account. These costs, which are not reflected in annual fund operating expenses or in the example of fund expenses, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was 24% of the average value of its portfolio.
Principal Investment Strategy
Under normal market conditions, the Matthews Asia Focus Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which
include borrowings for investment purposes, in the common and preferred stocks of companies located in Asia Ex Japan, which consists of all countries and markets in Asia excluding Japan but including all other developed, emerging, and frontier
countries and markets in the Asian region. A company is considered to be located in a country or a region if it has substantial ties to that country or region, and currently, Matthews makes that determination primarily based on one or
more of the following five criteria: if the company (i) is organized under the laws of that country or any country in that region; (ii) derives at least 50% of its revenues or profits from goods produced or sold, investments made, or
services performed, or has at least 50% of its assets located, within that country or region; (iii) has the primary trading markets for its securities in that country or region; (iv) has its principal place of business in or is otherwise
headquartered in that country or region; or (v) is a governmental entity or an agency, instrumentality or a political subdivision of that country or any country in that region. The Fund may also invest in depositary receipts, including
American, European and Global Depositary Receipts.
The Fund seeks to invest in companies capable of sustainable growth based on fundamental
characteristics. Companies in which the Fund invests typically possess, in the portfolio managers judgment, such attributes as a high quality management team, strong corporate governance standards, sustainable return on capital over an
extended period, strong free cash flow generation and an attractive valuation in relation to growth prospects and intrinsic value. Although the Fund is unconstrained by sector, geographic area or market capitalization, companies in which the Fund
invests are typically expected to be medium capitalization companies or large capitalization companies. The Fund is currently expected to hold stocks of between 25 and 35 companies under normal market conditions.
Principal Risks of Investment
There is no guarantee that your investment in the Fund will increase in value. The value of your investment in the Fund could go down, meaning you could lose
money. The principal risks of investing in the Fund are:
Political, Social and Economic Risks: The value of the Funds assets may be adversely
affected by political, economic, social and religious instability; inadequate investor protection; changes in laws or regulations of countries within the Asian region (including countries in which the Fund invests, as well as the broader region);
international relations with other nations; natural disasters; corruption and military activity. The Asian region, and particularly China, Japan and South Korea, may be adversely affected by political, military, economic and other factors related to
North Korea. In addition, Chinas long-running conflict over Taiwan, border disputes with many of its neighbors and historically strained relations with Japan could adversely impact economies in the region. The economies of many Asian countries
differ from the economies of more developed countries in many respects, such as rate of growth, inflation, capital reinvestment, resource self-sufficiency, financial system stability, the national balance of payments position and sensitivity to
changes in global trade. Certain Asian countries are highly
dependent upon and may be affected by developments in the United States, Europe and other Asian economies.
Currency Risks: When the Fund conducts securities transactions in a foreign currency, there is the risk of the value of the foreign currency increasing or
decreasing against the value of the U.S. dollar. The value of an investment denominated in a foreign currency will decline in dollar terms if that currency weakens against the dollar. While the Fund is permitted to hedge currency risks, Matthews
does not anticipate doing so at this time. Additionally, Asian countries may utilize formal or informal currency-exchange controls or capital controls. Capital controls may impose restrictions on the Funds ability to repatriate
investments or income. Such controls may also affect the value of the Funds holdings.
Risks Associated with Emerging and Frontier Markets: Many
Asian countries are considered emerging or frontier markets. Such markets are often less stable politically and economically than developed markets such as the United States, and investing in these markets involves different and greater risks.
There may be less publicly available information about companies in many Asian countries, and the stock exchanges and brokerage industries in many Asian countries typically do not have the level of government oversight as do those in the United
States. Securities markets of many Asian countries are also substantially smaller, less liquid and more volatile than securities markets in the United States.
Depositary Receipts: Although depositary receipts have risks similar to the securities that they represent, they may also involve higher expenses and may
trade at a discount (or premium) to the underlying security. In addition, depositary receipts may not pass through voting and other shareholder rights, and may be less liquid than the underlying securities listed on an exchange.
Volatility: The smaller size and lower levels of liquidity in emerging markets, as well as other factors, may result in changes in the prices of Asian
securities that are more volatile than those of companies in more developed regions. This volatility can cause the price of the Funds shares (NAV) to go up or down dramatically. Because of this volatility, it is recommended that you invest in
the Fund only for the long term (at least five years).
Focused Investment Risk: The Fund is a focused fund and is currently expected to hold stocks of
between only 25 and 35 companies. Focused funds may invest a larger portion of their assets in the securities of a single issuer compared to a more diversified fund. Focusing investments in a small number of companies may subject the Fund to greater
share price volatility and therefore a greater risk of loss because a single securitys increase or decrease in value may have a greater impact on the Funds value and total return. Economic, political or regulatory developments may have a
greater impact on the value of the Funds portfolio than would be the case if the portfolio were diversified among more issuers, and events affecting a small number of companies may have a significant and potentially adverse impact on the
performance of the Fund. In addition, investors may buy or sell substantial amounts of Fund shares in response to factors affecting or expected to affect a small number of companies, resulting in extreme inflows and outflows of cash into or out of
the Fund. To the extent such inflows or outflows of cash cause the Funds cash position or cash requirements to exceed normal levels, management of the Funds portfolio may be negatively affected.
Risks Associated with Medium-Size Companies: Medium-size companies may be subject to a number of risks not associated with larger, more established companies,
potentially making their stock prices more volatile and increasing the risk of loss.