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Matthews Asian Funds | |||
FIRST QUARTER REPORT | ||||
MARCH 31, 2007 |
Asia Pacific Fund | ||||||
Asia Pacific Equity Income Fund | ||||||
Pacific Tiger Fund | ||||||
Asian Growth and Income Fund | ||||||
Asian Technology Fund | ||||||
China Fund | ||||||
India Fund | ||||||
Japan Fund | ||||||
Korea Fund |
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Matthews Asian Funds | |
Investing in the future of Asia since 1994 |
E-mail communications on Asia and the Funds are available at www.matthewsfunds.com
| Asia Weekly |
| Asia Insight (monthly) |
| AsiaNow Special Reports |
| Occasional Fund Updates |
The views and opinions in this report were current as of March 31, 2007. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Funds future investment intent.
Statements of fact are from sources considered reliable, but neither the Funds nor the Investment Advisor makes any representation or guarantee as to their completeness or accuracy.
C O N T E N T S | Message to Shareholders | 2 | ||
Redemption Fee Policy and Investor Disclosure | 5 | |||
Manager Commentaries, Funds At A Glance and Schedules of Investments: | ||||
6 | ||||
12 | ||||
18 | ||||
24 | ||||
32 | ||||
38 | ||||
46 | ||||
54 | ||||
60 | ||||
Notes to Schedules of Investments | 66 |
FROM THE INVESTMENT ADVISOR
Dear Shareholder,
The first quarter of 2007 saw a marked increase in the volatility of almost all financial markets in Asia. Following a relatively benign January, sharp sell-offs occurred throughout the region in late February. This increase in volatility follows four consecutive years of generally positive returns for Asian investors and particularly strong equity markets in India and China. While investors remain optimistic about the long-term prospects for both countries, concern has been raised that in the short term, further measures may be necessary to slow the recent pace of economic growth. In addition to growth concerns in China and India, the region was faced with the prospect of rising interest rates in Japan, which in turn led to speculation that the so called carry trade was likely to be unwound, leading to increased volatility in the Japanese yen and Japanese securities. The quarter as a whole ended with mixed results across the region, with the primary Japanese indices showing modest gains.
For the nine funds that comprise the Matthews Asian Funds, five fell during the quarter, while the other four showed gains. Relative performance was also mixed, with only two of the funds outperforming their benchmarks during the quarter. The Funds continue to focus on their long-term objectives. As advisors we believe that while there are always short-term challenges, the long-term prospects for continued economic development across the region remain quite positive.
The initial catalyst for the market corrections that occurred in February was widely ascribed to a sharp, one-day sell-off on the Shanghai stock exchange that occurred in late February. While a small number of international institutional investors are licensed to invest directly in domestic Chinese stock markets, for the most part they remain walled off from the outside world by a combination of capital controls and strict regulatory limits on ownership. For this reason,
2 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
the idea that a movement on a domestic exchange in China could create a ripple effect around the globe is a relatively recent one, one that we believe reflects the rapid evolution of Chinas financial system and its emergence as a global economic power. The number of ways in which capital can flow across the Chinese border is growing exponentially and adding to the pressure on the mainland authorities to allow the Chinese currency to float. The experience of other Asian countries that have gone through this process would suggest that as China gets closer to full currency convertibility, the short-term challenges of managing the transition will increase, adding to market volatility. Some of the same issues are facing other Asian countries, including India, which are a sign of enormous progress in recent years but continue to present many challenges.
The first quarter of 2007 saw interest rates increased in Japan, China and India, as well as a number of the regions smaller countries, reflecting concerns that the pace of growth in those countries was likely to lead to further inflationary pressures. For the most part, forecasters are reducing their expectations for the pace of economic growth over the next several quarters, partly in response to recent policy actions in Asia and partly out of concern for the recent slowdown in the U.S. housing market and its potential impact on Asian exports. Within the region, the continued impact of rising raw material prices was of concern to many companies that were visited by the Funds portfolio managers during the quarter; but for the most part, corporate management in Asia remains optimistic about the region and its prospects. The recent relative performance of the South Korean domestic economy has presented a more challenging environment for domestic companies, and the political uncertainties in Thailand have continued to weigh on sentiment there. We continue to believe that valuations, in general,
800.789.ASIA [2742] www.matthewsfunds.com | 3 |
MESSAGE TO SHAREHOLDERS
around the region are reasonable relative to growth prospects, and we have made no major shifts in investment strategy or policy.
We are pleased to announce that effective April 30, 2007, Taizo Ishida and David Ishibashi became CoLead Managers of the Matthews Japan Fund.
Thank you for your investment in the Matthews Asian Funds.
|
G. Paul Matthews |
Chairman and Chief Investment Officer |
Matthews International Capital Management, LLC |
|
Mark W. Headley |
Chief Executive Officer and Portfolio Manager |
Matthews International Capital Management, LLC |
4 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
The Funds assess a redemption fee of 2.00% of the total redemption proceeds if you sell or exchange your shares within 90 calendar days after purchasing them. The redemption fee is paid directly to the Funds and is designed to discourage frequent short-term trading and to offset transaction costs associated with such trading of Fund shares. For purposes of determining whether the redemption fee applies, the shares that have been held longest will be redeemed first. The redemption fee does not apply to redemptions of shares held in certain omnibus accounts and retirement plans that cannot currently implement the redemption fee. While these exceptions exist, the Funds are not accepting any new accounts that cannot implement the redemption fee or provide adequate alternative controls. For more information on this policy, please see the Funds prospectus.
INVESTOR DISCLOSURE
Past Performance: All performance quoted in this report is past performance and is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the returns quoted. Returns are net of the Funds management fee and other operating expenses. If certain of the Funds fees and expenses had not been waived, returns would have been lower. For the Funds most recent month-end performance, please call 1-800-789-ASIA [2742] or visit www.matthewsfunds.com.
Investment Risk: Mutual fund shares are not deposits or obligations of, or guaranteed by, any depositary institution. Shares are not insured by the FDIC, Federal Reserve Board or any government agency and are subject to investment risks, including possible loss of principal amount invested. Investing in international markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. In addition, single-country and sector funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific industry, sector or geographic location. Please see the Funds prospectus and Statement of Additional Information for more risk disclosure.
Fund Holdings: The portfolios shown in this report should not be relied upon as complete listings of the Funds holdings, as information on particular holdings may have been withheld if it was in the Funds interest to do so. Holdings are subject to change at any time, so holdings shown in this report may not reflect current Fund holdings. The Funds file complete schedules of portfolio holdings with the Securities and Exchange Commission (the SEC) for the first and third quarters of each fiscal year on Form N-Q. The Funds Form N-Q is filed with the SEC within 60 days of the end the quarter to which it relates, and is available on the SECs website at www.sec.gov. It may also be reviewed and copied at the Commissions Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
Proxy Voting Record: The Funds Statement of Additional Information containing a description of the policies and procedures that the Matthews Asian Funds use to vote proxies relating to portfolio securities, along with each Funds proxy voting record relating to portfolio securities held during the 12-month period ended June 30, 2006, is available upon request, at no charge, at the Funds website at www.matthewsfunds.com or by calling 1-800-789-ASIA [2742], or on the SECs website at www.sec.gov.
This report has been prepared for Matthews Asian Funds shareholders. It is not authorized for distribution to prospective investors unless accompanied or preceded by a current Matthews Asian Funds prospectus, which contains more complete information about the Funds investment objectives, risks and expenses. You should read the prospectus carefully before investing. Additional copies of the prospectus may be obtained by calling 800-789-ASIA [2742] or by visiting www.matthewsfunds.com. Please read the prospectus carefully before you invest or send money, as it explains the risks associated with investing in international markets. These include risks related to social and political instability, market illiquidity and currency volatility.
The Matthews Asian Funds are distributed by PFPC Distributors, Inc., 760 Moore Road, King of Prussia, PA 19406.
800.789.ASIA [2742] www.matthewsfunds.com | 5 |
FUND DESCRIPTION | SYMBOL: MPACX | |
Under normal market conditions, the Matthews Asia Pacific Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in the Asia Pacific region. The Asia Pacific region includes Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan, Thailand and (as of April 30, 2007) Vietnam. The Fund may also invest in the convertible securities, of any duration or quality, of Asia Pacific companies. |
PORTFOLIO MANAGES
Lead Manager: Mark W. Headley |
Co-Managers: Richard H. Gao, Taizo Ishida and Sharat Shroff, CFA |
PORTFOLIO MANAGER COMMENTARY
For the three months ended March 31, 2007, the Matthews Asia Pacific Fund declined 1.12%, underperforming its benchmark, the MSCI All Country Asia Pacific Index, which gained 3.59%. The Lipper Pacific Region Funds Category Average returned 4.22% for the same period. Following strong appreciation late last year, some of the Chinese financials in the portfolio have been relatively weaker year-to-date.
The performance of the equity markets across the region was quite mixed: On one hand, markets in Singapore and Malaysia recorded handsome gains, while the benchmark indices in China, India and Taiwan edged lower by about 3%. India was the worst-performing market in the region, dragged lower by the prospect of rising inflation and firming interest rates. The continued strength in credit growth is forcing the Reserve Bank of India to accelerate rate hikes. Similar trends were seen in China, although the governments efforts to restrain investment and lending growth have not proven to be particularly successful. The tightening monetary policies being pursued in both these economies led to a volatile period, particularly for stocks in the financials and real estate sectors.
The Funds Korean holdings in the pharmaceuticals and consumer sectors were lackluster during the quarter. Consumer spending is slow to recover, but sentiment may receive a boost given the prospect of moderating interest rates. In the long term, the signing of the Free Trade Accord (FTA) with the United States should help Korean industry become more competitive, although the short-term impact on sectors like media and pharmaceuticals is uncertain.
continued on page 9
6 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PERFORMANCE AS OF MARCH 31, 2007
Fund Inception: 10/31/03 |
3 MO | 1 YR | Average Annual Total Returns | ||||||
3 YRS | SINCE INCEPTION | ||||||||
Matthews Asia Pacific Fund |
1.12 | % | 8.22% | 15.27% | 17.63% | ||||
MSCI All Country Asia Pacific Index1 |
3.59 | % | 12.71% | 16.60% | 19.90% | ||||
Lipper Pacific Region Funds Category Average2 |
4.22 | % | 13.98% | 18.60% | 21.16% |
All performance quoted is past performance and is no guarantee of future results. Assumes reinvestment of all dividends and/or distributions. Unusually high returns may not be sustainable. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. The performance of foreign indices may be based on different exchange rates than those used by the Fund and, unlike the Funds NAV, is not adjusted to reflect fair value at the close of the NYSE. Current performance may be lower or higher than the return figures quoted. Returns are net of the Funds management fee and other operating expenses. Returns would have been lower if certain of the Funds fees and expenses had not been waived. For the Funds most recent month-end performance please call 800-789-ASIA [2742] or visit www.matthewsfunds.com.
OPERATING EXPENSES3 |
|||
Net Ratio: 3 months ended 3/31/07 (annualized)4,5 |
1.17 | % | |
Net Ratio: Fiscal Year 20065 |
1.24 | % | |
Gross Ratio: Fiscal Year 2006 |
1.26 | % | |
PORTFOLIO TURNOVER6 |
|||
3 months ended 3/31/07 (annualized)4 |
70.36 | % | |
Fiscal Year 2006 |
40.45 | % |
1 |
The MSCI All Country Asia Pacific Index is a free float-adjusted market capitalizationweighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand. It is not possible to invest directly in an index. Source: Index data from Morgan Stanley Capital International; total return calculations performed by PFPC Inc. |
2 |
As of 3/31/07, the Lipper Pacific Region Funds Category Average consisted of 33 funds for the three-month period, 27 funds for the one-year period, and 25 funds for the three-year period and since 10/31/03. Lipper, Inc. fund performance does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains, for the stated periods. |
3 |
Matthews Asian Funds do not charge 12b-1 fees. |
4 |
Unaudited. |
5 |
Includes management fee, administration and shareholder services fees after reimbursement, waiver or recapture of expenses by Advisor. Voluntary fee waivers by the Advisor may be discontinued at any time. |
6 |
The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
800.789.ASIA [2742] www.matthewsfunds.com | 7 |
MATTHEWS ASIA PACIFIC FUND
TOP TEN HOLDINGS1
COUNTRY | % OF NET ASSETS | |||
Hana Financial Group, Inc. |
South Korea | 2.1% | ||
AXA Asia Pacific Holdings, Ltd. |
Australia | 2.1% | ||
China Vanke Co., Ltd. |
China/Hong Kong | 2.1% | ||
The Sumitomo Trust & Banking Co., Ltd. |
Japan | 2.0% | ||
Sony Corp. |
Japan | 2.0% | ||
Nintendo Co., Ltd. |
Japan | 1.9% | ||
Dah Sing Financial Holdings, Ltd. |
China/Hong Kong | 1.8% | ||
China Life Insurance Co., Ltd. |
China/Hong Kong | 1.8% | ||
Benesse Corp. |
Japan | 1.8% | ||
Sumitomo Realty & Development Co., Ltd. |
Japan | 1.7% | ||
% OF ASSETS IN TOP 10 |
19.3% |
COUNTRY ALLOCATION |
|||
Japan |
45.5 | % | |
China/Hong Kong |
21.1 | % | |
South Korea |
12.3 | % | |
India |
5.6 | % | |
Thailand |
4.6 | % | |
Singapore |
3.6 | % | |
Australia |
2.8 | % | |
Taiwan |
2.4 | % | |
Indonesia |
1.6 | % | |
Cash, cash equivalents and other |
0.5 | % | |
SECTOR ALLOCATION |
|||
Financials |
38.0 | % | |
Consumer Discretionary |
20.5 | % | |
Information Technology |
17.2 | % | |
Consumer Staples |
8.2 | % | |
Health Care |
5.9 | % | |
Industrials |
4.1 | % | |
Telecommunication Services |
2.8 | % | |
Materials |
2.8 | % | |
Cash, cash equivalents and other |
0.5 | % | |
MARKET CAP EXPOSURE |
|||
Large cap (over $5 billion) |
56.4 | % | |
Mid cap ($1$5 billion) |
30.5 | % | |
Small cap (under $1 billion) |
12.6 | % | |
Cash, cash equivalents and other |
0.5 | % |
NUMBER OF POSITIONS |
NAV |
FUND ASSETS |
REDEMPTION FEE |
12B-1 FEES | ||||
79 |
$16.73 | $464.4 million | 2.00% within 90 calendar days |
None |
1 |
Holdings may include more than one security from same issuer. |
8 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PORTFOLIO MANAGER COMMENTARY continued from page 6
Meanwhile, the recovery in Japan was underway as the Bank of Japan (BOJ) raised interest rates in February by 0.25%, following a previous rate hike in July 2006. The yen temporarily appreciated by 4% to 115 yen to the dollar, but it quickly returned to the level where it ended last quarter. Toward the end of the first quarter, more important data came out: Japans 2007 land prices showed their first year-over-year gain0.4%after 15 years of consecutive declines. The Funds holdings in the real estate sector positively contributed to performance in Japan, but its holdings in technology and retail hurt Fund performance.
In terms of changes to the portfolio, Daibiru was added to the Fund during the quarter. One of the largest real estate companies in OsakaJapans second-largest city Daibiru is one of the most conservative real estate companies in Japan, but it has been actively investing in large-scale projects in the area. While we are seeing a rapid pace of rising rents in some select spots in Tokyo, the market has overlooked their prospects in the rest of the country. We believe that the stock will be one of the largest beneficiaries of potential rising rents in Osaka, which have been lagging those in Tokyo, and the stock is attractively priced.
We continue to steer the portfolio toward domestically oriented companies benefiting from private consumption. In that context, it is notable that the Chinese government recently passed new laws aimed at bolstering private-property rights. If properly enforced, the derivative impact of land ownership may be a boost to private consumption spending. In the long term, this may offset the economys dependence on exports and investment. The coming months may test Asias ability to decouple from a global slowdown, particularly in the U.S., although the slack may be at least partly offset by growing intra-regional trade. We continue to look for opportunities that will arise from greater engagement between some of the leading economies in the Asia Pacific region.
800.789.ASIA [2742] www.matthewsfunds.com |
9 |
MATTHEWS ASIA PACIFIC FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
EQUITIES: 99.5%*
SHARES | VALUE | ||||
JAPAN: 45.5% |
|||||
The Sumitomo Trust & Banking Co., Ltd. |
907,000 | $ | 9,459,462 | ||
Sony Corp. ADR |
184,100 | 9,295,209 | |||
Nintendo Co., Ltd. |
30,400 | 8,835,709 | |||
Benesse Corp. |
221,300 | 8,225,509 | |||
Sumitomo Realty & Development Co., Ltd. |
213,000 | 8,079,684 | |||
Daibiru Corp. |
551,700 | 7,879,422 | |||
Sekisui House, Ltd. |
497,000 | 7,735,048 | |||
Mitsubishi Estate Co., Ltd. |
226,000 | 7,422,098 | |||
Nitto Denko Corp. |
157,200 | 7,377,088 | |||
Sysmex Corp. |
198,500 | 7,209,606 | |||
Toyota Motor Corp. ADR |
55,600 | 7,125,696 | |||
Point, Inc. |
111,470 | 7,085,118 | |||
Ichiyoshi Securities Co., Ltd. |
437,700 | 7,027,566 | |||
Hoya Corp. |
209,400 | 6,948,014 | |||
Ito En, Ltd. |
211,000 | 6,875,764 | |||
T&D Holdings, Inc. |
94,030 | 6,487,304 | |||
Takeda Pharmaceutical Co., Ltd. |
95,600 | 6,271,113 | |||
Canon, Inc. ADR |
109,050 | 5,853,804 | |||
Funai Zaisan Consultants Co., Ltd. |
1,039 | 5,783,978 | |||
Pigeon Corp. |
334,300 | 5,744,717 | |||
Mizuho Financial Group, Inc. |
866 | 5,577,851 | |||
Nitori Co., Ltd. |
111,900 | 5,564,613 | |||
Keyence Corp. |
24,100 | 5,438,043 | |||
Nippon Shokubai Co., Ltd. |
500,000 | 5,397,149 | |||
Nomura Holdings, Inc. |
259,000 | 5,395,833 | |||
Monex Beans Holdings, Inc. |
5,700 | 5,272,403 | |||
Unicharm Petcare Corp. |
149,000 | 5,184,148 | |||
Nidec Corp. |
79,500 | 5,127,291 | |||
Nomura Research Institute, Ltd. |
164,500 | 4,843,983 | |||
The Chiba Bank, Ltd. |
519,000 | 4,580,448 | |||
Yahoo! Japan Corp. |
10,417 | 3,593,441 | |||
Honda Motor Co., Ltd. ADR |
90,100 | 3,141,787 | |||
ORIX Corp. |
8,390 | 2,185,786 | |||
Yamada Denki Co., Ltd. |
21,420 | 1,995,855 | |||
Honda Motor Co., Ltd. |
34,000 | 1,185,845 | |||
Total Japan |
211,206,385 | ||||
CHINA/HONG KONG: 21.1% |
|||||
China Vanke Co., Ltd. B Shares |
4,597,543 | $ | 9,520,477 | ||
Dah Sing Financial Holdings, Ltd. |
969,200 | 8,459,645 | |||
China Life Insurance Co., Ltd. H Shares |
2,922,000 | 8,395,585 | |||
Lenovo Group, Ltd. |
21,662,000 | 7,929,010 | |||
Swire Pacific, Ltd. A Shares |
644,000 | 7,228,361 | |||
Pico Far East Holdings, Ltd. |
29,774,000 | 6,935,263 | |||
Shangri-La Asia, Ltd. |
2,516,000 | 6,227,611 | |||
China Mobile, Ltd. ADR |
135,300 | 6,068,205 | |||
Hang Lung Group, Ltd. |
1,702,000 | 6,022,947 | |||
NetEase.com, Inc. ADR ** |
301,000 | 5,339,740 | |||
Ports Design, Ltd. |
1,983,500 | 5,280,195 | |||
Television Broadcasts, Ltd. |
788,000 | 4,926,576 | |||
Dairy Farm International Holdings, Ltd. |
1,256,400 | 4,899,960 | |||
Bank of Communications Co., Ltd. H Shares |
4,082,000 | 4,195,106 | |||
China Merchants Bank Co., Ltd. H Shares ** |
1,774,000 | 3,578,197 | |||
Other Investments |
3,077,088 | ||||
Total China/Hong Kong |
98,083,966 | ||||
SOUTH KOREA: 12.3% |
|||||
Hana Financial Group, Inc. |
186,340 | 9,645,789 | |||
AMOREPACIFIC Corp. |
14,262 | 7,852,591 | |||
Hanmi Pharmaceutical Co., Ltd. |
53,760 | 6,942,857 | |||
CDNetworks Co., Ltd. ** |
187,221 | 5,313,351 | |||
NHN Corp. ** |
35,372 | 5,188,495 | |||
Kiwoom.com Securities Co., Ltd. |
107,475 | 4,221,090 | |||
S1 Corp. |
103,390 | 4,154,062 | |||
Hyundai Department Store Co., Ltd. |
45,970 | 3,860,151 | |||
Kookmin Bank |
39,274 | 3,523,305 | |||
Kookmin Bank ADR |
35,540 | 3,203,931 | |||
Other Investments |
3,010,443 | ||||
Total South Korea |
56,916,065 | ||||
10 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
SHARES | VALUE | ||||
INDIA: 5.6% |
|||||
Dabur India, Ltd. *** |
3,524,835 | $ | 7,273,495 | ||
Sun Pharmaceuticals Industries, Ltd. *** |
298,907 | 6,872,351 | |||
HDFC Bank, Ltd. *** |
279,283 | 5,957,245 | |||
Infosys Technologies, Ltd. *** |
125,678 | 5,651,650 | |||
Total India |
25,754,741 | ||||
THAILAND: 4.6% |
|||||
Bangkok Bank Public Co., Ltd. |
2,246,300 | 7,250,268 | |||
Advanced Info Service Public Co., Ltd. |
3,611,600 | 6,911,660 | |||
Land & Houses Public Co., Ltd. |
22,417,300 | 4,738,304 | |||
Major Cineplex Group Public Co., Ltd. |
5,150,000 | 2,294,773 | |||
Total Thailand |
21,195,005 | ||||
SINGAPORE: 3.6% |
|||||
DBS Group Holdings, Ltd. |
442,700 | 6,244,458 | |||
Hyflux, Ltd. |
3,219,812 | 5,624,033 | |||
Fraser and Neave, Ltd. |
1,462,000 | 4,914,610 | |||
Total Singapore |
16,783,101 | ||||
AUSTRALIA: 2.8% |
|||||
AXA Asia Pacific Holdings, Ltd. |
1,647,685 | 9,625,297 | |||
Rural Press, Ltd. |
324,794 | 3,573,960 | |||
Total Australia |
13,199,257 | ||||
TAIWAN: 2.4% |
|||||
Taiwan Semiconductor Manufacturing Co., Ltd. |
3,376,152 | 6,927,376 | |||
Taiwan Secom Co., Ltd. |
2,708,160 | 4,329,193 | |||
Total Taiwan |
11,256,569 | ||||
INDONESIA: 1.6% |
|||||
Bank Rakyat Indonesia |
7,889,500 | 4,366,244 | |||
PT Astra International |
2,205,500 | 3,190,422 | |||
Total Indonesia |
7,556,666 | ||||
TOTAL INVESTMENTS: 99.5% |
$ | 461,951,755 | |||
(Cost $389,236,935****) |
|||||
CASH AND OTHER ASSETS, LESS LIABILITIES: 0.5% |
2,413,481 | ||||
NET ASSETS: 100.0% |
$ | 464,365,236 | |||
* | As a percentage of net assets as of March 31, 2007 |
** | Nonincome producing security |
*** | Fair valued under direction of the Board of Trustees |
**** | Cost of investments is $389,236,935 and net unrealized appreciation consists of: |
Gross unrealized appreciation |
$ | 86,787,264 | ||||
Gross unrealized depreciation |
(14,072,444 | ) | ||||
$ | 72,714,820 | |||||
ADR |
American Depositary Receipt |
See accompanying notes to schedules of investments.
This portfolio data should not be relied upon as a complete listing of this Funds holdings, as information on particular holdings may have been withheld if it was in the Funds interest to do so.
800.789.ASIA [2742] www.matthewsfunds.com | 11 |
MATTHEWS ASIA PACIFIC EQUITY INCOME FUND
FUND DESCRIPTION | SYMBOL: MAPIX |
Under normal market conditions, the Matthews Asia Pacific Equity Income Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in income-paying publicly traded common stocks, preferred stocks, convertible preferred stocks, and other equity-related instruments (including, for example, investment trusts and other financial instruments) of companies located in the Asia Pacific region, which includes Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.
PORTFOLIO MANAGERS | ||
Lead Manager: Andrew T. Foster |
Co-Manager: Jesper Madsen, CFA |
PORTFOLIO MANAGER COMMENTARY
The Matthews Asia Pacific Equity Income Fund returned 2.42% for the first quarter of 2007; its benchmark, the MSCI All Country Asia Pacific Index, gained 3.59%. Volatility returned to markets across the Asia Pacific region during the quarter, with equity markets not only in Asia, but globally, experiencing a short but sharp sell-off at the end of February. During times of sharp market declines, the correlation across marketsand often across asset classes tends to increase. The Fund experienced this firsthand as the value of the portfolio fell broadly in line with the MSCI All Country Asia Pacific Index during the sell-off.
The Funds relative underperformance vis-à-vis its benchmark during the quarter was predominantly a result of the portfolios underweight to Australia, one of the regions better-performing markets, and its overweight to Hong Kong and Taiwan, two relative laggards. The Fund is not bound by the benchmark, and its distinct focus on dividend-paying companies leads to substantial over- or underweights as compared to the benchmark, often resulting in divergent performance.
The portfolio continues to have a substantial 18% allocation to Japanese companies. This allocation is considerably less than the benchmarks weight of 55%, but given the low dividend yields prevalent there, it may seem counterintuitive to have any exposure to Japan. However, we continue to find Japanese companies attractive for investors seeking growing dividends. The Funds Japanese holdings, most of which paid their final dividends during the quarter, on average grew their annual dividends by a healthy 30% year-on-year. Many Japanese companies are growing dividends from a low base, having paid little attention to dividend policies in years past, but the mixture of earnings growth and increasing payout ratios offers the potential for continued
continued on page 15
12 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PERFORMANCE AS OF MARCH 31, 2007
Fund Inception: 10/31/06 |
3 MO | SINCE INCEPTION1 | ||||
Matthews Asia Pacific Equity Income Fund |
2.42 | % | 10.51 | % | ||
MSCI All Country Asia Pacific Index2 |
3.59 | % | 10.30 | % |
All performance quoted is past performance and is no guarantee of future results. Assumes reinvestment of all dividends and/or distributions. Unusually high returns may not be sustainable. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. The performance of foreign indices may be based on different exchange rates than those used by the Fund and, unlike the Funds NAV, is not adjusted to reflect fair value at the close of the NYSE. Current performance may be lower or higher than the return figures quoted. Returns are net of the Funds management fee and other operating expenses. Returns would have been lower if certain of the Funds fees and expenses had not been waived. For the Funds most recent month-end performance please call 800-789-ASIA [2742] or visit www.matthewsfunds.com.
OPERATING EXPENSES3 |
|||
Net Ratio: 3 months ended 3/31/07 (annualized)4,5 |
1.49 | % | |
Net Ratio: Fiscal Year 20065 |
1.50 | % | |
Gross Ratio: Fiscal Year 20067 |
2.93 | % |
PORTFOLIO TURNOVER6 |
|||
3 months ended 3/31/07 (annualized)4 |
17.02 | % | |
Fiscal Year 2006 (annualized)7 |
0.00 | % |
TOP TEN HOLDINGS8
COUNTRY |
% OF NET ASSETS | |||
Taiwan Semiconductor Manufacturing Co., Ltd. |
Taiwan | 4.6% | ||
HSBC Holdings PLC |
United Kingdom | 4.6% | ||
Lawson, Inc. |
Japan | 3.3% | ||
Singapore Press Holdings, Ltd. |
Singapore | 3.1% | ||
BOC Hong Kong Holdings, Ltd. |
China/Hong Kong | 3.0% | ||
Public Bank BHD |
Malaysia | 3.0% | ||
Hana Financial Group, Inc. |
South Korea | 3.0% | ||
SK Telecom Co., Ltd. |
South Korea | 2.9% | ||
Chunghwa Telecom Co., Ltd. |
Taiwan | 2.9% | ||
Eisai Co., Ltd. |
Japan | 2.9% | ||
% OF ASSETS IN TOP 10 |
33.3% |
1 |
Actual returns, not annualized. |
2 |
The MSCI All Country Asia Pacific Index is a free float-adjusted market capitalizationweighted 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 Matthews Asia Pacific Equity Income Fund invests in countries that are not included in the MSCI All Country Asia Pacific Index. It is not possible to invest directly in an index. Source: Index data from Morgan Stanley Capital International; total return calculations performed by PFPC Inc. |
3 |
Matthews Asian Funds do not charge 12b-1 fees. |
4 |
Unaudited. |
5 |
Includes management fee, administration and shareholder services fees after reimbursement, waiver or recapture or expenses by Advisor. The Advisor has agreed to waive fees and reimburse expenses to the extent needed to limit Total Annual Operating Expenses until October 31, 2009. Voluntary fee waivers by the Advisor may be discontinued at any time. |
6 |
The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
7 |
The Matthews Asia Pacific Equity Income Fund commenced operations on 10/31/06. |
8 |
Holdings may include more than one security from same issuer. |
800.789.ASIA [2742] www.matthewsfunds.com | 13 |
MATTHEWS ASIA PACIFIC EQUITY INCOME FUND
COUNTRY ALLOCATION |
| ||
China/Hong Kong |
19.0 | % | |
Japan |
18.1 | % | |
Taiwan |
11.7 | % | |
Singapore |
11.6 | % | |
Malaysia |
8.9 | % | |
Australia |
7.0 | % | |
South Korea |
5.9 | % | |
United Kingdom1 |
4.6 | % | |
New Zealand |
3.1 | % | |
Thailand |
3.0 | % | |
Philippines |
2.3 | % | |
Indonesia |
2.1 | % | |
India |
1.9 | % | |
Cash, cash equivalents and other2 |
0.8 | % |
SECTOR ALLOCATION |
| ||
Financials |
26.1 | % | |
Telecommunication Services |
17.1 | % | |
Information Technology |
15.4 | % | |
Consumer Discretionary |
14.1 | % | |
Consumer Staples |
7.4 | % | |
Health Care |
7.1 | % | |
Industrials |
6.8 | % | |
Energy |
2.7 | % | |
Utilities |
2.5 | % | |
Cash, cash equivalents and other2 |
0.8 | % |
MARKET CAP EXPOSURE |
| ||
Large cap (over $5 billion) |
55.2 | % | |
Mid cap ($1$5 billion) |
32.1 | % | |
Small cap (under $1 billion) |
11.9 | % | |
Cash, cash equivalents and other2 |
0.8 | % |
NUMBER OF POSITIONS2 |
NAV |
FUND ASSETS |
REDEMPTION FEE |
12B-1 FEES | ||||
52 |
$11.03 | $45.2 million | 2.00% within 90 calendar days |
None |
1 |
The United Kingdom is not included in the MSCI All Country Asia Pacific Index. |
2 |
Includes BNY Hamilton Money Fund. |
14 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PORTFOLIO MANAGER COMMENTARY continued from page 12
dividend growth. So, while the absolute level of dividend payments in Japan remains low, especially in relation to earnings, it is the pace of change in dividends that continues to impress us.
The Funds dual focus on dividend growth and current yield often leads us to invest in companies that are perceived by the market to face either unattractive growth prospects or challenging business conditions. While this perception may at times be correct, especially in the short term, we believe that companies are often discounted in excess of their true growth potential. The former Hongkong and Shanghai Banking Corporation, known today as HSBC, illustrates this point. While the extent and pace of HSBCs losses in its U.S. sub-prime mortgage lending business are a cause of concern, the market seems to have latched on to one facet of what is otherwise a global business with a considerable footprint in fast-growing emerging economies across the world. In 2006, HSBC derived almost 40% of its pre-tax profits from Asia, and these profits were 23% higher than in 2005. Furthermore, HSBC has a history of paying growing dividends, even during periods of slower earnings growth, and its balance sheet remains healthy. In 2006, while earnings per share grew by just 3%due in large part to the provisioning related to its sub-prime mortgage lendingthe company still raised its dividend payment by a healthy 11%. With an estimated yield of 5% and an attractive global footprint, which we believe offers great potential for future growth, we continue to view HSBC as a core holding for the Fund.
Our aim is to strike the right balance between constructing a portfolio that provides current yield while being invested in companies that will deliver consistent dividend growth. This becomes especially challenging when equity values rise, as we experienced in some markets in the region during this quartersuch as Singapore, Malaysia and Australia. That said, we believe that companies in the Asia Pacific region continue to offer good potential for both current income and healthy dividend growth.
800.789.ASIA [2742] www.matthewsfunds.com |
15 |
MATTHEWS ASIA PACIFIC EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
EQUITIES: 99.2%*
SHARES | VALUE | ||||
CHINA/HONG KONG: 19.0% |
|||||
BOC Hong Kong Holdings, Ltd. |
567,000 | $ | 1,374,414 | ||
Hang Seng Bank, Ltd. |
81,300 | 1,154,963 | |||
VTech Holdings, Ltd. |
121,000 | 872,637 | |||
Café de Coral Holdings, Ltd. |
474,000 | 856,579 | |||
ASM Pacific Technology, Ltd. |
142,000 | 837,806 | |||
PetroChina Co., Ltd. H Shares |
614,000 | 728,455 | |||
Huaneng Power International, Inc. H Shares |
836,000 | 727,561 | |||
China Mobile, Ltd. |
65,500 | 595,607 | |||
SA SA International Holdings, Ltd. |
1,846,000 | 541,030 | |||
PetroChina Co., Ltd. ADR |
4,200 | 491,778 | |||
CLP Holdings, Ltd. |
58,000 | 423,485 | |||
Total China/Hong Kong |
8,604,315 | ||||
JAPAN: 18.1% |
|||||
Lawson, Inc. |
38,600 | 1,483,859 | |||
Eisai Co., Ltd. |
26,900 | 1,289,757 | |||
Takeda Pharmaceutical Co., Ltd. |
17,200 | 1,128,276 | |||
Monex Beans Holdings, Inc. |
1,191 | 1,101,655 | |||
Tokyu REIT, Inc. |
100 | 1,086,219 | |||
Hisamitsu Pharmaceutical Co., Inc. |
26,500 | 782,586 | |||
Benesse Corp. |
19,300 | 717,362 | |||
Nintendo Co., Ltd. |
2,000 | 581,297 | |||
Total Japan |
8,171,011 | ||||
TAIWAN: 11.7% |
|||||
Taiwan Semiconductor Manufacturing Co., Ltd. |
919,000 | 1,885,655 | |||
Chunghwa Telecom Co., Ltd. |
680,000 | 1,317,176 | |||
Taiwan Secom Co., Ltd. |
622,000 | 994,313 | |||
President Chain Store Corp. |
372,000 | 910,552 | |||
Taiwan Semiconductor Manufacturing Co., Ltd. ADR |
17,500 | 188,125 | |||
Total Taiwan |
5,295,821 | ||||
SINGAPORE: 11.6% |
|||||
Singapore Press Holdings, Ltd. |
479,000 | $ | 1,389,184 | ||
Venture Corp., Ltd. |
124,000 | 1,193,290 | |||
Singapore Post, Ltd. |
1,301,000 | 951,857 | |||
SMRT Corp., Ltd. |
675,000 | 662,920 | |||
Yellow Pages (Singapore), Ltd. |
779,000 | 662,367 | |||
StarHub, Ltd. |
203,000 | 381,340 | |||
Total Singapore |
5,240,958 | ||||
MALAYSIA: 8.9% |
|||||
Public Bank BHD |
527,800 | 1,350,985 | |||
Maxis Communications BHD |
367,000 | 1,263,138 | |||
Malayan Banking BHD |
217,300 | 804,466 | |||
Berjaya Sports Toto BHD |
451,200 | 608,125 | |||
Total Malaysia |
4,026,714 | ||||
AUSTRALIA: 7.0% |
|||||
Coca-Cola Amatil, Ltd. |
134,498 | 957,638 | |||
Insurance Australia Group, Ltd. |
176,554 | 837,101 | |||
TABCORP Holdings, Ltd. |
52,393 | 699,031 | |||
St. George Bank, Ltd. |
23,464 | 665,036 | |||
Total Australia |
3,158,806 | ||||
SOUTH KOREA: 5.9% |
|||||
Hana Financial Group, Inc. |
25,790 | 1,335,005 | |||
SK Telecom Co., Ltd. ADR |
31,300 | 733,046 | |||
SK Telecom Co., Ltd. |
2,940 | 598,438 | |||
Total South Korea |
2,666,489 | ||||
UNITED KINGDOM: 4.6% |
|||||
HSBC Holdings PLC |
67,600 | 1,174,900 | |||
HSBC Holdings PLC ADR |
10,100 | 886,881 | |||
Total United Kingdom |
2,061,781 | ||||
16 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
SHARES | VALUE | |||||
NEW ZEALAND: 3.1% |
||||||
Fisher & Paykel Appliances Holdings, Ltd. |
345,798 | $ | 906,569 | |||
Auckland International Airport, Ltd. |
278,710 | 479,824 | ||||
Total New Zealand |
1,386,393 | |||||
THAILAND: 3.0% |
||||||
Advanced Info Service Public Co., Ltd. |
425,600 | 814,487 | ||||
Hana Microelectronics Public Co., Ltd. |
705,600 | 534,087 | ||||
Total Thailand |
1,348,574 | |||||
PHILIPPINES: 2.3% |
||||||
Globe Telecom, Inc. |
40,950 | 1,043,907 | ||||
Total Philippines |
1,043,907 | |||||
INDONESIA: 2.1% |
||||||
PT Telekomunikasi Indonesia |
559,000 | 603,414 | ||||
PT Telekomunikasi Indonesia ADR |
8,200 | 353,748 | ||||
Total Indonesia |
957,162 | |||||
INDIA: 1.9% |
||||||
HCL-Infosystems, Ltd.** |
299,167 | 884,045 | ||||
Total India |
884,045 | |||||
TOTAL EQUITIES |
44,845,976 | |||||
(Cost $43,373,613) |
||||||
MONEY MARKET MUTUAL FUND: 2.2%* |
| |||||
BNY Hamilton Money Fund |
988,909 | $ | 988,909 | |||
(Cost $988,909) |
||||||
TOTAL INVESTMENTS: 101.4% |
45,834,885 | |||||
(Cost $44,362,522***) |
||||||
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS: 1.4% |
(646,716 | ) | ||||
NET ASSETS: 100.0% |
$ | 45,188,169 | ||||
* | As a percentage of net assets as of March 31, 2007 |
** | Fair valued under direction of the Board of Trustees |
*** | Cost of investments is $44,362,522 and net unrealized appreciation consists of: |
Gross unrealized appreciation |
$ | 2,484,149 | ||
Gross unrealized depreciation |
(1,011,786 | ) | ||
Net unrealized appreciation |
$ | 1,472,363 | ||
ADR | American Depositary Receipt |
REIT | Real Estate Investment Trust |
See accompanying notes to schedules of investments.
800.789.ASIA [2742] www.matthewsfunds.com | 17 |
MATTHEWS PACIFIC TIGER FUND (CLOSED TO MOST NEW INVESTORS)
FUND DESCRIPTION | SYMBOL: MAPTX |
Under normal market conditions, the Matthews Pacific Tiger Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in the Pacific Tiger countries of China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand and (as of April 30, 2007) Vietnam.
PORTFOLIO MANAGERS | ||
Lead Manager: Mark W. Headley |
Co-Manager: Richard H. Gao |
PORTFOLIO MANAGER COMMENTARY
The Matthews Pacific Tiger Fund had a lack-luster return of 0.72% in the first quarter of 2007, versus the MSCI All Country Far East ex-Japan Indexs return of 1.46% and the MSCI All Country Asia ex-Japan Indexs return of 1.04%. The first index is the Funds historical benchmark; the second was added several years ago, given its inclusion of the increasingly important Indian market. The Lipper Pacific ex-Japan Funds Category Average returned 3.40% for the quarter, which was notable for its volatility.
The portfolio saw strong returns from a number of consistent performers from the past few years of positive returns. Hang Lung Group has grown to be one of the largest positions in the Fund. As a long-established Hong Kong property holding company, the group has gone aggressively into China, with impressive results so far. NHN Corporation continues to define itself as one of Asias most unique Internet companies, maintaining its position within its home market in Korea and expanding to neighboring markets competently. The industrial sector of the portfolio performed well, with a recovery in the Singaporean water filtration company Hyflux and continued strong performance of Fraser and Neave, largely due to its property exposure in Singapore. Singapore was a notable area of strength for the portfolio as a whole.
On a country basis, the portfolio was hurt by negative returns from Korea and India. Indonesia also saw a pullback across most holdings. Most other markets showed little direction for the quarter as a whole but generally recovered from the sharp fall in late February. The new positions in Malaysia have so far been a modest positive addition. On a sector basis, consumer and health carerelated companies were a significant negative for the portfolio: both are areas in which the portfolio is significantly overweight relative to the regional benchmarks. The Fund has always been willing to build major positions
continued on page 21
18 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PERFORMANCE AS OF MARCH 31, 2007
Fund Inception: 9/12/94 |
3 MO | 1 YR | Average Annual Total Returns | |||||||||||||||
3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION |
|||||||||||||||
Matthews Pacific Tiger Fund |
0.72 | % | 17.13 | % | 22.18 | % | 21.02 | % | 9.81 | % | 9.13 | % | ||||||
MSCI All Country Far East ex-Japan Index1 |
1.46 | % | 23.96 | % | 20.96 | % | 17.68 | % | 3.40 | % | 2.94 | %2 | ||||||
MSCI All Country Asia ex-Japan Index3 |
1.04 | % | 23.54 | % | 22.02 | % | 18.75 | % | 4.38 | % | 3.31 | %2 | ||||||
Lipper Pacific ex-Japan Funds Category Average4 |
3.40 | % | 23.79 | % | 22.41 | % | 18.58 | % | 6.76 | % | 6.33 | %2 |
All performance quoted is past performance and is no guarantee of future results. Assumes reinvestment of all dividends and/or distributions. Unusually high returns may not be sustainable. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. The performance of foreign indices may be based on different exchange rates than those used by the Fund and, unlike the Funds NAV, is not adjusted to reflect fair value at the close of the NYSE. Current performance may be lower or higher than the return figures quoted. Returns are net of the Funds management fee and other operating expenses. Returns would have been lower if certain of the Funds fees and expenses had not been waived. For the Funds most recent month-end performance please call 800-789-ASIA [2742] or visit www.matthewsfunds.com.
OPERATING EXPENSES5 |
|||
Net Ratio: 3 months ended 3/31/07 (annualized)6,7 |
1.11 | % | |
Net Ratio: Fiscal Year 20067 |
1.16 | % | |
Gross Ratio: Fiscal Year 2006 |
1.18 | % |
PORTFOLIO TURNOVER8 |
|||
3 months ended 3/31/07 (annualized)6 |
49.75 | % | |
Fiscal Year 2006 |
18.80 | % |
1 |
The MSCI All Country Far East ex-Japan Index is a free floatadjusted market capitalizationweighted index of the stock markets of China, Hong Kong, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand. The Matthews Pacific Tiger Fund invests in countries that are not included in the MSCI All Country Far East ex-Japan Index. It is not possible to invest directly in an index. Source: Index data from Morgan Stanley Capital International; total return calculations performed by PFPC Inc. |
2 |
Calculated from 8/31/94. |
3 |
The MSCI All Country Asia ex-Japan Index is a free floatadjusted market capitalizationweighted index of the stock of markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan, and Thailand. It is not possible to invest directly in an index. Source: Index data from Morgan Stanley Capital International; total return calculations performed by PFPC Inc. |
4 |
As of 3/31/07, the Lipper Pacific ex-Japan Funds Category Average consisted of 50 funds for the three-month period, 48 funds for the one-year period, 47 funds for the three-year period, 43 funds for the five-year period, 23 funds for the 10-year period, and 12 funds since 8/31/94. Lipper, Inc. fund performance does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains, for the stated periods. |
5 |
Matthews Asian Funds do not charge 12b-1 fees. |
6 |
Unaudited. |
7 |
Includes management fee, administration and shareholder services fees after reimbursement, waiver or recapture of expenses by Advisor. Voluntary fee waivers by the Advisor may be discontinued at any time. |
8 |
The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
800.789.ASIA [2742] www.matthewsfunds.com | 19 |
MATTHEWS PACIFIC TIGER FUND (CLOSED TO MOST NEW INVESTORS)
TOP TEN HOLDINGS1
COUNTRY | % OF NET ASSETS | |||
Hang Lung Group, Ltd. |
China/Hong Kong | 3.3% | ||
Hana Financial Group, Inc. |
South Korea | 3.1% | ||
Lenovo Group, Ltd. |
China/Hong Kong | 3.1% | ||
Advanced Info Service Public Co., Ltd. |
Thailand | 2.8% | ||
Swire Pacific, Ltd. |
China/Hong Kong | 2.8% | ||
NHN Corp. |
South Korea | 2.8% | ||
DBS Group Holdings, Ltd. |
Singapore | 2.7% | ||
Dah Sing Financial Holdings, Ltd. |
China/Hong Kong | 2.7% | ||
Taiwan Semiconductor Manufacturing Co., Ltd. |
Taiwan | 2.6% | ||
AMOREPACIFIC Corp. |
South Korea | 2.6% | ||
% OF ASSETS IN TOP 10 |
28.5% |
COUNTRY ALLOCATION |
|||
China/Hong Kong |
33.7 | % | |
South Korea |
20.7 | % | |
Singapore |
11.6 | % | |
India2 |
9.7 | % | |
Thailand |
9.1 | % | |
Indonesia |
5.1 | % | |
Taiwan |
4.9 | % | |
Malaysia |
4.2 | % | |
Philippines |
0.4 | % | |
Cash, cash equivalents and other3 |
0.6 | % |
SECTOR ALLOCATION |
|||
Financials |
33.1 | % | |
Information Technology |
15.1 | % | |
Consumer Discretionary |
15.1 | % | |
Consumer Staples |
12.2 | % | |
Health Care |
9.6 | % | |
Industrials |
8.6 | % | |
Telecommunication Services |
5.7 | % | |
Cash, cash equivalents and other3 |
0.6 | % |
MARKET CAP EXPOSURE |
|||
Large cap (over $5 billion) |
41.2 | % | |
Mid cap ($1$5 billion) |
47.2 | % | |
Small cap (under $1 billion) |
11.0 | % | |
Cash, cash equivalents and other3 |
0.6 | % |
NUMBER OF POSITIONS3 |
NAV |
FUND ASSETS |
REDEMPTION FEE |
12B-1 FEES | ||||
71 |
$23.54 | $3.22 billion | 2.00% within 90 calendar days |
None |
1 |
Holdings may include more than one security from same issuer. |
2 |
India is not included in the MSCI All Country Far East ex-Japan Index. |
3 |
Includes BNY Hamilton Money Fund. |
20 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PORTFOLIO MANAGER COMMENTARY continued from page 18
in market areas where benchmarks may have very little weighting. When these areas underperform, we have historically continued to increase their positions. This can lead to significant volatility and periods of very off-benchmark performance.
Looking across the region at the end of a challenging quarter, it is something of a relief that the markets appear to be taking risk more seriouslyor at least talking a great deal about it. With rising interest rates in China and India, where in some cases valuations are quite stretched, the Fund continues to have a diversified portfolio and is only building new positions with some caution. New holdings have been added in Korea, Indonesia and China, all of smaller- and medium-sized companies. While the world continues to express concern over the uncertainty in both the Middle East and the U.S. economy, overall conditions in Asia appear reasonably healthy. The obvious threat within the region would be a major problem of some sort in China. Japans economy is still hardly appreciated despite its continued strength, and India is still too isolated to cause broad problems, in our opinion. Overall, the Fund is continuing its long search for exceptional Asian companies that define the future of the worlds most-important region.
800.789.ASIA [2742] www.matthewsfunds.com |
21 |
MATTHEWS PACIFIC TIGER FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
EQUITIES: 99.4%*
SHARES | VALUE | ||||
CHINA/HONG KONG: 33.7% |
|||||
Hang Lung Group, Ltd. |
30,303,000 | $ | 107,234,652 | ||
Lenovo Group, Ltd. |
270,292,000 | 98,935,832 | |||
Swire Pacific, Ltd. A Shares |
7,990,500 | 89,686,677 | |||
Dah Sing Financial Holdings, Ltd. |
10,032,400 | 87,567,630 | |||
NWS Holdings, Ltd. |
24,775,636 | 66,588,386 | |||
Television Broadcasts, Ltd. |
10,362,700 | 64,787,598 | |||
Agile Property Holdings, Ltd. |
63,112,000 | 62,195,226 | |||
Shangri-La Asia, Ltd. |
22,824,000 | 56,494,037 | |||
Bank of Communications Co., Ltd. H Shares |
49,491,000 | 50,862,319 | |||
Ping An Insurance (Group) Co. of China, Ltd. H Shares |
10,077,500 | 49,397,613 | |||
Dairy Farm International Holdings, Ltd. |
11,984,900 | 46,741,110 | |||
NetEase.com, Inc. ADR ** |
2,581,300 | 45,792,262 | |||
China Mobile, Ltd. ADR |
914,650 | 41,022,053 | |||
Travelsky Technology, Ltd. H Shares |
20,406,000 | 35,936,080 | |||
Integrated Distribution Services Group, Ltd. |
13,783,000 | 33,480,686 | |||
Dynasty Fine Wines Group, Ltd. |
77,862,000 | 33,084,001 | |||
Dickson Concepts International, Ltd. |
28,334,900 | 32,637,627 | |||
China Merchants Bank Co., Ltd. H Shares ** |
9,278,000 | 18,713,928 | |||
Li Ning Co., Ltd. |
8,248,000 | 16,340,825 | |||
SCMP Group, Ltd. |
32,396,000 | 11,692,164 | |||
Other Investments |
35,800,398 | ||||
Total China/Hong Kong |
1,084,991,104 | ||||
SOUTH KOREA: 20.7% |
|||||
Hana Financial Group, Inc. |
1,924,363 | $ | 99,613,603 | ||
NHN Corp. ** |
608,212 | 89,214,770 | |||
AMOREPACIFIC Corp. |
152,635 | 84,040,109 | |||
Hanmi Pharmaceutical Co., Ltd. |
386,069 | 49,859,039 | |||
Samsung Securities Co., Ltd. |
888,160 | 48,335,238 | |||
Hite Brewery Co., Ltd. |
382,037 | 45,683,634 | |||
Nong Shim Co., Ltd. |
161,478 | 42,051,562 | |||
S1 Corp. |
973,120 | 39,098,571 | |||
Yuhan Corp. |
200,284 | 31,400,820 | |||
ON*Media Corp. ** |
3,669,480 | 29,798,923 | |||
Kookmin Bank |
253,151 | 22,710,400 | |||
GS Home Shopping, Inc. |
234,698 | 17,063,503 | |||
SK Telecom Co., Ltd. ADR |
680,300 | 15,932,626 | |||
Kookmin Bank ADR |
68,000 | 6,130,200 | |||
Pacific Corp. |
13,652 | 2,002,526 | |||
Other Investments |
45,330,437 | ||||
Total South Korea |
668,265,961 | ||||
SINGAPORE: 11.6% |
|||||
DBS Group Holdings, Ltd. |
6,242,750 | 88,056,455 | |||
Fraser and Neave, Ltd. |
23,832,750 | 80,115,364 | |||
Hyflux, Ltd. |
37,706,187 | 65,861,250 | |||
Venture Corp., Ltd. |
6,524,800 | 62,790,153 | |||
Parkway Holdings, Ltd. |
20,287,050 | 43,859,555 | |||
Keppel Land, Ltd. |
5,424,000 | 33,963,682 | |||
Total Singapore |
374,646,459 | ||||
INDIA: 9.7% |
|||||
Cipla, Ltd.*** |
12,196,873 | 65,551,352 | |||
Infosys Technologies, Ltd.*** |
1,246,624 | 56,059,791 | |||
Sun Pharmaceuticals Industries, Ltd.*** |
2,196,352 | 50,497,652 | |||
Titan Industries, Ltd. *** |
2,229,554 | 41,771,373 | |||
HDFC Bank, Ltd.*** |
1,952,568 | 41,649,244 | |||
Dabur India, Ltd.*** |
17,572,258 | 36,260,343 | |||
Bank of Baroda *** |
4,547,022 | 21,956,263 | |||
Total India |
313,746,018 | ||||
22 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
SHARES | VALUE | ||||
THAILAND: 9.1% |
|||||
Advanced Info Service Public Co., Ltd. |
47,888,300 | $ | 91,645,704 | ||
Bangkok Bank Public Co., Ltd. |
24,921,800 | 80,438,829 | |||
Land & Houses Public Co., Ltd. |
173,222,300 | 36,613,682 | |||
Bank of Ayudhya Public Co., Ltd. NVDR |
58,539,600 | 35,782,560 | |||
Thai Beverage Public Co., Ltd. |
189,105,000 | 30,537,999 | |||
Amata Corp. Public Co., Ltd. |
59,894,900 | 18,818,735 | |||
Total Thailand |
293,837,509 | ||||
INDONESIA: 5.1% |
|||||
PT Bank Central Asia |
69,945,500 | 39,092,827 | |||
PT Telekomunikasi Indonesia |
34,940,500 | 37,716,595 | |||
PT Kalbe Farma ** |
249,644,000 | 33,103,478 | |||
PT Astra International |
20,030,230 | 28,975,237 | |||
PT Ramayana Lestari Sentosa |
277,326,000 | 24,617,431 | |||
Total Indonesia |
163,505,568 | ||||
TAIWAN: 4.9% |
|||||
Taiwan Semiconductor Manufacturing Co., Ltd. |
41,185,159 | 84,505,992 | |||
President Chain Store Corp. |
29,591,000 | 72,430,527 | |||
Total Taiwan |
156,936,519 | ||||
MALAYSIA: 4.2% |
|||||
Resorts World BHD |
12,096,500 | 60,176,370 | |||
Public Bank BHD |
16,107,900 | 41,230,633 | |||
Top Glove Corp. BHD |
13,027,480 | 33,911,011 | |||
Total Malaysia |
135,318,014 | ||||
PHILIPPINES: 0.4% |
|||||
SM Prime Holdings, Inc. |
56,072,000 | 13,364,311 | |||
Total Philippines |
13,364,311 | ||||
TOTAL EQUITIES |
3,204,611,463 | ||||
(Cost $2,393,574,957) |
|||||
MONEY MARKET MUTUAL FUND: 0.1%* |
|||||
BNY Hamilton Money Fund |
3,052,731 | $ | 3,052,731 | ||
(Cost $3,052,731) |
|||||
TOTAL INVESTMENTS: 99.5% |
3,207,664,194 | ||||
(Cost $2,396,627,688****) |
|||||
CASH AND OTHER ASSETS, LESS LIABILITIES: 0.5% |
17,222,483 | ||||
NET ASSETS: 100.0% |
$ | 3,224,886,677 | |||
* | As a percentage of net assets as of March 31, 2007 |
** | Nonincome producing security |
*** | Fair valued under direction of the Board of Trustees |
**** | Cost of investments is $2,396,627,688 and net unrealized appreciation consists of: |
Gross unrealized appreciation |
$ | 859,430,264 | ||
Gross unrealized depreciation |
(48,393,758 | ) | ||
Net unrealized appreciation |
$ | 811,036,506 | ||
| Affiliated Issuer, as defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of this issuer) |
ADR | American Depositary Receipt |
NVDR | Non-voting Depositary Receipt |
See accompanying notes to schedules of investments.
This portfolio data should not be relied upon as a complete listing of this Funds holdings, as information on particular holdings may have been withheld if it was in the Funds interest to do so.
800.789.ASIA [2742] www.matthewsfunds.com | 23 |
MATTHEWS ASIAN GROWTH AND INCOME FUND (CLOSED TO MOST NEW INVESTORS)
FUND DESCRIPTION | SYMBOL: MACSX |
Under normal market conditions, the Matthews Asian Growth and Income Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in dividend-paying equity securities and the convertible securities, of any duration or quality, of companies located in Asia. Asia includes China, Hong Kong, India, Indonesia, Japan, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan, Thailand and (as of April 30, 2007) Vietnam.
PORTFOLIO MANAGERS
Lead Manager: G. Paul Matthews |
Co-Manager: Andrew T. Foster |
PORTFOLIO MANAGER COMMENTARY
For the first quarter of 2007, the Matthews Asian Growth and Income Fund returned 2.46% while its benchmark, the MSCI All Country Far East ex-Japan Index, rose 1.46%. The Lipper Pacific ex-Japan Funds Category Average gained 3.40% over the same period.
Asian markets began the quarter much as they finished the prior one: Most were characterized by relative stability, and many continued to steadily appreciate in value. However, these conditions were reversed by the end of February, when a sharp sell-off in domestic Chinese equities appeared to trigger a global correction. Whether events in China or other factors were the root cause behind the decline in global equities is debatable. What is clear in either case is that many market participants were poised to sell after a period of prolonged stability. Despite
continued on page 27
24 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PERFORMANCE AS OF MARCH 31, 2007
Fund Inception: 9/12/94 |
3 MO | 1 YR | Average Annual Total Returns | |||||||||||||||
3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION |
|||||||||||||||
Matthews Asian Growth and Income Fund |
2.46 | % | 18.99 | % | 18.74 | % | 19.64 | % | 14.06 | % | 12.61 | % | ||||||
MSCI All Country Far East ex-Japan Index1 |
1.46 | % | 23.96 | % | 20.96 | % | 17.68 | % | 3.40 | % | 2.94 | %2 | ||||||
Lipper Pacific ex-Japan Funds Category Average3 |
3.40 | % | 23.79 | % | 22.41 | % | 18.58 | % | 6.76 | % | 6.33 | %2 |
All performance quoted is past performance and is no guarantee of future results. Assumes reinvestment of all dividends and/or distributions. Unusually high returns may not be sustainable. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. The performance of foreign indices may be based on different exchange rates than those used by the Fund and, unlike the Funds NAV, is not adjusted to reflect fair value at the close of the NYSE. Current performance may be lower or higher than the return figures quoted. Returns are net of the Funds management fee and other operating expenses. Returns would have been lower if certain of the Funds fees and expenses had not been waived. For the Funds most recent month-end performance please call 800-789-ASIA [2742] or visit www.matthewsfunds.com.
30 -DAY SEC YIELD4 |
|||
0.61 | % |
OPERATING EXPENSES6 |
|||
Net Ratio: 3 months ended 3/31/07 (annualized)7,8 |
1.14 | % | |
Net Ratio: Fiscal Year 20068 |
1.19 | % | |
Gross Ratio: Fiscal Year 2006 |
1.20 | % |
INCOME DISTRIBUTION YIELD5 |
|||
3.23 | % |
PORTFOLIO TURNOVER9 |
|||
3 months ended 3/31/07 (annualized)6 |
22.63 | % | |
Fiscal Year 2006 |
28.37 | % |
1 |
The MSCI All Country Far East ex-Japan Index is a free floatadjusted market capitalizationweighted index of the stock markets of China, Hong Kong, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand. The Matthews Asian Growth and Income Fund invests in countries that are not included in the MSCI All Country Far East ex-Japan Index. It is not possible to invest directly in an index. Source: Index data from Morgan Stanley Capital International; total return calculations performed by PFPC Inc. |
2 |
Calculated from 8/31/94. |
3 |
As of 3/31/07, the Lipper Pacific ex-Japan Funds Category Average consisted of 50 funds for the three-month period, 48 funds for the one-year period, 47 funds for the three-year period, 43 funds for the five-year period, 23 funds for the 10-year period, and 12 funds since 8/31/94. Lipper, Inc. fund performance does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains, for the stated periods. |
4 |
The 30-day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 3/31/07, expressed as an annual percentage rate based on the Funds share price at the end of the 30-day period. The SEC Yield should be regarded as an estimate of the Funds rate of investment income, and it may not equal the Funds actual income distribution rate, the income paid to a shareholders account, or the income reported in the Funds financial statements. Past yields are no guarantee of future yields. |
5 |
The Income Distribution Yield represents the past two dividends (does not include capital gains) paid by the Fund for the period ended 3/31/07, expressed as an annual percentage rate based on the Funds share price on 3/31/07. Generally, the Fund has made distributions of net investment income twice each year and of capital gains, if any, annually. Past Income Distribution Yields are no guarantee of future yields or that any distributions will continue to be paid twice each year. |
6 |
Matthews Asian Funds do not charge 12b-1 fees. |
7 |
Unaudited. |
8 |
Includes management fee, administration and shareholder services fees after reimbursement, waiver or recapture of expenses by Advisor. Voluntary fee waivers by the Advisor may be discontinued at any time. |
9 |
The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
800.789.ASIA [2742] www.matthewsfunds.com | 25 |
MATTHEWS ASIAN GROWTH AND INCOME FUND (CLOSED TO MOST NEW INVESTORS)
TOP TEN HOLDINGS1
HOLDING |
COUNTRY | SECURITY TYPE | % OF NET ASSETS | |||
Hong Kong Land Ltd. |
China/Hong Kong | Convertible Bond | 3.1% | |||
HSBC Holdings PLC |
United Kingdom | Equity | 2.8% | |||
Hang Lung Group, Ltd. |
China/Hong Kong | Equity | 2.7% | |||
Fraser and Neave, Ltd. |
Singapore | Equity | 2.6% | |||
SK Telecom Co., Ltd. |
South Korea | Equity | 2.5% | |||
CLP Holdings, Ltd. |
China/Hong Kong | Equity | 2.4% | |||
Cathay Financial Holding Co., Ltd. |
Taiwan | Convertible Bond | 2.2% | |||
Nippon Building Fund, Inc. |
Japan | Equity | 2.0% | |||
Rafflesia Capital, Ltd. |
Malaysia | Convertible Bond | 2.0% | |||
Chunghwa Telecom Co., Ltd. |
Taiwan | Equity | 1.9% | |||
% OF ASSETS IN TOP 10 |
24.2% |
COUNTRY ALLOCATION |
|||
China/Hong Kong |
30.7 | % | |
South Korea |
14.1 | % | |
Taiwan |
11.2 | % | |
Singapore |
10.7 | % | |
India2 |
7.5 | % | |
Japan2 |
7.0 | % | |
Thailand |
4.2 | % | |
Australia2 |
3.9 | % | |
Malaysia |
3.5 | % | |
United Kingdom2 |
2.8 | % | |
Indonesia |
2.2 | % | |
Philippines |
1.0 | % | |
Cash, cash equivalents and other3 |
1.2 | % |
SECTOR ALLOCATION |
|||
Financials |
29.9 | % | |
Telecommunication Services |
20.2 | % | |
Consumer Discretionary |
16.6 | % | |
Utilities |
9.1 | % | |
Industrials |
7.5 | % | |
Information Technology |
4.2 | % | |
Consumer Staples |
4.2 | % | |
Health Care |
4.0 | % | |
Energy |
2.8 | % | |
Materials |
0.3 | % | |
Cash, cash equivalents and other3 |
1.2 | % |
MARKET CAP EXPOSURE |
|||
Large cap (over $5 billion) |
57.5 | % | |
Mid cap ($1$5 billion) |
32.6 | % | |
Small cap (under $1 billion) |
8.7 | % | |
Cash, cash equivalents and other 3 |
1.2 | % |
BREAKDOWN BY SECURITY4 |
|||
Common Equities |
74.7 | % | |
Convertible Bonds |
21.3 | % | |
Preferred Equities |
2.8 | % | |
Cash, cash equivalents and other3 |
1.2 | % |
NUMBER OF POSITIONS3 |
NAV |
FUND ASSETS |
REDEMPTION FEE |
12B-1 FEES | ||||
86 |
$19.14 | $2.06 billion | 2.00% within 90 calendar days |
None |
1 |
Holdings may include more than one security from same issuer. |
2 |
Australia, India, Japan and the United Kingdom are not included in the MSCI All Country Far East ex-Japan Index. |
3 |
Includes BNY Hamilton Money Fund. |
4 |
As of 3/31/07, convertible bonds, which are not reflected in the Funds benchmark, the MSCI All Country Far East ex-Japan Index, accounted for 21.3% of the Matthews Asian Growth and Income Fund. |
26 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PORTFOLIO MANAGER COMMENTARY continued from page 24
this renewed volatility, however, most major Asian markets finished the quarter with positive returns; only India (down 3.6%), Hong Kong and Taiwan (each down less than 1%) posted negative returns.
Amidst this environment, we were relatively pleased with the Funds performance. The Fund outpaced its benchmark index, yet it did so with a lower degree of volatility: Daily price variations in the Fund were only about three-quarters of those of the MSCI All Country Far East ex-Japan Index.
An examination of the quarters top-contributing positions yields interesting results. Nine of the top 10 contributors derive the bulk of their economic value from property or real estate. From a fundamental perspective, that sectors health has been mixed. Interest rates in the regions largest markets have generally risen in the past few quarters. This has raised borrowing costs, and it may crimp some companies ability to borrow easily. Meanwhile, evidence of landlords ability to increase rents to offset such costs has been uneven. Rents in Singapore have fared well, though from a depressed base; the going has been tougher in other markets.
Nevertheless, investors appetite for real estate in the region continued unabated. This was particularly evident in the performance of Japanese REITs (real estate investment trusts). The Fund has held stakes in Japanese REITs since 2003 and continues to hold four REITs today. By country, Japan was the top contributor to Fund performance as a result of the combined performance of its REIT positions. This was somewhat out of keeping with the Funds composition: It has historically carried a relatively small weighting in Japan (roughly 7% as of March 31, 2007). Japanese REITs were also notable in that they have recently become some of the Funds most volatile positions. This, in part, is because the market has begun to hope for improved rents, on the back of a much-improved commercial real estate market in Tokyo and other major metropolitan areas. However, the REITs volatility may also be symptomatic of the uncertainty that hangs over the forward path of interest rates in Japan.
The Funds composition was largely unchanged during the quarter. It exited some of its holdings in corporate bonds to take advantage of lower valuations in dividend-paying common stocks amidst the sell-off that occurred during the quarter. The Fund also lowered its weighting in convertible bonds, having converted three larger bonds that were nearing maturity. The growth of the Asian convertible bond universe has remained lackluster; however, we hold out hope that new issuersincluding the recently arrived private-equity investors in the regionwill open up this market once again.
800.789.ASIA [2742] www.matthewsfunds.com | 27 |
MATTHEWS ASIAN GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
COMMON EQUITIES: 74.7%*
SHARES | VALUE | ||||
CHINA/HONG KONG: 25.0% |
|||||
Hang Lung Group, Ltd. |
15,449,000 | $ | 54,670,103 | ||
CLP Holdings, Ltd. |
6,846,200 | 49,987,292 | |||
Hang Seng Bank, Ltd. |
2,812,700 | 39,957,727 | |||
China Travel International Investment HK, Ltd. |
71,714,000 | 33,500,493 | |||
CITIC Pacific, Ltd. |
8,970,000 | 33,177,577 | |||
Television Broadcasts, Ltd. |
5,262,000 | 32,898,023 | |||
HongKong Electric Holdings, Ltd. |
5,914,500 | 30,354,060 | |||
Shangri-La Asia, Ltd. |
12,043,740 | 29,810,703 | |||
Café de Coral Holdings, Ltd. |
16,415,100 | 29,664,198 | |||
I-CABLE Communications, Ltd. |
129,144,000 | 27,767,572 | |||
Giordano International, Ltd. |
54,735,000 | 26,619,697 | |||
PCCW, Ltd. |
37,047,000 | 22,237,209 | |||
ASM Pacific Technology, Ltd. |
3,559,500 | 21,001,209 | |||
Hong Kong & China Gas Co., Ltd. |
7,989,000 | 17,852,171 | |||
Cheung Kong Infrastructure Holdings, Ltd. |
4,475,500 | 15,579,907 | |||
Hang Lung Properties, Ltd. |
5,216,920 | 14,588,814 | |||
Vitasoy International Holdings, Ltd. |
33,359,000 | 14,003,650 | |||
PetroChina Co., Ltd. H Shares |
9,756,000 | 11,574,598 | |||
PetroChina Co., Ltd. ADR |
64,650 | 7,569,868 | |||
China-Hong Kong Photo Products Holdings, Ltd. |
14,998,003 | 1,573,989 | |||
CITIC 1616 Holdings, Ltd.**,*** |
448,500 | 148,094 | |||
Total China/Hong Kong |
514,536,954 | ||||
SINGAPORE: 10.7% |
|||||
Fraser and Neave, Ltd. |
16,069,100 | 54,017,342 | |||
Singapore Press Holdings, Ltd. |
12,952,500 | 37,564,512 | |||
CapitaMall Trust REIT |
13,841,900 | 34,304,811 | |||
StarHub, Ltd. |
17,275,714 | 32,452,813 | |||
Parkway Holdings, Ltd. |
14,242,200 | 30,790,901 | |||
Singapore Post, Ltd. |
33,312,000 | 24,372,224 | |||
Yellow Pages (Singapore), Ltd. |
5,559,000 | 4,726,698 | |||
Other Investmants |
1,676,248 | ||||
Total Singapore |
219,905,549 | ||||
TAIWAN: 9.0% |
|||||
Far EasTone Telecommunications Co., Ltd. |
35,067,000 | $ | 39,844,047 | ||
Chunghwa Telecom Co., Ltd. ADR |
1,717,150 | 34,205,628 | |||
President Chain Store Corp. |
13,430,000 | 32,872,900 | |||
Taiwan Semiconductor Manufacturing Co., Ltd. |
15,073,000 | 30,927,617 | |||
Taiwan Secom Co., Ltd. |
13,195,779 | 21,094,425 | |||
SinoPac Financial Holdings Co., Ltd. |
44,775,047 | 20,566,321 | |||
Chunghwa Telecom Co., Ltd. |
3,073,960 | 5,954,334 | |||
Total Taiwan |
185,465,272 | ||||
SOUTH KOREA: 7.8% |
|||||
SK Telecom Co., Ltd. |
205,630 | 41,856,021 | |||
Hana Financial Group, Inc. |
685,369 | 35,477,753 | |||
KT Corp. |
505,730 | 22,684,743 | |||
Korea Electric Power Corp. |
480,590 | 19,181,712 | |||
KT Corp. ADR |
718,800 | 16,093,932 | |||
SK Telecom Co., Ltd. ADR |
395,300 | 9,257,926 | |||
Daehan City Gas Co., Ltd. |
280,300 | 7,388,861 | |||
Korea Electric Power Corp. ADR |
259,750 | 5,195,000 | |||
G11R, Inc. |
309,540 | 4,408,839 | |||
Total South Korea |
161,544,787 | ||||
JAPAN: 7.0% |
|||||
Nippon Building Fund, Inc. REIT |
2,538 | 41,998,473 | |||
Japan Retail Fund Investment Corp. REIT |
2,860 | 28,153,428 | |||
Tokyu REIT, Inc. |
2,543 | 27,622,539 | |||
Japan Real Estate Investment Corp. REIT |
2,039 | 26,992,872 | |||
Kao Corp. |
682,000 | 19,966,904 | |||
Total Japan |
144,734,216 | ||||
28 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
SHARES | VALUE | ||||
THAILAND: 4.2% |
|||||
Advanced Info Service Public Co., Ltd. |
18,935,000 | $ | 36,236,647 | ||
BEC World Public Co., Ltd. |
47,386,400 | 29,506,527 | |||
Charoen Pokphand Foods Public Co., Ltd. |
46,820,800 | 6,232,074 | |||
Aeon Thana Sinsap Public Co., Ltd. |
2,995,600 | 3,935,950 | |||
Thai Reinsurance Public Co., Ltd. |
25,672,800 | 3,886,485 | |||
MCOT Public Co., Ltd. |
5,364,700 | 3,815,511 | |||
Charoen Pokphand Foods Public Co., Ltd. Foreign shares |
28,587,300 | 3,805,108 | |||
Total Thailand |
87,418,302 | ||||
AUSTRALIA: 3.9% |
|||||
Insurance Australia Group, Ltd. |
7,864,808 | 37,289,665 | |||
AXA Asia Pacific Holdings, Ltd. |
5,391,885 | 31,497,824 | |||
Rural Press, Ltd. |
1,131,130 | 12,446,698 | |||
Total Australia |
81,234,187 | ||||
UNITED KINGDOM: 2.8% |
|||||
HSBC Holdings PLC ADR |
616,200 | 54,108,522 | |||
HSBC Holdings PLC |
196,800 | 3,420,419 | |||
Total United Kingdom |
57,528,941 | ||||
INDONESIA: 2.2% |
|||||
PT Telekomunikasi Indonesia ADR |
745,500 | $ | 32,160,870 | ||
PT Tempo Scan Pacific |
139,445,000 | 12,836,581 | |||
Total Indonesia |
44,997,451 | ||||
INDIA: 1.1% |
|||||
GAIL India, Ltd. **** |
3,597,158 | 21,629,294 | |||
Total India |
21,629,294 | ||||
PHILIPPINES: 1.0% |
|||||
Globe Telecom, Inc. |
781,160 | 19,913,509 | |||
Total Philippines |
19,913,509 | ||||
TOTAL COMMON EQUITIES |
1,538,908,462 | ||||
(Cost $1,094,290,872) |
See footnotes on page 31.
800.789.ASIA [2742] www.matthewsfunds.com | 29 |
MATTHEWS ASIAN GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (continued)
PREFERRED EQUITIES: 2.8%*
SHARES | VALUE | |||||
SOUTH KOREA: 2.8% |
||||||
Hyundai Motor Co., Ltd., Pfd. |
566,280 | $ | 21,247,538 | |||
Hyundai Motor Co., Ltd., 2nd Pfd. |
305,760 | 11,992,500 | ||||
Samsung Fire & Marine Insurance Co., Ltd., Pfd. |
119,550 | 9,746,476 | ||||
LG Household & Health Care, Ltd., Pfd. |
177,830 | 8,534,252 | ||||
LG Chem, Ltd., Pfd. |
242,450 | 6,262,261 | ||||
Total South Korea |
57,783,027 | |||||
TOTAL PREFERRED EQUITIES |
57,783,027 | |||||
(Cost $ 25,013,795) |
||||||
INTERNATIONAL DOLLAR BONDS: 21.3%*
|
||||||
FACE AMOUNT | VALUE | |||||
INDIA: 6.4% |
||||||
Housing Development Finance Corp., Cnv. 0.000%, 09/27/10 |
$ | 31,800,000 | $ | 39,034,500 | ||
Sun Pharmaceuticals Industries, Ltd., Cnv. 0.000%, 11/26/09 |
26,269,000 | 37,958,705 | ||||
Reliance Communications, Ltd., Cnv. 0.000%, 05/10/11 |
22,290,000 | 25,494,188 | ||||
Tata Motors, Ltd., Cnv. 1.000%, 04/27/11 |
17,949,000 | 21,000,330 | ||||
Tata Power Co., Ltd. Cnv. 1.000%, 02/25/10 |
8,564,000 | 9,463,220 | ||||
Total India |
132,950,943 | |||||
CHINA/HONG KONG: 5.7% |
||||||
Hong Kong Land CB 2005, Ltd., Cnv. 2.750%, 12/21/12 |
48,400,000 | 64,202,600 | ||||
CNOOC Finance 2004, Ltd., Cnv. 0.000%, 12/15/09 |
31,603,000 | 37,923,600 | ||||
Brilliance China Finance, Ltd. Cnv. 0.000%, 06/07/11 |
13,150,000 | 15,740,550 | ||||
Total China/Hong Kong |
117,866,750 | |||||
MALAYSIA: 3.5% |
||||||
Rafflesia Capital, Ltd. Cnv. 1.250%, 10/04/11 |
37,700,000 | 41,988,375 | ||||
Prime Venture Labuan, Ltd., Cnv. 1.000%, 12/12/08 |
14,740,000 | 19,788,450 | ||||
YTL Power Finance Cayman, Ltd. Cnv. 0.000%, 05/09/10 |
9,400,000 | 10,868,280 | ||||
Total Malaysia |
72,645,105 | |||||
SOUTH KOREA: 3.5% |
||||||
SK Telecom Co., Ltd., Cnv. 0.000%, 05/27/09 |
29,430,000 | 35,757,450 | ||||
LG.Philips LCD Co., Ltd., Cnv. 0.000%, 04/19/10 |
33,550,000 | 35,396,928 | ||||
Total South Korea |
71,154,378 | |||||
30 | MATTHEW ASIAN FUNDS |
MARCH 31, 2007
FACE AMOUNT | VALUE | |||||
TAIWAN: 2.2% |
||||||
Cathay Financial Holding Co., Ltd., Cnv. 0.000%, 05/20/07 |
$ | 30,706,000 | $ | 44,830,760 | ||
Total Taiwan |
44,830,760 | |||||
TOTAL INTERNATIONAL DOLLAR BONDS |
439,447,936 | |||||
(Cost $389,606,835) |
||||||
SHARES | VALUE | |||||
MONEY MARKET MUTUAL FUND: 0.9%* |
||||||
BNY Hamilton Money Fund |
18,718,633 | $ | 18,718,633 | |||
(Cost $18,718,633) |
||||||
TOTAL INVESTMENTS: 99.7% |
2,054,858,058 | |||||
(Cost $1,527,630,135*****) |
||||||
CASH AND OTHER ASSETS, LESS LIABILITIES: 0.3% |
5,966,948 | |||||
NET ASSETS: 100.0% |
$ | 2,060,825,006 | ||||
* | As a percentage of net assets as of March 31, 2007 |
** | Nonincome producing security |
*** | Illiquid security |
**** | Fair valued under direction of the Board of Trustees |
***** | Cost of investments is $1,527,630,135 and net unrealized appreciation consists of: |
Gross unrealized appreciation |
$ | 547,131,612 | ||
Gross unrealized depreciation |
(19,903,689 | ) | ||
Net unrealized appreciation |
$ | 527,227,923 | ||
| Affiliated Issuer, as defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of this issuer) |
ADR | American Depositary Receipt |
Cnv. | Convertible |
Pfd. | Preferred |
REIT | Real Estate Investment Trust |
See accompanying notes to schedules of investments.
This portfolio data should not be relied upon as a complete listing of this Funds holdings, as information on particular holdings may have been withheld if it was in the Funds interest to do so.
800.789.ASIA [2742] www.matthewsfunds.com | 31 |
MATTHEWS ASIAN TECHNOLOGY FUND
FUND DESCRIPTION | SYMBOL: MATFX | |
Under normal market conditions, the Matthews Asian Technology Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in Asia that derive greater than 50% of their revenues from the sale of products or services in technology-related industries and services. Asia includes China, Hong Kong, India, Indonesia, Japan, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan, Thailand and (as of April 30, 2007) Vietnam.
Matthews considers technology-related industries and businesses to include, but not be limited to, the following: 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. |
PORTFOLIO MANAGERS | ||
Lead Manager: J. Michael Oh | Co-Manager: Mark W. Headley |
PORTFOLIO MANAGER COMMENTARY
For the three-month period ended March 31, 2007, the Matthews Asian Technology Fund declined 0.88%, slightly underperforming the MSCI/Matthews Asian Technology Index, which lost 0.27%, and the Lipper Science and Technology Funds Category Average, which gained 1.22%.
The Asian technology sector had a relatively weak start in the first quarter of the year as prices of key products declined and demand for consumer electronics was generally weak during the quarter.
The Fund gained most from its positions in the telecommunications sector, which continued to outperform the information technology sector following its strong outperformance last year. The expectation of increasing yield in the Japanese telecommunication sector and fast-growing subscriber numbers in emerging markets such as India and China contributed to the sectors strong performance. The overall valuation of the telecommunication services sector in the developed countries of the region remains attractive.
The technology hardware and equipment industry was the worst performer during the quarter due to concerns over declining prices and weak demand for key consumer electronics. The first quarter of the year is typically a slow season for consumer electronics sales, as consumers do most of their spending in the last quarter of the year. The semiconductor industry was the second-worst performer in the Fund, mainly due to falling DRAM (dynamic random access memory) prices. DRAM product prices decreased in part due to capacity expansion, as some DRAM manufacturers have
continued on page 35
32 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PERFORMANCE AS OF MARCH 31, 2007
Fund Inception: 12/27/99 |
3 MO |
1 YR |
Average Annual Total Returns | ||||||||||||
3 YRS | 5 YRS | SINCE INCEPTION |
|||||||||||||
Matthews Asian Technology Fund |
0.88 | % | 11.03 | % | 14.35 | % | 13.50 | % | 2.55 | % | |||||
MSCI/Matthews Asian Technology Index1 |
0.27 | % | 9.86 | % | 8.41 | % | 8.24 | % | 7.84 | %2 | |||||
Lipper Science and Technology Funds Category Average3 |
1.22 | % | 0.65 | % | 5.51 | % | 2.90 | % | 9.80 | %2 |
All performance quoted is past performance and is no guarantee of future results. Assumes reinvestment of all dividends and/or distributions. Unusually high returns may not be sustainable. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. The performance of foreign indices may be based on different exchange rates than those used by the Fund and, unlike the Funds NAV, is not adjusted to reflect fair value at the close of the NYSE. Current performance may be lower or higher than the return figures quoted. Returns are net of the Funds management fee and other operating expenses. Returns would have been lower if certain of the Funds fees and expenses had not been waived. For the Funds most recent month-end performance please call 800-789-ASIA [2742] or visit www.matthewsfunds.com.
OPERATING EXPENSES4 |
|||
Net Ratio: 3 months ended 3/31/07 (annualized)5,6 |
1.23 | % | |
Net Ratio: Fiscal Year 20066 |
1.39 | % | |
Gross Ratio: Fiscal Year 2006 |
1.41 | % | |
PORTFOLIO TURNOVER7 |
|||
3 months ended 3/31/07 (annualized)5 |
73.40 | % | |
Fiscal Year 2006 |
34.77 | % |
1 |
The MSCI/Matthews Asian Technology Index is a free floatadjusted market capitalizationweighted index of Asian equities tracking a broad range of technology stocks including semiconductor equipment and products, communications equipment, computers and peripherals, electronic equipment and instruments, office electronics, software, IT consulting and services, Internet software and services, diversified telecommunications services, and wireless telecommunications services. It is not possible to invest directly in an index. Source: Index data from Morgan Stanley Capital International; total return calculations performed by PFPC Inc. |
2 |
Calculated from 12/31/99. |
3 |
As of 3/31/07, the Lipper Science and Technology Funds Category Average consisted of 295 funds for the three-month period, 288 funds for the one-year period, 262 funds for the three-year period, 242 funds for the five-year period, and 112 funds since 12/31/99. Lipper, Inc. fund performance does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains, for the stated periods. |
4 |
Matthews Asian Funds do not charge 12b-1 fees. |
5 |
Unaudited. |
6 |
Includes management fee, administration and shareholder services fees after reimbursement, waiver or recapture of expenses by Advisor. Voluntary fee waivers by the Advisor may be discontinued at any time. |
7 |
The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
800.789.ASIA [2742] www.matthewsfunds.com | 33 |
MATTHEWS ASIAN TECHNOLOGY FUND
TOP TEN HOLDINGS1
COUNTRY | % OF NET ASSETS | |||
Samsung Electronics Co., Ltd. |
South Korea | 7.1% | ||
NHN Corp. |
South Korea | 4.4% | ||
Sony Corp. |
Japan | 3.5% | ||
The9, Ltd. |
China/Hong Kong | 3.4% | ||
Nintendo Co., Ltd. |
Japan | 3.3% | ||
HON HAI Precision Industry Co., Ltd. |
Taiwan | 3.2% | ||
China Mobile, Ltd. |
China/Hong Kong | 3.2% | ||
Taiwan Semiconductor Manufacturing Co., Ltd. |
Taiwan | 3.1% | ||
Canon, Inc. |
Japan | 2.9% | ||
Infosys Technologies, Ltd. |
India | 2.8% | ||
% OF ASSETS IN TOP 10 |
36.9% |
COUNTRY ALLOCATION |
|||
Japan |
35.6 | % | |
South Korea |
19.0 | % | |
China/Hong Kong |
18.2 | % | |
Taiwan |
13.7 | % | |
India |
9.2 | % | |
Indonesia |
1.7 | % | |
Singapore |
1.4 | % | |
Thailand |
1.0 | % | |
Cash, cash equivalents and other2 |
0.2 | % |
SECTOR ALLOCATION |
|||
Information Technology |
69.2 | % | |
Telecommunication Services |
13.2 | % | |
Consumer Discretionary |
9.8 | % | |
Health Care |
3.3 | % | |
Materials |
3.1 | % | |
Industrials |
1.2 | % | |
Cash, cash equivalents and other2 |
0.2 | % |
MARKET CAP EXPOSURE |
|||
Large cap (over $5 billion) |
74.5 | % | |
Mid cap ($1$5 billion) |
10.9 | % | |
Small cap (under $1 billion) |
14.4 | % | |
Cash, cash equivalents and other2 |
0.2 | % |
NUMBER OF POSITIONS2 |
NAV |
FUND ASSETS |
REDEMPTION FEE |
12B-1 FEES | ||||
51 | $7.85 | $144.2 million | 2.00% within 90 calendar days |
None |
1 |
Holdings may include more than one security from same issuer. |
2 |
Includes BNY Hamilton Money Fund. |
34 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PORTFOLIO MANAGER COMMENTARY continued from page 32
converted their production lines from flash memory products back to DRAM production.
On a company basis, the largest contributor during the quarter was NHN, South Koreas dominant Internet search, casual game and portal. NHN recorded strong growth last year, and a positive growth outlook for the current year contributed to its strong performance. Sony was the second-largest contributor to Fund performance. The company has been restructuring its consumer electronics business and benefited from improved profitability. Sony is expected to continue its restructuring efforts in various areas, and the outlook for the current fiscal years earnings remains positive.
Samsung Electronics was the worst performer in the Fund; the company has been mainly hurt by declining prices of DRAM products and increasing competition in the handset business.
By country, overall returns were strongest in India and Singapore, while the Funds positions in Taiwan and Korea were the largest drag on Fund performance. Taiwanese and Korean technology companies lagged other countries due to their broad exposure to the hardware and memory industries. Taiwanese technology companies have large exposure to the PC, notebook and other consumer electronic hardware manufacturing services industries, and Korea is home to the worlds largest and second-largest DRAM manufacturers. Despite the Indian markets overall weak performance during the quarter, the Funds holdings performed well, making India the largest contributor to Fund performance during the period.
The Fund made a few changes in the Internet, information technology services and health care sectors during the quarter. The Fund continues to overweight China, India and Korea and underweight Japan; it is underweight in the diversified telecommunication services sector while taking a selective overweight position in the wireless telecommunication services industry in emerging countries in the region compared to the benchmark. The Fund continues to look for long-term opportunities in a broad range of technology industries that we believe are poised to benefit from increasing demand from Asian consumers and overall growth in the Asia Pacific region.
800.789.ASIA [2742] www.matthewsfunds.com | 35 |
MATTHEWS ASIAN TECHNOLOGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
EQUITIES: 99.8%*
SHARES | VALUE | ||||
JAPAN: 35.6% |
|||||
Sony Corp. |
100,300 | $ | 5,098,413 | ||
Nintendo Co., Ltd. |
16,585 | 4,820,403 | |||
Canon, Inc. ADR |
79,200 | 4,251,456 | |||
Murata Manufacturing Co., Ltd. |
49,000 | 3,576,035 | |||
KDDI Corp. |
399 | 3,186,176 | |||
Sumco Corp. |
76,400 | 3,176,850 | |||
Yahoo! Japan Corp. |
9,132 | 3,150,168 | |||
Keyence Corp. |
13,250 | 2,989,795 | |||
Hoya Corp. |
83,000 | 2,753,988 | |||
Sharp Corp. |
131,000 | 2,523,506 | |||
SoftBank Corp. |
85,300 | 2,193,304 | |||
Hirose Electric Co., Ltd. |
17,200 | 2,068,262 | |||
Nidec Corp. |
31,400 | 2,025,119 | |||
Ibiden Co., Ltd. |
38,400 | 1,991,039 | |||
Nitto Denko Corp. |
42,200 | 1,980,363 | |||
NTT Data Corp. |
372 | 1,890,937 | |||
Nomura Research Institute, Ltd. |
64,100 | 1,887,534 | |||
Eisai Co., Ltd. |
36,900 | 1,769,221 | |||
Total Japan |
51,332,569 | ||||
SOUTH KOREA: 19.0% |
|||||
Samsung Electronics Co., Ltd. |
17,008 | 10,178,044 | |||
NHN Corp. ** |
43,324 | 6,354,923 | |||
ON*Media Corp. ** |
356,210 | 2,892,692 | |||
CDNetworks Co., Ltd. ** |
96,223 | 2,730,819 | |||
Techno Semichem Co., Ltd. |
92,655 | 2,437,515 | |||
JVM Co., Ltd. |
33,940 | 1,706,380 | |||
Osstem Implant Co., Ltd. ** |
21,901 | 1,047,561 | |||
Total South Korea |
27,347,934 | ||||
CHINA/HONG KONG: 18.2% |
|||||
The9, Ltd. ADR ** |
145,008 | $ | 4,892,570 | ||
China Mobile, Ltd. ADR |
103,200 | 4,628,520 | |||
Tencent Holdings, Ltd. |
1,129,000 | 3,684,584 | |||
Baidu.com ADR ** |
25,700 | 2,481,335 | |||
Sina Corp. ** |
61,000 | 2,050,210 | |||
Ctrip.com International, Ltd. ADR |
30,300 | 2,029,646 | |||
China Communications Services Corp., Ltd. H Shares ** |
2,964,000 | 2,006,727 | |||
Focus Media Holding, Ltd. ADR ** |
20,600 | 1,616,276 | |||
ZTE Corp. H Shares |
323,800 | 1,520,888 | |||
Sohu.com, Inc. ** |
61,300 | 1,313,659 | |||
Total China/Hong Kong |
26,224,415 | ||||
TAIWAN: 13.7% |
|||||
HON HAI Precision Industry Co., Ltd. |
692,218 | 4,643,793 | |||
Taiwan Semiconductor Manufacturing Co., Ltd. |
2,163,470 | 4,439,128 | |||
MediaTek, Inc. |
251,400 | 2,886,861 | |||
Foxconn International Holdings, Ltd. ** |
801,000 | 2,444,980 | |||
Foxconn Technology Co., Ltd. |
204,950 | 2,325,599 | |||
Lite-On Technology Corp. |
1,261,000 | 1,629,027 | |||
InnoLux Display Corp. ** |
578,000 | 1,365,877 | |||
Total Taiwan |
19,735,265 | ||||
INDIA: 9.2% |
|||||
Infosys Technologies, Ltd. *** |
89,591 | 4,028,843 | |||
Bharti Airtel, Ltd. **, *** |
183,049 | 3,178,184 | |||
Tata Consultancy Services, Ltd. *** |
90,156 | 2,552,370 | |||
Glenmark Pharmaceuticals, Ltd. *** |
135,218 | 1,887,857 | |||
Info Edge India, Ltd. **, *** |
106,030 | 1,632,640 | |||
Total India |
13,279,894 | ||||
INDONESIA: 1.7% |
|||||
PT Telekomunikasi Indonesia ADR |
55,400 | 2,389,956 | |||
Total Indonesia |
2,389,956 | ||||
36 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
SHARES | VALUE | |||||
SINGAPORE: 1.4% |
||||||
Unisteel Technology, Ltd. |
1,056,000 | $ | 2,046,363 | |||
Total Singapore |
2,046,363 | |||||
THAILAND: 1.0% |
||||||
Advanced Info Service Public Co., Ltd. |
787,500 | 1,507,069 | ||||
Total Thailand |
1,507,069 | |||||
TOTAL EQUITIES |
143,863,465 | |||||
(Cost $ 119,743,997) |
||||||
MONEY MARKET MUTUAL FUND: 0.3%* |
||||||
BNY Hamilton Money Fund |
433,753 | $ | 433,753 | |||
(Cost $ 433,753) |
||||||
TOTAL INVESTMENTS: 100.1% |
144,297,218 | |||||
(Cost $120,177,750****) |
||||||
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS: -0.1% |
(83,224 | ) | ||||
NET ASSETS: 100.0% |
$ | 144,213,994 | ||||
* | As a percentage of net assets as of March 31, 2007 |
** | Nonincome producing security |
*** | Fair valued under direction of the Board of Trustees |
**** | Cost of investments is $120,177,750 and net unrealized appreciation consists of: |
Gross unrealized appreciation |
$ | 28,320,973 | ||
Gross unrealized depreciation |
(4,201,505 | ) | ||
Net unrealized appreciation |
$ | 24,119,468 | ||
ADR | American Depositary Receipt |
See accompanying notes to schedules of investments.
800.789.ASIA [2742] www.matthewsfunds.com | 37 |
FUND DESCRIPTION |
SYMBOL: MCHFX |
Under normal market conditions, the Matthews China Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in China. China includes its political, administrative and other districts, such as Hong Kong.
PORTFOLIO MANAGERS
Lead Manager: Richard H. Gao |
Co-Managers: Mark W. Headley and G. Paul Matthews |
PORTFOLIO MANAGER COMMENTARY
The Matthews China Fund gained 3.44% for the first quarter of 2007, outperforming its benchmark MSCI China Index, which was down 2.30%. The Fund also outperformed the Lipper China Region Funds Category Average, which gained 3.00% for the same period.
After a huge rally in 2006, Chinese equities became extremely volatile during the first quarter of 2007. While Chinas economic fundamentals remained generally solid and corporate earnings growth was strong, investors were more concerned about stock market valuations and the tightening measures taken by the Chinese central bank to prevent the economy from overheating. Meanwhile, with more H shares listed in the domestic A-share market, the relationship among the domestic A shares and the Hong Konglisted H shares and Red Chips is increasing. Any major movements in the domestic stock market are having a bigger impact on Chinese equities listed in Hong Kong than in the past. During the quarter, the A-share market experienced extreme volatility after reaching historical high levels. As a result, Hong Konglisted Chinese shares were affected, also experiencing high volatility. The MSCI China Index fell sharply in the first two months of the quarter but recovered most of its losses in March.
The Fund saw most of its gains in the industrials, consumer discretionary and materials sectors. Industrial and materials companies have become the key beneficiaries of Chinas strong overall economy, driven in large part by investment growth. Some of the industrial companies that provided strong positive returns for the portfolio included transportation companies, port operators, airlines, airports, and builders of roads and bridges. Chinas huge demand for and capacity constraints of container board and cement also drove up performance of the two materials companies in the portfolio. On the negative side, the Funds positions in the financials
continued on page 41
38 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PERFORMANCE AS OF MARCH 31, 2007
Fund Inception: 2/19/98 |
Average Annual Total Returns | ||||||||||||||
3 MO |
1 YR |
3 YRS | 5 YRS | SINCE INCEPTION |
|||||||||||
Matthews China Fund |
3.44 | % | 41.99 | % | 22.36 | % | 22.56 | % | 12.86 | % | |||||
MSCI China Index1 |
2.30 | % | 47.15 | % | 31.15 | % | 29.50 | % | 1.92 | %2 | |||||
Lipper China Region Funds Category Average3 |
3.00 | % | 38.24 | % | 22.39 | % | 20.64 | % | 10.95 | %2 |
All performance quoted is past performance and is no guarantee of future results. Assumes reinvestment of all dividends and/or distributions. Unusually high returns may not be sustainable. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. The performance of foreign indices may be based on different exchange rates than those used by the Fund and, unlike the Funds NAV, is not adjusted to reflect fair value at the close of the NYSE. Current performance may be lower or higher than the return figures quoted. Returns are net of the Funds management fee and other operating expenses. Returns would have been lower if certain of the Funds fees and expenses had not been waived. For the Funds most recent month-end performance please call 800-789-ASIA [2742] or visit www.matthewsfunds.com.
OPERATING EXPENSES4 |
|||
Net Ratio: 3 months ended 3/31/07 (annualized)5,6 |
1.12 | % | |
Net Ratio: Fiscal Year 20066 |
1.26 | % | |
Gross Ratio: Fiscal Year 2006 |
1.27 | % | |
PORTFOLIO TURNOVER7 |
|||
3 months ended 3/31/07 (annualized)5 |
32.37 | % | |
Fiscal Year 2006 |
11.65 | % |
1 |
The MSCI China Index is a free floatadjusted market capitalizationweighted index of Chinese equities that includes China-affiliated corporations and H shares listed on the Hong Kong exchange, and B shares listed on the Shanghai and Shenzhen exchanges. Source: Index data from Morgan Stanley Capital International; total return calculations performed by PFPC Inc. |
2 |
Calculated from 2/28/98. |
3 |
As of 3/31/07, the Lipper China Region Funds Category Average consisted of 52 funds for the three-month period, 51 funds for the one-year period, 26 funds for the three-year period, 22 funds for the five-year period, and 16 funds since 2/28/98. Lipper, Inc. fund performance does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains, for the stated periods. |
4 |
Matthews Asian Funds do not charge 12b-1 fees. |
5 |
Unaudited. |
6 |
Includes management fee, administration and shareholder services fees after reimbursement, waiver or recapture of expenses by Advisor. Voluntary fee waivers by the Advisor may be discontinued at any time. |
7 |
The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
800.789.ASIA [2742] www.matthewsfunds.com |
39 |
MATTHEWS CHINA FUND
TOP TEN HOLDINGS1
SECTOR | % OF NET ASSETS | ||||
China Vanke Co., Ltd. |
Financials | 5.2 | % | ||
China Life Insurance Co., Ltd. |
Financials | 4.1 | % | ||
China Mobile, Ltd. |
Telecommunication Services | 3.7 | % | ||
Shanghai Zhenhua Port Machinery Co., Ltd. |
Industrials | 3.6 | % | ||
Swire Pacific, Ltd. |
Financials | 3.4 | % | ||
China Shenhua Energy Co., Ltd. |
Energy | 3.1 | % | ||
Li & Fung, Ltd. |
Consumer Discretionary | 2.5 | % | ||
Huaneng Power International, Inc. |
Utilities | 2.5 | % | ||
Dongfeng Motor Group Co., Ltd. |
Consumer Discretionary | 2.4 | % | ||
China Communications Construction Co., Ltd. |
Industrials | 2.3 | % | ||
% OF NET ASSETS IN TOP 10 |
32.8 | % |
CHINA EXPOSURE2 |
|||
H Share |
42.4 | % | |
SAR (Hong Kong) |
31.2 | % | |
China-affiliated corporations |
11.9 | % | |
B Share |
8.8 | % | |
Overseas Limited |
4.4 | % | |
Cash, cash equivalents and other3 |
1.3 | % |
SECTOR ALLOCATION |
|||
Financials |
23.8 | % | |
Consumer Discretionary |
17.9 | % | |
Industrials |
15.6 | % | |
Energy |
9.8 | % | |
Information Technology |
9.5 | % | |
Utilities |
7.1 | % | |
Telecommunication Services |
6.3 | % | |
Materials |
4.6 | % | |
Consumer Staples |
4.1 | % | |
Cash, cash equivalents and other3 |
1.3 | % |
MARKET CAP EXPOSURE |
|||
Large cap (over $5 billion) |
63.8 | % | |
Mid cap ($1$5 billion) |
27.3 | % | |
Small cap (under $1 billion) |
7.6 | % | |
Cash, cash equivalents and other3 |
1.3 | % |
NUMBER OF POSITIONS3 |
NAV |
FUND ASSETS |
REDEMPTION FEE |
12B-1 FEES | ||||
57 |
$24.99 | $1.11 billion | 2.00% within 90 calendar days |
None |
1 |
Holdings may include more than one security from same issuer. |
2 |
H Shares are mainland China companies listed on the Hong Kong exchange but incorporated in mainland China. SAR (Hong Kong) companies are companies that conduct business in Hong Kong and/or mainland China. China-affiliated corporations, also known as Red Chips, are mainland China companies with partial state ownership listed and incorporated in Hong Kong. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors. Overseas Listed companies are companies that conduct business in mainland China but are listed in overseas markets such as Japan, Singapore, Taiwan and the United States. |
3 |
Includes BNY Hamilton Money Fund. |
40 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PORTFOLIO MANAGER COMMENTARY continued from page 38
and energy sectors provided most of its losses. Financial stocks were under severe selling pressure during the quarter, after accumulating enormous gains last year.
The Funds relative underweighting in the financials and energy sectors helped it outperform its benchmark index. The Funds holdings in small- and mid-cap companies also outperformed the benchmarks holdings during the quarter.
The Chinese central bank raised its reserve ratio for the fifth time in the past eight months and also raised interest rates for the third time in the past year. It is expected that the central bank will continue its tightening policy to prevent the economy from overheating. While controlling investment growth, the government has been encouraging domestic consumption growth to achieve a more balanced and sustainable growth pattern and to rely less on investments and exports. This is in line with our belief that domestic consumption will become the driving force of Chinas economic growth.
The Fund made few changes to its portfolio and remains diversified, with overweight positions in the consumer, financials and industrials sectors. We did slightly trim the Funds holdings in the financials sector, as we believe that valuations there are still relatively high. We also increased our position in the utilities sector as costs appear to be stabilizing.
800.789.ASIA [2742] www.matthewsfunds.com |
41 |
MATTHEWS CHINA FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
EQUITIES: CHINA/HONG KONG: 98.7%*
SHARES | VALUE | ||||
FINANCIALS: 23.8% | |||||
Real Estate Management & Development: 10.7% | |||||
China Vanke Co., Ltd. B Shares |
27,941,087 | $ | 57,859,703 | ||
Swire Pacific, Ltd. A Shares |
3,355,000 | 37,657,068 | |||
Agile Property Holdings, Ltd. |
23,546,000 | 23,203,967 | |||
118,720,738 | |||||
Commercial Banks: 6.9% | |||||
China Merchants Bank Co., Ltd. H Shares ** |
12,376,000 | 24,962,662 | |||
Bank of Communications Co., Ltd. H Shares |
19,331,000 | 19,866,632 | |||
BOC Hong Kong Holdings, Ltd. |
8,118,000 | 19,678,111 | |||
China Construction Bank Corp. H Shares |
21,695,000 | 12,411,423 | |||
76,918,828 | |||||
Insurance: 6.2% | |||||
China Life Insurance Co., Ltd. H Shares |
15,785,000 | 45,353,971 | |||
Ping An Insurance (Group) Co. of China, Ltd. H Shares |
4,753,500 | 23,300,576 | |||
68,654,547 | |||||
Total Financials |
264,294,113 | ||||
CONSUMER DISCRETIONARY: 17.9% | |||||
Hotels, Restaurants & Leisure: 5.6% | |||||
Shangri-La Asia, Ltd. |
10,167,600 | $ | 25,166,876 | ||
China Travel International Investment HK, Ltd. |
42,956,000 | 20,066,475 | |||
Café de Coral Holdings, Ltd. |
9,596,100 | 17,341,388 | |||
62,574,739 | |||||
Media: 3.0% | |||||
Television Broadcasts, Ltd. |
2,542,000 | 15,892,583 | |||
Pico Far East Holdings, Ltd. |
43,110,000 | 10,041,620 | |||
Clear Media, Ltd. ** |
6,200,000 | 6,736,802 | |||
32,671,005 | |||||
Distributors: 2.5% | |||||
Li & Fung, Ltd. |
8,803,200 | 27,659,635 | |||
Automobiles: 2.4% | |||||
Dongfeng Motor Group Co., Ltd. H Shares ** |
48,968,000 | 26,697,854 | |||
Textiles, Apparel & Luxury Goods: 1.8% | |||||
Ports Design, Ltd. |
6,200,000 | 16,504,767 | |||
Other Investments |
3,742,855 | ||||
20,247,622 | |||||
Leisure Equipment & Products: 1.5% | |||||
Li Ning Co., Ltd. |
8,062,000 | 15,972,325 | |||
Diversified Consumer Services: 1.1% | |||||
New Oriental Education & Technology Group, Ltd. ADR ** |
305,700 | 12,390,021 | |||
Total Consumer Discretionary |
198,213,201 | ||||
42 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
SHARES | VALUE | ||||
INDUSTRIALS: 15.6% |
|||||
Transportation Infrastructure: 5.4% |
|||||
Beijing Capital International Airport Co., Ltd. H Shares |
21,354,000 | $ | 21,207,787 | ||
China Merchants Holdings International Co., Ltd. |
3,940,581 | 16,592,451 | |||
GZI Transport, Ltd. |
22,926,000 | 13,409,077 | |||
COSCO Pacific, Ltd. |
3,678,000 | 9,113,212 | |||
60,322,527 | |||||
Machinery: 3.6% |
|||||
Shanghai Zhenhua Port Machinery Co., Ltd. B Shares |
26,128,606 | 39,245,166 | |||
Construction & Engineering: 2.3% |
|||||
China Communications Construction Co., Ltd. H Shares ** |
21,574,000 | 26,009,737 | |||
Industrial Conglomerates: 2.0% |
|||||
NWS Holdings, Ltd. |
8,033,276 | 21,590,682 | |||
Airlines: 1.3% |
|||||
Air China, Ltd. H Shares |
20,807,900 | 14,407,210 | |||
Air Freight & Logistics: 1.0% |
|||||
Sinotrans, Ltd. H Shares |
27,295,000 | 10,934,069 | |||
Total Industrials |
172,509,391 | ||||
ENERGY: 9.8% |
|||||
Oil, Gas & Consumable Fuels: 8.3% |
|||||
China Shenhua Energy Co., Ltd. H Shares |
14,426,500 | $ | 34,896,122 | ||
PetroChina Co., Ltd. H Shares |
19,094,000 | 22,653,277 | |||
China Petroleum & Chemical Corp. (Sinopec) H Shares |
20,640,000 | 17,460,856 | |||
CNOOC, Ltd. |
19,616,000 | 17,197,108 | |||
92,207,363 | |||||
Energy Equipment & Services: 1.5% |
|||||
China Oilfield Services, Ltd. H Shares |
19,782,000 | 15,899,528 | |||
Total Energy |
108,106,891 | ||||
INFORMATION TECHNOLOGY: 9.5% |
|||||
Internet Software & Services: 3.2% |
|||||
Sina Corp. ** |
773,400 | 25,993,974 | |||
NetEase.com, Inc. ADR ** |
565,200 | 10,026,648 | |||
36,020,622 | |||||
Computers & Peripherals: 2.2% |
|||||
Lenovo Group, Ltd. |
37,842,000 | 13,851,426 | |||
TPV Technology, Ltd. |
16,998,000 | 10,855,573 | |||
24,706,999 | |||||
Software: 1.6% |
|||||
Kingdee International Software Group Co., Ltd. |
23,378,000 | 17,592,966 | |||
Communications Equipment: 1.5% |
|||||
ZTE Corp. H Shares |
3,564,800 | 16,743,861 | |||
IT Services: 1.0% |
|||||
Travelsky Technology, Ltd. H Shares |
6,089,000 | 10,723,061 | |||
Total Information Technology |
105,787,509 | ||||
See footnotes on page 45.
800.789.ASIA [2742] www.matthewsfunds.com | 43 |
MATTHEWS CHINA FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (continued)
EQUITIES: CHINA/HONG KONG (continued)
SHARES | VALUE | ||||
UTILITIES: 7.1% |
|||||
Independent Power Producers & Energy Traders: 4.4% |
|||||
Huaneng Power International, Inc. H Shares |
26,174,000 | $ | 22,778,934 | ||
Datang International Power Generation Co., Ltd. H Shares |
22,910,000 | 21,697,575 | |||
Huaneng Power International, Inc. ADR |
140,400 | 4,878,900 | |||
49,355,409 | |||||
Electric Utilities: 1.8% | |||||
Cheung Kong Infrastructure Holdings, Ltd. |
5,698,500 | 19,837,358 | |||
Gas Utilities: 0.9% | |||||
Hong Kong & China Gas Co., Ltd. |
4,501,400 | 10,058,801 | |||
Total Utilities |
79,251,568 | ||||
TELECOMMUNICATION SERVICES: 6.3% | |||||
Wireless Telecommunication Services: 3.7% | |||||
China Mobile, Ltd. |
4,279,583 | 38,915,258 | |||
China Mobile, Ltd. ADR |
50,500 | 2,264,925 | |||
41,180,183 | |||||
Diversified Telecommunication Services: 2.6% | |||||
China Communications Services Corp., Ltd. H Shares ** |
23,736,000 | 16,070,063 | |||
China Telecom Corp., Ltd. H Shares |
25,028,000 | 12,300,188 | |||
28,370,251 | |||||
Total Telecommunication Services |
69,550,434 | ||||
MATERIALS: 4.6% |
|||||
Paper & Forest Products: 2.3% |
|||||
Nine Dragons Paper Holdings, Ltd. |
12,383,000 | $ | 25,832,585 | ||
Construction Materials: 2.3% | |||||
China National Building Material Co., Ltd. H Shares |
28,532,000 | 25,123,205 | |||
Total Materials |
50,955,790 | ||||
CONSUMER STAPLES: 4.1% | |||||
Food Products: 1.8% | |||||
Tingyi (Cayman Islands) Holding Corp. |
20,685,000 | 19,934,479 | |||
Food & Staples Retailing: 1.3% | |||||
Lianhua Supermarket Holdings Co., Ltd. H Shares |
10,981,000 | 15,009,545 | |||
Beverages: 1.0% | |||||
Tsingtao Brewery Co., Ltd. H Shares |
6,351,000 | 10,680,507 | |||
Total Consumer Staples |
45,624,531 | ||||
TOTAL EQUITIES: CHINA/HONG KONG |
1,094,293,428 | ||||
(Cost $733,364,527) |
44 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
SHARES | VALUE | |||||
MONEY MARKET MUTUAL FUND: 1.5%* |
||||||
BNY Hamilton Money Fund |
16,740,894 | $ | 16,740,894 | |||
(Cost $16,740,894) |
||||||
TOTAL INVESTMENTS: 100.2% |
1,111,034,322 | |||||
(Cost $750,105,421***) |
||||||
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS: -0.2% |
(2,398,707 | ) | ||||
NET ASSETS: 100.0% |
$ | 1,108,635,615 | ||||
* | As a percentage of net assets as of March 31, 2007 |
** | Nonincome producing security |
*** | Cost of investments is $750,105,421 and net unrealized appreciation consists of: |
Gross unrealized appreciation |
$ | 367,603,370 | ||
Gross unrealized depreciation |
(6,674,469 | ) | ||
Net unrealized appreciation |
$ | 360,928,901 | ||
| Affiliated Issuer, as defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of this issuer) |
ADR | American Depositary Receipt |
See accompanying notes to schedules of investments.
This portfolio data should not be relied upon as a complete listing of this Funds holdings, as information on particular holdings may have been withheld if it was in the Funds interest to do so.
800.789.ASIA [2742] www.matthewsfunds.com | 45 |
FUND DESCRIPTION |
SYMBOL: MINDX |
Under normal market conditions, the Matthews India Fund, a non-diversified fund, seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in publicly traded common stocks, preferred stocks and convertible securities of companies located in India.
PORTFOLIO MANAGERS
Lead Manager: Andrew T. Foster | Co-Manager: Sharat Shroff, CFA |
PORTFOLIO MANAGER COMMENTARY
For the first quarter of 2007, the Matthews India Fund declined 4.27%, while its benchmark, the Bombay Sensex Exchange 100 Index fell 3.62%. The Lipper Emerging Markets Funds Category Average gained 2.33% over the same period.
Changes in expectations for inflation and interest rates dominated the markets action during the quarter. As we have noted for more than a year now, inflationary pressures have been building across the country, most notably for raw materials, agricultural products and wages. However, productivity gains in the economy had generally kept these price pressures in check. Yet early in the first quarter, the most broadly followed measure of inflationthe wholesale price index, or WPIshowed an annual increase of about 6.5%. This figure is well above the central banks espoused comfort zone, which lies between 5% and 5.5%. (On a side note: India does not have a well-established nationwide measure of consumer price inflation; thus, many market participants look to WPI as a substitutealbeit a flawed one.)
After ignoring the gathering inflation for the better part of 2006, the countrys authorities exhibited a newfound resolve to stomp out perceived excess. An upcoming election in one of Indias most populous states has focused attention on the issue: The poorest segments of society have struggled to keep pace with rising costs, especially for basic staples. The ruling government fears that the dissatisfaction will spill over to the polls and is keen to bring the situation under controlwhich could have unpredictable consequences.
The market got its first surprise when the Reserve Bank of India (RBI) enacted two rate increases during the quarter. The second of these increases caught the market largely off guard, having been announced at the close of trading on the last day of the quarter. The government has also utilized more-blunt means to reign in price speculation in selected industries: Explicit regulation
continued on page 49
46 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PERFORMANCE AS OF MARCH 31, 2007 |
|||||||||
Fund Inception: 10/31/05 |
3 MO | 1 YR | SINCE INCEPTION |
||||||
Matthews India Fund |
4.27 | % | 9.15 | % | 31.90 | % | |||
Bombay Stock Exchange 100 Index1 |
3.62 | % | 16.46 | % | 43.95 | % | |||
Lipper Emerging Markets Funds Category Average2 |
2.33 | % | 20.09 | % | 35.63 | % |
All performance quoted is past performance and is no guarantee of future results. Assumes reinvestment of all dividends and/or distributions. Unusually high returns may not be sustainable. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. The performance of foreign indices may be based on different exchange rates than those used by the Fund and, unlike the Funds NAV, is not adjusted to reflect fair value at the close of the NYSE. Current performance may be lower or higher than the return figures quoted. Returns are net of the Funds management fee and other operating expenses. Returns would have been lower if certain of the Funds fees and expenses had not been waived. For the Funds most recent month-end performance please call 800-789-ASIA [2742] or visit www.matthewsfunds.com.
OPERATING EXPENSES3 |
|||
Net Ratio: 3 months ended 3/31/07 (annualized)4,5 |
1.25 | % | |
Net Ratio: Fiscal Year 20065 |
1.41 | % | |
Gross Ratio: Fiscal Year 2006 |
1.41 | % |
PORTFOLIO TURNOVER6 |
|||
3 months ended 3/31/07 (annualized)4 |
59.71 | % | |
Fiscal Year 2006 |
21.57 | % |
1 |
The Bombay Stock Exchange 100 Index (BSE 100) is a free floatadjusted market capitalizationweighted index of the 100 stocks listed on the Bombay Stock Exchange. It is not possible to invest directly in an index. Source: Index data from Bloomberg; total return calculations performed by PFPC Inc. |
2 |
As of 3/31/07, the Lipper Emerging Markets Funds Category Average consisted of 249 funds for the three-month period, 225 funds for the one-year period, and 213 funds since 10/31/05. Lipper, Inc. fund performance does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains for the stated periods. |
3 |
Matthews Asian Funds do not charge 12b-1 fees. |
4 |
Unaudited. |
5 |
Includes management fee, administration and shareholder services fees after reimbursement, waiver or recapture of expenses by Advisor. Voluntary fee waivers by the Advisor may be discontinued at any time. |
6 |
The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
800.789.ASIA [2742] www.matthewsfunds.com | 47 |
MATTHEWS INDIA FUND
TOP TEN HOLDINGS1 |
||||
SECTOR |
% OF NET ASSETS | |||
Dabur India, Ltd. |
Consumer Staples | 4.9% | ||
CESC, Ltd. |
Utilities | 4.3% | ||
Glenmark Pharmaceuticals, Ltd. |
Health Care | 4.1% | ||
Bharti Airtel, Ltd. |
Telecommunication Services | 3.7% | ||
Infosys Technologies, Ltd. |
Information Technology | 3.7% | ||
GAIL India, Ltd. |
Utilities | 3.6% | ||
Cipla, Ltd. |
Health Care | 3.5% | ||
Sun Pharmaceuticals Industries, Ltd. |
Health Care | 3.5% | ||
UTI Bank, Ltd. |
Financials | 3.4% | ||
HDFC Bank, Ltd. |
Financials | 3.3% | ||
% OF ASSETS IN TOP 10 |
38.0% |
COUNTRY ALLOCATION |
|||
India |
99.5 | % | |
Cash, cash equivalents and other |
0.5 | % |
SECTOR ALLOCATION |
|||
Industrials |
17.0 | % | |
Information Technology |
15.2 | % | |
Financials |
13.5 | % | |
Consumer Discretionary |
12.7 | % | |
Consumer Staples |
11.5 | % | |
Health Care |
11.1 | % | |
Utilities |
7.9 | % | |
Telecommunication Services |
6.7 | % | |
Energy |
3.9 | % | |
Cash, cash equivalents and other |
0.5 | % |
MARKET CAP EXPOSURE |
|||
Large cap (over $5 billion) |
34.2 | % | |
Mid cap ($1$5 billion) |
32.9 | % | |
Small cap (under $1 billion) |
32.4 | % | |
Cash, cash equivalents and other |
0.5 | % |
NUMBER OF POSITIONS |
NAV |
FUND ASSETS |
REDEMPTION FEE |
12B-1 FEES | ||||
50 |
$14.79 | $629.7 million | 2.00% within 90 calendar days |
None |
1 |
Holdings may include more than one security from same issuer. |
48 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PORTFOLIO MANAGER COMMENTARY continued from page 46
and implicit moral suasion have sought to curtail price hikes in energy, sugar, wheat, cement, steel and mortgages rates. The governments efforts are certainly well-intendedmeant to keep living costs affordableyet in the end they may produce unpredictable and possibly opposite results.
Amid this environment, corporate earnings still appear healthy, though their growth will likely moderate from the extremely high rates seen during the prior two quarters. Capital expenditures are beginning to rise againa healthy sign given that excess capacities in many industries are nearly exhausted. Meanwhile, some consumer industries are facing headwinds, given that consumer credit growth is moderating as banks shift their focus to finance corporate growth. Borrowing rates for consumers have risen sharply in the past few months, and this may crimp spending for certain large-ticket consumer durable products; motorcycle sales, for instance, have lagged as of late. However, despite these shorter-term constraints, we believe that the economic outlook for the country remains quite positive, particularly as households continue to experience substantial income gains and material improvements in their quality of life. We continue to look for stocks that can participate in this sort of growthtapping into the strength of rising wealth and growth across the breadth of Indias populace.
800.789.ASIA [2742] www.matthewsfunds.com | 49 |
MATTHEWS INDIA FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
EQUITIES: INDIA*: 96.0%**
SHARES | VALUE | ||||
INDUSTRIALS: 17.0% |
|||||
Machinery: 6.9% |
|||||
Ashok Leyland, Ltd. |
23,336,277 | $ | 19,725,637 | ||
Jain Irrigation Systems, Ltd. |
1,752,536 | 16,797,169 | |||
Tata Motors, Ltd. |
443,538 | 7,209,674 | |||
43,732,480 | |||||
Construction & Engineering: 4.5% | |||||
Larsen & Toubro, Ltd. |
448,830 | 16,466,325 | |||
Hindustan Construction Co. |
2,266,950 | 4,609,526 | |||
Other Investments |
7,220,768 | ||||
28,296,619 | |||||
Industrial Conglomerates: 3.3% | |||||
Siemens India, Ltd. |
548,707 | 13,383,199 | |||
MAX India, Ltd. *** |
1,528,880 | 7,050,471 | |||
20,433,670 | |||||
Building Products: 1.3% | |||||
Other Investments |
8,338,649 | ||||
Air Freight & Logistics: 1.0% | |||||
Gati, Ltd. |
3,046,428 | 6,263,173 | |||
Total Industrials |
107,064,591 | ||||
INFORMATION TECHNOLOGY: 15.2% |
|||||
IT Services: 9.3% |
|||||
Infosys Technologies, Ltd. |
515,091 | $ | 23,163,274 | ||
Wipro, Ltd. |
1,422,435 | 18,215,284 | |||
HCL-Infosystems, Ltd. |
3,833,185 | 11,327,143 | |||
Other Investments |
6,032,752 | ||||
58,738,453 | |||||
Internet Software & Services: 3.5% | |||||
Sify, Ltd. ADR *** |
1,659,300 | 14,319,759 | |||
Info Edge India, Ltd. *** |
476,727 | 7,340,598 | |||
21,660,357 | |||||
Software: 2.4% | |||||
Financial Technologies (India), Ltd. |
357,355 | 15,235,993 | |||
Total Information Technology |
95,634,803 | ||||
50 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
SHARES | VALUE | ||||
CONSUMER DISCRETIONARY: 12.7% |
|||||
Media: 6.0% |
|||||
Zee Entertainment Enterprises, Ltd. |
1,763,908 | $ | 10,027,471 | ||
Sun TV, Ltd. |
211,954 | 7,262,564 | |||
Wire and Wireless India, Ltd. *** |
3,020,454 | 6,090,247 | |||
Television Eighteen India, Ltd. |
384,860 | 5,378,211 | |||
Inox Leisure, Ltd. *** |
1,076,527 | 2,668,469 | |||
Dish TV India, Ltd. ***,**** |
1,157,997 | 2,434,072 | |||
PVR, Ltd. |
627,251 | 2,332,799 | |||
Balaji Telefilms, Ltd. |
438,115 | 1,269,843 | |||
37,463,676 | |||||
Household Durables: 1.9% |
|||||
Voltas, Ltd. |
6,211,750 | 12,071,932 | |||
Automobiles: 1.9% |
|||||
Hero Honda Motors, Ltd. |
766,007 | 11,797,900 | |||
Textiles, Apparel & Luxury Goods: 1.6% |
|||||
Titan Industries, Ltd. |
324,589 | 6,081,274 | |||
Bata India, Ltd. *** |
1,343,500 | 4,178,713 | |||
10,259,987 | |||||
Hotels, Restaurants & Leisure: 1.3% |
|||||
Indian Hotels Co., Ltd. |
2,508,200 | 8,247,947 | |||
Total Consumer Discretionary |
79,841,442 | ||||
HEALTH CARE: 11.1% |
|||||
Pharmaceuticals: 11.1% |
|||||
Glenmark Pharmaceuticals, Ltd. |
1,849,285 | $ | 25,818,937 | ||
Cipla, Ltd. |
4,114,657 | 22,113,974 | |||
Sun Pharmaceuticals Industries, Ltd. |
953,325 | 21,918,469 | |||
Total Health Care |
69,851,380 | ||||
FINANCIALS: 10.9% |
|||||
Commercial Banks: 9.8% |
|||||
UTI Bank, Ltd. |
1,934,200 | 21,162,947 | |||
HDFC Bank, Ltd. |
983,033 | 20,968,581 | |||
Corporation Bank |
2,954,331 | 19,444,956 | |||
61,576,484 | |||||
Capital Markets: 1.1% |
|||||
IL&FS Investsmart, Ltd. |
1,903,682 | 7,298,506 | |||
Total Financials |
68,874,990 | ||||
CONSUMER STAPLES: 10.6% |
|||||
Personal Products: 6.9% |
|||||
Dabur India, Ltd. |
14,903,857 | 30,754,098 | |||
Marico, Ltd. |
8,824,720 | 12,415,314 | |||
43,169,412 | |||||
Household Products: 3.1% |
|||||
Hindustan Lever, Ltd. |
4,212,269 | 19,626,567 | |||
Beverages: 0.6% |
|||||
Radico Khaitan, Ltd. |
1,267,000 | 3,777,243 | |||
Total Consumer Staples |
66,573,222 | ||||
See footnotes on page 53.
800.789.ASIA [2742] www.matthewsfunds.com | 51 |
MATTHEWS INDIA FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (continued)
EQUITIES: INDIA (continued)
SHARES | VALUE | ||||
UTILITIES: 7.9% |
|||||
Electric Utilities: 4.3% |
|||||
CESC, Ltd. |
3,211,120 | $ | 26,689,272 | ||
Gas Utilities: 3.6% |
|||||
GAIL India, Ltd. |
3,816,501 | 22,948,178 | |||
Total Utilities |
49,637,450 | ||||
TELECOMMUNICATION SERVICES: 6.7% |
|||||
Wireless Telecommunication Services: 6.7% |
|||||
Bharti Airtel, Ltd. *** |
1,334,191 | 23,164,859 | |||
Reliance Communications, Ltd. *** |
2,024,755 | 19,193,830 | |||
Idea Cellular, Ltd. *** |
49,675 | 108,081 | |||
Total Telecommunication Services |
42,466,770 | ||||
ENERGY: 3.9% |
|||||
Oil, Gas & Consumable Fuels: 3.9% |
|||||
Reliance Industries, Ltd. |
478,371 | 14,719,387 | |||
Chennai Petroleum Corp., Ltd. |
2,467,744 | 10,084,452 | |||
Total Energy |
24,803,839 | ||||
TOTAL EQUITIES: INDIA |
604,748,487 | ||||
(Cost $543,150,309) |
INTERNATIONAL DOLLAR BONDS: 3.5%** |
||||||
FACE AMOUNT | VALUE | |||||
FINANCIALS: 2.6% |
||||||
Thrifts & Mortgage Finance: 2.6% |
||||||
Housing Development Finance Corp., Cnv. 0.000%, 09/27/10 |
$ | 13,600,000 | $ | 16,694,000 | ||
Total Financials |
16,694,000 | |||||
CONSUMER STAPLES: 0.9% |
||||||
Beverages: 0.9% |
||||||
Radico Khaitan, Ltd., Cnv. 3.500%, 07/27/11 |
5,000,000 | 5,475,000 | ||||
Total Consumer Staples |
5,475,000 | |||||
TOTAL INTERNATIONAL DOLLAR BONDS | 22,169,000 | |||||
(Cost $21,481,407) |
52 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
VALUE | |||
TOTAL INVESTMENTS: 99.5% |
$ | 626,917,487 | |
(Cost $564,631,716*****) |
|||
CASH AND OTHER ASSETS, LESS LIABILITIES: 0.5% |
2,832,385 | ||
NET ASSETS: 100.0% |
$ | 629,749,872 | |
* | All equity securities, except for Sify, Ltd. ADR, were fair valued under direction of the Board of Trustees |
** | As a percentage of net assets as of March 31, 2007 |
*** | Nonincome producing security |
**** | Illiquid security |
***** | Cost of investments is $564,631,716 and net unrealized appreciation consists of: |
Gross unrealized appreciation | $ | 95,613,360 | ||
Gross unrealized depreciation | (33,327,589 | ) | ||
Net unrealized appreciation | $ | 62,285,771 | ||
ADR | American Depositary Receipt |
Cnv. | Convertible |
See accompanying notes to schedules of investments.
This portfolio data should not be relied upon as a complete listing of this Funds holdings, as information on particular holdings may have been withheld if it was in the Funds interest to do so.
800.789.ASIA [2742] www.matthewsfunds.com | 53 |
FUND DESCRIPTION |
SYMBOL: MJFOX | |
Under normal market conditions, the Matthews Japan Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in Japan. |
PORTFOLIO MANAGERS |
Note: Managers shown reflect changes effective April 30, 2007. | |
Lead Managers: David Ishibashi and Taizo Ishida |
PORTFOLIO MANAGER COMMENTARY
For the quarter ended March 31, 2007, the Matthews Japan Fund gained 0.93%, underperforming its benchmarks, the MSCI Developed Markets Japan Index and the TOPIX Index, which gained 3.56% and 3.76%, respectively. The Lipper Japanese Funds Category Average returned 1.16% for the same period.
The Japanese market began the quarter strongly but hit a bump when global equities corrected in late February. Although most other Asian markets quickly recovered and have since exceeded their previous highs, the Japanese market lagged for the quarter. Over the period, indices of new markets, such as Mothers and Hercules, were down more than the TOPIX as a result of a prolonged concern over last years questionable financial accounting practices and related scandals.
During the quarter, the market was very keen to find out whether the Bank of Japan (BOJ) would raise interest rates. The BOJ disappointed the market in January by keeping its rate unchanged, but it finally raised it a much-anticipated 0.25% in February. The yen appreciated by 4% to 115 yen to the dollar, but it quickly fell back to the level it held at the end of last quarter. For this quarter, the exchange rate was unchanged and had little impact on exporters.
Japans 2007 land prices, the other closely watched macro statistic, was a delight to the market: It showed the first year-over-year positive gain0.4%after 15 years of consecutive declines. More importantly, land prices in many areas of major metropolitan cities (Tokyo, Osaka, Nagoya) jumped anywhere from 40% to 50%. The Funds holdings in the real estate sector were a beneficiary of this rising trend in Japans land prices.
Looking at sector performance, the best performer was telecom, followed by energy, industrials and utilities. The Fund participated in the telecom sector through its position in KDDI, Japans second-largest wireless operator, with a growing market
continued on page 57
54 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PERFORMANCE AS OF MARCH 31, 2007 |
|||||||||||||||
Fund Inception: 12/31/98 |
3 MO |
1 YR |
Average Annual Total Returns | ||||||||||||
3 YRS | 5 YRS | SINCE INCEPTION |
|||||||||||||
Matthews Japan Fund |
0.93 | % | 10.05 | % | 3.88 | % | 12.94 | % | 8.86 | % | |||||
MSCI Developed Markets Japan Index1 |
3.56 | % | 3.09 | % | 11.67 | % | 14.08 | % | 5.98 | % | |||||
TOPIX2 |
3.76 | % | 0.04 | % | 9.80 | % | 13.86 | % | 6.35 | % | |||||
Lipper Japanese Funds Category Average3 |
1.16 | % | 6.01 | % | 9.07 | % | 10.81 | % | 5.86 | % |
All performance quoted is past performance and is no guarantee of future results. Assumes reinvestment of all dividends and/or distributions. Unusually high returns may not be sustainable. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. The performance of foreign indices may be based on different exchange rates than those used by the Fund and, unlike the Funds NAV, is not adjusted to reflect fair value at the close of the NYSE. Current performance may be lower or higher than the return figures quoted. Returns are net of the Funds management fee and other operating expenses. Returns would have been lower if certain of the Funds fees and expenses had not been waived. For the Funds most recent month-end performance please call 800-789-ASIA [2742] or visit www.matthewsfunds.com.
OPERATING EXPENSES4 |
|||
Net Ratio: 3 months ended 3/31/07 (annualized)5,6 |
1.20 | % | |
Net Ratio: Fiscal Year 20066 |
1.24 | % | |
Gross Ratio: Fiscal Year 2006 |
1.25 | % |
PORTFOLIO TURNOVER7 |
|||
3 months ended 3/31/07 (annualized)5 |
42.21 | % | |
Fiscal Year 2006 |
59.95 | % |
1 |
The MSCI Developed Markets Japan Index is a free floatadjusted market capitalizationweighted index of Japanese equities listed in Japan. It is not possible to invest directly in an index. Source: Index data from Morgan Stanley Capital International; total return calculations performed by PFPC Inc. |
2 |
The Tokyo Price Index (TOPIX) is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. It is not possible to invest directly in an index. Source: Index data from Bloomberg; total return calculations performed by PFPC Inc. |
3 |
As of 3/31/07, the Lipper Japanese Funds Category Average consisted of 55 funds for the three-month period, 49 funds for the one-year period, 41 funds for the three-year period, 36 funds for the five-year period, and 28 funds since 12/31/98. Lipper, Inc. fund performance does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains, for the stated periods. |
4 |
Matthews Asian Funds do not charge 12b-1 fees. |
5 |
Unaudited. |
6 |
Includes management fee, administration and shareholder services fees after reimbursement, waiver or recapture of expenses by Advisor. Voluntary fee waivers by the Advisor may be discontinued at any time. |
7 |
The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
800.789.ASIA [2742] www.matthewsfunds.com | 55 |
MATTHEWS JAPAN FUND
TOP TEN HOLDINGS1
SECTOR |
% OF NET ASSETS | |||
The Sumitomo Trust & Banking Co., Ltd. |
Financials | 3.6% | ||
Sysmex Corp. |
Health Care | 3.2% | ||
Nintendo Co., Ltd. |
Information Technology | 2.9% | ||
Sony Corp. |
Consumer Discretionary | 2.8% | ||
Toyota Motor Corp. |
Consumer Discretionary | 2.8% | ||
Mizuho Financial Group, Inc. |
Financials | 2.7% | ||
Keyence Corp. |
Information Technology | 2.6% | ||
Sharp Corp. |
Consumer Discretionary | 2.5% | ||
Benesse Corp. |
Consumer Discretionary | 2.5% | ||
The Joyo Bank, Ltd. |
Financials | 2.4% | ||
% OF ASSETS IN TOP 10 |
28.0% |
COUNTRY ALLOCATION |
|||
Japan |
99.1 | % | |
Cash, cash equivalents and other2 |
0.9 | % |
SECTOR ALLOCATION |
|||
Financials |
34.9 | % | |
Consumer Discretionary |
23.9 | % | |
Information Technology |
18.5 | % | |
Health Care |
7.7 | % | |
Consumer Staples |
5.5 | % | |
Materials |
4.2 | % | |
Industrials |
3.8 | % | |
Telecommunication Services |
0.6 | % | |
Cash, cash equivalents and other2 |
0.9 | % |
MARKET CAP EXPOSURE |
|||
Large cap (over $5 billion) |
54.1 | % | |
Mid cap ($1$5 billion) |
29.6 | % | |
Small cap (under $1 billion) |
15.4 | % | |
Cash, cash equivalents and other2 |
0.9 | % |
NUMBER OF POSITIONS2 |
NAV |
FUND ASSETS |
REDEMPTION FEE |
12B-1 FEES | ||||
60 |
$17.45 | $299.6 million | 2.00% within 90 calendar days |
None |
1 |
Holdings may include more than one security from same issuer. |
2 |
Includes BNY Hamilton Money Fund. |
56 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PORTFOLIO MANAGER COMMENTARY continued from page 54
share. Because of its focus on the domestic economy and services, the Fund typically invests in the consumer discretionary and financial sectors, but we are taking advantage of attractive valuations and good fundamentals in other parts of the market.
Two new additions to the portfolio during the quarter were Park24, which focuses on the utilization of idle land in productive ways, and Funai Zaisan, a consulting firm specializing in financial solutions.
Park24 is Japans largest developer and operator of time-rental parking spaces and parking lots nationwide. The company has expanded throughout Japan as a result of its strong development capabilities and a steady supply of idle land amid 15 years of depressed property prices. The company has been able to secure prime locations in major city centers as well as outlying regional areas. In addition, the company has begun to manage parking lots on behalf of land owners such as banks, shopping centers and large-scale retail outlets.
As the first major wave of the post-war baby boomers begins to retire, the need for financial advisory services is growing sharply, much like in the United States in the early 1980s. Funai Zaisan is engaged in developing solutions for some of the most onerous areas of taxation for both high-net-worth individuals and corporations (in which the owner/founder is the largest shareholder), and in the areas of inheritance, corporate revitalization, and the effective utilization of land holdings. The company is able to procure its clients through a network of 46 offices nationwide, as well as its relationships with the largest CPA firms in Japan.
Overall, we believe that the portfolio is well positioned to benefit from the continued recovery of the Japanese economy and its increasing integration with its Asia Pacific neighbors.
800.789.ASIA [2742] www.matthewsfunds.com |
57 |
MATTHEWS JAPAN FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
EQUITIES: JAPAN: 99.1%*
SHARES | VALUE | ||||
FINANCIALS: 34.9% |
|||||
Commercial Banks: 12.7% |
|||||
The Sumitomo Trust & Banking Co., Ltd. |
1,020,000 | $ | 10,637,984 | ||
Mizuho Financial Group, Inc. |
1,258 | 8,102,698 | |||
The Joyo Bank, Ltd. |
1,149,000 | 7,176,375 | |||
The Chiba Bank, Ltd. |
665,000 | 5,868,975 | |||
The Toyko Star Bank, Ltd. |
1,529 | 4,826,782 | |||
Mitsubishi UFJ Financial Group, Inc. |
129 | 1,455,957 | |||
38,068,771 | |||||
Real Estate Management & Development: 10.4% |
|||||
Daibiru Corp. |
352,700 | 5,037,289 | |||
Creed Corp. |
1,407 | 4,561,049 | |||
JOINT Corp. |
115,100 | 4,375,832 | |||
Kenedix, Inc. |
787 | 4,020,485 | |||
Funai Zaisan Consultants Co., Ltd. |
636 | 3,540,529 | |||
Sumitomo Realty & Development Co., Ltd. |
91,000 | 3,451,884 | |||
Mitsubishi Estate Co., Ltd. |
97,000 | 3,185,591 | |||
Shoei Co., Ltd. |
104,800 | 3,014,868 | |||
31,187,527 | |||||
Capital Markets: 4.9% |
|||||
Monex Beans Holdings, Inc. |
6,355 | 5,878,267 | |||
Ichiyoshi Securities Co., Ltd. |
266,300 | 4,275,625 | |||
Nomura Holdings, Inc. |
148,000 | 3,083,333 | |||
GCA Co., Ltd. |
222 | 1,557,994 | |||
14,795,219 | |||||
Insurance: 4.7% |
|||||
T&D Holdings, Inc. |
103,245 | 7,123,064 | |||
The Fuji Fire & Marine Insurance Co., Ltd. |
1,686,000 | 6,939,155 | |||
14,062,219 | |||||
Real Estate Investment Trusts: 1.6% |
|||||
Japan Logistics Fund, Inc. REIT |
511 | 4,683,299 | |||
Consumer Finance: 0.6% |
|||||
ORIX Corp. |
6,650 | 1,732,476 | |||
Total Financials |
104,529,511 | ||||
CONSUMER DISCRETIONARY: 23.9% | |||||
Household Durables: 9.2% | |||||
Sony Corp. ADR |
166,800 | $ | 8,421,732 | ||
Sharp Corp. |
392,000 | 7,551,256 | |||
Sekisui House, Ltd. |
446,000 | 6,941,310 | |||
Makita Corp. |
123,900 | 4,594,730 | |||
27,509,028 | |||||
Specialty Retail: 5.2% |
|||||
Point, Inc. |
104,250 | 6,626,209 | |||
Nitori Co., Ltd. |
118,400 | 5,887,848 | |||
Yamada Denki Co., Ltd. |
34,460 | 3,210,886 | |||
15,724,943 | |||||
Automobiles: 4.7% |
|||||
Toyota Motor Corp. ADR |
64,300 | 8,240,688 | |||
Honda Motor Co., Ltd. ADR |
167,900 | 5,854,673 | |||
14,095,361 | |||||
Diversified Consumer Services: 2.5% |
|||||
Benesse Corp. |
199,000 | 7,396,640 | |||
Internet & Catalog Retail: 1.2% |
|||||
Nissen Co., Ltd. |
520,100 | 3,641,230 | |||
Auto Components: 1.1% |
|||||
Takata Corp. |
80,800 | 3,208,961 | |||
Total Consumer Discretionary |
71,576,163 | ||||
INFORMATION TECHNOLOGY: 18.5% |
|||||
Electronic Equipment & Instruments: 9.4% | |||||
Keyence Corp. |
34,370 | 7,755,417 | |||
Nidec Corp. |
92,900 | 5,991,514 | |||
Hoya Corp. |
166,800 | 5,534,521 | |||
Murata Manufacturing Co., Ltd. |
69,800 | 5,094,026 | |||
Horiba, Ltd. |
114,300 | 3,870,137 | |||
28,245,615 | |||||
Software: 2.9% |
|||||
Nintendo Co., Ltd. |
29,315 | 8,520,356 | |||
IT Services: 2.3% | |||||
Otsuka Corp. |
48,000 | 4,594,705 | |||
Nomura Research Institute, Ltd. |
80,000 | 2,355,737 | |||
6,950,442 | |||||
58 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
SHARES | VALUE | ||||
Office Electronics: 2.0% |
|||||
Canon, Inc. ADR |
109,550 | $ | 5,880,644 | ||
Computers & Peripherals: 1.2% |
|||||
Melco Holdings, Inc. |
144,300 | 3,710,362 | |||
Internet Software & Services: 0.7% |
|||||
Yahoo! Japan Corp. |
6,155 | 2,123,224 | |||
Total Information Technology |
55,430,643 | ||||
HEALTH CARE: 7.7% |
|||||
Health Care Equipment & Supplies: 6.5% |
|||||
Sysmex Corp. |
264,600 | 9,610,387 | |||
Nakanishi, Inc. |
56,100 | 6,545,952 | |||
Terumo Corp. |
83,500 | 3,252,419 | |||
19,408,758 | |||||
Pharmaceuticals: 1.2% |
|||||
Takeda Pharmaceutical Co., Ltd. |
57,900 | 3,798,091 | |||
Total Health Care |
23,206,849 | ||||
CONSUMER STAPLES: 5.5% |
|||||
Beverages: 2.1% |
|||||
Ito En, Ltd. |
192,700 | 6,279,430 | |||
Food Products: 1.8% |
|||||
Unicharm Petcare Corp. |
151,200 | 5,260,692 | |||
Household Products: 1.6% |
|||||
Pigeon Corp. |
277,900 | 4,775,522 | |||
Total Consumer Staples |
16,315,644 | ||||
MATERIALS: 4.2% |
|||||
Chemicals: 4.2% |
|||||
Nitto Denko Corp. |
143,700 | 6,743,559 | |||
Nippon Shokubai Co., Ltd. |
308,000 | 3,324,643 | |||
Teijin, Ltd. |
444,000 | 2,505,601 | |||
Total Materials |
12,573,803 | ||||
INDUSTRIALS: 3.8% | |||||
Commercial Services & Supplies: 3.8% | |||||
PRONEXUS, Inc. |
516,400 | $ | 5,127,189 | ||
Secom Co., Ltd. |
90,100 | 4,182,340 | |||
Park24 Co., Ltd. |
163,300 | 2,196,457 | |||
Total Industrials |
11,505,986 | ||||
TELECOMMUNICATION SERVICES: 0.6% |
|||||
Wireless Telecommunication Services: 0.6% |
|||||
KDDI Corp. |
233 | 1,860,599 | |||
Total Telecommunication Services |
1,860,599 | ||||
TOTAL EQUITIES: JAPAN |
296,999,198 | ||||
(Cost $271,931,784) |
|||||
MONEY MARKET MUTUAL FUND: 0.3%* |
|||||
BNY Hamilton Money Fund (Cost $786,145) |
786,145 | 786,145 | |||
TOTAL INVESTMENTS: 99.4% |
297,785,343 | ||||
(Cost $272,717,929**) |
|||||
CASH AND OTHER ASSETS, LESS LIABILITIES: 0.6% |
1,833,692 | ||||
NET ASSETS: 100.0% |
$ | 299,619,035 | |||
* | As a percentage of net assets as of March 31, 2007 |
** | Cost of investments is $272,717,929 and net unrealized appreciation consists of: |
Gross unrealized appreciation | $ | 39,416,788 | ||
Gross unrealized depreciation | (14,349,374 | ) | ||
Net unrealized appreciation | $ | 25,067,414 | ||
ADR | American Depositary Receipt |
REIT | Real Estate Investment Trust |
See accompanying notes to schedules of investments.
800.789.ASIA [2742] www.matthewsfunds.com | 59 |
FUND DESCRIPTION | SYMBOL: MAKOX |
Under normal market conditions, the Matthews Korea Fund, a non-diversified fund, seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in South Korea.
PORTFOLIO MANAGERS |
Lead Managers: G. Paul Matthews and Mark W. Headley
Co-Manager: J. Michael Oh
PORTFOLIO MANAGER COMMENTARY
For the three-month period ended March 31, 2007, the Matthews Korea Fund declined 4.66%, underperforming its benchmark index, which gained 0.23%, and the Lipper Pacific ex-Japan Funds Category Average, which gained 3.40%.
After a market dip in January, the South Korean market began to recover its losses as a Free Trade Agreement (FTA) with the United States was finalized and its relationship with North Korea improved. Foreign selling pressure also eased during the quarter as the overall valuation of the Korean market became attractive. Exports continued to show stronger-than-expected growth during the first quarter despite the wons continuing strength. The governments approval rating rose as a result of the adoption of the FTA. We believe that the FTA will have a positive long-term impact on the Korean economy, although the short-term impact could be mixed. Domestic sentiment remained weak during the quarter due to weak corporate spending in the market. Korean corporations continue to invest more overseas due to investment restrictions around the Seoul metropolitan area.
The Funds underperformance of its benchmark for the period was primarily due to its underweight position in the industrials sector, particularly in shipbuilding and construction. The shipbuilding industry had a strong first quarter as ship prices rose and overseas orders increased. The construction industry performed well on the back of expectations that restrictions on new developments could be eased. The Funds performance was also hurt by its health care exposure; the sector was under pressure from the expectation that the FTA would have a negative impact on Korean pharmaceutical companies. The FTA is expected to increase foreign competition in the Korean pharmaceutical industry and may delay Korean generic drug makers from releasing new drugs.
continued on page 63
60 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PERFORMANCE AS OF MARCH 31, 2007 |
| |||||||||||||||||
Fund Inception: 1/3/95 |
3 MO | 1 YR | Average Annual Total Returns | |||||||||||||||
3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION |
|||||||||||||||
Matthews Korea Fund |
4.66 | % | 3.04 | % | 24.21 | % | 18.73 | % | 13.95 | % | 6.26 | % | ||||||
KOSPI1 |
0.23 | % | 10.63 | % | 26.38 | % | 18.22 | % | 7.76 | % | 1.91 | % | ||||||
Lipper Pacific ex-Japan Funds Category Average2 |
3.40 | % | 23.79 | % | 22.41 | % | 18.58 | % | 6.76 | % | 7.24 | %3 |
All performance quoted is past performance and is no guarantee of future results. Assumes reinvestment of all dividends and/or distributions. Unusually high returns may not be sustainable. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. The performance of foreign indices may be based on different exchange rates than those used by the Fund and, unlike the Funds NAV, is not adjusted to reflect fair value at the close of the NYSE. Current performance may be lower or higher than the return figures quoted. Returns are net of the Funds management fee and other operating expenses. Returns would have been lower if certain of the Funds fees and expenses had not been waived. For the Funds most recent month-end performance please call 800-789-ASIA [2742] or visit www.matthewsfunds.com.
OPERATING EXPENSES4 |
|||
Net Ratio: 3 months ended 3/31/07 (annualized)5,6 |
1.25 | % | |
Net Ratio: Fiscal Year 20066 |
1.28 | % | |
Gross Ratio: Fiscal Year 2006 |
1.30 | % |
PORTFOLIO TURNOVER7 |
|||
3 months ended 3/31/07 (annualized)5 |
33.85 | % | |
Fiscal Year 2006 |
25.82 | % |
1 |
The Korea Composite Stock Price Index (KOSPI) is a capitalization-weighted index of all common stocks listed on the Korea Stock Exchange. It is not possible to invest directly in an index. Source: Index data from Bloomberg; total return calculations performed by PFPC Inc. |
2 |
As of 3/31/07, the Lipper Pacific ex-Japan Funds Category Average consisted of 50 funds for the three-month period, 48 funds for the one-year period, 47 funds for the three-year period, 43 funds for the five-year period, 23 funds for the 10-year period, and 14 funds since 12/31/94. Lipper, Inc. fund performance does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains, for the stated periods. |
3 |
Calculated from 12/31/94. |
4 |
Matthews Asian Funds do not charge 12b-1 fees. |
5 |
Unaudited. |
6 |
Includes management fee, administration and shareholder services fees after reimbursement, waiver or recapture of expenses by Advisor. Voluntary fee waivers by the Advisor may be discontinued at any time. |
7 |
The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
800.789.ASIA [2742] www.matthewsfunds.com | 61 |
MATTHEWS KOREA FUND
TOP TEN HOLDINGS1
SECTOR |
% OF NET ASSETS | |||
Samsung Electronics Co., Ltd. |
Information Technology | 9.6% | ||
Kookmin Bank |
Financials | 6.6% | ||
Hana Financial Group, Inc. |
Financials | 5.5% | ||
SK Telecom Co., Ltd. |
Telecommunication Services | 5.4% | ||
NHN Corp. |
Information Technology | 4.5% | ||
Shinhan Financial Group Co., Ltd. |
Financials | 4.0% | ||
AMOREPACIFIC Corp. |
Consumer Staples | 3.8% | ||
Samsung Securities Co., Ltd. |
Financials | 3.6% | ||
Samsung Fire & Marine Insurance Co., Ltd. |
Financials | 3.3% | ||
Hanmi Pharmaceutical Co., Ltd. |
Health Care | 3.2% | ||
% OF ASSETS IN TOP 10 |
49.5% |
COUNTRY ALLOCATION |
|||
South Korea |
99.0 | % | |
Cash, cash equivalents and other2 |
1.0 | % |
SECTOR ALLOCATION |
|||
Financials |
24.9 | % | |
Information Technology |
16.5 | % | |
Consumer Discretionary |
14.4 | % | |
Health Care |
11.6 | % | |
Consumer Staples |
10.9 | % | |
Industrials |
9.9 | % | |
Telecommunication Services |
7.7 | % | |
Energy |
2.3 | % | |
Materials |
0.8 | % | |
Cash, cash equivalents and other2 |
1.0 | % |
MARKET CAP EXPOSURE |
|||
Large cap (over $5 billion) |
46.1 | % | |
Mid cap ($1$5 billion) |
35.0 | % | |
Small cap (under $1 billion) |
17.9 | % | |
Cash, cash equivalents and other2 |
1.0 | % |
NUMBER OF POSITIONS2 |
NAV |
FUND ASSETS |
REDEMPTION FEE |
12B-1 FEES | ||||
44 |
$5.94 | $206.5 million | 2.00% within 90 calendar days |
None |
1 |
Holdings may include more than one security from same issuer. |
2 |
Includes BNY Hamilton Money Fund. |
62 | MATTHEWS ASIAN FUNDS |
ALL DATA IS AS OF MARCH 31, 2007, UNLESS OTHERWISE NOTED
PORTFOLIO MANAGER COMMENTARY continued from page 60
The largest contribution to Fund performance came from the financials sector, which performed strongly on attractive valuations and improved profitability. The energy and materials sectors also made positive contributions to Fund performance.
On a company basis, Kookmin Bank was the largest contributor to Fund performance. The largest retail bank in Korea, Kookmin Banks profitability improved over the past year, primarily due to an increase in fee-related revenue. The second-largest contribution came from NHN, the dominant player in the Internet search, casual games and portal industry in Korea. NHN recorded strong growth during the last fiscal year, and a positive outlook for the current fiscal year contributed to its strong performance.
Samsung Electronics was the worst performer during the period. Prices of DRAM (dynamic random access memory) products declined, and increased competition in the handset business contributed to its poor performance. SK Telecom, Koreas largest wireless telecommunications operator, was the second worst performer for the quarter; competition among local wireless operators is increasing as companies roll out new 3G services. The sectors valuation remains among the lowest in the region.
Tensions between North Korea and its neighbors improved during the quarter as North Korea agreed to remove its nuclear facilities in exchange for economic subsidies from its neighbors. However, North Korea still remains one of the key risks to investing in South Korea, and any deteriorating relationship with North Korea could result in increased volatility in the South Korean market and throughout the region. Exports remain a key growth driver in the South Korean economy, and further strengthening of its currency could negatively impact exports and, hence, the overall Korean economy.
During the quarter, the Fund made a few changes in the industrials, consumer and health care sectors. The Fund remains primarily focused on three sectors: consumer, financials and information technology. It remains underweight in cyclical industries such as shipbuilding.
800.789.ASIA [2742] www.matthewsfunds.com |
63 |
MATTHEWS KOREA FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
EQUITIES: SOUTH KOREA: 99.0%*
SHARES | VALUE | ||||
FINANCIALS: 24.9% |
|||||
Commercial Banks: 16.1% |
|||||
Kookmin Bank |
135,861 | $ | 12,188,210 | ||
Hana Financial Group, Inc. |
218,720 | 11,321,922 | |||
Shinhan Financial Group Co., Ltd. |
144,242 | 8,279,196 | |||
Kookmin Bank ADR |
16,339 | 1,472,961 | |||
33,262,289 | |||||
Capital Markets: 5.5% |
|||||
Samsung Securities Co., Ltd. |
135,415 | 7,369,524 | |||
Kiwoom.com Securities Co., Ltd. |
100,353 | 3,941,372 | |||
11,310,896 | |||||
Insurance: 3.3% |
|||||
Samsung Fire & Marine Insurance Co., Ltd. |
40,374 | 6,759,040 | |||
Total Financials |
51,332,225 | ||||
INFORMATION TECHNOLOGY: 16.5% |
|||||
Semiconductors & Semiconductor Equipment: 9.6% |
|||||
Samsung Electronics Co., Ltd. |
30,561 | 18,288,524 | |||
Samsung Electronics Co., Ltd., Pfd. |
3,303 | 1,553,547 | |||
19,842,071 | |||||
Internet Software & Services: 5.6% |
|||||
NHN Corp. ** |
64,044 | 9,394,209 | |||
CDNetworks Co., Ltd. ** |
80,638 | 2,288,515 | |||
11,682,724 | |||||
Office Electronics: 1.3% |
|||||
Sindo Ricoh Co., Ltd. |
47,126 | 2,604,753 | |||
Total Information Technology |
34,129,548 | ||||
CONSUMER DISCRETIONARY: 14.4% |
|||||
Media: 4.7% |
|||||
Cheil Communications, Inc. |
21,311 | 5,323,219 | |||
ON*Media Corp. ** |
396,220 | 3,217,603 | |||
Mediaplex, Inc. ** |
68,586 | 1,133,623 | |||
9,674,445 | |||||
Multiline Retail: 2.8% |
|||||
Hyundai Department Store Co., Ltd. |
51,820 | $ | 4,351,382 | ||
Taegu Department Store Co., Ltd. |
82,000 | 1,372,768 | |||
5,724,150 | |||||
Automobiles: 3.7% |
|||||
Hyundai Motor Co. |
76,301 | 5,360,859 | |||
Hyundai Motor Co., Pfd. |
61,710 | 2,315,437 | |||
7,676,296 | |||||
Internet & Catalog Retail: 1.8% |
|||||
GS Home Shopping, Inc. |
52,539 | 3,819,800 | |||
Auto Components: 1.4% |
|||||
Hankook Tire Co., Ltd. |
173,460 | 2,876,250 | |||
Total Consumer Discretionary |
29,770,941 | ||||
HEALTH CARE: 11.6% |
|||||
Pharmaceuticals: 10.9% |
|||||
Hanmi Pharmaceutical Co., Ltd. |
50,992 | 6,585,379 | |||
Daewoong Pharmaceutical Co., Ltd. |
88,326 | 5,961,629 | |||
Yuhan Corp. |
33,397 | 5,236,031 | |||
Dong-A Pharmaceutical Co., Ltd. |
60,805 | 4,718,071 | |||
22,501,110 | |||||
Health Care Equipment & Supplies: 0.7% |
|||||
Osstem Implant Co., Ltd. ** |
31,343 | 1,499,187 | |||
Total Health Care |
24,000,297 | ||||
CONSUMER STAPLES: 10.9% |
|||||
Personal Products: 3.8% |
|||||
AMOREPACIFIC Corp. |
14,181 | 7,807,991 | |||
Food & Staples Retailing: 3.3% |
|||||
Shinsegae Food Co., Ltd. |
66,098 | 4,285,691 | |||
Shinsegae Co., Ltd. |
4,400 | 2,525,510 | |||
6,811,201 | |||||
Beverages: 2.0% |
|||||
Hite Brewery Co., Ltd. |
34,015 | 4,067,482 | |||
Food Products: 1.8% |
|||||
Nong Shim Co., Ltd. |
14,670 | 3,820,312 | |||
Total Consumer Staples |
22,506,986 | ||||
64 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
SHARES | VALUE | ||||
INDUSTRIALS: 9.9% |
|||||
Industrial Conglomerates: 3.9% |
|||||
Orion Corp. |
21,139 | $ | 5,235,318 | ||
Samsung Techwin Co., Ltd. |
71,910 | 2,740,193 | |||
7,975,511 | |||||
Construction & Engineering: 2.3% |
|||||
Samsung Engineering Co., Ltd. |
41,210 | 2,566,864 | |||
GS Engineering & Construction Corp. |
24,870 | 2,225,823 | |||
4,792,687 | |||||
Commercial Services & Supplies: 2.7% |
|||||
S1 Corp. |
136,845 | 5,498,237 | |||
Machinery: 1.0% |
|||||
JVM Co., Ltd. |
43,421 | 2,183,050 | |||
Total Industrials |
20,449,485 | ||||
TELECOMMUNICATION SERVICES: 7.7% |
|||||
Wireless Telecommunication Services: 5.4% |
|||||
SK Telecom Co., Ltd. |
41,385 | 8,423,924 | |||
SK Telecom Co., Ltd. ADR |
114,200 | 2,674,564 | |||
11,098,488 | |||||
Diversified Telecommunication Services: 2.3% |
|||||
KT Corp. |
65,740 | 2,948,797 | |||
KT Corp. ADR |
81,300 | 1,820,307 | |||
4,769,104 | |||||
Total Telecommunication Services |
15,867,592 | ||||
ENERGY: 2.3% |
|||||
Oil, Gas & Consumable Fuels: 2.3% |
|||||
GS Holdings Corp. |
122,890 | 4,819,984 | |||
Total Energy |
4,819,984 | ||||
MATERIALS: 0.8% |
|||||
Chemicals: 0.8% |
|||||
LG Chem, Ltd. |
33,680 | 1,695,098 | |||
Total Materials |
1,695,098 | ||||
TOTAL EQUITIES: SOUTH KOREA |
$ | 204,572,156 | |||
(Cost $ 131,141,918) |
|||||
MONEY MARKET MUTUAL FUND: 0.1%* |
|||||
BNY Hamilton Money Fund |
135,085 | 135,085 | |||
(Cost $ 135,085) |
|||||
TOTAL INVESTMENTS: 99.1% |
204,707,241 | ||||
(Cost $131,277,003***) |
|||||
CASH AND OTHER ASSETS, LESS LIABILITIES: 0.9% |
1,800,890 | ||||
NET ASSETS: 100.0% |
$ | 206,508,131 | |||
* | As a percentage of net assets as of March 31, 2007 |
** | Nonincome producing security |
*** | Cost of investments is $131,277,003 and net unrealized appreciation consists of: |
Gross unrealized appreciation |
$ | 74,957,320 | ||
Gross unrealized depreciation |
(1,527,082 | ) | ||
Net unrealized appreciation |
$ | 73,430,238 | ||
ADR | American Depositary Receipt |
Pfd. | Preferred |
See accompanying notes to schedules of investments.
800.789.ASIA [2742] www.matthewsfunds.com | 65 |
NOTES TO SCHEDULES OF INVESTMENTS
SIGNIFICANT ACCOUNTING POLICIES (UNAUDITED)
A. | SECURITY VALUATION: The Funds equity securities are valued based on market quotations or at fair value as determined in good faith by or under the direction of the Board of Trustees (the Board) when no market quotations are available or when market quotations have become unreliable. The Board has delegated the responsibility of making fair value determinations to the Pricing Committee of Matthews International Capital Management, LLC, subject to the Funds Pricing Policies. The Board has retained a third-party pricing service which may be utilized by the Pricing Committee under circumstances described in the Pricing Policies to provide fair value prices for certain securities held by the Funds. When fair value pricing is employed, the prices of securities used by a Fund to calculate its NAV differ from quoted or published prices for the same securities for that day. All fair value determinations are made subject to the Boards oversight. |
The books and records of the Funds are maintained in U.S. dollars. Transactions denominated in foreign currencies are recorded at the current prevailing exchange rates. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the current exchange rate. Translation gains or losses resulting from changes in the exchange rate during the reporting period and realized gains and losses on the settlement of foreign currency transactions are reported in the results of operations for the current period. The Funds do not isolate that portion of gains and losses on investment in equity securities which is due to changes in the foreign exchange rate from that which is due to changes in market prices of equity securities. International dollar bonds are issued offshore, pay interest and principal in U.S. dollars, and are denominated in U.S. dollars.
Market values for equity securities are determined based on the last sale price on the principal exchange or over-the-counter market on which the security is traded. If a reliable last sale price is not available, market values for equity securities are determined using the mean between the last available bid and asked price. Securities are valued through valuations obtained from a commercial pricing service or at the most recent mean of the bid and asked prices provided by investment dealers in accordance with procedures established by the Board.
Foreign securities are valued as of the close of trading on the primary exchange on which they trade. The value is then converted to U.S. dollars using current exchange rates and in accordance with the Pricing Policies.
Foreign currency exchange rates are determined at the close of trading on the New York Stock Exchange, Inc. (NYSE). Occasionally, events affecting the value of foreign investments occur between the time at which they are determined and the close of trading on the NYSE. Such events would not normally be reflected in a calculation of a Funds NAV on that day. If events that materially affect the value of the Funds foreign investments occur during such period, the investments will be valued at their fair value as described above.
Foreign securities held by the Funds may be traded on days and at times when the NYSE is closed. Accordingly, the NAV 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.
66 | MATTHEWS ASIAN FUNDS |
MARCH 31, 2007
B. | TAX INFORMATION: Under the current tax law, capital and currency losses realized after October 31 and prior to the Funds fiscal year end may be deferred as occurring on the first day of the following fiscal year. Post October losses at fiscal year end December 31, 2006 were as follows: |
POST OCTOBER CAPITAL LOSSES |
POST OCTOBER CURRENCY LOSSES |
|||||||
Matthews Asia Pacific Equity Income Fund |
$ | | $ | (5,232 | ) | |||
Matthews Pacific Tiger Fund |
| (74,412 | ) | |||||
Matthews Asian Technology Fund |
(12,095 | ) | (79,224 | ) | ||||
Matthews China Fund |
| (542 | ) | |||||
Matthews Korea Fund |
| (31,864 | ) |
For Federal income tax purposes, the Funds indicated below have capital loss carryforwards, which expire in the year indicated, as of December 31, 2006, which are available to offset future capital gains, if any:
LOSSES DEFERRED EXPIRING IN: |
2008 | 2009 | 2010 | 2011 | ||||||||||||
Matthews Asian Technology Fund |
$ | (3,293,471 | ) | $ | (5,967,059 | ) | $ | (3,461,198 | ) | $ | | |||||
Matthews China Fund |
| | | | ||||||||||||
Matthews India Fund |
| | | | ||||||||||||
LOSSES DEFERRED EXPIRING IN: |
2012 | 2013 | 2014 | Total | ||||||||||||
Matthews Asian Technology Fund |
$ | | $ | | $ | | $ | (12,721,728 | ) | |||||||
Matthews China Fund |
(78,979 | ) | (6,184,085 | ) | (9,072,204 | ) | (15,335,268 | ) | ||||||||
Matthews India Fund |
| | (2,320,226 | ) | (2,320,226 | ) |
For additional information regarding the accounting policies of the Matthews Asian Funds, refer to the most recent financial statements in the N-CSR filing at www.sec.gov.
800.789.ASIA [2742] www.matthewfunds.com | 67 |
MATTHEWS ASIAN FUNDS | MARCH 31, 2007 |
BOARD OF TRUSTEES
Independent Trustees:
Geoffrey H. Bobroff, Chairman
Robert K. Connolly
Rhoda Rossman
Toshi Shibano
Interested Trustee:1
G. Paul Matthews
OFFICERS
Mark W. Headley
Andrew T. Foster
Shai Malka
John P. McGowan
Manoj K. Pombra
INVESTMENT ADVISOR
Matthews International Capital Management, LLC
Four Embarcadero Center, Suite 550
San Francisco, CA 94111
800-789-ASIA [2742]
ACCOUNT SERVICES
PFPC Inc.
P.O. Box 9791
Providence, RI 02940
800-789-ASIA [2742]
1 |
As defined under the Investment Company Act of 1940, as amended. |
68 | MATTHEWS ASIAN FUNDS |
FOR MORE INFORMATION ABOUT
MATTHEWS ASIAN FUNDS
800.789.ASIA [2742]
www.matthewsfunds.com
©2007 Matthews International Capital Management, LLC
MAFQR/G-0307-200M-FST