Form 497K
Matthews Asia Innovators Fund
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SUMMARY PROSPECTUSINVESTOR CLASS |
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April 30, 2018 |
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TICKER: MATFX
Before you invest, you may
want to review the Funds Prospectus, which contains more information about the Fund and its risks. You can find the Funds Prospectus and other information about the Fund online at matthewsasia.com/prospectus. You may also obtain this
information at no additional cost by calling 800.789.ASIA (2742) or by sending an e-mail request to prospectus@matthewsasia.com. The Funds Prospectus and Statement of Additional Information, both dated April 30, 2018, are
incorporated by reference into this Summary Prospectus.
Investment Objective
Long-term capital appreciation.
Fees
and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of this Fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
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Maximum Account Fee on Redemptions (for wire redemptions only) |
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$9 |
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ANNUAL OPERATING EXPENSES
(expenses that you pay
each year as a percentage of the value of your investment)
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Management Fees |
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0.66% |
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Distribution (12b-1) Fees |
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0.00% |
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Other Expenses |
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0.58% |
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Administration and Shareholder Servicing Fees |
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0.14% |
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Total Annual Fund Operating Expenses |
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1.24% |
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EXAMPLE OF FUND EXPENSES
This example is
intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of
those periods. The example also assumes that your investment has a 5% return each year and that the Funds operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs
would be:
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One year: $126 |
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Three years: $393 |
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Five years: $681 |
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Ten years: $1,500 |
PORTFOLIO TURNOVER
The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a
taxable account. These costs, which are not reflected in annual fund operating expenses or in the example of fund expenses, affect the Funds performance. During the most recent fiscal year, the Funds portfolio turnover rate was 67% of
the average value of its portfolio.
Principal Investment Strategy
Under normal market conditions, the Matthews Asia Innovators Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which
include borrowings for investment purposes, in the common and preferred stocks of companies located in Asia that Matthews believes are innovators in their products, services, processes, business models, management, use of technology, or approach to
creating, expanding or servicing their markets. Asia consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region. A company or other issuer is considered to be
located in a country or a region, and a security or instrument will deemed to be an Asian (or specific country) security or instrument, if it has substantial ties to that country or region. Matthews currently makes that determination
based primarily on one or more of the following criteria: (A) with respect to a company or issuer, whether (i) it is organized under the laws of that country or any country in that region; (ii) it derives at least 50% of its
revenues or profits from goods produced or sold, investments made, or services performed, or has at least 50% of its assets located, within that country or region; (iii) it has the primary trading markets for its securities in that country or
region; (iv) it has its principal place of business in or
PS-MATFX-0418
is otherwise headquartered in that country or region; or (v) it is a governmental entity or an agency, instrumentality or a political subdivision of that country or any country in that
region; and (B) with respect to an instrument or issue, whether (i) its issuer is headquartered or organized in that country or region; (ii) it is issued to finance a project with significant assets or operations in that country or
region; (iii) it is secured or backed by assets located in that country or region; (iv) it is a component or its issuer is included in a recognized securities index for the country or region; or (v) it is denominated in the currency
of an Asian country and addresses at least one of the other above criteria. The term located and the associated criteria listed above have been defined in such a way that Matthews has latitude in determining whether an issuer should be
included within a region or country. The Fund may also invest in depositary receipts, including American, European and Global Depositary Receipts.
It is
important to note that there are no universally agreed upon objective standards for assessing innovators. Innovative companies can be both old and new companies. Innovative companies can exist in any industries, old and new, and in any countries,
emerging or developed. Companies perceived as innovators in one country or one industry might not be perceived as innovators in another country or another industry. For these reasons, the term innovators may be aspirational and tend to be stated
broadly and applied flexibly.
The Fund seeks to invest in companies capable of sustainable growth based on the fundamental characteristics of those
companies, including balance sheet information; number of employees; size and stability of cash flow; managements depth, adaptability and integrity; product lines; marketing strategies; corporate governance; and financial health. The Fund may
invest in companies of any size, including smaller size companies. Matthews measures a companys size with respect to fundamental criteria such as, but not limited to, market capitalization, book value, revenues, profits, cash flow, dividends
paid and number of employees.
The Fund has a fundamental policy to invest at least 25% of its net assets, which include borrowings for investment
purposes, in the common and preferred stocks of companies that derive more than 50% of their revenues from the sale of products or services in science- and technology-related industries and services, which Matthews considers to be the following,
among others: telecommunications, telecommunications equipment, computers, semiconductors, semiconductor capital equipment, networking, Internet and online service companies, media, office automation, server hardware producers, software companies
(e.g., design, consumer and industrial), biotechnology and medical device technology companies, pharmaceuticals and companies involved in the distribution and servicing of these products.
Principal Risks of Investment
There is no guarantee that your investment in the Fund will increase in value. The value of your investment in the Fund could go down, meaning you could lose
money. The principal risks of investing in the Fund are:
Science and Technology: As a fund that invests in science and technology companies, the Fund is
subject to the risks associated with these industries. This makes the Fund more vulnerable to the price changes of securities issuers in science- and technology-related industries and to factors that affect these industries, relative to a broadly
diversified fund.
Certain science- and technology-related companies may face special risks because their products or services may not prove to be
commercially successful. Many science and technology companies have limited operating histories and experience in managing adverse market conditions, and are also strongly affected by worldwide scientific or technological developments and
global demand cycles. As a result, their
products may rapidly become obsolete, which could cause a dramatic decrease in the value of their stock. Such companies are also often subject to governmental regulation and may therefore be
adversely affected by governmental policies.
Concentration Risk: By focusing on a group of industries, the Fund carries much greater risks of adverse
developments and price movements in such industries than a fund that invests in a wider variety of industries. Because the Fund concentrates in a group of industries, there is also the risk that the Fund will perform poorly during a slump in demand
for securities of companies in such industries.
Political, Social and Economic Risks of Investing in Asia: 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. Deflationary factors could also reemerge in certain Asian markets, the potential effects of which are difficult to forecast. While certain Asian governments will have the ability to offset deflationary
conditions through fiscal or budgetary measures, others will lack the capacity to do so. Certain Asian countries are highly dependent upon and may be affected by developments in the United States, Europe and other Asian economies. Global
economic conditions, and international trade, affecting Asian economies and companies could deteriorate as a result of political instability and uncertainty, and politically motivated actions, in the United States and Europe, as well as increased
tensions with certain nations such as Russia.
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 (newer or less developed emerging markets are also sometimes referred to as 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
Continued
on Page 4
2 MATTHEWS ASIA INNOVATORS FUND
Past Performance
The bar chart below shows the Funds performance for the past 10 years and how it has varied from year to year, reflective of the Funds volatility
and some indication of risk. Also shown are the best and worst quarters for this time period. The table below shows the Funds performance over certain periods of time, along with performance of its benchmark index. The information presented
below is past performance, before and after taxes, and is not a prediction of future results. Both the bar chart and performance table assume reinvestment of all dividends and distributions. For the Funds most recent month-end performance, please visit matthewsasia.com or call 800.789.ASIA (2742).
ANNUAL RETURNS FOR YEARS ENDED 12/31
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2017
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1 year |
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5 years |
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10 years |
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Since Inception (12/27/99 Fund) (12/31/99 Index) |
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Matthews Asia Innovators Fund |
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Return before taxes |
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52.88% |
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16.55% |
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7.46% |
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4.28% |
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Return after taxes on
distributions1 |
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49.91% |
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14.77% |
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6.68% |
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3.73% |
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Return after taxes on distributions and sale of Fund shares1 |
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32.19% |
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13.08% |
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5.97% |
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3.35% |
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MSCI All Country Asia ex Japan Index |
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(reflects no deduction for fees, expenses or taxes) |
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42.08% |
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8.26% |
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4.11% |
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7.07% |
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After-tax returns are calculated using the highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. |
Investment Advisor
Matthews International Capital Management, LLC (Matthews)
Portfolio Managers
Lead
Manager: Michael J. Oh, CFA, has been a Portfolio Manager of the Matthews Asia Innovators Fund since 2006.
Co-Manager: Sunil Asnani has been a Portfolio Manager of the Matthews Asia Innovators Fund since 2018.
Co-Manager: Tiffany Hsiao, CFA, has been a Portfolio Manager of the Matthews Asia Innovators Fund since 2018.
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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 (typically five years or longer).
Risks Associated with Investing in Innovative Companies: The standards for
assessing innovative companies tend to have many subjective characteristics, can be difficult to analyze, and frequently involve a balancing of a companys business plans, objectives, actual conduct and other factors. The definition of
innovators can vary over different periods and can evolve over time. They may also be difficult to apply consistently across regions, countries, industries or sectors.
Risks Associated with Smaller Companies: Smaller companies may offer substantial opportunities for capital growth; they also involve substantial risks, and
investments in smaller companies may be considered speculative. Such companies often have limited product lines, markets or financial resources. Smaller companies may be more dependent on one or few key persons and may lack depth of management.
Larger portions of their stock may be held by a small number of investors (including founders and management) than is typical of larger companies. Credit may be more difficult to obtain (and on less advantageous terms) than for larger companies. As
a result, the influence of creditors (and the impact of financial or operating restrictions associated with debt financing) may be greater than in larger or more established companies. The Fund may have more difficulty obtaining information about
smaller companies, making it more difficult to evaluate the impact of market, economic, regulatory and other factors on them. Informational difficulties may also make valuing or disposing of their securities more difficult than it would for larger
companies. Securities of smaller companies may trade less frequently and in lesser volume than more widely held securities and the securities of such companies generally are subject to more abrupt or erratic price movements than more widely held or
larger, more established companies or the market indices in general. The value of securities of smaller companies may react differently to political, market and economic developments than the markets as a whole or than other types of stocks.
Risks Associated with China, Hong Kong and Taiwan
China: The Chinese
government exercises significant control over Chinas economy through its industrial policies (e.g., allocation of resources and other preferential treatment), monetary policy, management of currency exchange rates, and management of the
payment of foreign currency-denominated obligations. Changes in these policies could adversely impact affected industries or companies. Chinas economy, particularly its export-oriented industries, may be adversely impacted by trade or
political disputes with Chinas major trading partners, including the U.S. In addition, as its consumer class emerges, Chinas domestically oriented industries may be especially sensitive to changes in government policy and investment
cycles. Chinas currency, which historically has been managed in a tight range relative to the U.S. dollar, may in the future be subject to greater uncertainty as Chinese authorities change the policies that determine the exchange rate
mechanism.
Hong Kong: If China were to exert its authority so as to alter the economic, political or legal structures or the existing social policy of
Hong Kong, investor and business confidence in Hong Kong could be negatively affected, which in turn could negatively affect markets and business performance and have an adverse effect on the Funds investments.
Taiwan: Although the relationship between China and Taiwan has been improving, there is the potential for future political or economic disturbances that may
have an adverse impact on the values of investments in either China or Taiwan, or make investments in China and Taiwan impractical or impossible.
Purchase and Sale of Fund Shares
You may purchase and sell Fund shares directly through the Funds transfer agent by
calling 800.789.ASIA (2742) or online at matthewsasia.com. Fund shares may also be purchased and sold through various securities brokers and benefit plan administrators or their sub-agents. You may
purchase and redeem Fund shares by electronic bank transfer, check, or wire. The minimum initial and subsequent investment amounts for various types of accounts offered by the Fund are shown below.
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Type of Account |
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Minimum Initial Investment |
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Subsequent Investments |
Non-retirement |
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$2,500 |
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$100 |
Retirement and Coverdell |
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$500 |
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$50 |
The minimum investment requirements do not apply to Trustees, officers and employees of the Fund and Matthews,
and their immediate family members.
Tax Information
The Funds distributions are taxable, and will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Tax-deferred arrangements may be taxed later upon withdrawal from those accounts.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase Fund shares through a broker-dealer or other financial intermediary (such as a bank), Matthews may pay the intermediary for the sale of Fund
shares and related services. Shareholders who purchase or hold Fund shares through an intermediary may inquire about such payments from that intermediary. These payments may create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys website for more information.
4 MATTHEWS ASIA INNOVATORS FUND