. While many
countries in western Europe are considered to have developed markets, many
eastern European countries are less developed. Investments in eastern European
countries, even if denominated in Euros, may involve special risks associated
with investments in emerging markets. Economic and political structures in many
emerging European countries are in the early stages of economic development and
developing rapidly, and these countries may lack the social, political, and
economic stability characteristics of many more developed countries. In
addition, the small size and inexperience of the securities markets in emerging
European countries and the limited volume of trading in securities in those
markets may make the Matthews Emerging Markets Equity Fund’s and the Matthews
Emerging Markets Small Companies Fund’s investments in these countries illiquid
and more volatile than investments in more developed countries and may make
obtaining prices on portfolio securities from independent sources more difficult
than in other, more developed markets. In the past, certain emerging European
countries have failed to recognize private property rights and at times have
nationalized or expropriated the assets of private companies.
There
may also be little financial or accounting information available with respect to
companies located in certain eastern European countries, which, as a result, may
make it difficult to assess the value or prospects of an investment in those
companies.
The
European financial markets have been experiencing volatility and adverse trends
due to concerns about economic downturns or rising government debt levels in
both emerging and developed European countries. These events have adversely
affected currency exchange rates and may continue to significantly affect every
country in Europe, including countries that do not use the Euro. Defaults or
restructurings by governments could have adverse effects on economies, financial
markets, and asset valuations throughout Europe and lead to additional countries
abandoning the Euro or withdrawing from the European Union. During periods of
instability or upheaval, a country’s government may act in a detrimental or
hostile manner toward private enterprise or foreign investment. In addition, at
certain times, the Matthews Emerging Markets Equity Fund and the Matthews
Emerging Markets Small Companies Fund may have to “fair value” certain
securities by determining value on the basis of factors other than market
quotations. Portfolio holdings that are valued using techniques other than
market quotations, including “fair valued” securities, may be subject to greater
fluctuation than if market quotations had been used, and there is no assurance
that the Matthews Emerging Markets Equity Fund or the Matthews Emerging Markets
Small Companies Fund could sell or close out a portfolio position for the value
established for it at any time.
In
addition, Russia’s recent military incursions in Ukraine have led to, and may
lead to additional, sanctions being levied against Russia by the United States,
European Union and other countries. Russia’s military incursion and the
resulting sanctions could adversely affect European and global energy and
financial markets and thus could affect the value of a Fund’s investments, even
beyond any direct exposure the Fund may have to Russian issuers or the adjoining
geographic regions. The extent and duration of the military action, sanctions
and resulting market disruptions are impossible to predict, but could be
substantial.
Latin
America
Latin
American economies are generally considered emerging markets and have in the
past experienced considerable difficulties, including high inflation rates, high
interest rates, high unemployment, government overspending and political
instability. Similar conditions in the present or future could impact the
Matthews Emerging Markets Equity Fund’s and the Matthews Emerging Markets Small
Companies Fund’s performance. Because Latin American countries are highly
reliant on the exportation of commodities such as oil and gas, minerals, and
metals, their economies may be significantly impacted by fluctuations in
commodity prices and the global demand for certain commodities. Investments in
Latin American countries may be subject to currency risks, such as
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restrictions
on the flow of money in and out of a country, extreme volatility relative to the
U.S. dollar, and devaluation, all of which could decrease the value of the
Matthews Emerging Markets Equity Fund’s and the Matthews Emerging Markets Small
Companies Fund’s investments. Other Latin American investment risks may include
inadequate investor protection, less developed regulatory, accounting, auditing
and financial standards, unfavorable changes in laws or regulations, natural
disasters, corruption and military activity. The governments of many Latin
American countries may also exercise substantial influence over many aspects of
the private sector, and any such exercise could have a significant effect on
companies in which the Matthews Emerging Markets Equity Fund and the Matthews
Emerging Markets Small Companies Fund invest. A relatively small number of Latin
American companies represents a large portion of Latin America’s total market
and thus may be more sensitive to adverse political or economic circumstances
and market movements. Securities of companies in Latin American countries may be
subject to significant price volatility, which could impact the Matthews
Emerging Markets Equity Fund’s and the Matthews Emerging Markets Small Companies
Fund’s performance. During periods of instability or upheaval, a country’s
government may act in a detrimental or hostile manner toward private enterprise
or foreign investment. In addition, at certain times, the Matthews Emerging
Markets Equity Fund and the Matthews Emerging Markets Small Companies Fund may
have to “fair value” certain securities by assigning a value on the basis of
factors other than market quotations. Portfolio holdings that are valued using
techniques other than market quotations, including “fair valued” securities, may
be subject to greater fluctuation than if market quotations had been used, and
there is no assurance that the Matthews Emerging Markets Equity Fund or the
Matthews Emerging Markets Small Companies Fund could sell or close out a
portfolio position for the value established for it at any time.
Additional Risks
The
following additional or non‑principal risks also apply to investments in the
Funds.
Risks
Associated with Other Asia Pacific and Emerging Market Countries
Australia. The Australian economy is dependent,
in particular, on the price and demand for agricultural products and natural
resources. The United States and China are Australia’s largest trade and
investment partners, which may make the Australian markets sensitive to economic
and financial events in those two countries. Australian markets may also be
susceptible to sustained increases in oil prices as well as weakness in
commodity and labor markets.
Bangladesh. Bangladesh is facing many economic
hurdles, including weak political institutions, poor infrastructure, lack of
privatization of industry and a labor force that has outpaced job growth in the
country. High poverty and inflationary tensions may cause social unrest, which
could weigh negatively on business sentiment and capital investment.
Bangladesh’s
developing capital markets rely primarily on domestic investors. The recent
overheating of the stock market and subsequent correction underscored weakness
in capital markets and regulatory oversight. Corruption remains a serious
impediment to investment and economic growth in Bangladesh, and the country’s
legal system makes debt collection unpredictable, dissuading foreign investment.
Bangladesh is geographically located in a part of the world that is historically
prone to natural disasters and is economically sensitive to environmental
events.
Brazil. Brazilian issuers are subject to
possible regulatory and economic interventions by the Brazilian government,
including the imposition of wage and price controls and the limitation of
imports. In addition, the market for Brazilian securities is directly influenced
by the flow of international capital and economic and market conditions of
certain countries, especially other emerging market countries in Central and
South America. The Brazilian economy historically has been exposed to high rates
of inflation and a high level of debt, each of which may reduce and/or prevent
economic growth. Brazil also has suffered from chronic structural public sector
deficits. Such challenges have contributed to a high degree of price volatility
in both the Brazilian equity and foreign currency markets. A rising unemployment
rate could also have the same effect.
Cambodia. Cambodia is experiencing a period of
political stability and relative peace following years of violence under the
Khmer Rouge regime. Despite its recent growth and stability, Cambodia faces
risks from a weak infrastructure (particularly power generation capacity and the
high cost of electric power), a poorly developed education system, inefficient
bureaucracy and charges of government corruption. Very low foreign exchange
reserves make Cambodia vulnerable to sudden capital flight, and the banking
system suffers from a lack of oversight and very high dollarization. Further,
destruction of land-ownership records during the Khmer Rouge regime has resulted
in numerous land disputes, which strain the country’s institutional capacity and
threaten violence and demonstrations.
Indonesia. Indonesia’s political institutions
and democracy have a relatively short history, increasing the risk of political
instability. Indonesia has in the past faced political and militant unrest
within several of its regions, and further unrest could present a risk to the
local economy and stock markets. The country has also experienced acts of
terrorism, predominantly targeted at foreigners, which has had a negative impact
on tourism. Corruption and the perceived lack of a rule of law in dealings with
international companies in the past may have discouraged much needed foreign
direct investment. Should this issue remain, it could negatively impact the
long-term growth of the economy. In addition, many economic development problems
remain, including high unemployment, a developing banking sector, endemic
corruption, inadequate infrastructure, a poor investment climate and unequal
resource distribution among regions.
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Laos. Laos is a poor, developing country ruled
by an authoritarian, Communist, one‑party government. It is politically stable,
with political power centralized in the Lao People’s Revolutionary Party. Laos’
economic growth is driven largely by the construction, mining and hydroelectric
sectors. However, the increased development of natural resources could lead to
social imbalances, particularly in light of Laos’ underdeveloped health care and
education systems. Laos is a poorly regulated economy with limited rule of law.
Corruption, patronage and a weak legal system threaten to slow economic
development. Another major risk for Laos is the stability of its banks, which,
despite the significant credit growth since 2009, are under-capitalized and
inadequately supervised.
Malaysia. Malaysia has previously imposed
currency controls and a 10% “exit levy” on profits repatriated by foreign
entities such as the Funds and has limited foreign ownership of Malaysian
companies (which may artificially support the market price of such companies).
The Malaysian capital controls have been changed in significant ways since they
were first adopted without prior warning on September 1, 1998. Malaysia has
also abolished the exit levy. However, there can be no assurance that the
Malaysian capital controls will not be changed adversely in the future or that
the exit levy will not be re‑established, possibly to the detriment of the Funds
and their shareholders. In addition, Malaysia is currently exhibiting political
instability which could have an adverse impact on the country’s economy.
Mexico. The Mexican economy is dependent upon
external trade with other economies, specifically with the United States and
certain Latin American countries. As a result, Mexico is dependent on the U.S.
economy, and any change in the price or demand for Mexican exports may have an
adverse impact on the Mexican economy. Recently, Mexico has experienced an
outbreak of violence related to drug trafficking. Incidents involving Mexico’s
security may have an adverse effect on the Mexican economy and cause uncertainty
in its financial markets. In the past, Mexico has experienced high interest
rates, economic volatility, and high unemployment rates. In addition, one
political party dominated its government until the elections of 2000, when
political reforms were put into place to improve the transparency of the
electoral process. Since then, competition among political parties has
increased, resulting in elections that have been contentious, and this continued
trend could lead to greater market volatility.
Mongolia. Mongolia has experienced political
instability in conjunction with its election cycles. Mongolian governments have
had a history of cycling favorable treatment among China, Russia, Japan, the
United States and Europe and may at any time abruptly change current policies in
a manner adverse to investors. In addition, assets in Mongolia may be subject to
nationalization, requisition or confiscation (whether legitimate or not) by any
government authority or body. Government corruption and inefficiencies are also
a problem. Mongolia’s unstable economic policies and regulations towards foreign
investors threaten to impede necessary growth
of
production capacity. Additionally, the Mongolian economy is extremely dependent
on the price of minerals and Chinese demand for Mongolian exports.
Myanmar. Myanmar (formerly Burma) is emerging
from nearly half a century of isolation under military rule and from the gradual
suspension of sanctions imposed for human-rights violations. However, Myanmar
struggles with rampant corruption, poor infrastructure (including basic
infrastructure, such as transport, telecoms and electricity), ethnic tensions, a
shortage of technically proficient workers and a dysfunctional bureaucratic
system. Myanmar has no established corporate bond market or stock exchange and
has a limited banking system. Additionally, despite democratic trends and
progress on human rights, Myanmar’s political situation remains fluid, and there
remains the possibility of reinstated sanctions.
New Zealand. New Zealand is generally
considered to be a developed market, and investments in New Zealand generally do
not have risks associated with them that are present with investments in
developing or emerging markets. New Zealand is a country heavily dependent on
free trade, particularly in agricultural products. This makes New Zealand
particularly vulnerable to international commodity prices and global economic
slowdowns. Its principal export industries are agriculture, horticulture,
fishing and forestry.
Pakistan. Changes in the value of investments
in Pakistan and in companies with significant economic ties to that country
largely depend on continued economic growth and reform in Pakistan, which
remains uncertain and subject to a variety of risks. Pakistan has faced, and
continues to face, high levels of political instability and social unrest at
both the regional and national levels. Ongoing border disputes with India may
result in armed conflict between the two nations, and Pakistan’s geographic
location and its shared borders with Afghanistan and Iran increase the risk that
it will be involved in, or otherwise affected by, international conflict.
Pakistan’s economic growth is in part attributable to high levels of
international support, which may be significantly reduced or terminated in
response to changes in the political leadership of Pakistan. Pakistan faces a
wide range of other economic problems and risks, such as the uncertainty over
the privatization efforts, the substantial natural resource constraints it is
subject to, its large budgetary and current account deficits as well as trade
deficits, its judicial system that is still developing and widely perceived as
lacking transparency, and inflation.
Papua New Guinea. Papua New Guinea is a small
country that faces challenges in maintaining political stability. The government
intrudes in many aspects of the economy through state ownership and regulation.
Despite promises from the government to address rampant corruption, corruption
and nepotism remain pervasive and often go unpunished. Other challenges facing
Papua New Guinea include providing physical security for foreign investors,
regaining investor confidence, restoring integrity to state institutions,
privatizing state institutions, improving its legal
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system
and maintaining good relations with Australia. Exploitation of Papua New
Guinea’s natural resources is limited by terrain, land tenure issues and the
high cost of developing infrastructure. Papua New Guinea has several thousand
distinct and heterogeneous indigenous communities, which create additional
challenges in dealing with tribal conflicts, some of which have been going on
for millennia.
Philippines. Philippines’ consistently large
budget deficit has produced a high debt level and has forced the country to
spend a large portion of its national government budget on debt service. Large,
unprofitable public enterprises, especially in the energy sector, contribute to
the government’s debt because of slow progress on privatization.
Russia. Russia has been undergoing some
market-oriented reforms including a movement from centrally controlled ownership
to privatization; however, it may experience unfavorable political developments,
social instability, and/or significant changes in government policies. For
example, military and political actions undertaken by Russia have prompted the
United States and the regulatory bodies of certain other countries, as well as
the EU, to impose economic sanctions on certain Russian individuals and Russian
companies. These sanctions can consist of prohibiting certain securities trades,
certain private transactions in the energy sector, asset freezes and prohibition
of all business, against certain Russian individuals and Russian companies.
Additionally, Russia is alleged to have participated in state-sponsored
cyberattacks against foreign companies and foreign governments. Actual and
threatened responses to such activity, including economic restrictions,
sanctions, tariffs or cyberattacks on the Russian government or Russian
companies, may impact Russia’s economy and Russian issuers of securities in
which the Funds invest. In addition, Russia’s recent military incursions in
Ukraine have led to, and may lead to additional, sanctions being levied against
Russia by the United States, European Union and other countries. Russia’s
military incursion and the resulting sanctions could adversely affect European
and global energy and financial markets and thus could affect the value of a
Fund’s investments. The extent and duration of the military action, sanctions
and resulting market disruptions are impossible to predict, but could be
substantial. These sanctions and other responses and the continued disruption of
the Russian economy may result in the devaluation of the Russian currency and a
decline in the value and liquidity of Russian securities and may have other
negative impacts on Russia’s economy, which could have a negative impact on the
Matthews Emerging Markets Equity Fund’s and the Matthews Emerging Markets Small
Companies Fund’s investment performance and liquidity. Retaliatory actions by
the Russian government could involve the seizure of assets of U.S. residents and
entities, such as the Matthews Emerging Markets Equity Fund and the Matthews
Emerging Markets Small Companies Fund, and could further impair the value and
liquidity of Russian securities. In addition, the Matthews Emerging Markets
Equity Fund’s and the Matthews Emerging
Markets
Small Companies Fund’s ownership in securities could be lost through fraud or
negligence because ownership in shares of Russian companies is recorded by the
companies themselves and by registrars, rather than by a central registration
system. The Matthews Emerging Markets Equity Fund and the Matthews Emerging
Markets Small Companies Fund may not be able to pursue claims on behalf of its
shareholders because Russian banking institutions and registrars are not
guaranteed by the Russian government.
Singapore. As a small open economy, Singapore
is particularly vulnerable to external economic influences, such as the Asian
economic crisis of the late 1990s. Singapore has been a leading manufacturer of
electronics goods. However, competition from other countries in this and related
industries, and adverse Asian economic influences generally, may negatively
affect Singapore’s economy.
Sri Lanka. Civil war and terrorism have
disrupted the economic, social and political stability of Sri Lanka for decades.
While these tensions appear to have lessened, there is the potential for
continued instability resulting from ongoing ethnic conflict. Sri Lanka faces
severe income inequality, high inflation and a sizable public debt load. Sri
Lanka relies heavily on foreign assistance in the form of grants and loans from
a number of countries and international organizations such as the World Bank and
the Asian Development Bank. Changes in international political sentiment may
have significant adverse effects on the Sri Lankan economy.
Thailand. In recent years Thailand has
experienced increased political, social and militant unrest, negatively
impacting tourism and the broader economy.
Thailand’s
political institutions remain unseasoned, increasing the risk of political
instability. Since 2005, Thailand has experienced several rounds of political
turmoil, including a military coup in September 2006 that replaced Thailand’s
elected government with new leadership backed by a military junta. Political and
social unrest have continued following the 2006 coup and have resulted in
disruptions, violent protests and clashes between citizens and the government.
In May 2014, after months of large-scale anti-government protests, another
military coup was staged, and a new military junta was established to govern the
nation. In March 2019, after many rounds of delays, the first general election
since the 2014 coup was held in Thailand. The election has been widely
considered a contest between the pro‑military and pro‑democracy forces, and the
outcome of the election could lead to further political instability in Thailand.
These events have negatively impacted the Thai economy, and the long-term effect
of these developments remains unclear. The Thai government has historically
imposed investment controls apparently designed to control volatility in the
Thai baht and to support certain export-oriented Thai industries. These controls
have largely been suspended, although there is no guarantee that such controls
will not be re‑imposed. However, partially in response to these controls, an
offshore market for
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the
exchange of Thai baht developed. The depth and transparency of this market have
been uncertain.
Risks Associated with
Other Regions
Africa
and the Middle East
The
economies of certain African and Middle Eastern countries are in the earliest
stages of economic development, which may result in a high concentration of
trading volume and market capitalization in a small number of issuers or a
limited number of industries. There are typically fewer brokers in African and
Middle Eastern countries, and they are typically less well capitalized than
brokers in the United States or other developed markets. Many African nations
have a history of military intervention, dictatorship, civil war, and
corruption, which all limit the effectiveness of markets in those countries.
Many Middle Eastern countries are facing political and economic uncertainty,
with little or no democratic tradition or free market history, which could
result in significant economic downturn.
During
periods of instability or upheaval, a country’s government may act in a
detrimental or hostile manner toward private enterprise or foreign investment.
In addition, at certain times, the Matthews Emerging Markets Equity Fund and the
Matthews Emerging Markets Small Companies Fund may have to “fair value” certain
securities by assigning a value on the basis of factors other than market
quotations. Portfolio holdings that are valued using techniques other than
market quotations, including “fair valued” securities, may be subject to greater
fluctuation than if market quotations had been used, and there is no assurance
that the Matthews Emerging Markets Equity Fund or the Matthews Emerging Markets
Small Companies Fund could sell or close out a portfolio position for the value
established for it at any time. Further, the economies of many Middle Eastern
and African countries are largely dependent on, and linked together by, certain
commodities (such as gold, silver, copper, diamonds, and oil). As a result,
African and Middle Eastern economies are vulnerable to changes in commodity
prices, and fluctuations in demand for these commodities could significantly
impact economies in these regions. A downturn in one country’s economy could
have a disproportionally large effect on others in the region.
U.S.
Securities Risk
Certain
Funds invest to a limited extent in stocks issued by U.S. companies. U.S. stocks
have certain risks similar to equity securities issued in other countries, such
as declines in value over short or extended periods as a result of changes in a
company’s financial condition or the overall market as well as economic and
political conditions. Although U.S. stocks have enjoyed many years of favorable
returns, they have more recently experienced volatility based on political and
economic events such as trade disputes. In addition, interest rate increases in
the U.S. may adversely affect stocks.
Risks
Associated with Investment in a Smaller Number of Companies or Industries
From
time to time, a relatively small number of companies and industries may
represent a large portion of the total stock market in a particular country or
region, and these companies and industries may be more sensitive to adverse
social, political, economic or regulatory developments than funds whose
portfolios are more diversified. Events affecting a small number of companies or
industries may have a significant and potentially adverse impact on your
investment in the Funds, and the Funds’ performance may be more volatile than
that of funds that invest globally.
Credit
Ratings Risk
In
this prospectus, references are made to credit ratings of debt securities, which
measure an issuer’s expected ability to pay principal and interest over time
(but not other risks, including market risks). Credit ratings are determined by
rating organizations, such as Moody’s, S&P and Fitch, based on their view of
past and potential developments related to an issuer (or security). Such
potential developments may not reflect actual developments and a rating
organization’s evaluation may be incomplete or inaccurate. For a further
description of credit ratings, see “Appendix: Bond Ratings” in the Funds’
SAI.
Passive
Foreign Investment Companies Risk
The
Funds may invest in PFICs. Investments in PFICs may subject the Funds to taxes
and interest charges that cannot be avoided, or that can be avoided only through
complex methods that may have the effect of imposing a less favorable tax rate
or accelerating the recognition of gains and payment of taxes.
Initial
Public Offerings (“IPOs”) Risk
IPOs
of securities issued by unseasoned companies with little or no operating history
are risky and their prices are highly volatile, but they can result in very
large gains in their initial trading. Attractive IPOs are often oversubscribed
and may not be available to the Funds or may be available only in very limited
quantities. Thus, when a Fund’s size is smaller, any gains or losses from IPOs
may have an exaggerated impact on the Fund’s performance than when it is larger.
The Funds’ portfolio managers are permitted to engage in short-term trading of
IPOs. Although IPO investments have had a positive impact on the performance of
some Funds, there can be no assurance that a Fund will have favorable IPO
investment opportunities in the future or that a Fund’s investments in IPOs will
have a positive impact on its performance.
Market
Timing and Other Short-Term Trading Risk
The
Funds are not intended for short-term trading by investors. Investors who hold
shares of the Funds for the short term, including market-timers, may harm the
Funds and other shareholders by diluting the value of their shares, disrupting
management of a Fund’s portfolio and causing a Fund to incur additional costs,
which are borne by non‑redeeming shareholders. The Funds attempt to discourage
time-zone arbitrage and similar market-timing activities, which seek to
benefit
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from
any differences between a Fund’s NAV and the fair value of its holdings that may
occur between the closing times of foreign and U.S. markets, with the latter
generally used to determine when each Fund’s NAV is calculated. See
page 102 for additional information on the Funds’ policies and procedures
related to short-term trading and market-timing activity.
Risks
Associated with Investment in China A Shares
Matthews
has applied for and received a license as a Qualified Foreign Investor (“QFI”)
from the China Securities Regulatory Commission and has been registered with the
State Administration of Foreign Exchange of China for the inward and outward
remittance of funds in foreign currencies and/or offshore renminbi (the “QFI
Status”), by which Matthews may invest in stocks of Chinese companies listed on
the Shanghai Stock Exchange and the Shenzhen Stock Exchange and traded and
denominated in the currency of China, the renminbi (“China A Shares”) on behalf
of clients whose portfolios it manages, including for this purpose any series,
sub‑fund, sleeve, or other sub‑account of such client (each an “A Share
Investor”). For a further discussion of China A Shares and risks associated with
investing in China A Shares, see “Risks Associated with Investing in China A
Shares” in the Funds’ SAI.
Matthews,
as a QFI license holder, maintains custody of China A Share assets with a local
custodian in its own name for the benefit of the A Share Investors (the “A Share
Account”). In addition, the local Chinese custodian will maintain, on
its
books
and records, a sub‑account on behalf of each A Share Investor with respect to
the China A Share assets held by each individual A Share Investor.
Matthews
has agreed with each A Share Investor that Matthews has and shall have no
beneficial interest in such China A Share assets and that they belong
exclusively to the individual A Share Investors in whose name they are held on
the books and records of the Chinese custodian. In addition, each A Share
Investor has agreed that such A Share Investor has an interest solely in the
China A Share assets held through the QFI Status of Matthews that are registered
in its name on the books and records of the Chinese custodian, and that they
have no interest in any China A Share assets held on the books and records of
the Chinese custodian in the name of any other A Share Investor.
A
Share Investors, including the Funds, bear the costs of maintaining their
sub‑account on the books and records of the Chinese custodian, as well as their
share of the costs of maintaining the A Share Account.
Although
China A Shares generally trade in liquid markets, because of the repatriation
requirements imposed by the Chinese government, a Fund’s investment in China A
Shares may be illiquid and subject to the Fund’s policy of investing no more
than 15% of its net assets in illiquid securities.
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RISKS OF INVESTING IN THE FUNDS |
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Management
of the Funds
Matthews
International Capital Management, LLC is the investment advisor to the Funds.
Matthews is located at Four Embarcadero Center, Suite 550, San Francisco,
California 94111 and can be reached toll free by telephone at 800.789.ASIA
(2742). Matthews was founded in 1991 by G. Paul Matthews. Since its
inception, Matthews has specialized in managing portfolios of Asian securities.
Matthews invests the Funds’ assets, manages the Funds’ business affairs,
supervises the Funds’ overall day‑to‑day operations, and provides the personnel
needed by the Funds with respect to Matthews’ responsibilities pursuant to an
Investment Advisory Agreement dated as of February 1, 2016 between Matthews
and the Trust on behalf of the Funds (as amended from time to time, the
“Advisory Agreement”). Matthews also furnishes the Funds with office space and
provides certain administrative, clerical and shareholder services to the Funds
pursuant to the Services Agreement (as defined below).
Pursuant
to the Advisory Agreement, the Funds, other than the Matthews Emerging Markets
Small Companies Fund and the Matthews China Small Companies Fund (such Funds
collectively, the “Family-Priced Funds”), in the aggregate, pay Matthews 0.75%
of the aggregate average daily net assets of the Family-Priced Funds up to
$2 billion, 0.6834% of the aggregate average daily net assets of the
Family-Priced Funds over $2 billion up to $5 billion, 0.65% of the
aggregate average daily net assets of the Family-Priced Funds over
$5 billion up to $25 billion, 0.64% of the aggregate average daily net
assets of the Family-Priced Funds over $25 billion up to $30 billion,
0.63% of the aggregate average daily net assets of the Family-Priced Funds over
$30 billion up to $35 billion, 0.62% of the aggregate average daily
net assets of the Family-Priced Funds over $35 billion up to
$40 billion, 0.61% of the aggregate average daily net assets of the
Family-Priced Funds over $40 billion up to $45 billion, and 0.60% of
the aggregate average daily net assets of the Family-Priced Funds over
$45 billion. The Family-Priced Funds shall pay to Matthews a monthly fee at
the annual rate using the applicable management fee calculated based on the
actual number of days of that month and based on such Funds’ average daily net
assets for the month.
Pursuant
to the Advisory Agreement, each of the Matthews Emerging Markets Small Companies
Fund and the Matthews China Small Companies Fund pays Matthews a fee equal to
1.00% of its average daily net assets up to $1 billion and 0.95% of its
average daily net assets over $1 billion. Each of the Matthews Emerging
Markets Small Companies Fund and the Matthews China Small Companies Fund shall
pay to Matthews a monthly fee at the annual rate using the applicable management
fee calculated based on the actual number of days of that month and based on
such Fund’s average daily net assets for the month.
A
discussion regarding the basis for the Board’s approval of the Advisory
Agreement with respect to the Funds is available in the Funds’ Annual Report to
Shareholders for the fiscal year ended December 31, 2021.
For
the fiscal year ended December 31, 2021, the Funds paid investment
management fees to Matthews as follows (as a percentage of average net
assets):
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Matthews
Emerging Markets Equity Fund, Matthews Asian Growth and Income Fund,
Matthews Asia Dividend Fund, Matthews China Dividend Fund, Matthews Asia
Growth Fund, Matthews Pacific Tiger Fund, Matthews Asia ESG Fund, Matthews
Asia Innovators Fund, Matthews China Fund, Matthews India Fund, Matthews
Japan Fund, Matthews Korea Fund |
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0.66% |
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Matthews Emerging Markets Small Companies
Fund, Matthews China Small Companies Fund |
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1.00% |
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Matthews
may delegate certain portfolio management activities with respect to one or more
Funds to a wholly owned subsidiary based outside of the United States. Any such
participating affiliate would enter into a participating affiliate agreement
with Matthews related to the affected Fund, and Matthews would remain fully
responsible for the participating affiliate’s services as if Matthews had
performed the services directly. Any delegation of services in this manner would
not increase the fees or expenses paid by the Fund, and would normally be used
only where a portfolio manager or other key professional is located in the
country where the subsidiary is based.
Pursuant
to an administration and shareholder services agreement dated as of
August 13, 2004 (as amended from time to time, the “Services Agreement”),
the Matthews Asia Funds in the aggregate pay Matthews 0.25% of the aggregate
average daily net assets of the Matthews Asia Funds up to $2 billion,
0.1834% of the aggregate average daily net assets of the Matthews Asia Funds
over $2 billion up to $5 billion, 0.15% of the aggregate average daily
net assets of the Matthews Asia Funds over $5 billion up to
$7.5 billion, 0.125% of the aggregate average daily net assets of the
Matthews Asia Funds over $7.5 billion up to $15 billion, 0.11% of the
aggregate average daily net assets of the Matthews Asia Funds over
$15 billion up to $22.5 billion, 0.10% of the aggregate average daily
net assets of the Matthews Asia Funds over $22.5 billion up to
$25 billion, 0.09% of the aggregate average daily net assets of the
Matthews Asia Funds over $25 billion up to $30 billion, 0.08% of the
aggregate average daily net assets of the Matthews Asia Funds over
$30 billion up to $35 billion, 0.07% of the aggregate average daily
net assets of the Matthews Asia Funds over $35 billion up to
$40 billion, 0.06% of the aggregate average daily net assets of the
Matthews Asia Funds over $40 billion up to $45 billion, and 0.05% of
the aggregate average daily net assets of the Matthews Asia Funds
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over
$45 billion. Matthews receives this compensation for providing certain
administrative and shareholder services to the Matthews Asia Funds and current
shareholders of the Matthews Asia Funds, including overseeing the activities of
the Matthews Asia Funds’ transfer agent, accounting agent, custodian and
administrator; assisting with the daily calculation of the Matthews Asia Funds’
net asset values; overseeing each Matthews Asia Fund’s compliance with its
legal, regulatory and ethical policies and procedures; assisting with the
preparation of agendas and other materials drafted by the Matthews Asia Funds’
third-party administrator and other parties for Board meetings; coordinating and
executing fund launches and closings (as applicable); general oversight of the
vendor community at large as well as industry trends to ensure that shareholders
are receiving quality service and technology; responding to shareholder
communications including coordinating shareholder mailings, proxy statements,
annual reports, prospectuses and other correspondence from the Matthews Asia
Funds to shareholders; providing regular communications and investor education
materials to shareholders, which may include communications via electronic
means, such as electronic mail; providing certain shareholder services not
handled by the Matthews Asia Funds’ transfer agent or other intermediaries (such
as fund supermarkets); communicating with investment advisors whose clients own
or hold shares of the Matthews Asia Funds; and providing such other information
and assistance to shareholders as may be reasonably requested by such
shareholders.
Pursuant
to an operating expenses agreement, dated as of November 4, 2003, (as
amended from time to time, the “Operating Expenses Agreement”), for all Funds
other than the Matthews Emerging Markets Equity Fund and the Matthews Emerging
Markets Small Companies Fund, Matthews has agreed to waive fees and reimburse
expenses to the extent needed to limit total annual operating expenses
(excluding Rule 12b‑1 fees, taxes, interest, brokerage commissions, short sale
dividend expenses, expenses incurred in connection with any merger or
reorganization or extraordinary expenses such as litigation) of the
Institutional Class to 1.20%, first by waiving class specific expenses
(e.g., shareholder service fees specific
to a particular class) of the Institutional Class and then, to the extent
necessary, by waiving non‑class specific expenses of the Institutional Class.
For the Matthews Emerging Markets Equity Fund and the Matthews Emerging Markets
Small Companies Fund, Matthews has agreed to reduce this expense limitation to
0.90% and 1.15%, respectively, for the Institutional Class.
In
turn, if a Fund’s expenses fall below the expense limitation within three years
after Matthews has made such a waiver or reimbursement, the Fund may reimburse
Matthews up to an amount not to cause the expenses for that year to exceed the
lesser of (i) the expense limitation applicable at the time of such fee
waiver and/or expense reimbursement, or (ii) the expense limitation in
effect at the time of recoupment. For
each
Fund, this agreement will continue through April 30, 2023 and may be
extended for additional periods not exceeding one year, and may be terminated at
any time by the Board of Trustees on behalf of the Fund on 60 days’ written
notice to Matthews. Matthews may decline to renew this agreement by written
notice to the Trust at least 30 days before its annual expiration
date.
Pursuant
to a fee waiver letter agreement (the “Fee Waiver Agreement”), effective as of
September 1, 2014, as amended, between the Trust, on behalf of the
Family-Priced Funds, and Matthews, for each Family-Priced Fund, Matthews has
contractually agreed to waive a portion of the fee payable under the Advisory
Agreement and a portion of the fee payable under the Services Agreement, if any
Family-Priced Fund’s average daily net assets are over $3 billion, as
follows: for every $2.5 billion average daily net assets of a Family-Priced
Fund that are over $3 billion, the fee rates under the Advisory Agreement
and the Services Agreement for such Family-Priced Fund with respect to such
excess average daily net assets will be each reduced by 0.01%, in each case
without reducing such fee rate below 0.00%. Matthews may not recoup fees waived
pursuant to the Fee Waiver Agreement. The Board has approved the Fee Waiver
Agreement for an additional one‑year term through April 30, 2023 and may
terminate the agreement at any time upon 60 days’ written notice to Matthews.
Matthews may decline to renew the Fee Waiver Agreement by providing written
notice to the Trust at least 60 days before its annual expiration date.
Pursuant
to an amended and restated intermediary platform fee subsidy letter agreement
(the “Subsidy Agreement”), effective March 1, 2015, between the Trust, on
behalf of the Matthews Asia Funds, and Matthews, with respect to each
intermediary platform that charges the Matthews Asia Funds 10 basis points
(0.10%) or more for services provided with respect to Institutional
Class shares of the Matthews Asia Funds through such platform, Matthews has
voluntarily agreed to reimburse the Institutional Class of the Matthews
Asia Funds a portion of those service fees in an amount equal to 2 basis points
(0.02%), and with respect to each intermediary platform that charges the
Matthews Asia Funds 5 basis points (0.05%) or more but less than 10 basis points
(0.10%) for the offer and sale of Institutional Class shares of the
Matthews Asia Funds through such platform, Matthews has voluntarily agreed to
reimburse the Institutional Class of the Matthews Asia Funds a portion of
those service fees in an amount equal to 1 basis point (0.01%). Matthews may not
recoup amounts reimbursed pursuant to the Subsidy Agreement. The Subsidy
Agreement may be terminated at any time by the Board upon 60 days’ written
notice to Matthews, or by Matthews upon 60 days’ written notice to the
Board.
Each
Fund also offers Investor Class shares. Investor Class shares have
different expenses which will result in different performance than Institutional
Class shares. Shares of the two classes of each Fund otherwise have
identical rights and vote together except for matters affecting only a specific
class.
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MANAGEMENT OF THE FUNDS |
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99 |
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Portfolio Managers
Each
of the Funds is managed by one or more Lead Managers. A Lead Manager of a Fund
is primarily responsible for its day‑to‑day investment management decisions (and
jointly responsible with any other Lead Managers). For most of the Funds, a Lead
Manager is supported by and consults with one or more Co‑Managers, who are not
primarily responsible for portfolio management.
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ROBERT J.
HORROCKS, PhD |
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Robert Horrocks is Chief Investment
Officer and a Portfolio Manager at Matthews and has been a Matthews Asia
Funds Trustee since 2018. He manages the firm’s Asian Growth and Income
Strategy and co‑manages the Asia Dividend and Asia ex Japan Dividend
Strategies. As Chief Investment Officer, Robert oversees the firm’s
investment process and investment professionals and sets the research
agenda for the investment team. Before joining Matthews in 2008, Robert
was Head of Research at Mirae Asset Management in Hong Kong. From 2003 to
2006, Robert served as Chief Investment Officer for Everbright Pramerica
in China, establishing its quantitative investment process. He started his
career as a Research Analyst with WI Carr Securities in Hong Kong before
moving on to spend eight years working in several different Asian
jurisdictions for Schroders, including stints as Country General Manager
in Taiwan, Deputy Chief Investment Officer in Korea and Designated Chief
Investment Officer in Shanghai. Robert earned his PhD in Chinese Economic
History from Leeds University in the United Kingdom and is fluent in
Mandarin. Robert has been a Portfolio Manager of the Matthews Asian Growth
and Income Fund since 2009 and of the Matthews Asia Dividend Fund since
2013. |
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Lead
Manager
Matthews Asian
Growth and Income Fund
Co‑Manager
Matthews
Asia Dividend Fund |
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SIDDHARTH
BHARGAVA |
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Siddharth Bhargava is a Portfolio
Manager at Matthews and co‑manages the firm’s Asian Growth and Income
Strategy. Prior to joining the firm in 2011, he was an Investment Analyst
at Navigator Capital. Siddharth also served as a credit and debt market
research assistant to Dr. Edward Altman at the New York
University Salomon Center. From 2005 to 2008, he was a Credit Analyst at
Sandell Asset Management. Siddharth received a B.A. in Economics from the
University of Virginia and an MBA from the Stern School of Business at New
York University. He is fluent in Hindi and conversational in German.
Siddharth has been a Portfolio Manager of the Matthews Asian Growth and
Income Fund since 2021. |
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Co‑Manager
Matthews
Asian Growth and Income Fund |
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WINNIE
CHWANG |
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Winnie Chwang is a Portfolio Manager
at Matthews and manages the firm’s China Small Companies Strategy and
co‑manages the firm’s China and Pacific Tiger Strategies. She joined the
firm in 2004 and has built her investment career at the firm. Winnie
earned an M.B.A. from the Haas School of Business and received her B.A. in
Economics with a minor in Business Administration from the University of
California, Berkeley. She is fluent in Mandarin and conversational in
Cantonese. Winnie has been a Portfolio Manager of the Matthews China Fund
since 2014, of the Matthews China Small Companies Fund since 2020, and of
the Matthews Pacific Tiger Fund since 2021. |
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Lead
Manager
Matthews
China Small Companies Fund
Co‑Manager
Matthews
China Fund
Matthews
Pacific Tiger Fund |
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TAIZO
ISHIDA |
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Taizo Ishida is a Portfolio Manager
at Matthews and manages the firm’s Asia Growth and Japan Strategies, and
co‑manages the firm’s Asia Innovators Strategy. Prior to joining Matthews
in 2006, Taizo spent six years on the global and international teams at
Wellington Management Company as a Vice President and Portfolio Manager.
From 1997 to 2000, he was a Senior Securities Analyst and a member of the
international investment team at USAA Investment Management Company. From
1990 to 1997, he was a Principal and Senior Research Analyst at Sanford
Bernstein & Co. Prior to beginning his investment career at
Yamaichi International (America), Inc. as a Research Analyst, he spent two
years in Dhaka, Bangladesh as a Program Officer with the United Nations
Development Program. Taizo received a B.A. in Social Science from
International Christian University in Tokyo and an M.A. in International
Relations from The City College of New York. He is fluent in Japanese.
Taizo has been a Portfolio Manager of the Matthews Asia Growth Fund since
2007, of the Matthews Japan Fund since 2006, and of the Matthews Asia
Innovators Fund since 2022. |
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Lead
Manager
Matthews
Asia Growth Fund
Matthews
Japan Fund
Co-Manager
Matthews
Asia Innovators Fund |
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JOHN PAUL
LECH |
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John Paul Lech is a Portfolio Manager
at Matthews and manages the firm’s Emerging Markets Equity Strategy. Prior
to joining the firm in 2018, he spent most of his 10 years at
OppenheimerFunds as an Analyst and Portfolio Manager on a diversified
emerging market equity strategy. John Paul started his career as an
Analyst and Associate at Citigroup Global Markets, Inc. He is fluent in
Spanish and conversational in French and Portuguese. John Paul earned both
an M.A. and a B.S.F.S. from the Walsh School of Foreign Service at
Georgetown University. John Paul has been a Portfolio Manager of the
Matthews Emerging Markets Equity Fund since its inception 2020. |
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Lead
Manager
Matthews
Emerging Markets Equity Fund |
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ELLI
LEE |
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Elli Lee is a Portfolio Manager at
Matthews and manages the firm’s Korea Strategy. Prior to joining the firm
in 2016, Elli worked at Bank of America Merrill Lynch for 10 years, most
recently in Korean Equity Sales and previously as an Equity Research
Analyst covering South Korea’s engineering, construction, steel and
education sectors. From 2003 to 2005, Elli was an Investor Relations
Specialist at Hana Financial Group in Seoul. She earned a Master of
Science in Global Finance from the Hong Kong University of Science and
Technology Business School and New York University Stern School of
Business, and received a B.A. in Economics from Bates College, and is
fluent in Korean. Elli has been a Portfolio Manager of the Matthews Korea
Fund since 2019. |
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Lead
Manager
Matthews
Korea Fund |
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S. JOYCE LI,
CFA |
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S. Joyce Li is a Portfolio Manager at
Matthews and manages the firm’s Asia Dividend Strategy and co‑manages the
firm’s China Dividend and Asia ex Japan Dividend Strategies. Prior to
joining the firm in 2016, she was a Portfolio Manager and Principal at
Marvin & Palmer Associates, where she co‑managed equity
investments in the Asia Pacific markets between 2007 and 2016. Joyce
started her investment career as a Senior Investment Associate at
Wilmington Trust. Joyce received an M.B.A. with honors from the Wharton
School of the University of Pennsylvania and a M.S. in Computer Science
from the University of Virginia. She is fluent in Mandarin and Cantonese.
Joyce has been a Portfolio Manager of the Matthews Asia Dividend Fund
since 2020 and of the Matthews China Dividend Fund since 2019. |
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Lead
Manager
Matthews
Asia Dividend Fund
Co‑Manager
Matthews
China Dividend Fund |
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KENNETH LOWE,
CFA |
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Kenneth Lowe is a Portfolio Manager
at Matthews and manages the firm’s Asian Growth and Income Strategy. Prior
to joining Matthews in 2010, he was an Investment Manager on the Asia and
Global Emerging Market Equities Team at Martin Currie Investment
Management in Edinburgh, Scotland. Kenneth received an M.A. in Mathematics
and Economics from the University of Glasgow. Kenneth has been a Portfolio
Manager of the Matthews Asian Growth and Income Fund since 2011. |
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Lead
Manager
Matthews
Asian Growth and Income Fund |
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ANDREW MATTOCK,
CFA |
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Andrew Mattock is a Portfolio Manager
at Matthews and manages the firm’s China and China Small Companies
Strategies, and co‑manages the firm’s Pacific Tiger Strategy. Prior to
joining the firm in 2015, he was a Fund Manager at Henderson Global
Investors for 15 years, first in London and then in Singapore, managing
Asia Pacific equities. Andrew holds a Bachelor of Business majoring in
Accounting from ACU. He began his career at PricewaterhouseCoopers and
qualified as a Chartered Accountant. Andrew has been a Portfolio Manager
of the Matthews China Fund since 2015, of the Matthews China Small
Companies Fund since 2020, and of the Matthews Pacific Tiger Fund since
2022. |
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Lead
Manager
Matthews
China Fund
Matthews
China Small Companies Fund
Co‑Manager
Matthews
Pacific Tiger Fund |
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PEEYUSH MITTAL,
CFA |
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Peeyush Mittal is a Portfolio Manager
at Matthews and manages the firm’s India Strategy. Prior to joining the
firm in 2015, he spent over three years at Franklin Templeton Asset
Management India, most recently as a Senior Research Analyst. Previously,
he was with Deutsche Asset & Wealth Management New York, from
2009 to 2011, researching U.S. and European stocks in the industrials and
materials sectors. Peeyush began his career in 2003 with Scot Forge as an
Industrial Engineer, and was responsible for implementing Lean
Manufacturing systems on the production shop floor. Peeyush earned his
M.B.A from The University of Chicago Booth School of Business. He received
a Master of Science in Industrial Engineering from The Ohio State
University and received a Bachelor of Technology in Metallurgical
Engineering from The Indian Institute of Technology Madras. He is fluent
in Hindi. Peeyush has been a Portfolio Manager of the Matthews India Fund
since 2018. |
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Lead
Manager
Matthews
India Fund |
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MANAGEMENT OF THE FUNDS |
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MICHAEL J. OH,
CFA |
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Michael Oh is a Portfolio Manager at
Matthews and manages the firm’s Asia Innovators and Korea Strategies and
co‑manages the Asia Growth Strategy. Michael joined Matthews in 2000 and
has built his investment career at the firm. Michael received a B.A. in
Political Economy of Industrial Societies from the University of
California, Berkeley. He is fluent in Korean. Michael has been a Portfolio
Manager of the Matthews Korea Fund since 2007, of the Matthews Asia
Innovators Fund since 2006 and of the Matthews Asia Growth Fund since
2020. |
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Lead
Manager
Matthews
Korea Fund
Matthews
Asia Innovators Fund
Co‑Manager
Matthews
Asia Growth Fund |
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SOJUNG
PARK |
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Sojung Park is a Portfolio Manager at
Matthews Asia and co-manages the firm’s Korea Strategy. Prior to joining
the firm in 2016, she earned an MBA from the University of Chicago’s Booth
School of Business. From 2010 to 2013, Sojung worked as an Equity Research
Analyst at HSBC Securities as primary analyst for mid-cap companies in the
Korean financial services sector, and from 2009 to 2010, was an Equity
Research Associate at E*Trade Securities. She received a Bachelor of
Business Administration from Seoul National University and is fluent in
Korean. Sojung has been a Portfolio Manager of the Matthews Korea Fund
since 2022. |
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Co-Manager
Matthews
Korea Fund |
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SATYA
PATEL |
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Satya Patel is a Portfolio Manager at
Matthews and manages the firm’s Asia Credit Opportunities Strategy and
co‑manages the Asia Total Return Bond and Asian Growth and Income
Strategies. Prior to joining Matthews in 2011, Satya was an Investment
Analyst with Concerto Asset Management. He earned his M.B.A. from the
University of Chicago Booth School of Business in 2010. In 2009, Satya
worked as an Investment Associate in Private Placements for Metlife
Investments and from 2006 to 2008, he was an Associate in Credit Hedge
Fund Sales for Deutsche Bank in London. He holds a Master’s in Accounting
and Finance from the London School of Economics and a B.A. in Business
Administration and Public Health from the University of Georgia. Satya is
proficient in Gujarati. Satya has been a Portfolio Manager of the Matthews
Asia Credit Opportunities Fund since its inception in 2016, of the
Matthews Asia Total Return Bond Fund since 2014 and of the Matthews Asian
Growth and Income Fund since 2020. |
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Lead
Manager
Matthews
Asia Credit Opportunities Fund
Co‑Manager
Matthews
Asia Total Return Bond Fund
Matthews
Asian Growth and Income Fund |
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SHARAT SHROFF,
CFA |
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Sharat Shroff is a Portfolio Manager
at Matthews and manages the firm’s Pacific Tiger Strategy and co‑manages
the India Strategy. Prior to joining Matthews in 2005, Sharat worked in
the San Francisco and Hong Kong offices of Morgan Stanley as an Equity
Research Associate. Sharat received a Bachelor of Technology from the
Institute of Technology in Varanasi, India and an M.B.A. from the Indian
Institute of Management, in Calcutta, India. He is fluent in Hindi and
Bengali. Sharat has been a Portfolio Manager of the Matthews Pacific Tiger
Fund since 2008 and of the Matthews India Fund since 2006. |
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Lead
Manager
Matthews
Pacific Tiger Fund
Co‑Manager
Matthews
India Fund |
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INBOK
SONG |
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Inbok Song is a Portfolio Manager at
Matthews and manages the firm’s Pacific Tiger Strategy. Prior to rejoining
the firm in 2019, Inbok spent three years at Seafarer Capital Partners as
a portfolio manager, the firm’s Director of Research and chief data
scientist. Previously she was at Thornburg Investment Management as an
associate portfolio manager. From 2007 to 2015, she was at Matthews, most
recently as a portfolio manager. From 2005 to 2006, Inbok served as an
Analyst and Technology Specialist at T. Stone Corp., a private equity
firm in Seoul, South Korea. From 2004 to 2005, she was a research engineer
for Samsung SDI in Seoul. Inbok received both a B.A. and Masters in
Materials Science and Engineering from Seoul National University. She
received a Masters in International Management from the University of
London, King’s College, and also an M.A. in Management Science and
Engineering, with a concentration in finance from Stanford University.
Inbok is fluent in Korean. Inbok has been a Portfolio Manager of the
Matthews Pacific Tiger Fund since 2019. |
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Lead
Manager
Matthews
Pacific Tiger Fund |
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JEREMY SUTCH, CFA |
Jeremy Sutch, CFA, is a Portfolio
Manager at Matthews and co‑manages the firm’s Emerging Markets Small
Companies Strategy. Prior to joining the firm in 2015, he was Director and
Global Head of Emerging Companies at Standard Chartered Bank in Hong Kong
from 2012 to 2015, responsible for the fundamental analysis of companies
in Asia, with a particular focus on small- and mid‑capitalization
companies. From 2009 to 2012, he was Managing Director at MJP Capital in
Hong Kong, which he co‑founded. His prior experience has included managing
small‑cap equities at Indus Capital Advisors and serving as Head of Hong
Kong Research for ABN AMRO Asia Securities. Jeremy earned an M.A. in
French and History from the University of Edinburgh. Jeremy has been a
Portfolio Manager of the Matthews Emerging Markets Small Companies Fund
since 2021. |
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Co‑Manager
Matthews
Emerging Markets Small Companies Fund |
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SHUNTARO
TAKEUCHI |
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Shuntaro Takeuchi is Head of Research
and a Portfolio Manager at Matthews and manages the firm’s Japan Strategy.
Prior to joining the firm in 2016, he was an Executive Director for Japan
Equity Sales at UBS Securities LLC in New York. Beginning in 2003, he
worked on both Japanese Equity and International Equity Sales at UBS Japan
Securities, based in Tokyo, and held the position of Special Situations
Analyst from 2006 to 2008, and Head of International Equity Sales from
2009 to 2013. Before that, he worked at Merrill Lynch Japan from 2001 to
2003 in U.S. Equity Sales. Shuntaro received a B.A. in Commerce and
Management from Hitotsubashi University in Tokyo. He is fluent in
Japanese. Shuntaro has been a Portfolio Manager of the Matthews Japan Fund
since 2019. |
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Lead
Manager
Matthews
Japan Fund |
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VIVEK
TANNEERU |
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Vivek Tanneeru is a Portfolio Manager
at Matthews and manages the firm’s Asia ESG and Emerging Markets Small
Companies Strategies. Prior to joining Matthews in 2011, Vivek was an
Investment Manager on the Global Emerging Markets team of Pictet Asset
Management in London. While at Pictet, he also worked on the firm’s Global
Equities team, managing Japan and Asia ex Japan markets. Before earning
his M.B.A. from the London Business School in 2006, Vivek was a Business
Systems Officer at The World Bank and served as a Consultant at Arthur
Andersen Business Consulting and Citicorp Infotech Industries. He interned
at Generation Investment Management while studying for his M.B.A. Vivek
received his Master’s in Finance from the Birla Institute on
Technology & Science in India. He is fluent in Hindi and Telugu.
Vivek has been a Portfolio Manager of the Matthews Asia ESG Fund since its
inception in 2015 and of the Matthews Emerging Markets Small Companies
Fund since 2020. |
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Lead
Manager
Matthews
Asia ESG Fund
Matthews
Emerging Markets Small Companies Fund |
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ALEX
ZARECHNAK |
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Alex Zarechnak is a Portfolio Manager
at Matthews Asia and co‑manages the firm’s Emerging Markets Equity
Strategy. Prior to joining the firm in 2020, he spent a total of 15 years
(1998 – 2006 and 2012 – 2019) at Wellington Management as an analyst for
the firm’s flagship Emerging Markets Equity Fund as a generalist first
covering CEEMEA, then Latin America. From 2006-2012, he was a regional
equity analyst at Capital Group, covering Emerging Markets with a focus on
energy, telecoms and consumer sectors in Latin America and CEEMEA. Alex
began his Emerging Markets career as a Russia equity analyst with
Templeton Emerging Markets, based in Moscow. He earned a B.A. in Economics
and Government from the College of William and Mary. Alex is fluent in
Russian. Alex has been a Portfolio Manager of the Matthews Emerging
Markets Equity Fund since 2022. |
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Co‑Manager
Matthews
Emerging Markets Equity Fund |
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SHERWOOD ZHANG,
CFA |
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Sherwood Zhang is a Portfolio Manager
at Matthews and manages the firm’s China Dividend Strategy and co‑manages
the Asia Dividend, Asia ex Japan Dividend, and China Strategies. Prior to
joining Matthews in 2011, Sherwood was an analyst at Passport Capital from
2007 to 2010, where he focused on such industries as property and basic
materials in China as well as consumer-related sectors. Before earning his
M.B.A. in 2007, Sherwood served as a Senior Treasury Officer for Hang Seng
Bank in Shanghai and Hong Kong, and worked as a Foreign Exchange Trader at
Shanghai Pudong Development Bank in Shanghai. He received his M.B.A. from
the University of Maryland and his Bachelor of Economics in Finance from
Shanghai University. Sherwood is fluent in Mandarin and speaks
conversational Cantonese. Sherwood has been a Portfolio Manager of the
Matthews China Dividend Fund since 2014, of the Matthews Asia Dividend
Fund since 2018, and of the Matthews China Fund since 2022. |
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Lead
Manager
Matthews
China Dividend Fund
Co‑Manager
Matthews
Asia Dividend Fund
Matthews
China Fund |
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MANAGEMENT OF THE FUNDS |
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103 |
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YU ZHANG,
CFA |
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Yu Zhang is a Portfolio Manager at
Matthews and manages the firm’s Asia Dividend and Asia ex Japan Dividend
Strategies, and co‑manages the China Dividend Strategy. Prior to joining
Matthews in 2007 as a Research Associate, Yu was an Analyst researching
Japanese companies at Aperta Asset Management from 2005 to 2007. Before
receiving a graduate degree in the U.S., he was an Associate in the
Ningbo, China office of Mitsui & Co., a Japanese general trading
firm. Yu received a B.A. in English Language from the Beijing Foreign
Studies University, an M.B.A. from Suffolk University and an M.S. in
Finance from Boston College. He is fluent in Mandarin. Yu has been a
Portfolio Manager of the Matthews Asia Dividend Fund since 2011 and of the
Matthews China Dividend Fund since 2012. |
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Lead
Manager
Matthews
Asia Dividend Fund
Co‑Manager
Matthews
China Dividend Fund |
The
investment team travels extensively to Asian and emerging market countries to
conduct research relating to those markets. The Funds’ SAI provides additional
information about the Lead Managers’ compensation, other accounts managed by the
Lead Managers, and the Lead Managers’ ownership of securities in each
Fund.
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Investing
in the Matthews Asia Funds
Pricing of Fund Shares
The
price at which the Funds’ Institutional Class shares are bought or sold is
called the net asset value per share or NAV. The NAV is computed once daily as
of the close of regular trading on the NYSE, generally 4:00 PM Eastern
Time, on each day that the exchange is open for trading. In addition to Saturday
and Sunday, the NYSE is closed on the days that the following holidays are
observed: New Year’s Day, Martin Luther King, Jr. Day, Washington’s Birthday,
Good Friday, Memorial Day, Juneteenth National Independence Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
The
NAV of the Institutional Class of a Fund is computed by adding the value of
all securities and other assets of the Fund, attributable to the Institutional
Class, deducting any liabilities of the Fund attributable to the Institutional
Class, and dividing by the total number of outstanding Institutional Class
shares of the Fund. A Fund’s Institutional Class expenses are generally
accounted for by estimating the total expenses for the year and applying each
day’s estimated expense when the NAV calculation is made.
The
value of the Funds’ exchange-traded securities is based on market quotations for
those securities, or on their fair value determined by or under the direction of
the Board of Trustees (as described below). Market quotations are provided by
pricing services that are independent of the Funds and Matthews. Foreign
exchange-traded securities are valued as of the close of trading of the primary
exchange on which they trade. Securities that trade in over‑the‑counter markets,
including most debt securities (bonds), may be valued using indicative bid
quotations from bond dealers or market makers, or other available market
information, or on their fair value as determined by or under the direction of
the Board of Trustees (as described below). The Funds may also utilize
independent pricing services to assist it in determining a current market value
for each security based on sources believed to be reliable.
Foreign
values of the Funds’ securities are converted to U.S. dollars using exchange
rates determined as of the close of trading on the NYSE and in accordance with
the Funds’ Pricing and Valuation Policy and Procedures. The Funds generally use
the foreign currency exchange rates deemed to be most appropriate by a foreign
currency pricing service that is independent of the Funds and Matthews.
The
Funds value any exchange-traded security for which market quotations are
unavailable (e.g., when trading of a
security is suspended) or have become unreliable, and any over‑the‑counter
security for which indicative quotes are unavailable, at that security’s fair
market value. In general, the fair value of such securities is determined, in
accordance with the Funds’ Pricing and Valuation Policy and Procedures and
subject to the Board’s oversight, by a pricing service retained
by
the Funds that is independent of the Funds and Matthews. There may be
circumstances in which the Funds’ independent pricing service is unable to
provide a reliable price of a security.
In
addition, when establishing a security’s fair value, the independent pricing
service may not take into account events that occur after the close of Asian and
other foreign markets but prior to the time the Funds calculate their NAVs.
Similarly, there may be circumstances in which a foreign currency exchange rate
is deemed inappropriate for use by the Funds or multiple appropriate rates
exist. In such circumstances, the Board of Trustees has delegated the
responsibility of making fair-value determinations to a Valuation Committee
composed of employees of Matthews (some of whom may also be officers of the
Funds). In these circumstances, the Valuation Committee will determine the fair
value of a security, or a fair exchange rate, in good faith, in accordance with
the Funds’ Pricing and Valuation Policy and Procedures and subject to the
oversight of the Board. When fair value pricing is employed (whether through the
Funds’ independent pricing service or the Valuation Committee), the prices of a
security used by a Fund to calculate its NAV typically differ from quoted or
published prices for the same security for that day. The Funds generally fair
value securities daily to avoid, among other things, the use of stale prices. In
addition, changes in a Fund’s NAV may not track changes in published indices of,
or benchmarks for, Asia Pacific and other foreign market securities. Similarly,
changes in a Fund’s NAV may not track changes in the value of closed‑end
investment companies, exchange-traded funds or other similar investment
vehicles.
Foreign
securities held by the Funds may be traded on days and at times when the NYSE is
closed and the NAVs are therefore not calculated. Accordingly, the NAVs of the
Funds may be significantly affected on days when shareholders have no access to
the Funds. For valuation purposes, quotations of foreign portfolio securities,
other assets and liabilities, and forward contracts stated in foreign currency
are translated into U.S. dollar equivalents at the prevailing market
rates.
Indian
securities in the Funds may be subject to a short-term capital gains tax in
India on gains realized upon disposition of securities lots held less than one
year. The Funds accrue for this potential expense, which reduces their net asset
values. For further information regarding this tax, please see page 104.
Purchasing Shares
The
Funds are open for business each day the NYSE is open. You may purchase
Institutional Class shares directly from the Funds by mail, by telephone,
online or by wire without paying any sales charge. The price for each share you
buy will be the NAV calculated after your order is received in good order by the
Fund. “In good order” means that payment for your purchase and all the
information needed to complete your order must be received by the Fund before
your order is
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INVESTING IN THE MATTHEWS ASIA
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processed.
If your order is received before the close of regular trading on the NYSE
(generally 4:00 PM Eastern Time) on a day the Funds’ NAVs are calculated, the
price you pay will be that day’s NAV. If your order is received after the close
of regular trading on the NYSE, the price you pay will be the next NAV
calculated.
You
may purchase Institutional Class shares of the Funds directly through the
Funds’ transfer agent by calling 800.789.ASIA (2742). Institutional
Class shares of the Funds may also be purchased through various securities
brokers and benefit plan administrators or their sub‑agents (“Third-Party
Intermediaries”). These Third-Party Intermediaries may charge you a commission
or other service or transaction fee for their services. Another share class may
have a different or no such commission or fee. You should contact them directly
for information regarding how to invest or redeem through them. If you purchase
or redeem shares through the Funds’ transfer agent or a Third-Party
Intermediary, you will receive the NAV calculated after receipt of the order by
it on any day the NYSE is open. A Fund’s NAV is calculated as of the close of
regular trading on the NYSE (generally, 4:00 PM Eastern Time) on each day that
the NYSE is open. If your order is received by the Fund or a Third-Party
Intermediary after that time, it will be purchased or redeemed at the
next-calculated NAV.
The
Funds may reject for any reason, or cancel as permitted or required by law, any
purchase order at any time.
Brokers
and benefit plan administrators who perform transfer agency and shareholder
servicing for the Funds may receive fees from the Funds for these services.
Brokers and benefit plan administrators who also provide distribution services
to the Funds may be paid by Matthews (out of its own resources) for providing
these services. For further information, please see Additional Information about Shareholder
Servicing and Other Compensation to
Intermediaries on page 104.
You
may purchase Institutional Class shares of the Funds by mail, by telephone,
online or by wire. New accounts may be opened by mailing a completed
application. Please see Opening an
Account on page 100, and Telephone and
Online Transactions on page 102. Call 800.789.ASIA (2742) or
visit matthewsasia.com for details.
The
Funds do not accept third-party checks, temporary (or starter) checks, bank
checks, cash, credit card checks, traveler’s checks, cashier’s checks, official
checks or money orders. If the Funds receive notice of insufficient funds for a
purchase made by check, the purchase will be cancelled and you will be liable
for any related losses or fees the Fund or its transfer agent incurs. The Funds
may reject any purchase order or stop selling shares of the Funds at any time.
Also, the Funds may vary or waive the initial investment minimum and minimums
for additional investments.
Additionally,
if any transaction is deemed to have the potential to adversely impact any of
the Funds, the Funds reserve the right to, among other things, reject any
purchase order or exchange request, limit the amount of any exchange, or revoke
a shareholder’s privilege to purchase Fund shares (including exchanges).
MINIMUM
INVESTMENTS IN THE INSTITUTIONAL CLASS SHARES OF THE FUNDS
(U.S.
RESIDENTS*)
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Initial
investment: |
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$100,000 |
Subsequent investments: |
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$100 |
*Generally,
non‑U.S. residents may not invest in the Funds. Please contact a Fund
representative at 800.789.ASIA (2742) for information and assistance.
If
you invest in Institutional Class shares through a financial intermediary,
the minimum initial investment requirement may be met if that financial
intermediary aggregates investments of multiple clients to meet the minimum.
Additionally, different minimums may apply for retirement plans and model-based
programs that invest through a single account, subject to criteria set by
Matthews. Financial intermediaries or plan record keepers may require retirement
plans to meet certain other conditions, such as plan size or a minimum level of
assets per participant, in order to be eligible to purchase Institutional Class
shares.
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The
minimum investment requirements do not apply to Trustees, officers and employees
of the Funds and Matthews, and their immediate family members.
OPENING AN ACCOUNT (Initial Investment)
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By Mail |
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You
can obtain an account application by calling 800.789.ASIA (2742)
between 9:00 AM–4:30 PM ET, Monday through Friday, or by downloading an
application at matthewsasia.com.
Mail
your check payable to Matthews Asia Funds and a completed
application to: |
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Regular
Mail:
Matthews Asia Funds
P.O.
Box 9791
Providence, RI 02940 |
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Overnight
Mail:
Matthews
Asia Funds
4400
Computer Dr.
Westborough, MA 01581-1722 |
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Through Broker/
Intermediary |
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You may contact your broker or intermediary, who may charge you
a fee for their services. |
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By Wire |
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To
open an account and make an initial investment by wire, a completed
application is required before your wire can be accepted. After a
completed account application is received by mail at one of the addresses
listed above, you will receive an account number. Please be sure to inform
your bank of this account number as part of the instructions.
For
specific wiring instructions, please visit matthewsasia.com or call
800.789.ASIA (2742) between 9:00 AM–4:30 PM ET, Monday through
Friday.
Note
that wire fees are charged by most banks. |
Please
note that when opening your account the Funds follow identity verification
procedures outlined on page 107.
ADDING TO AN ACCOUNT (Subsequent
Investment)
Existing
Institutional Class shareholders may purchase additional Institutional
Class shares for all authorized accounts through the methods described
below.
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By Mail |
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Please send your check payable
to Matthews Asia Funds and a statement stub indicating your fund(s)
selection via: |
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Regular
Mail:
Matthews
Asia Funds
P.O.
Box 9791
Providence,
RI 02940 |
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Overnight
Mail:
Matthews
Asia Funds
4400
Computer Dr.
Westborough,
MA 01581-1722 |
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By
Phone |
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Call 800.789.ASIA (2742). When you open your account, you will
automatically have the ability to purchase shares by telephone unless you
specify otherwise on your New Account Application. |
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Online |
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As a first time user, you will need your Fund account number and
your Tax Identification Number to establish online account access. Visit
matthewsasia.com and select
Account Login, where you will be able to create a login ID and
password. |
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Through Broker/
Intermediary |
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You may contact your broker or intermediary, who may charge you
a fee for their services. |
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By Wire |
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Please
call us at 800.789.ASIA (2742) between 9:00 AM–4:30 PM ET,
Monday through Friday, and inform us that you will be wiring funds.
Please also be sure to inform your bank of your Matthews account number as
part of the instructions.
Note
that wire fees are charged by most banks. |
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INVESTING IN THE MATTHEWS ASIA
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Exchanging Shares
You
may exchange your Institutional Class shares of one Matthews Asia Fund for
Institutional Class shares of another Matthews Asia Fund. If you exchange
your shares, minimum investment requirements. To receive that day’s NAV, any
request must be received by the close of regular trading on the NYSE that day
(generally, 4:00 PM Eastern Time). Such exchanges may be made by telephone
or online if you have so authorized on your application. Please see Telephone and Online Transactions on page 102,
or call 800.789.ASIA (2742) for more information. Because excessive
exchanges can harm a Matthews Asia Fund’s performance, the exchange privilege
may be terminated if the Matthews Asia Funds believe it is in the best interest
of all shareholders to do so.
The
Matthews Asia Funds may reject for any reason, or cancel as permitted or
required by law, any purchase order or exchange request at any time.
Additionally, if any transaction is deemed to have the potential to adversely
impact any of the Matthews Asia Funds, the Matthews Asia Funds reserve
the
right
to, among other things, reject any exchange request or limit the amount of any
exchange. In the event that a shareholder’s exchange privilege is terminated,
the shareholder may still redeem his, her or its shares. An exchange is treated
as a taxable event on which gain or loss may be recognized.
Selling (Redeeming)
Shares
You
may redeem shares of a Fund on any day the NYSE is open for business. To receive
a specific day’s NAV, your request must be received by the Fund’s agent before
the close of regular trading on the NYSE that day (generally, 4:00 PM Eastern
Time). If your request is received after the close of regular trading on the
NYSE, you will receive the next NAV calculated.
In
extreme circumstances, such as the imposition of capital controls that
substantially limit repatriation of the proceeds of sales of portfolio holdings,
the Funds may suspend shareholders’ redemption privileges for a period of not
more than seven days unless otherwise permitted by applicable law.
SELLING
(REDEEMING) SHARES
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By Mail |
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Send a letter to the Funds
via: |
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Regular
Mail:
Matthews
Asia Funds
P.O.
Box 9791
Providence,
RI 02940 |
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Overnight
Mail:
Matthews
Asia Funds
4400
Computer Dr.
Westborough,
MA 01581-1722 |
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The
letter must include your name and account number, the name of the Fund and
the amount you want to sell in dollars or shares. This letter must be
signed by each owner of the account.
For
security purposes, a medallion signature guarantee will be required if
(among others):
T A change of address was
received by the Funds’ transfer agent within the last 30 days; or
T The money is to be sent to
an address that is different from the registered address or to a bank
account other than the account that was preauthorized. |
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By
Phone |
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Call 800.789.ASIA (2742). When you open your account you will
automatically have the ability to exchange and redeem shares by telephone
unless you specify otherwise on your New Account Application. |
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By Wire |
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If
you have wiring instructions already established on your account, contact
us at 800.789.ASIA (2742) to request a redemption form. Please note
that the Funds charge $9.00 for wire redemptions, in addition to a wire
fee that may be charged by your bank.
Note: When you opened your account
you must have provided the wiring instructions for your bank with your
application.*
*
If your account has already been opened, you may send us a written request
to add wiring instructions to your account. Please complete the Banking
Instructions Form available on matthewsasia.com or call 800.789.ASIA
(2742). |
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Online |
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As a first time user, you will need your Fund account number and
your Tax Identification Number to establish online account access. Visit
matthewsasia.com and select Account Login, where you will be able to
create a login ID and password. |
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Through Broker/Intermediary |
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Contact your broker or
intermediary, who may charge you a fee for their
services. |
If
you are redeeming shares of a Fund recently purchased by check, the Fund may
delay sending your redemption proceeds until your check has cleared. This may
take up to 15 calendar days after we receive your check.
If
any transaction is deemed to have the potential to adversely impact any of the
Matthews Asia Funds, the Matthews Asia Funds reserve the right to, among other
things, delay payment of immediate cash redemption proceeds for up to seven
calendar days.
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You
may redeem your shares by telephone or online. Please see Telephone and Online Transactions below, or
call 800.789.ASIA (2742) for more information.
Telephone
and Online Transactions
Shareholders
with existing accounts may purchase additional shares, or exchange or redeem
shares, directly with a Fund by calling 800.789.ASIA (2742), or through an
online order at the Funds’ website at matthewsasia.com. Only bank accounts held
at domestic institutions that are Automated Clearing House (ACH) members may be
used for online transactions.
Telephone
or online orders to purchase or redeem shares of a Fund, if received in good
order before 4:00 PM Eastern Time (your “placement date”), will be processed at
the Fund’s NAV calculated as of 4:00 PM Eastern Time on your placement
date.
In
times of extreme market conditions or heavy shareholder activity, you may have
difficulty getting through to the Funds, and in such event, you may still
purchase or redeem shares of the Funds using a method other than telephone or
online. If the Funds believe that it is in the best interest of all
shareholders, it may modify or discontinue telephone and/or online transactions
without notice.
The
convenience of using telephone and/or online transactions may result in
decreased security. The Funds employ certain security measures as they process
these transactions. If such security procedures are used, the Funds or their
agents will not be responsible for any losses that you incur because of a
fraudulent telephone or online transaction.
Market Timing Activities
The
Board of Trustees has approved policies and procedures applicable to most
purchases, exchanges and redemptions of Fund shares to discourage market timing
by shareholders (the “Market Timing Procedures”). Market timing can harm other
shareholders because it may dilute the value of their shares. Market timing may
also disrupt the management of a Fund’s investment portfolio and cause the
targeted Fund to incur costs, which are borne by non‑redeeming
shareholders.
The
Funds, because they invest in overseas securities markets, are particularly
vulnerable to market timers who may take advantage of time zone differences
between the close of the foreign markets on which each Fund’s portfolio
securities trade and the U.S. markets that generally determine the time as of
which the Fund’s NAV is calculated (this is sometimes referred to as “time zone
arbitrage”). The Funds also can be the targets of market timers if they invest
in small‑cap securities and other types of investments that are not frequently
traded, including high-yield bonds.
The
Funds deem market timing activity to refer to purchase and redemption
transactions in shares of the Funds that have the effect of (i) diluting
the interests of long-term shareholders; (ii) harming the performance of
the Funds by
compromising
portfolio management strategies or increasing Fund expenses for non‑redeeming
shareholders; or (iii) otherwise disadvantaging the Funds or their
shareholders. Market timing activity includes time zone arbitrage (i.e., seeking to take advantage of differences
between the closing times of foreign markets on which portfolio securities of
each Fund may trade and the U.S. markets that generally determine when each
Fund’s NAV is calculated), market cycle trading (i.e., buying on market down days and selling
on market up days); and other types of trading strategies.
The
Funds and their agents have adopted procedures to assist them in identifying and
limiting market timing activity. The Funds have also adopted and implemented a
Pricing and Valuation Policy and Procedures, which the Funds believe may reduce
the opportunity for certain market timing activity by fair valuing the Funds’
portfolios. However, there is no assurance that such practices will eliminate
the opportunity for time zone arbitrage or prevent or discourage market timing
activity.
The
Funds may reject for any reason, or cancel as permitted or required by law, any
purchase order or exchange request, including transactions deemed to represent
excessive trading, at any time.
Identification
of Market Timers
The
Funds have adopted procedures to identify transactions that appear to involve
market timing. However, the Funds do not receive information on all transactions
in their shares and may not be able to identify market timers. Moreover,
investors may elect to invest in a Fund through one or more financial
intermediaries that use a combined or omnibus account. Such accounts obscure,
and may be used to facilitate, market timing transactions. The Funds or their
agents request representations or other assurances related to compliance with
the Market Timing Procedures from parties involved in the distribution of Fund
shares and administration of shareholder accounts. In addition, the Funds have
entered into agreements with intermediaries that permit the Funds to request
greater information from intermediaries regarding transactions. These
arrangements may assist the Funds in identifying market timing activities.
However, the Funds will not always know of, or be able to detect, frequent
trading (or other market timing activity).
Omnibus
accounts, in which shares are held in the name of an intermediary on behalf of
multiple investors, are a common form of holding shares among retirement plans
and financial intermediaries such as brokers, investment advisors and
third-party administrators. Individual trades in omnibus accounts are often not
disclosed to the Funds, making it difficult to determine whether a particular
shareholder is engaging in excessive trading. Excessive trading in omnibus
accounts may not be detected by the Funds and may increase costs to the Funds
and disrupt their portfolio management.
Under
policies approved by the Board of Trustees, the Funds may rely on intermediaries
to apply the Funds’ Market Timing
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Procedures
and, if applicable, their own similar policies. In these cases, the Funds will
typically not request or receive individual account data but will rely on the
intermediary to monitor trading activity in good faith in accordance with its or
the Funds’ policies. Reliance on intermediaries increases the risk that
excessive trading may go undetected. For some intermediaries, the Funds will
generally monitor trading activity at the omnibus account level to attempt to
identify disruptive trades. The Funds may request transaction information, as
frequently as daily, from any intermediary at any time, and may apply the Funds’
Market Timing Procedures to such transactions. The Funds may prohibit purchases
of Fund shares by an intermediary or request that the intermediary prohibit the
purchase of Fund shares by some or all of its clients. There is no assurance
that the Funds will request data with sufficient frequency, or that the Funds’
analysis of such data will enable them to detect or deter market timing activity
effectively.
The
Funds (or their agents) attempt to contact shareholders whom the Funds (or their
agents) believe have violated the Market Timing Procedures and notify them that
they will no longer be permitted to buy (or exchange) shares of the Funds. When
a shareholder has purchased shares of the Funds through an intermediary, the
Funds may not be able to notify the shareholder of a violation of the Funds’
policies or that the Funds have taken steps to address the situation (for
example, the Funds may be unable to notify a shareholder that his or her
privileges to purchase or exchange shares of the Funds have been terminated).
Nonetheless, additional purchase and exchange orders for such investors will not
be accepted by the Funds.
Many
intermediaries have adopted their own market timing policies. These policies may
result in a shareholder’s privileges to purchase or exchange the Matthews Asia
Funds’ shares being terminated or restricted independently of the Matthews Asia
Funds. Such actions may be based on other factors or standards that are
different than or in addition to the Funds’ standards. For additional
information, please contact your intermediary.
Redemption
in Kind and Funding Redemptions
The
Funds generally pay redemption proceeds in cash. The Funds typically expect to
satisfy redemption requests by selling portfolio assets or by using holdings of
cash or cash equivalents. In some circumstances, it may be necessary for a Fund
to borrow in order to pay redemption proceeds. The Funds may use these methods
during both normal and stressed market conditions.
During
conditions that make the payment of cash unwise and/or in order to protect the
interests of a Fund’s remaining shareholders, you could receive your redemption
proceeds as a combination of cash and securities. Receiving securities instead
of cash is called “redemption in kind.” The Funds may redeem shares in kind
during both normal and stressed market
conditions.
Generally, in‑kind redemptions will be effected through a pro rata distribution
of the Fund’s portfolio securities. Note that if you receive securities as part
of your redemption proceeds, you will bear any market risks associated with
investments in these securities, and you will incur transaction charges if you
sell the securities to convert them to cash.
After
the Funds have received your redemption request and all proper documents,
payment for shares tendered will generally be made within (i) one to three
business days for redemptions made by wire, and (ii) three to five business
days for ACH redemptions. Redemption payments by check will generally be issued
on the business day following the redemption date; however, your actual receipt
of the check will be subject to postal delivery schedules and timing. If you are
redeeming shares of a Fund recently purchased by check, the Fund may delay
sending your redemption proceeds until your check has cleared, which may take up
to 15 calendar days after we receive your check. It may take up to several weeks
for the initial portion of the in‑kind securities to be delivered to you, and
substantially longer periods for the remainder of the in‑kind securities to be
delivered to you, in payment of your redemption in kind.
Medallion
Signature Guarantees
The
Funds may require a medallion signature guarantee on any redemption request to
help protect against fraud; the redemption of corporate, partnership or
fiduciary accounts; or for certain types of transfer requests or account
registration changes. A medallion signature guarantee may be obtained from a
domestic bank or trust company, broker, dealer, clearing agency, savings
association or other financial institution that is participating in a medallion
program recognized by the Securities Transfer Association. The three
“recognized” medallion programs are Securities Transfer Agents Medallion Program
(STAMP), Stock Exchanges Medallion Program (SEMP), and NYSE, Inc. Medallion
Signature Program (NYSE MSP). Please call 800.789.ASIA (2742) for
information on obtaining a signature guarantee.
Other Shareholder
Information
Disclosure
of Portfolio Holdings
A
description of the Funds’ policies and procedures with respect to the disclosure
of the Funds’ portfolio securities is available in the Funds’ SAI, which is
available on the Matthews Asia Funds website at matthewsasia.com.
Minimum
Size of an Account
The
Funds reserve the right to redeem small Institutional Class accounts that
fall below $100,000 due to redemption activity. If this happens to your account,
you may receive a letter from the Funds giving you the option of investing more
money into your account or closing it. Accounts that fall below $100,000 due to
market volatility will not be affected.
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Confirming
Your Transactions
The
Funds will send you a written confirmation following each purchase, sale and
exchange of Fund shares, except for systematic purchases and redemptions.
Additional
Information about Shareholder Servicing
The
operating expenses of each Fund include the cost of maintaining shareholder
accounts, generating shareholder statements, providing taxpayer information, and
performing related recordkeeping and administrative services. For shareholders
who open accounts directly with the Funds, BNY Mellon Investment Servicing (US)
Inc. (“BNY Mellon”), the Funds’ transfer agent, performs these services as part
of the various services it provides to the Funds under an agreement between the
Trust, on behalf of the Funds and BNY Mellon. For shareholders who purchase
shares through a broker or other financial intermediary, some or all of these
services may be performed by that intermediary. For performing these services,
the intermediary seeks compensation from the Funds or Matthews. In some cases,
the services for which compensation is sought may be bundled with services not
related to shareholder servicing, and may include distribution fees. The Board
of Trustees has made a reasonable allocation of the portion of bundled fees, and
Matthews pays from its own resources that portion of the fees that the Board of
Trustees determines may represent compensation to intermediaries for
distribution services.
Other
Compensation to Intermediaries
Matthews,
out of its own resources and without additional cost to a Fund or its
shareholders, may provide additional cash payments or non‑cash compensation to
intermediaries who sell shares of the Fund. Such payments and compensation are
in addition to service fees or sub‑transfer agency fees paid by the Fund. The
level of payments will vary for each particular intermediary. These additional
cash payments generally represent some or all of the following:
(a) payments to intermediaries to help defray the costs incurred to educate
and train personnel about the Fund; (b) marketing support fees for
providing assistance in promoting the sale of Fund shares; (c) access to
sales meetings, sales representatives and management representatives of the
intermediary; and (d) inclusion of the Fund on the sales list, including a
preferred or select sales list, or other sales program of the intermediary. A
number of factors will be considered in determining the level of payments,
including the intermediary’s sales, assets and redemption rates, as well as the
nature and quality of the intermediary’s relationship with Matthews. Aggregate
payments may change from year to year and Matthews will, on an annual basis,
determine the advisability of continuing these payments. Shareholders who
purchase or hold shares through an intermediary may inquire about such payments
from that intermediary.
Rule
12b‑1 Plan
The
Trust’s 12b‑1 Plan (the “Plan”) is inactive. The Plan authorizes the use of the
Funds’ assets to compensate parties
that
provide distribution assistance or shareholder services, including, but not
limited to, printing and distributing prospectuses to persons other than
shareholders, printing and distributing advertising and sales literature and
reports to shareholders used in connection with selling shares of the Funds, and
furnishing personnel and communications equipment to service shareholder
accounts and prospective shareholder inquiries. Although the Plan currently is
not active, it is reviewed by the Board annually in case the Board decides to
re‑activate the Plan. The Plan would not be re‑activated without prior notice to
shareholders. If the Plan were re‑activated, the fee would be up to 0.25% for
each of the Investor Class and Institutional Class, respectively.
Distributions
All
of the Funds, except the Matthews Asia Dividend Fund, Matthews China Dividend
Fund and the Matthews Asian Growth and Income Fund, generally distribute their
net investment income once annually in December. The Matthews Asia Dividend Fund
generally distributes net investment income quarterly in March, June, September
and December. The Matthews China Dividend Fund and Matthews Asian Growth and
Income Fund generally distribute net investment income semi-annually in June and
December. Any net realized gain from the sale of portfolio securities and net
realized gains from foreign currency transactions are distributed at least once
each year unless they are used to offset losses carried forward from prior
years. All such distributions are reinvested automatically in additional shares
at the current NAV, unless you elect to receive them in cash. If you hold the
shares directly with the Funds, the manner in which you receive distributions
may be changed at any time by writing to the Funds. Additionally, details of
distribution-related transactions will be reported on quarterly account
statements. You may not receive a separate confirmation statement for these
transactions.
Any
check in payment of dividends or other distributions that cannot be delivered by
the post office or that remains uncashed for a period of more than one year will
be reinvested in your account.
Distributions
are treated the same for tax purposes whether received in cash or reinvested. If
you buy shares when a Fund has realized but not yet distributed ordinary income
or capital gains, you will be “buying a dividend” by paying the full price of
the shares and then receiving a portion of the price back in the form of a
taxable dividend.
Taxes
This
section summarizes certain income tax considerations that may affect your
investment in the Funds. You are urged to consult your tax advisor regarding the
tax effects to you of an investment in the Funds based on your individual tax
situation. The tax consequences of an investment in the Funds depend on the type
of account that you have and your particular tax circumstances. Distributions
are subject to federal income tax and may also be subject to state and local
income taxes. The Funds intend to make distributions that may be
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taxed
as ordinary income and capital gains (which may be taxable at different rates
depending on the length of time the Funds hold their assets). Distributions are
generally taxable when they are paid, whether in cash or by reinvestment.
Distributions declared in October, November or December and paid the following
January are taxable as if they were paid on December 31.
The
exchange of one Matthews Asia Fund for another is a “taxable event,” which means
that if you have a gain, you may be obligated to pay tax on it. If you have a
qualified retirement account, taxes are generally deferred until distributions
are made from the retirement account.
Part
of a distribution may include realized capital gains, which may be taxed at
different rates depending on how long a Fund has held specific securities.
You
must have an accurate Social Security Number or taxpayer I.D. number on file
with the Funds. If you do not, you may be subject to backup withholding on your
distributions.
In
mid‑February, if applicable, you will be sent a Form 1099‑DIV or other
Internal Revenue Service (“IRS”) forms, as required, indicating the tax status
of any distributions made to you. This information will be reported to the IRS.
If the total distributions you received for the year are less than $10, you may
not receive a Form 1099‑DIV. Please note retirement account shareholders will
not receive a Form 1099‑DIV.
Speak
with your tax advisor concerning state and local tax laws, which may produce
different consequences than those under federal income tax laws.
In
addition, the Funds may be subject to short-term capital gains tax in India on
gains realized upon disposition of Indian securities held less than one year.
The tax is computed on net realized gains; any realized losses in excess of
gains may be
carried
forward for a period of up to eight years to offset future gains. Any net taxes
payable must be remitted to the Indian government prior to repatriation of sales
proceeds. The Funds accrue a deferred tax liability for net unrealized
short-term gains in excess of available carryforwards on Indian securities. This
accrual may reduce a Fund’s net asset value.
You
should read the tax information in the Statement of Additional information,
which supplements the information above and is a part of this prospectus. The
Funds do not expect to request an opinion of counsel or rulings from the IRS
regarding their tax status or the tax consequences to investors in the
Funds.
Cost
Basis Reporting
As
part of the Emergency Economic Stabilization Act of 2008, the Funds are
responsible for tracking and reporting cost basis information to the IRS on the
sale or exchange of shares acquired on or after January 1, 2012 (“Covered
Shares”). Cost basis is the cost of the shares you purchased, including
reinvested dividends and capital gains distributions. Where applicable, the cost
is adjusted for sales charges or transaction fees. When you sell Covered Shares
in a taxable account, the cost basis accounting method you choose determines how
your gain or loss is calculated. Matthews’ default cost basis accounting method
is Average Cost. If you and your financial or tax advisor determine another
method to be more beneficial to your situation, you will be able to change your
default setting to another IRS‑accepted cost basis method by notifying the
Funds’ transfer agent in writing or by phone at 800.789.ASIA (2742), Monday
through Friday, 9:00 AM to 4:30 PM ET. When you redeem Covered Shares from your
account, we will calculate the cost basis on those shares according to your cost
basis method election. Again, please consult your tax professional to determine
which method should be considered for your individual tax situation.
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Index
Definitions
It
is not possible to invest directly in an index. The performance of foreign
indices may be based on different exchange rates than those used by a Fund and,
unlike the Fund’s NAV, is not adjusted to reflect fair value at the close of
regular trading on the NYSE (generally 4:00 PM Eastern Time) on each day that
the exchange is open for trading.
The
MSCI Emerging Markets Index is a free float-adjusted market
capitalization-weighted index of the stock markets of Argentina, Brazil, Chile,
China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia,
Kuwait, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia,
Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United
Arab Emirates.
The
MSCI Emerging Markets Small Cap Index is a free float adjusted market
capitalization-weighted small cap index of the stock markets of Argentina,
Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India,
Indonesia, Kuwait, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar,
Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and
United Arab Emirates.
The
MSCI All Country Asia Pacific Index is a free float-adjusted market
capitalization-weighted index of the stock markets of Australia, China, Hong
Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines,
Singapore, South Korea, Taiwan and Thailand.
The
MSCI All Country Asia ex Japan Index is a free float-adjusted market
capitalization-weighted index of the stock markets of China, Hong Kong, India,
Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and
Thailand.
The
MSCI China Index is a free float-adjusted market capitalization-weighted index
of Chinese equities that includes H shares listed on the Hong Kong exchange, and
B shares listed on the Shanghai and Shenzhen exchanges, Hong Kong-listed
securities known as Red Chips (issued by entities owned by national or local
governments in China) and P Chips (issued by companies controlled by
individuals in China and deriving substantial revenues in China), and foreign
listings (e.g., ADRs).
The
MSCI China All Shares Index captures large and mid‑cap representation across
China A shares, B shares, H shares, Red Chips (issued by entities owned by
national or local governments in China), P Chips (issued by companies controlled
by individuals in China and deriving substantial revenues in China), 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.
The
MSCI China Small Cap Index is a free float-adjusted market
capitalization-weighted small cap index of the Chinese equity securities
markets, including H shares listed on the Hong Kong exchange, B shares listed on
the Shanghai and Shenzhen exchanges, Hong Kong-listed securities known as Red
Chips (issued by entities owned by national or local governments in China), P
Chips (issued by companies controlled by individuals in China and deriving
substantial revenues in China), and foreign listings (e.g., ADRs).
The
S&P Bombay Stock Exchange 100 (S&P BSE 100) Index is a free
float-adjusted market capitalization-weighted index of 100 stocks listed on the
Bombay Stock Exchange.
The
MSCI Japan Index is a free float-adjusted market capitalization-weighted index
of Japanese equities listed in Japan.
The
Korea Composite Stock Price Index (KOSPI) is a market capitalization-weighted
index of all common stocks listed on the Korea Stock Exchange.
General
Information
Identity
Verification Procedures Notice
The
USA PATRIOT Act requires financial institutions, including mutual funds, to
adopt certain policies and programs to prevent money laundering activities,
including procedures to verify the identity of customers opening new accounts.
When completing the New Account Application, you will be required to supply the
Funds with information, such as your taxpayer identification number, that will
assist the Funds in verifying your identity. Until such verification is made,
the Funds may limit additional share purchases. In addition, the Funds may limit
additional share purchases or close an account if they are unable to verify a
customer’s identity. As required by law, the Funds may employ various
procedures, such as comparing the information to fraud databases or requesting
additional information or documentation from you, to ensure that the information
supplied by you is correct. Your information will be handled by us as discussed
in our Privacy Statement below.
Privacy
Statement
Matthews
Asia Funds will never sell your personal information and will only share it for
the limited purposes described below. While it is necessary for us to collect
certain non‑public personal information about you when you open an account (such
as your address and Social Security Number), we protect this information and use
it only for communication purposes or to assist us in providing the information
and services necessary to address your financial needs. We respect your privacy
and are committed to ensuring that it is maintained.
As
permitted by law, it is sometimes necessary for us to share your information
with companies that perform administrative or marketing services on our behalf,
such as transfer agents and/or mail facilities that assist us in shareholder
servicing or distribution of investor materials. These companies are not
permitted to use or share this information for any other purpose.
We
restrict access to non‑public personal information about you to those employees
who need to know that information to provide products or services to you. We
maintain physical, electronic and procedural safeguards that comply with federal
standards to protect your personal information.
When
using Matthews Asia Funds’ Online Account Access, you will be required to
provide personal information to gain access to your account. For your
protection, the login screen resides on a secure server.
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Investment Advisor
Matthews
International Capital Management, LLC
800.789.ASIA
(2742)
Account Services
BNY
Mellon Investment Servicing (US) Inc.
P.O.
Box 9791
Providence,
RI 02940
800.789.ASIA
(2742)
Custodian
Brown
Brothers Harriman & Co.
50
Post Office Square
Boston,
MA 02110
Administrator and
Transfer Agent
BNY
Mellon
301
Bellevue Parkway
Wilmington,
DE 19809
Shareholder
Service Representatives are available
from
9:00 AM to 4:30 PM ET, Monday through Friday.
For
additional information about
Matthews
Asia Funds:
matthewsasia.com
800.789.ASIA (2742)
Matthews Asia Funds
P.O. Box 9791
Providence, RI 02940
Shareholder
Reports
Additional
information about the Funds’ investments is available in the Funds’ annual
reports (audited by independent accountants) and semi-annual reports. These
reports contain a discussion of the market conditions and investment strategies
that significantly affected each Fund’s performance during its reporting period.
To reduce the Funds’ expenses, we try to identify related shareholders in a
household and send only one copy of the Funds’ prospectus and annual and
semi-annual reports to that address. This process, called “householding,” will
continue indefinitely unless you instruct us otherwise. At any time you may view
the Funds’ current prospectus and annual and semi-annual reports, free of
charge, on the Funds’ website at matthewsasia.com. The Funds’ current prospectus
and annual and semi-annual reports are also available to you, without charge,
upon request.
Statement
of Additional Information (SAI)
The
SAI, which is incorporated into this prospectus by reference and dated
April 28, 2022, is available to you, without charge, upon request or
through the Funds’ website at matthewsasia.com. It contains additional
information about the Funds.
HOW
TO OBTAIN ADDITIONAL INFORMATION
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Contacting Matthews Asia Funds |
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You
can obtain free copies of the publications described above by visiting the
Funds’ website at matthewsasia.com. To request the
SAI, the Funds’ annual and semi-annual reports and other information about
the Funds or to make shareholder inquiries, contact the Funds at:
Matthews
Asia Funds
P.O.
Box 9791
Providence,
RI 02940
800.789.ASIA
(2742) |
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Obtaining Information from the SEC |
|
Reports and other information about the
Funds are available on the EDGAR Database on the SEC’s Internet site at
http://www.sec.gov, and copies of this information may be obtained, after
paying a duplication fee, by electronic request at the following E‑mail
address: [email protected]. |
Investment
Company Act File Number: 811‑08510
Distributed
in the United States by Foreside Funds Distributors LLC
Distributed
in Latin America by Picton S.A.
P.O.
Box 9791 | Providence, RI
02940 | matthewsasia.com | 800.789.ASIA (2742)
PS_INSTIT-0422