MATTHEWS ASIAN FUNDS
BOARD OF TRUSTEES
Richard K. Lyons, Chairman
Norman W. Berryessa
Robert K. Connolly
David FitzWilliam-Lay
G. Paul Matthews
John H. Dracott, Emeritus
OFFICERS
G. Paul Matthews
Mark W. Headley
James E. Walter
Downey L. Hebble
INVESTMENT ADVISOR
Matthews International Capital Management, LLC
456 Montgomery Street, Suite 1200
San Francisco, CA 94104
800.789.ASIA [2742]
UNDERWRITER
PFPC Distributors, Inc.
3200 Horizon Drive
King of Prussia, PA 19406
SHAREHOLDER SERVICES
PFPC Inc.
211 South Gulph Road
King of Prussia, PA 19406
800.892.0382
CUSTODIAN
The Bank of New York
One Wall Street
New York, NY 10286
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
55 Second Street
San Francisco, CA 94105
[GRAPHIC OMITTED]
DRAGON
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For additional information about Matthews Asian Funds:
www.matthewsfunds.com
800.789.ASIA [2742]
456 Montgomery Street, Suite 1200
San Francisco, CA 94104
--------------------------------------------------------------------------------
Distributed by PFPC Distributors, Inc.
[GRAPHIC OMITTED]
DRAGON
SEMI-ANNUAL REPORT
FEBRUARY 28, 2002
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Pacific Tiger Fund
----------------------------
Asian Growth and Income Fund
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Korea Fund
----------------------------
China Fund
----------------------------
Japan Fund
----------------------------
Asian Technology Fund
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[GRAPHIC OMITTED]
LETTERS
www.matthewsfunds.com
MATTHEWS ASIAN FUNDS www.matthewsfunds.com
800.789.ASIA [2742]
A Message to Shareholders
Dear Fellow Shareholder,
The six-month period that ended February 28, 2002 witnessed many changes and
challenges. The Asian financial markets have generally recovered from the
tragedies of September 11, 2001, and the broad Asian investment environment
remains positive outside of Japan. We are very proud that both the Matthews
Asian Growth and Income Fund and the Matthews China Fund have attained
Morningstar 5 Star overall ratings among 1,388 international equity funds for
the period ended February 28, 2002.
While the U.S. economic slowdown was of great concern to Asia, the region has
weathered the U.S. recession relatively well. The South Korean economy, in
particular, showed surprising resilience despite its strong export orientation.
We are hopeful that the recent strength of the South Korean market represents a
re-rating of the Korean economy as a whole by global investors who are slowly
recognizing the profound changes that have occurred there in recent years. The
entire region can learn valuable lessons from South Korea's successful bank
restructuring and consistent efforts to improve corporate governance.
Japan, more than any other country, needs to take note of South Korea's example.
Its failure to address its banking system problems has profoundly impacted the
economy's ability to perform. We continue to await positive change in the
Japanese economy and fear that greater pain may lie ahead.
China has taken the historic step of entering the World Trade Organization
following 15 years of negotiations. In the coming years, China can follow a
clear path to a more open economy with much greater participation in the global
economy. While there remain many serious challenges ahead, the commitment China
has undertaken is very impressive and should support the broad move to a free
market economy. China's role in the region is maturing rapidly as its economic
importance grows, and we believe that its emergence will gradually result in a
more stable and balanced Asian economic landscape.
The Southeast nations, which were hardest hit by the financial crisis of
1997/98, are showing encouraging signs of recovery. Low interest rates are
helping to heal corporate balance sheets and stimulate domestic consumption.
Stable currencies and quiet politics are gradually restoring investor
confidence.
continues...
[GRAPHIC OMITTED] MATTHEWS AND HEADLEY
G. PAUL MATTHEWS,
Chairman and Chief
Investment Officer (left), and
MARK W. HEADLEY, PRESIDENT
and Portfolio Manager
CONTENTS
---------------------------------------------------------
PORTFOLIO MANAGERS'
COMMENTARIES AND
SCHEDULES OF INVESTMENTS
---------------------------------------------------------
Pacific Tiger Fund 1
---------------------------------------------------------
Asian Growth and Income Fund 4
---------------------------------------------------------
Korea Fund 7
---------------------------------------------------------
China Fund 10
---------------------------------------------------------
Japan Fund 13
---------------------------------------------------------
Asian Technology Fund 16
---------------------------------------------------------
FINANCIAL STATEMENTS
---------------------------------------------------------
Assets and Liabilities 18
---------------------------------------------------------
Statement of Operations 19
---------------------------------------------------------
Changes in Net Assets 20
---------------------------------------------------------
Financial Highlights 23
---------------------------------------------------------
Notes 29
---------------------------------------------------------
MATTHEWS ASIAN FUNDS
[GRAPHIC OMITTED]
DRAGON
WE ARE VERY PROUD
THAT BOTH THE
MATTHEWS ASIAN GROWTH
AND INCOME FUND AND
THE MATTHEWS CHINA
FUND HAVE ATTAINED
MORNINGSTAR 5 STAR
OVERALL RATINGS.
As of 2/28/02, the Matthews Asian Growth and Income Fund and the Matthews China
Fund had three-year Morningstar Ratings of 5 Stars out of 1,388 funds in the
International Equity Funds category, and the Matthews Asian Growth and Income
Fund had a five-year Morningstar Rating of 5 Stars out of 919 funds in the
International Equity Funds category.
Morningstar, Inc. rates over 6,700 mutual funds by assigning each fund's
historical total returns and risk relative to other mutual funds in its
class--e.g. Domestic Equity, International Equity, Taxable Bond or Municipal
Bond. Morningstar proprietary ratings reflect historical risk-adjusted
performance as of 2/28/02. The ratings are subject to change every month.
Morningstar ratings are calculated from a fund's three-, five-, and 10-year
average annual returns (if applicable) in excess of 90-day Treasury bill returns
with appropriate fee adjustments and a risk factor that reflects fund
performance below 90-day T-bill returns. The top 10% of funds in each
broad-asset class receive five stars, the next 22.5% receive four stars, the
next 35% receive three stars, the next 22.5% receive two stars, and the bottom
10% receive one star. The Overall Morningstar Rating for a fund is derived from
a weighted average of the performance figures associated with its three-, five-
and 10-year (if applicable) Morningstar Rating metrics. Morningstar does not
rate funds or share classes that have less than three years of performance. A
fund's rating may change at any time based on new data. Ratings are historical
and do not represent future performance.
Hong Kong, Singapore and Taiwan have all suffered painful recessions as their
economies shift to ever higher value-added services in the face of low-cost
competition in manufacturing from China and elsewhere. The well-established
listed companies found in each of these markets offer many of the best regional
and global competitors to be found in Asia.
As dedicated Asian specialists, we remain as committed as ever to fundamental,
bottom-up portfolio management within the Asian region. Many of our
best-performing companies were only discovered after exhaustive research trips
across the region. By looking beyond the largest companies, we have often been
able to invest in companies that are only today being noticed by the global
investment community. We believe that Asia is an ideal environment for active
management driven by experienced and independent professional portfolio
managers. We are privileged to be observers of and participants in the profound
changes rippling through the region today and are dedicated to providing
portfolios that will capture a share of Asia's vast economic potential.
In closing, we would like to thank you for your participation as fellow
shareholders. WE URGE YOU TO VISIT OUR WEB SITE, WWW.MATTHEWSFUNDS.COM, WHERE A
VARIETY OF REGULAR INFORMATION ON ASIA AND OUR FUNDS IS AVAILABLE AND CAN NOW BE
DELIVERED TO YOU VIA E-MAIL. The benefits of diversification over the past few
years, especially into the Asian markets, has soundly disproved the skeptics who
spoke with such confidence at the top of the U.S. market that diversification
was unnecessary. As long-term growth-at-a-reasonable-price managers, we look
forward to providing quality exposure to the Asian financial markets for U.S.
investors for many years to come.
Thank you for your continued support.
/S/SIGNATURE /S/SIGNATURE
MATTHEWS HEADLEY
G. Paul Matthews Mark W. Headley
Chairman and Chief Investment Officer President and Portfolio Manager
www.matthewsfunds.com
---------------------
800.789.ASIA [2742]
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MATTHEWS PACIFIC TIGER FUND
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PORTFOLIO MANAGERS' COMMENTARY
Co-Portfolio Managers: G. Paul Matthews and Mark W. Headley
Our flagship Matthews Pacific Tiger Fund performed slightly better than its
benchmark for the six-month period ended February 28, 2002. The Fund gained
15.55% compared to the MSCI All Country Far East Free ex-Japan Index's return of
14.55%.
The Matthews Pacific Tiger Fund continued its 71/2 year philosophy of
maintaining a well-diversified growth-at-a-reasonable price portfolio. The
number of companies in the portfolio has typically numbered 40 to 50, with
individual positions ranging from 1% to 5% of the portfolio. We have long held
the belief that the quality of a company in developing Asia is not a matter of
market size, and the Fund reflects this belief with holdings ranging from very
large to quite small market capitalizations.
We believe a portfolio that includes a range of small, medium and large
companies offers better diversification into a wider range of businesses. We are
constantly searching for new companies and visiting older companies that may
have improving operations. Many of Asia's older holding companies are making
serious efforts to improve their business structures and provide a clear path to
greater shareholder value.
As we look ahead towards the rest of the year, Asian companies are continuing to
develop more domestic activity in the local economies that should provide a
crucial cushion given the uncertainty of the global economic environment. The
Fund has increased its exposure in the Southeast Asian markets of Singapore,
Thailand and Indonesia. We believe that earnings opportunities in these
countries are improving for well-managed and well-financed companies, of which
we have added several in the early months of 2002.
The Fund continues to have significant weightings in Hong Kong, South Korea and
China, where we find excellent long-term prospects. We continue to view the
region's improving corporate governance and general economic and market
liberalization as a strong backdrop for Asian investors for many years to come.
--------------------------------------------------------------------------------
FUND PERFORMANCE
--------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
AS OF FEBRUARY 28, 2002
--------------------------------------------------------------------------------
MATTHEWS
PACIFIC TIGER FUND
One Year ....................... 0.00%
Three Years .................... 18.39%
Five Years ..................... (2.76%)
Since Inception (9/12/94) ...... 1.05%
--------------------------------------------------------------------------------
MSCI ALL COUNTRY FAR EAST
FREE EX-JAPAN INDEX(1)
One Year ....................... (5.29%)
Three Years .................... 3.43%
Five Years ..................... (11.42%)
Since 9/12/94 .................. (6.74%)
GROWTH OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
Matthews Pacific MSCI AC Far East Lipper Pacific Funds
Tiger Fund ex-Japan Index(1) Ex-Japan Average(3)
9/12/94 10000 10000 10000
11/30/94 9720 9329.22 9104.79
2/28/95 9241.42 8878.63 8392
5/31/95 9722.53 9447.07 9174.17
8/31/95 9792.7 8873.17 8918.42
11/30/95 9431.86 8783.99 8546.68
2/29/96 10965.4 9563.05 9694.15
5/31/96 11185.9 10185 9845.31
8/31/96 10835.1 9657.71 9293.71
11/30/96 11907.6 10172.9 9644.63
2/28/97 12438.8 10325.4 9856.72
5/31/97 12920 10117.1 9885.97
8/31/97 11349.4 9015.88 8987.76
11/30/97 8075.15 6233.33 6677.74
2/28/98 7693.49 6768.71 6748.45
5/31/98 6046.32 5087.9 5606.47
8/31/98 4150.87 3797.75 4425.53
11/30/98 6455.77 5614.14 5825.08
2/28/99 6516.97 5502 5784.9
5/31/99 9127.83 7205 7264.02
8/31/99 10637.7 8421 8508.58
11/30/99 11915 8778 9440.3
2/29/00 13129.1 9280 10729.8
5/31/00 11958.2 8368 8837.03
8/31/00 12901.3 8221 8980.13
11/30/00 9892.71 6301 7017.45
2/28/01 10814.1 6794 7336.89
5/31/01 10636.6 6050 6636.18
8/31/01 9358.83 5595 6007.64
11/30/01 9843.89 5221 6093.8
2/28/02 10813.7 5944 6752.11
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
BEFORE TAXES ON DISTRIBUTIONS OR REDEMPTION OF FUND SHARES.
Investment return and principal value will fluctuate with market conditions
so that shares, when redeemed, may be worth more or less than their original
cost.
1 The MSCIAll Country Far East Free ex-Japan Index is an unmanaged
capitalization-weighted index of stock markets of Hong Kong, Taiwan, Singapore,
Korea, Indonesia, Malaysia, Philippines, Thailand and China that excludes
securities not available to foreign investors. Taiwan is only represented at 50%
of its total market cap.
2 The Lipper Pacific ex-Japan Funds Average consisted of 23 funds as of 9/30/94.
1
MATTHEWS ASIAN FUNDS
--------------------------------------------------------------------------------
MATTHEWS PACIFIC TIGER FUND
SCHEDULE OF INVESTMENTS FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
SHARES VALUE
--------- ----------
EQUITIES - 100.22%***
CHINA/HONG KONG - 47.52%
Asia Satellite Telecommunications
Holdings, Ltd. .......................... 1,620,600 $2,763,589
AsiaInfo Holdings, Inc.** .................. 161,400 1,794,768
Beijing Enterprises
Holdings, Ltd. .......................... 1,422,000 1,613,574
China Hong Kong Photo
Products Holdings, Ltd. ................. 16,886,000 1,169,140
China Mobile HK, Ltd.** .................... 298,217 860,322
China Mobile HK, Ltd. ADR** ................ 165,850 2,391,557
China.com Corp. A Shares** ................. 289,800 809,991
Dah Sing Financial Group ................... 407,200 1,696,825
Giordano International, Ltd. ............... 9,913,000 5,052,290
Huaneng Power International,
Inc. ADR ................................ 167,100 4,687,155
Hutchison Whampoa, Ltd. .................... 297,000 2,418,111
i-CABLE Communications** ................... 4,116,000 2,480,386
Legend Holdings, Ltd. ...................... 8,350,000 3,533,023
Li & Fung Ltd. ............................. 2,659,000 3,579,758
Quality Healthcare Asia, Ltd.** ............ 12,808,500 328,454
Shangri-La Asia, Ltd. ...................... 5,058,000 4,345,099
Swire Pacific Ltd. A Shares ............... 549,000 2,984,587
Television Broadcasts, Ltd. ................ 633,700 2,843,792
Vitasoy International
Holdings, Ltd. .......................... 16,776,750 2,602,791
----------
TOTAL CHINA/HONG KONG 47,955,212
----------
SINGAPORE - 9.85%
CSE Systems &
Engineering, Ltd.** ..................... 3,941,000 1,064,920
Datacraft Asia, Ltd. ....................... 981,000 2,236,680
DBS Group Holdings, Ltd. ................... 458,750 3,380,767
Venture Manufacturing, Ltd. ................ 405,800 3,256,377
----------
TOTAL SINGAPORE ............................ 9,938,744
----------
SOUTH KOREA - 32.10%
Hana Bank .................................. 491,697 7,335,163
Hite Brewery Co., Ltd. ..................... 71,617 4,273,543
Internet Auction Co., Ltd.** ............... 180,740 2,955,677
KT Freetel** ............................... 72,463 2,293,375
Nong Shim Co., Ltd. ........................ 37,850 2,287,182
S1 Corp. ................................... 148,000 2,129,617
Samsung Electronics ........................ 19,008 4,924,650
Samsung Securities Co., Ltd. ............... 92,214 3,580,179
SK Telecom Co., Ltd. ....................... 7,415 1,456,228
SK Telecom Co., Ltd., ADR .................. 52,700 1,156,765
----------
TOTAL SOUTH KOREA .......................... 32,392,379
----------
TAIWAN - 5.97%
Bank Sinopac** ............................. 2,754,800 $1,086,853
Taiwan Semiconductor
Manufacturing Co., Ltd.** ............... 1,025,200 2,394,714
VIA Technologies, Inc.** ................... 611,392 2,542,751
----------
TOTAL TAIWAN ............................... 6,024,318
----------
THAILAND - 4.78%
Advanced Info Service
Public Co., Ltd. ...................... 4,634,000 4,824,873
----------
TOTAL INVESTMENTS - 100.22%***
(Cost $94,617,524*) ..................... 101,135,526
LIABILITIES, LESS CASH AND
OTHER ASSETS - (0.22)% .................. (223,113)
------------
NET ASSETS - 100.00% ....................... $100,912,413
============
* Cost for Federal income tax purposes is $94,617,524 and net unrealized
appreciation consists of:
Gross unrealized appreciation ................. $ 17,207,348
Gross unrealized depreciation ................. (10,689,346)
-----------
Net unrealized appreciation$ .................. 6,518,002
===========
** Non-income producing security.
*** As a percentage of net assets as of February 28, 2002.
ADR American Depositary Receipt
See accompanying notes to financial statements.
2
www.matthewsfunds.com
---------------------
800.789.ASIA [2742]
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MATTHEWS PACIFIC TIGER FUND
SCHEDULE OF INVESTMENTS FEBRUARY 28, 2002 (UNAUDITED)
MARKET SECTOR DIVERSIFICATION
AS A PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
CONSUMER DISCRETIONARY.................... 17.53%
Hotels, Restaurants & Leisure........... 4.31
Internet & Catalog Retail.............. 2.94
Media................................... 5.27
Specialty Retail........................ 5.01
CONSUMER STAPLES.......................... 8.91
Beverages............................... 4.25
Food Products........................... 4.66
FINANCIALS................................ 19.95
Banks................................... 13.42
Diversified Financials.................. 6.53
HEALTH CARE............................... 0.33
Health Care Providers & Services........ 0.33
INDUSTRIALS............................... 10.83
Commercial Services & Supplies ......... 2.12
Distributors............................ 3.55
Industrial Conglomerates................ 4.00
Trade Company & Distributor............. 1.16
INFORMATION TECHNOLOGY.................... 22.25
Commercial Equipment.................... 2.12
Computers & Peripherals................. 3.51
Electronic Equipment & Instruments...... 3.23
Internet Software & Services............ 0.83
IT Consulting & Services................ 1.06
Software................................ 1.75
Semiconductor Equipment & Products...... 9.75
TELECOMMUNICATION SERVICES................ 15.54
Diversified Telecommunication Services.. 2.73
Wireless Telecommunication Services..... 12.81
UTILITIES................................. 4.66
Electric Utilities...................... 4.66
------
TOTAL INVESTMENTS ........................ 100.00%
=======
3
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MATTHEWS ASIAN GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
PORTFOLIO MANAGER'S COMMENTARY
Portfolio Manager: G. Paul Matthews
The Matthews Asian Growth and Income Fund gained 15.87% for the six-month period
ended February 28, 2002, performing slightly better than the benchmark MSCI All
Country Far East Free ex-Japan Index's performance of 14.55%. This performance
can be attributed to strong returns from specific securities, particularly in
South Korea, and from lower interest rates generally throughout the region.
The Fund benefited from its Korean holdings in preferred equities, which are
essentially non-voting stocks that pay a higher dividend than their voting
counterparts, and from its exposure to domestic industries.
Concerted easing by central banks in Asia to offset the impact of post September
11, 2001 declines in export demand caused sharp falls in interest rates around
the region, which benefited higher yielding securities generally.
The continued strong performance of the domestic economies of China and South
Korea, which both possess relatively large pools of consumers who continued to
increase their spending in the second half of 2001, helped insulate these two
economies from the uncertainties in the global economy. In general, companies
that focused on domestic consumption saw their stock prices appreciate in the
second half of 2001. Since companies in these sectors have historically paid out
higher dividends than have manufacturing exporters, they have tended to have a
higher weighting in this Fund than in pure growth oriented portfolios.
The Fund has maintained its exposure to convertible bonds at approximately 40%
of the portfolio in recent months, with approximately 9% invested in preferred
equities and the balance in equities with above average dividend yields.
In the early months of 2002, the Fund has increased its weighting in Thailand
and has taken some profits in its Korean positions. Overall, the geographic
positioning of the Fund has continued to favor South Korea, Hong Kong and
Mainland China.
--------------------------------------------------------------------------------
FUND PERFORMANCE
--------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
AS OF FEBRUARY 28, 2002
--------------------------------------------------------------------------------
MATTHEWS ASIAN
GROWTH AND INCOME FUND
One Year ......................... 15.90%
Three Years ...................... 24.35%
Five Years ....................... 7.71%
Since Inception (9/12/94) ........ 7.81%
--------------------------------------------------------------------------------
MSCI ALL COUNTRY FAR EAST FREE
EX-JAPAN INDEX(1)
One Year ......................... (5.29%)
Three Years ...................... 3.43%
Five Years ....................... (11.42%)
Since 9/12/94 .................... (6.74%)
GROWTH OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
Matthews Asian MSCI AC Lipper
Growth and Far East Pacific
Income Fund ex Japan Free Index Ex-Japan
9/12/94 10000 10000 10000
11/30/94 9930 9074.96 9104.79
2/28/95 9721.7 8700.08 8392
5/31/95 10284.1 9714.12 9174.17
8/31/95 10088.9 9256.69 8918.42
11/30/95 10191 9176.84 8546.68
2/29/96 11124.1 10480.3 9694.15
5/31/96 11228.2 10754.6 9845.31
8/31/96 11122.4 10131.8 9293.71
11/30/96 11978 10774.9 9644.63
2/28/97 12094.9 10902.3 9856.72
5/31/97 12268.1 10553.4 9885.97
8/31/97 12753.6 8883.53 8987.76
11/30/97 9758.49 6241.93 6677.74
2/28/98 9872.76 6713.26 6748.45
5/31/98 9410.88 4965.1 5606.47
8/31/98 8255.87 3637.16 4425.53
11/30/98 9227.89 5596.41 5825.08
2/28/99 9117.03 5392.58 5784.9
5/31/99 10833.8 7051.83 7264.02
8/31/99 12602.6 8077 8508.58
11/30/99 13261.7 8573 9440.3
2/29/00 13871.5 8506 10729.8
5/31/00 13982.6 7541 8837.03
8/31/00 14957.3 7522 8980.13
11/30/00 13945.9 5828 7017.45
2/28/01 15125.6 6276 7336.89
5/31/01 15741 5599 6636.18
8/31/01 15130 5189 6007.64
11/30/01 15913.5 5221 6093.8
2/28/02 17531.1 5944 6752.11
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
BEFORE TAXES ON DISTRIBUTIONS OR REDEMPTION OF FUND SHARES.
1 The MSCI All Country Far East Free ex-Japan Index is an unmanaged
capitalization-weighted index of stock markets of Hong Kong, Taiwan, Singapore,
Korea, Indonesia, Malaysia, Philippines, Thailand and China that excludes
securities not available to foreign investors. Taiwan is only represented at 50%
of its total market cap.
2 The Lipper Pacific ex-Japan Funds Average consisted of 23 funds as of 9/30/94.
4
www.matthewsfunds.com
---------------------
800.789.ASIA [2742]
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MATTHEWS ASIAN GROWTH AND INCOME FUND SCHEDULE OF INVESTMENTS
FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
SHARES VALUE
-------- ----------
EQUITIES - 58.57%****
CHINA/HONG KONG - 34.91%
Bank of East Asia, Ltd. .................. 403,400 $ 768,083
Cafe De Coral
Holdings, Ltd. ........................ 1,816,000 1,175,854
Cheung Kong Infrastructure
Holdings, Ltd. ........................ 297,500 469,179
China Hong Kong Photo
Products Holdings, Ltd. ............... 4,420,003 306,029
CLP Holdings, Ltd. ....................... 318,100 1,280,676
Dickson Concepts
International, Ltd. ................... 1,295,500 307,295
Hang Seng Bank, Ltd. ..................... 73,500 805,748
Hong Kong Electric
Holdings, Ltd. ........................ 334,000 1,250,476
Hong Kong Land
Holdings, Ltd. ........................ 528,000 997,920
Huaneng Power
International, Inc. ADR ............... 30,000 841,500
Petrochina Co., Ltd., ADR** .............. 53,300 1,006,837
Petrochina Co., Ltd. H Shares ............ 1,154,000 214,546
Shangri-La Asia, Ltd. .................... 1,357,000 1,165,737
Television Broadcasts, Ltd. .............. 312,000 1,400,131
The Wharf Holdings, Ltd. ................. 510,000 1,121,451
Vitasoy International
Holdings, Ltd. ........................ 5,130,000 795,882
----------
TOTAL CHINA/HONG KONG .................... 13,907,344
----------
INDONESIA - 0.98%
PT Indosat (Persero) ADR ................. 40,200 392,754
----------
SOUTH KOREA - 15.83%
Hyundai Motor Co., Ltd. - Pfd. ........... 89,750 1,084,674
Kookmin Bank ADR** ....................... 1,415 62,846
Korea Electric Power
(KEPCO) Corp. ADR ..................... 103,250 952,998
Korea Gas Corp. .......................... 86,980 1,077,477
LG Household & Health
Care Ltd. - Pfd. ...................... 72,660 965,946
Samsung Fire & Marine
Insurance Co., Ltd. - Pfd. ............ 60,920 1,403,475
Sindo Ricoh Co. .......................... 18,320 758,317
----------
TOTAL SOUTH KOREA ........................ 6,305,733
----------
THAILAND - 4.85%
Bangkok Bank
Public Co., Ltd.** .................... 457,000 705,892
Charoen Pokphand Foods
Public Co., Ltd. ...................... 4,180,000 698,261
Thai Farmers Bank
Public Co., Ltd.** .................... 560,000 329,977
Thai Farmers Bank
Public Co., Ltd., Foreign** ........... 304,000 200,000
----------
TOTAL THAILAND ........................... 1,934,130
----------
UNITED KINGDOM - 2.00%
HSBC Holdings PLC ADR .................... 14,200 $ 796,052
----------
TOTAL EQUITIES
(Cost $21,486,127) ...................... 23,336,013
----------
FACE AMOUNT
INTERNATIONAL DOLLAR BONDS - 37.92%****
CHINA/HONG KONG - 20.33%
Amoy Properties, Ltd.
5.50%, 12/29/49 ......................... 2,100,000 1,685,250
China Mobile HK Ltd., Cnv ..................
2.250%, 11/03/05 ........................ 1,800,000 1,676,250
Huaneng Power International
Public Co., Ltd. ........................
1.750%, 05/21/04 ........................ 700,000 903,000
Korea Deposit Insurance Cnv ................
2.250%, 10/11/05 ........................ 1,520,000 1,721,400
New World Cap Finl., Cnv ...................
(New World Development)
3.000%, 06/09/04 ........................ 600,000 681,000
New World Infrastructure Cnv ...............
1.000%, 04/15/03 ........................ 400,000 522,000
PCCW Capital Ltd., Cnv .....................
3.500%, 12/05/05 ........................ 900,000 911,250
----------
TOTAL CHINA/HONG KONG ...................... 8,100,150
----------
SINGAPORE - 6.38%
Finlayson Global Corp. .....................
(DBS Holdings)***
0.000%, 02/19/04 ........................ 100,000 131,750
Finlayson Global Corp. .....................
(DBS Holdings)
0.000%, 02/19/04 ........................ 850,000 1,119,875
Fullerton Global Corp. .....................
(Singapore Telecom)
0.000%, 04/02/03 ........................ 1,100,000 1,289,750
----------
TOTAL SINGAPORE ............................ 2,541,375
----------
SOUTH KOREA - 7.94%
Intel Corp. ................................
0.000%, 02/01/04 ........................ 690,000 986,700
Korea Telecom Co. ..........................
0.250%, 01/04/07 ........................ 1,625,000 1,769,219
Korea Telecom Co.***
0.250%, 01/04/07 ........................ 375,000 408,281
----------
TOTAL SOUTH KOREA .......................... 3,164,200
----------
TAIWAN - 0.84%
Mosel Vitelic, Inc. ........................
1.000%, 02/02/05 ........................ 200,000 222,000
Walsin Lihwa Corp. .........................
3.250%, 06/16/04 ........................ 120,000 112,200
----------
TOTAL TAIWAN ............................... 334,200
----------
5
MATTHEWS ASIAN FUNDS
--------------------------------------------------------------------------------
MATTHEWS ASIAN GROWTH AND INCOME FUND SCHEDULE OF INVESTMENTS
FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
----------- ----------
THAILAND - 2.43%
Bangkok Bank Public Co. ..................
4.589%, 03/03/04 ...................... 1,625,000 $ 962,812
Robinson Department Store
Public Co., Ltd. ......................
4.250%, 04/07/04 ...................... 50,000 5,000
----------
TOTAL THAILAND ........................... 967,812
----------
TOTAL INTERNATIONAL DOLLAR BONDS
(Cost $14,790,132) ...................... 15,107,737
----------
TOTAL INVESTMENTS - 96.49%****
(Cost $36,276,259*) ..................... 38,443,750
CASH AND OTHER ASSETS,
LESS LIABILITIES - 3.51% ................ 1,396,608
----------
NET ASSETS - 100.00% ....................... $39,840,358
===========
* Cost for Federal income tax purposes is $36,276,259 and net unrealized
appreciation consists of:
Gross unrealized appreciation ..................... $ 3,177,427
Gross unrealized depreciation ..................... (1,009,936)
----------
Net unrealized appreciation ....................... $2,167,491
============
** Non-income producing security
*** Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At February 28,
2002, the value of these securities amounted to $540,031 or 1.36% of net
assets.
**** As a percentage of net assets as of February 28, 2002.
ADR American Depositary Receipt
Pfd. Preferred
Cnv. Convertible
See accompanying notes to financial statements.
MARKET SECTOR DIVERSIFICATION
AS A PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
CONSUMER DISCRETIONARY.................... 16.22%
Automobiles............................. 2.88
Hotels, Restaurants & Leisure........... 6.04
Household Products...................... 2.58
Media................................... 3.67
Multiline Retail........................ 0.14
Specialty Retail........................ 0.91
CONSUMER STAPLES.......................... 3.90
Food Products........................... 3.90
ENERGY.................................... 2.67
Oil & Gas............................... 2.67
FINANCIALS................................ 33.01
Banks................................... 12.94
Diversified Financials.................. 8.15
Insurance............................... 3.70
Real Estate............................. 8.22
INDUSTRIALS............................... 5.80
Commercial Services & Supplies.......... 2.05
Electrical Equipment.................... 0.41
Transportation Infrastructure........... 2.43
Trade Companies & Distributors.......... 0.91
INFORMATION TECHNOLOGY.................... 3.18
Semiconductor Equipment & Products...... 3.18
MATERIALS................................. 1.31
Construction Materials.................. 1.31
TELECOMMUNICATION SERVICES................ 14.78
Diversified Telecommunication Services.. 10.42
Wireless Telecommunication Services..... 4.36
UTILITIES................................. 19.13
Electric Utilities...................... 16.27
Gas Utilities........................... 2.86
-------
TOTAL INVESTMENTS ........................ 100.00%
=======
6
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---------------------
800.789.ASIA [2742]
--------------------------------------------------------------------------------
MATTHEWS KOREA FUND
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS' COMMENTARY
Co-Portfolio Managers: G. Paul Matthews and Mark W. Headley
For the six-month period ended February 28, 2002, the Matthews Korea Fund was up
58.96%, while the Korea Stock Price Index (KOSPI) was up 48.55%.
South Korea's resilient domestic economy held up the Korean equity market amid
the global economic slowdown. Financial, information technology, and
consumer-related stocks led the rally. Financial stocks were fueled by the
expectation of further industry consolidation, while strong domestic consumption
led the consumer stocks. The information technology sector benefited from the
recovery in DRAM prices and a slight pick-up in end-user demand.
Samsung Electronics, Hana Bank, and Lotte Chilsung Beverage were among the top
contributors to Fund performance. Many companies we visited in early 2002 are
seeing recovery in demand and had a positive outlook for the year. Corporate
governance is generally improving across all sectors. However, some concerns
remain as household debt has increased to historical highs, and exports continue
to decline.
Nonetheless, we believe that the recent rally is sustainable. We believe that
South Korea's recent performance has been partly attributable to the structural
re-rating of the market. Improved corporate governance and successful
restructuring have lifted some of the traditional Korean discounts. We expect
that the Korean discount will continue to erode as individual companies continue
to focus more on profitability and shareholder value.
--------------------------------------------------------------------------------
FUND PERFORMANCE
--------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
AS OF FEBRUARY 28, 2002
--------------------------------------------------------------------------------
MATTHEWS KOREA FUND
One Year .......................... 63.49%
Three Years ....................... 28.83%
Five Years ........................ 6.43%
Since Inception (1/3/95) .......... (2.99%)
--------------------------------------------------------------------------------
KOSPI(1)
(SOUTH KOREAN STOCK PRICE INDEX)
One Year .......................... 37.54%
Three Years ....................... 14.35%
Five Years ........................ (3.76%)
Since 1/3/95 ...................... (9.42%)
GROWTH OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
Matthews Korea Stock
Korea Fund Price Korea
Class I Shares Index Lipper Index
12/31/94 10000 10000 10000
2/28/95 9000 8768.39 9492.26
5/31/95 8960 9009.59 10337.2
8/31/95 9130 9152.66 10077.2
11/30/95 9230 9416.78 9716.27
2/29/96 8403.7 8500.6 10961.8
5/31/96 8635.74 8918.8 11162
8/31/96 7293.97 7423.01 10524.1
11/30/96 6819.81 6820.47 10929.4
2/28/97 5891.67 6093.21 11151.6
5/31/97 6416.27 6603.12 11202.8
8/31/97 6244.77 5974.91 10182.9
11/30/97 3046.72 2736.63 7481.67
2/28/98 3046.72 2653.17 7553.92
5/31/98 2280 1828.7 6297.94
8/31/98 2047.96 1781.01 4987.13
11/30/98 3107.25 2810.91 6567.75
2/28/99 3763 3296.06 6542.16
5/31/99 6012.73 4809.27 8274.24
8/31/99 7556.27 6157.41 9726.68
11/30/99 8222.11 6663.65 10806.6
2/29/00 7103.27 5675.93 12164.7
5/31/00 5723.01 5022.04 10140.3
8/31/00 5824.01 4794.6 10330.3
11/30/00 4309.09 3247.45 8093.81
2/28/01 4921.56 3571.19 8509.16
5/31/01 5269.49 3707 7822.59
8/31/01 5061.74 3302 7091.08
11/30/01 6516.12 3936 7203.45
2/28/02 8046.31 4925 8008.15
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
BEFORE TAXES ON DISTRIBUTIONS OR REDEMPTION OF FUND SHARES.
1 KOSPI: The South Korea Stock Price Index is a capitalization-weighted
index of all common stocks listed on the Korean Stock Exchange.
2 The Lipper Pacific ex-Japan Funds Average consisted of 27 funds as of 1/31/95.
7
MATTHEWS ASIAN FUNDS
--------------------------------------------------------------------------------
MATTHEWS KOREA FUND SCHEDULE OF INVESTMENTS FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
SHARES VALUE
------- ----------
EQUITIES - SOUTH KOREA - 96.97%****
BUSINESS SERVICES - 1.24%
MEDIA - 1.24%
Cheil Communications, Inc. ............... 21,970 $2,904,109
----------
TOTAL BUSINESS SERVICES .................. 2,904,109
----------
CONSUMER DISCRETIONARY - 13.16%
AUTOMOBILE PARTS - 0.25%
Global & Yuasa Battery Co., Ltd.224,800 .. 577,325
----------
AUTOMOBILES - 6.57%
Hyundai Motor Co., Ltd. .................. 373,481 10,268,682
Hyundai Motor Co., Ltd. - Pfd. ........... 419,900 5,074,703
----------
15,343,385
----------
HOTELS, RESTAURANTS & LEISURE - 0.46%
Kangwon Land, Inc.** ..................... 7,900 1,080,066
----------
INTERNET & CATALOG RETAIL - 4.10%
Internet Auction Co., Ltd.** ............. 202,027 3,303,788
LG Home Shopping, Inc. ................... 61,083 6,251,791
----------
9,555,579
----------
RETAIL - 1.78%
Hansol CSN Co., Ltd. ..................... 3,215 8,937
Hyundai Department
Store Co., Ltd. ....................... 129,200 4,147,594
----------
4,156,531
----------
TOTAL CONSUMER DISCRETIONARY ............. 30,712,886
----------
CONSUMER STAPLES - 14.11%
BEVERAGES - 6.07%
Hite Brewery Co., Ltd. ................... 138,211 8,247,351
Lotte Chilsung Beverage Co. .............. 14,450 5,926,694
----------
14,174,045
----------
CONSUMER PRODUCTS - 2.55%
Pacific Corp. ............................ 58,880 5,959,604
----------
FOOD PRODUCTS - 4.84%
Lotte Confectionery Co., Ltd. ............ 12,300 3,855,654
Nong Shim Co., Ltd. ...................... 122,978 7,431,256
----------
11,286,910
----------
HOUSEHOLD PRODUCTS / WARE - 0.65%
LG Household & Health Care,
Ltd. - Pfd. ........................... 114,520 1,522,435
----------
TOTAL CONSUMER STAPLES ................... 32,942,994
----------
FINANCIALS - 23.84%
BANKS - 11.42%
Hana Bank ................................ 915,564 $13,658,425
Kookmin Bank ............................. 170,043 7,436,736
Kookmin Bank ADR** ....................... 68,939 3,062,960
Shinhan Financial
Group Co., Ltd. ....................... 184,402 2,493,236
----------
26,651,357
----------
DIVERSIFIED FINANCIALS - 7.23%
Good Morning
Securities Co., Ltd. .................. 1,615,180 7,198,098
Samsung Securities Co., Ltd. ............. 206,795 8,028,751
Seoul Securities Co., Ltd. ............... 336,380 1,651,537
----------
16,878,386
----------
INSURANCE - 5.19%
Samsung Fire & Marine
Insurance Co., Ltd. ................... 200,743 9,855,952
Samsung Fire & Marine
Insurance Co., Ltd. - Pfd. ............ 98,000 2,257,723
----------
12,113,675
----------
TOTAL FINANCIALS ......................... 55,643,418
----------
HEALTH CARE - 1.36%
HEALTH CARE EQUIPMENT & SUPPLIES - 0.40%
Shinhung Co., Ltd. ....................... 342,700 939,649
----------
PHARMACEUTICALS - 0.96%
Yuhan Corp. .............................. 48,960 2,229,993
----------
TOTAL HEALTH CARE ........................ 3,169,642
----------
INDUSTRIALS - 7.03%
CHEMICALS - 1.82%
Hyosung Corp. ............................ 299,752 4,245,298
----------
COMMERCIAL SERVICES - 2.08%
S1 Corp. ................................. 338,405 4,869,412
----------
CONSTRUCTION - 1.19%
Tae Young Corp. .......................... 96,950 2,775,440
----------
MACHINERY - 0.03%
Hanjin Heavy
Industries Co., Ltd. .................. 26,139 68,117
----------
METALS & MINING - 1.91%
Pohang Iron & Steel Co., Ltd. ............ 20,300 2,246,356
Poongsan Corp. ........................... 248,500 2,214,895
----------
4,461,251
----------
TOTAL INDUSTRIALS ........................ 16,419,518
----------
8
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--------------------------------------------------------------------------------
MATTHEWS KOREA FUND SCHEDULE OF INVESTMENTS FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
SHARES VALUE
---------- ---------
INFORMATION TECHNOLOGY - 16.90%
ELECTRICAL & ELECTRONIC EQUIPMENT - 1.63%
Dae Duck GDS Co., Ltd. ................... 402,934 $3,804,421
----------
INTERNET SOFTWARE & SERVICES - 2.27%
NCSoft Corp. ............................. 37,247 5,289,248
----------
OFFICE ELECTRONICS - 1.22%
Sindo Ricoh Co. .......................... 68,906 2,852,216
----------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 11.78%
Samsung Electronics ...................... 93,261 24,162,341
Samsung Electronics Co.,
Ltd. - Pfd. ........................... 28,990 3,339,357
----------
27,501,698
----------
TOTAL INFORMATION TECHNOLOGY ............. 39,447,583
----------
TELECOMMUNICATION SERVICES - 13.28%
COMMUNICATIONS EQUIPMENT - 2.46%
Humax Co., Ltd ........................... 149,243 5,749,220
----------
TELECOMMUNICATION SERVICES - 2.76%
Korea Telecom Corp. ...................... 120,570 5,309,488
Korea Telecom Corp. ADR .................. 51,000 1,137,300
----------
6,446,788
----------
WIRELESS TELECOMMUNICATION SERVICES - 8.06%
KT Freetel** ............................. 300,531 9,511,480
SK Telecom Co., Ltd. ..................... 38,695 7,599,290
SK Telecom Co., Ltd., ADR ................ 77,600 1,703,320
----------
18,814,090
----------
TOTAL TELECOMMUNICATION SERVICES ......... 31,010,098
----------
UTILITIES - 6.05%
Daehan City Gas Co., Ltd. ................ 57,492 614,481
Korea Electric Power
(KEPCO) Corp. ......................... 432,850 7,176,567
Korea Electric Power
(KEPCO) Corp. ADR ..................... 157,250 1,451,418
Korea Gas Corp. .......................... 394,410 4,885,810
----------
TOTAL UTILITIES .......................... 14,128,276
----------
TOTAL EQUITIES - SOUTH KOREA
(Cost $145,232,151) ..................... 226,378,524
----------
FACE AMOUNT VALUE
----------- ----------
INTERNATIONAL DOLLAR BONDS -
SOUTH KOREA - 0.98%***
FINANCIALS - 0.10%
INSURANCE - 0.10%
Korea Deposit Insurance Cnv ..............
2.250%, 10/11/05 ...................... 200,000 $ 226,500
----------
TELECOMMUNICATION SERVICES - 0.88%
Telecommunication Services - 0.88%
Korea Telecom Co.
0.250%, 01/04/07 ...................... 1,525,000 1,660,344
Korea Telecom Co.***
0.250%, 01/04/07 ...................... 375,000 408,281
----------
2,068,625
----------
TOTAL INTERNATIONAL DOLLAR BONDS -
SOUTH KOREA
(Cost $2,158,443) ....................... 2,295,125
----------
TOTAL INVESTMENTS - 97.95%****
(Cost $147,390,594) ..................... 228,673,649
CASH AND OTHER ASSETS,
LESS LIABILITIES - 2.05% ................ 4,788,278
----------
NET ASSETS - 100.00% ....................... $233,461,928
============
* Cost for Federal income tax purposes is $147,390,594 and net unrealized
appreciation consists of:
Gross unrealized appreciation ......... $83,212,278
Gross unrealized depreciation ......... (1,929,223)
------------
Net unrealized appreciation ........... $81,283,055
============
** Non-income producing security
*** Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At February 28,
2002, the value of these securities amounted to $408,281 or 0.17% of net
assets.
**** As a percentage of net assets as of February 28, 2002.
ADR American Depositary Receipt
Cnv. Convertible
GDS Global Depositary Security
Pfd. Preferred
See accompanying notes to financial statements.
9
MATTHEWS ASIAN FUNDS
--------------------------------------------------------------------------------
MATTHEWS CHINA FUND
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS' COMMENTARY
Co-Portfolio Managers: G. Paul Matthews, Mark W. Headley and Richard H. Gao
For the six-months ended February 28, 2002, the Matthews China Fund gained
5.79%, outperforming its benchmarks, the MSCI China Free Index, which was down
0.36% and the Credit Lyonnais China World Index which gained 3.99% over the same
time period.
The Fund remained overweight the consumer discretionary, utilities, and
industrial sectors. We continue to believe that domestic demand will be the
major driving force behind China's economy in the long term.
While China's domestic market provides huge growth potential, competition has
become more and more severe especially after China joined the World Trade
Organization (WTO) in late 2001. We believe that quality of management and a
good long-term track record are among the most important factors in finding good
companies in China.
During the period, we added to our positions in Hong Kong companies that derive
a substantial amount of their business from Mainland China. Examples of these
companies are Texwinca, Giordano and Shangri-La Asia. We believe these
companies, run by professional management teams in Hong Kong and with good
long-term track records, will be the winners in the highly competitive domestic
consumer market.
We have remained underweight the telecom and technology sectors. Although stock
prices in the two sectors have been declining quite substantially lately, we
believe they are still very expensive. We are also concerned about the
regulatory issues in China's telecom sector.
China's economic growth started to slow in the second half of 2001 affected by
the global economic slowdown. China's central bank recently cut interest rates
for the first time since mid-1998. We believe that the central bank will
continue to ease monetary policy and boost domestic demand. Meanwhile, we
believe that economic reforms will be accelerated to meet the challenge of WTO
entry.
--------------------------------------------------------------------------------
FUND PERFORMANCE
-------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
AS OF FEBRUARY 28, 2002
--------------------------------------------------------------------------------
MATTHEWS CHINA FUND
One Year .......................... 6.95%
Three Years ....................... 27.10%
Since Inception (2/19/98) ......... 1.39%
--------------------------------------------------------------------------------
CREDIT LYONNAIS
CHINA WORLD INDEX(1)
One Year .......................... (13.37%)
Three Years ....................... 13.01%
Since 2/19/98 ..................... (6.90%)
--------------------------------------------------------------------------------
MSCI CHINA FREE INDEX(2)
One Year .......................... (33.90%)
Three Years ....................... (11.11%)
Since 2/19/98 ..................... (25.30%)
GROWTH OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
Matthews China Lipper MSCI Free
China Fund World China Index China Index
02/19/98 10000 10000 10000 10000
05/98 8570 8097 7810 7592
08/98 4360 4024 5364.01 3827
11/98 6650 6576 8018.56 6218
02/99 5150 5174 7038.55 4448
05/99 6734 7026 8771.49 6336
08/99 8624 9056 10225.1 8077
11/99 8746 8550 11711 6992
02/00 8586 9045 13345.5 5049
05/00 8472 8397 11684.6 5752
08/00 10223 10002 12940.8 6137
11/00 8164 7493 10507.6 4455
02/01 9886 8628 11388.8 4673
05/01 12371.6 9380 11356.5 4431
08/01 9994.92 7189 9297.75 3100
11/01 10114.5 7400 9358.45 3371
02/02 10573.4 7475 9559.71 3089
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
BEFORE TAXES ON DISTRIBUTIONS OR REDEMPTION OF FUND SHARES.
1 The Credit Lyonnais China World Index is an unmanaged capitalization-weighted
index of Chinese equities which are listed on the Hong Kong, Shanghai and
Shenzhen stock exchanges.
2 The MSCI China Free Index is an unmanaged capitalization-weighted index of
Chinese equities that includes Red Chips and H shares listed on the Hong Kong
exchange, and B shares listed on the Shanghai and Shenzhen exchanges. Red Chips
are Chinese companies that are incorporated in Hong Kong but have at least 35%
of their shares held by Chinese state-owned organizations.
3 The Lipper China Region Funds Average consisted of 17 funds as of 2/28/98.
10
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800.789.ASIA [2742]
--------------------------------------------------------------------------------
MATTHEWS CHINA FUND SCHEDULE OF INVESTMENTS FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHARES VALUE
--------- ---------
EQUITIES - CHINA/HONG KONG - 98.81%***
CONSUMER DISCRETIONARY - 27.81%
AUTOMOBILES & COMPONENTS - 3.37%
Denway Motors, Ltd.** .................... 2,100,600 $ 538,666
Qingling Motors Co., Ltd. ................
H Shares .............................. 2,369,000 428,282
----------
966,948
----------
CONSUMER DURABLE & APPAREL - 4.74%
TCL International
Holdings, Ltd.** ...................... 424,000 78,284
Texwinca Holdings, Ltd. .................. 2,232,000 1,280,659
----------
1,358,943
----------
DISTRIBUTORS - 2.86%
Li & Fung, Ltd. .......................... 610,000 821,231
----------
HOTELS, RESTAURANTS & LEISURE - 4.34%
Shangri-La Asia, Ltd. .................... 1,451,000 1,246,488
----------
MEDIA - 4.71%
Clear Media, Ltd.** ...................... 350,000 212,039
MediaNation, Inc.** ...................... 1,200,000 307,721
Television Broadcasts, Ltd. .............. 185,000 830,206
----------
1,349,966
----------
RETAIL - 3.75%
Giordano International, Ltd. ............. 2,112,000 1,076,408
----------
TRAVEL & RECREATION - 4.04%
China Travel International
Investment Hong Kong, Ltd. ............ 5,354,000 1,160,142
----------
TOTAL CONSUMER DISCRETIONARY ............. 7,980,126
----------
CONSUMER STAPLES - 0.01%
FOOD PRODUCTS - 0.01%
Want Want Holdings Warrants .............. 3,500 3,815
----------
TOTAL CONSUMER STAPLES ................... 3,815
----------
ENERGY - 7.95%
OIL & GAS - 7.95%
CNOOC, Ltd. .............................. 658,000 704,463
PetroChina Co., Ltd. H Shares ............ 4,334,000 805,755
Sinopec Zhenhai Refining &
Chemical Co., Ltd. .................... 3,736,000 771,221
----------
TOTAL ENERGY ............................. 2,281,439
----------
FINANCIALS - 6.65%
DIVERSIFIED FINANCIALS - 4.80%
China Everbright, Ltd. ................... 510,000 $ 330,223
Swire Pacific, Ltd. A Shares ............. 192,500 1,046,508
----------
1,376,731
----------
REAL ESTATE - 1.85%
China Vanke Co., Ltd. B Shares ........... 504,912 531,502
----------
TOTAL FINANCIALS ......................... 1,908,233
----------
HEALTH CARE - 1.71%
PHARMACEUTICALS - 1.71%
China Pharmaceutical Enterprise
& Investment Corp., Ltd. .............. 5,048,000 491,903
----------
TOTAL HEALTH CARE ........................ 491,903
----------
INDUSTRIALS - 22.13%
AIRLINES - 4.37%
China Southern Airlines Co.,
Ltd. Class H .......................... 2,926,000 1,003,562
China Southern Airlines Co.,
Ltd. ADR** ............................ 14,800 249,380
----------
1,252,942
----------
INDUSTRIAL CONGLOMERATES - 11.22%
Beijing Enterprises
Holdings, Ltd. .......................... 780,000 885,083
Cheung Kong Infrastructure
Holdings, Ltd. .......................... 404,500 637,925
China Merchants Holdings
International Co., Ltd. ................. 1,218,000 905,777
Shanghai Industrial
Holdings, Ltd. .......................... 401,000 791,792
----------
3,220,577
----------
MACHINERY - 1.15%
Shanghai Zhenhua Port
Machinery Co., Ltd. B Shares ............ 316,500 328,527
----------
TRANSPORTATION - 5.39%
New World Infrastructure, Ltd.** ........... 1,080,400 339,388
Zhejiang Expressway Co., Ltd. ..............
H Shares ................................ 4,482,000 1,206,805
----------
1,546,193
----------
TOTAL INDUSTRIALS .......................... 6,348,239
----------
11
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--------------------------------------------------------------------------------
MATTHEWS CHINA FUND SCHEDULE OF INVESTMENTS FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
SHARES VALUE
--------- ----------
INFORMATION TECHNOLOGY - 10.40%
COMPUTER SOFTWARE - 2.10%
Travelsky Technology, Ltd.** ............. 656,000 $ 601,389
----------
COMPUTERS & PERIPHERALS - 4.60%
Legend Holdings, Ltd. .................... 3,122,000 1,320,970
----------
IT CONSULTING & SERVICES - 3.70%
AsiaInfo Holdings, Inc.** ................ 95,350 1,060,292
----------
TOTAL INFORMATION TECHNOLOGY ............. 2,982,651
----------
TELECOMMUNICATION SERVICES - 9.49%
WIRELESS TELECOMMUNICATION SERVICES - 9.49%
China Mobile HK, Ltd.** .................. 337,083 972,446
China Mobile HK, Ltd. ADR** .............. 21,500 310,030
China Unicom, Ltd.** ..................... 1,338,000 1,286,659
China Unicom, Ltd. ADR** ................. 16,200 154,710
----------
TOTAL TELECOMMUNICATION SERVICES ......... 2,723,845
----------
UTILITIES - 12.66%
Beijing Datang Power Generation,
Co., Ltd. H Shares .................... 2,124,000 810,191
CLP Holdings, Ltd. ....................... 130,100 523,785
Huaneng Power
International, Inc. ADR ............... 39,400 1,105,170
Huaneng Power International, Inc. ........
H Shares .............................. 506,000 356,829
Shandong International Power
Development Co., Ltd. .................
H Shares .............................. 3,216,000 835,001
----------
TOTAL UTILITIES .......................... 3,630,976
----------
TOTAL INVESTMENTS - 98.81%***
(Cost $28,228,191*) ..................... $28,351,227
CASH AND OTHER ASSETS,
LESS LIABILITIES - 1.19% ................ 340,897
-----------
NET ASSETS - 100.00% ....................... $28,692,124
===========
* Cost for Federal income tax purposes is $28,228,191and net unrealized
appreciation consists of:
Gross unrealized appreciation $3,158,864
Gross unrealized depreciation (3,035,828)
----------
Net unrealized appreciation $ 123,036
==========
** Non-income producing security
*** As a percentage of net assets as of February 28, 2002.
ADR American Depositary Receipt
See accompanying notes to financial statements.
12
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MATTHEWS JAPAN FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO MANAGER'S COMMENTARY
Portfolio Manager: Mark W. Headley
The Matthews Japan Fund suffered a painful period for the six-month period ended
February 28, 2002, falling 20.89%. During the same time period, the MSCI Japan
Index fell 18.07% and the Tokyo Stock Index (TOPIX) fell 18.19%. As long-term
fundamental investors, underperformance is always painful, and this time period
is no exception.
The Matthews Japan Fund is positioned for a recovery in the domestic Japanese
economy that has proven to be profoundly elusive. The Fund suffered losses in
every major sector that it participated in, but losses in financials and
consumer/retail companies were the most pronounced. These losses were largely a
reflection of Japan's return to a recessionary environment yet again.
The failure of government officials, including Prime Minister Koizumi, to
provide a clear plan of action for Japan's many structural challenges continues
to undermine confidence both within Japan and abroad. Unemployment continues to
rise, a sign that some restructuring is taking place, but no sense of new
opportunities has emerged as the government continues with a "finger in the
dyke" mentality to the country's fiscal problems.
We remain confident that despite a pall of gloom, major restructuring of the
Japanese economy is occurring. Company by company, Japan is slowly improving its
allocation of investment capital. We are well aware that our belief in this
process has not resulted in superior performance relative to our benchmarks, but
continue to believe a defensive portfolio risks missing the potential for a
profound improvement in market conditions.
The Fund's first full year of existence witnessed just such a swing in market
conditions with most investors caught either in defensive positions or entirely
out of the market. So we continue to believe that better days lie ahead for
Japan, and the portfolio continues to reflect this optimism.
--------------------------------------------------------------------------------
FUND PERFORMANCE
--------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
AS OF FEBRUARY 28, 2002
--------------------------------------------------------------------------------
MATTHEWS JAPAN FUND
One Year .......................... (30.41%)
Three Year ........................ (4.13%)
Since Inception (12/31/98) ........ (0.11%)
--------------------------------------------------------------------------------
MSCI DEVELOPED MARKET
JAPAN INDEX(2)
One Year .......................... (28.06%)
Three Year ........................ (7.05%)
Since 12/31/98 .................... (7.19%)
--------------------------------------------------------------------------------
TOPIX(1)
(TOKYO PRICE INDEX)
One Year .......................... (27.83%)
Three Year ........................ (6.26%)
Since 12/31/98 .................... (6.12%)
GROWTH OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
Matthews Topix Japanese
Japan Fund Index (Japan) Lipper Index
12/31/98 10000 10000 10000
02/99 11310 9943 10146.4
05/99 15370 11260 11932.2
08/99 21700 14085 16380.9
11/99 22840 17077 20461.9
02/00 23323 16526 21615
05/00 21238 14929 17593.3
08/00 21320 14983 17791.2
11/00 16935 13017 14312.8
02/01 14319 11185 12026.7
05/01 16063.8 11664 12650.6
08/01 12595.1 9822 10237
11/01 12078.9 9213 9796.71
2/02 9964.45 8208 8851.35
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
BEFORE TAXES ON DISTRIBUTIONS OR REDEMPTION OF FUND SHARES.
1 TOPIX: The Tokyo Price Index is a capitalization-weighted index of all
companies listed on the First Section of the Tokyo Stock Exchange.
2 The MSCI Developed Market Japan Index is an unmanaged,
capitalization-weighted index of all Japanese equities.
3 The Lipper Japanese Funds Average consisted of 40 funds as of 12/31/98.
13
MATTHEWS ASIAN FUNDS
--------------------------------------------------------------------------------
MATTHEWS JAPAN FUND SCHEDULE OF INVESTMENTS FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
SHARES VALUE
--------- ----------
EQUITIES - JAPAN - 99.23%***
CONSUMER DISCRETIONARY - 46.64%
AUTOMOBILES - 5.43%
Honda Motor Co., Ltd. ADR ................ 23,400 $ 465,894
----------
BEVERAGES - 1.49%
Starbucks Coffee Japan, Ltd.** ........... 598 128,023
----------
BICYCLE MANUFACTURING - 4.22%
Shimano, Inc. ............................ 30,700 362,000
----------
HOME FURNISHINGS - 2.26%
Toto, Ltd. ............................... 46,000 193,865
----------
HOUSEHOLD DURABLES - 11.64%
Arc Land Sakamoto Co., Ltd. .............. 14,800 147,088
Nintendo Co., Ltd. ....................... 2,065 304,600
Sony Corp. ............................... 4,500 204,446
Sony Corp. ADR ........................... 7,410 342,342
----------
998,476
----------
INTERNET & CATALOG RETAIL - 4.85%
Belluna Co., Ltd. ........................ 12,240 416,155
----------
MEDIA - 4.83%
Fuji Television Network, Inc. ............ 84 414,272
----------
RETAIL - 11.92%
Don Quijote Co., Ltd. .................... 5,200 298,420
Fast Retailing Co. Bonus Issue ........... 6,800 122,458
Fast Retailing Co., Ltd. ................. 6,800 119,918
Kyoto Kimono Yuzen Co., Ltd. ............. 66 155,352
USS Co., Ltd. ............................ 10,300 326,337
----------
1,022,485
----------
TOTAL CONSUMER DISCRETIONARY ............. 4,001,170
----------
FINANCIALS - 22.83%
BANKS - 3.61%
Mizuho Holdings, Inc. .................... 164 310,047
----------
DIVERSIFIED FINANCIALS - 17.48%
Japan Securities Finance Co., Ltd. ....... 113,000 391,795
Monex, Inc.** ............................ 1,675 299,141
Nomura Holdings, Inc. .................... 38,000 434,448
The Nikko Securities Co., Ltd. ........... 62,000 238,595
Tsubasa Securities Co., Ltd. ............. 72,000 135,580
----------
1,499,559
----------
INSURANCE - 1.74%
AFLAC, Inc. .............................. 5,800 149,060
----------
TOTAL FINANCIALS ......................... 1,958,666
----------
HEALTH CARE - 1.76%
PHARMACEUTICALS - 1.76%
Banyu Pharmaceutical Co., Ltd. ........... 6,000 $ 78,909
Nippon Shinyaku Co., Ltd. ................ 17,000 72,408
----------
TOTAL HEALTH CARE ........................ 151,317
----------
INDUSTRIALS - 0.98%
MACHINERY - 0.98%
Nitto Kohki Co., Ltd. .................... 6,600 83,841
----------
TOTAL INDUSTRIALS ........................ 83,841
----------
INFORMATION TECHNOLOGY - 18.76%
COMPUTERS & PERIPHERALS - 3.05%
NEC Corp. ................................ 36,000 261,745
----------
COMPUTERS, NETWORKS & SOFTWARE - 2.20%
Internet Initiative Japan, Inc. ADR** .... 34,900 189,158
----------
COMPUTERS-INTERGRATED SYSTEMS - 1.21%
Itochu Techno-Science Corp. .............. 3,100 104,009
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 7.70%
Canon, Inc. .............................. 9,500 332,935
Kyocera Corp. ............................ 3,800 227,730
Tokyo Denpa Co., Ltd. .................... 8,600 99,607
----------
660,272
----------
SEMICONDUCTOR EQUIPMENT - 2.53%
Rohm Co., Ltd. ........................... 1,500 216,888
----------
SOFTWARE - 2.07%
Konami Corp. ............................. 9,600 177,545
----------
TOTAL INFORMATION TECHNOLOGY ............. 1,609,617
----------
REAL ESTATE - 1.60%
REAL ESTATE DEVELOPMENT - 1.60%
Joint Corp. .............................. 10,200 137,575
----------
TOTAL REAL ESTATE ........................ 137,575
----------
SERVICES - 3.06%
BUSINESS SERVICES - 3.06%
The Goodwill Group, Inc. ................. 124 262,223
----------
TOTAL SERVICES ........................... 262,223
----------
TELECOMMUNICATION SERVICES - 3.60%
DIVERSIFIED TELECOMMUNICATION SERVICES - 3.60%
Nippon Telegraph &
Telephone Corp. ....................... 25 79,768
Nippon Telegraph &
Telephone Corp. ADR ................... 14,300 228,943
----------
TOTAL TELECOMMUNICATION SERVICES 308,711
----------
14
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MATTHEWS JAPAN FUND SCHEDULE OF INVESTMENTS FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
VALUE
----------
TOTAL INVESTMENTS - 99.23%***
(Cost $11,293,487) $8,513,120
CASH AND OTHER ASSETS,
LESS LIABILITIES - 0.77% 66,018
----------
NET ASSETS - 100.00% $8,579,139
==========
* Cost for Federal income tax purposes is $11,293,487 and net unrealized
appreciation consists of:
Gross unrealized appreciation ..................... $ 211,710
Gross unrealized depreciation ..................... (2,992,077)
------------
Net unrealized depreciation ....................... $(2,780,367)
============
** Non-income producing security
*** As a percentage of net assets as of February 28, 2002.
ADR American Depositary Receipt
See accompanying notes to financial statements.
15
MATTHEWS ASIAN FUNDS
--------------------------------------------------------------------------------
MATTHEWS ASIAN TECHNOLOGY FUND
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS' COMMENTARY
Co-Portfolio Managers: G. Paul Matthews and Mark W. Headley
The Matthews Asian Technology Fund was up 9.92% for the six-month period ended
February 28, 2002 while the benchmark MSCI/Matthews Asian Technology Index was
up 0.26%.
Within the Asian technology sector, we are most positive on portable devices
such as handsets and notebooks, and semiconductors, the hardest hit industry in
2001.
The biggest contributor to the Fund on a country-by-country basis was South
Korea, with Taiwan coming in second. Japanese companies continued to lag behind.
South Korea's resilient domestic economy and technological advancements enabled
companies to perform well over the last six months, while the expectation of a
U.S. economic recovery, slight pick-up in the end-user demand, and the global
outsourcing trend contributed to the Taiwanese technology sector rally.
On a company-by-company basis, Samsung Electronics was the biggest contributor
to the Fund's positive performance. Samsung Electronics benefited from a
recovery in DRAM prices and its telecommunications division's strong
performance. Samsung Electronics also improved its brand image and its brand
equity value has emerged as the second most valuable among Asian-based companies
behind only Sony.
We remain overweight South Korea and Taiwan. We are also overweight Japanese
exporters. We believe the Asian technology sector is well positioned to benefit
from a U.S. economic recovery, which appears to be on its way. However, if the
expected turnaround in the U.S. market is delayed, we believe that it will be a
challenge for South Korean and Taiwanese companies to hold their ground.
--------------------------------------------------------------------------------
FUND PERFORMANCE
--------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
AS OF FEBRUARY 28, 2002
--------------------------------------------------------------------------------
MATTHEWS ASIAN
TECHNOLOGY FUND
One Year .......................... (14.53%)
Since Inception (12/27/99) ........ (34.01%)
--------------------------------------------------------------------------------
MSCI/MATTHEWS
ASIAN TECHNOLOGY INDEX(1)
One Year .......................... (23.76%)
Since 12/31/99 .................... (39.40%)
GROWTH OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
Matthews Asian MSCI/Matthews Asian Lipper
Technology Fund Technology Index Science &
Tech Index
12/27/99 10000 10000 10000
2/28/00 11370 9488 12501.2
5/31/00 7900 7717 9125.94
8/31/00 7610 7449 11614.9
11/30/00 4870 5112 6816.21
2/28/01 4743 4413 5346.37
5/31/01 4533.73 4278 5135.96
8/31/01 3687.58 3355 4068.5
11/30/01 3959.19 3427 4209.75
2/28/02 4053.5 3364 3639.36
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
BEFORE TAXES ON DISTRIBUTIONS OR REDEMPTION OF FUND SHARES.
1 The MSCI/Matthews Asian Technology Index is an unmanaged
capitalization-weighted index of Asian equities comprised of 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.
2 The Lipper Science and Technology Funds Average consisted of 180 funds as
of 12/31/99.
16
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MATTHEWS ASIAN TECHNOLOGY FUND SCHEDULE OF INVESTMENTS
FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
SHARES VALUE
-------- ----------
EQUITIES - 102.55%***
CHINA/HONG KONG - 25.36%
Asia Satellite Telecommunications
Holdings, Ltd. ........................ 282,400 $ 481,573
AsiaInfo Holdings, Inc.** ................ 50,600 562,672
China Mobile HK, Ltd.** .................. 148,500 428,405
China Mobile HK, Ltd. ADR** .............. 5,000 72,100
China Unicom, Ltd.** ..................... 388,000 373,112
China Unicom, Ltd. ADR** ................. 20,100 191,955
China.com Corp. A Shares** ............... 113,500 317,233
i-CABLE Communications** ................. 422,000 254,306
Legend Holdings, Ltd. .................... 921,000 389,690
----------
TOTAL CHINA/HONG KONG .................... 3,071,046
----------
INDIA - 1.14%
Infosys Technologies Ltd., ADR** ......... 2,500 137,525
----------
JAPAN - 19.58%
Advantest Corp. .......................... 4,300 283,400
Canon, Inc. .............................. 10,500 367,981
Itochu Techno-Science Corp. .............. 900 30,196
Konami Corp. ............................. 10,500 194,190
NEC Corp. ................................ 63,000 458,054
NEC Corp. ADR ............................ 14,000 101,500
Nintendo Co., Ltd. ....................... 2,235 329,676
Sony Corp. ............................... 4,200 190,816
Sony Corp. ADR ........................... 9,000 415,800
----------
TOTAL JAPAN .............................. 2,371,613
----------
SINGAPORE - 7.16%
CSE Systems &
Engineering, Ltd.** ................... 529,000 142,944
Datacraft Asia, Ltd. ..................... 169,720 386,961
Venture Manufacturing, Ltd. .............. 42,000 337,033
----------
TOTAL SINGAPORE .......................... 866,938
----------
SOUTH KOREA - 27.12%
Humax Co., Ltd ........................... 10,857 418,239
Internet Auction Co., Ltd.** ............. 25,786 421,683
Korea Telecom Corp. ...................... 6,010 264,660
Korea Telecom Corp. ADR .................. 8,600 191,780
KT Freetel** ............................. 14,111 446,598
NCSoft Corp. ............................. 3,063 434,960
Samsung Electronics ...................... 2,913 754,709
SK Telecom Co., Ltd. ..................... 1,789 351,341
----------
TOTAL SOUTH KOREA .......................... 3,283,970
----------
TAIWAN - 17.48%
Asustek Computer, Inc. ................... 71,000 $ 343,826
Hon Hai Precision
Industry Co., Ltd. ................... 75,600 344,566
Realtek Semiconductor Corp. .............. 67,500 346,105
Sunplus Technology Co., Ltd .............. 86,000 296,425
Taiwan Semiconductor
Manufacturing Co., Ltd.** ............. 186,536 435,720
VIA Technologies, Inc.** ................. 78,120 324,898
Zyxel Communications Corp.** ............. 13,803 25,164
----------
TOTAL TAIWAN ............................. 2,116,704
----------
THAILAND - 4.71%
Advanced Info Service
Public Co., Ltd. ...................... 548,100 570,676
----------
TOTAL INVESTMENTS - 102.55%***
(Cost $13,316,820) ...................... 12,418,472
LIABILITIES, LESS CASH AND
OTHER ASSETS - (2.55)% .................. (308,824)
----------
NET ASSETS - 100.00% ....................... $12,109,648
===========
See accompanying notes to financial statements.
*Cost for Federal income tax purposes is $13,316,820 and net unrealized
appreciation consists of:
Gross unrealized appreciation $ 1,207,451
Gross unrealized depreciation (2,105,799)
------------
Net unrealized depreciation $ (898,348)
============
** Non-income producing security.
*** As a percentage of net assets as of February 28, 2002.
ADR American Depositary Receipt
MARKET SECTOR DIVERSIFICATION
AS A PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
CONSUMER DISCRETIONARY.................... 17.76%
Household Durables...................... 10.83
Internet & Catalog Retail............... 3.33
Leisure Equipment & Products............ 1.55
Media................................... 2.05
INFORMATION TECHNOLOGY.................... 55.10
Commercial Equipment.................... 3.14
Computers & Peripherals................. 10.61
Electronic Equipment & Instruments...... 5.52
Internet Software & Services............ 6.19
IT Consulting & Services................ 2.42
Office Electronics...................... 2.98
Semiconductor Equipment & Products...... 19.74
Software................................ 4.50
TELECOMMUNICATION SERVICES................ 27.14
Diversified Telecommunication Services.. 7.48
Wireless Telecommunication Services..... 19.66
------
TOTAL INVESTMENTS ........................ 100.00%
=======
17
MATTHEWS ASIAN FUNDS
STATEMENTS OF ASSETS AND LIABILITIES FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
MATTHEWS MATTHEWS MATTHEWS
PACIFIC ASIAN GROWTH MATTHEWS MATTHEWS MATTHEWS ASIAN
TIGER AND INCOME KOREA CHINA JAPAN TECHNOLOGY
FUND FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------ -------------
ASSETS:
Investments, at value (Cost
$94,617,524, $36,276,259,
$147,390,594, $28,228,191,
$11,293,487 and $13,316,820,
respectively) ............................ $101,135,526 $ 38,443,750 $228,673,649 $ 28,351,227 $ 8,513,120 $ 12,418,472
Cash .................................. -- 2,234,226 7,110,444 1,021,381 98,283 --
Foreign currency, at value (Cost
$0, $107, $0, $0, $0, and $250,918,
respectively) ....................... -- 107 -- -- -- 250,833
Dividends and interest receivable ..... 134,729 262,659 1,250,842 345 5,114 8,779
Receivable for securities sold ........ -- -- -- -- -- 73,735
Receivable for capital shares sold .... 275,873 226,917 551,518 68,538 20,500 6,144
Deferred organization costs (Note 1-F) -- -- -- 3,008 -- --
Other assets .......................... 7,219 2,616 15,942 2,265 612 1,309
------------ ------------ ------------ ------------ ------------ ------------
Total assets ........................ 101,553,347 41,170,275 237,602,395 29,446,764 8,637,629 12,759,272
------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES:
Payable for securities purchased ...... -- 1,277,014 3,617,976 678,118 -- 246,264
Payable for capital shares redeemed ... 224,025 5,249 208,606 20,545 21,976 314,063
Cash overdraft ........................ 177,069 -- -- -- -- 27,435
Due to Advisor (Note 2) ............... 98,405 27,337 162,682 27,951 5,693 9,198
Accrued expenses ...................... 141,313 20,317 151,203 28,026 30,821 52,664
Other liabilities ..................... 122 -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities ................... 640,934 1,329,917 4,140,467 754,640 58,490 649,624
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS: .............................. $100,912,413 $ 39,840,358 $233,461,928 $ 28,692,124 $ 8,579,139 $ 12,109,648
============ ============ ============ ============ ============ ============
SHARES OUTSTANDING:
(shares of beneficial interest issued and
outstanding, respectively, unlimited
number of shares authorized with a
$0.001 par value) ...................... 11,087,863 3,864,350 56,032,418 2,991,043 991,477 3,153,680
============ ============ ============ ============ ============ ============
Net asset value, offering price and
redemption price ......................... $ 9.10 $ 10.31 $ 4.17 $ 9.59 $ 8.65 $ 3.84
============ ============ ============ ============ ============ ============
NET ASSETS CONSIST OF:
Capital paid-in .......................... $101,455,41 $ 36,012,012 $162,800,850 $ 30,579,291 $17,827,576 $29,649,908
Accumulated undistributed net
investment income (loss) ............ (487,127) 77,414 (412,497) (83,679) (174,792) (152,861)
Accumulated net realized gain (loss)
on investments ...................... (6,574,445) 1,583,349 (10,206,925) (1,926,525) (6,293,242) (16,488,840)
Net unrealized appreciation (depreciation)
on investments and foreign currency
related transactions ................ 6,518,574 2,167,583 81,280,500 123,037 (2,780,403) (898,559)
------------ ------------ ------------ ------------ ------------ ------------
$100,912,413 $39,840,358 $233,461,928 $28,692,124 $8,579,139 $12,109,648
============ ============ ============ ============ ============ ============
See accompanying notes to financial statements.
18
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--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
MATTHEWS MATTHEWS MATTHEWS
PACIFIC ASIAN GROWTH MATTHEWS MATTHEWS MATTHEWS ASIAN
TIGER AND INCOME KOREA CHINA JAPAN TECHNOLOGY
FUND FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------ ------------
INVESTMENT INCOME:
Dividends (net of foreign tax
withheld of $56,084, $24,582,
$303,070, $0, $3,197, and
$4,856, respectively) ................. $ 387,042 $ 283,695 $ 1,354,836 $ 165,387 $ 17,449 $ 21,513
Interest ............................ -- 371,389 4,863 -- 607 --
------------ ------------ ------------ ------------ ------------ ------------
Total investment income ............. 387,042 655,084 1,359,699 165,387 18,056 21,513
------------ ------------ ------------ ------------ ------------ ------------
EXPENSES:
Investment advisory fees (Note 2) ..... 407,121 144,484 793,180 112,236 36,573 54,816
Recovery of reimbursed expenses
(Note 2) ............................ 37,644 17,499 -- 4,680 -- --
Transfer agent fees ................... 118,597 25,857 148,935 29,562 14,919 18,186
Administration fees ................... 65,338 17,510 94,311 16,331 6,184 7,951
Accounting fees ....................... 40,050 10,560 58,140 12,090 4,650 5,550
Professional fees ..................... 18,151 2,429 19,264 2,057 3,175 4,016
Custodian fees ........................ 42,756 15,264 90,451 28,951 6,755 16,067
Directors fees (Note 2) ............... 4,165 1,140 6,377 1,289 496 635
Insurance expense ..................... 5,232 1,106 7,510 819 803 803
Amortization of organization costs
(Note 1-F) .......................... -- -- -- 1,531 -- --
Printing expense ...................... 12,893 2,480 12,299 1,884 2,355 2,480
Registration expenses ................. 16,527 10,712 16,860 11,901 13,885 15,025
Other expenses ........................ 6,706 2,494 8,062 2,921 1,240 3,653
------------ ------------ ------------ ------------ ------------ ------------
Total expenses ...................... 775,180 251,535 1,255,389 226,252 91,035 129,182
Expenses waived and reimbursed (Note 2) .. -- -- -- -- (17,890) (18,030)
------------ ------------ ------------ ------------ ------------ ------------
Net expenses ........................ 775,180 251,535 1,255,389 226,252 73,145 111,152
------------ ------------ ------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ............. (388,138) 403,549 104,310 (60,865) (55,089) (89,639)
------------ ------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS:
Net realized gain (loss) on investments (4,121,636) 2,533,261 8,105,127 (821,193) (2,098,487) (862,215)
Net realized gain (loss) on foreign
currency related transactions ....... (12,705) (1,788) (177,506) (56) (659) (2,743)
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency related transactions 16,490,609 1,752,983 69,605,914 2,231,370 407,564 2,116,482
------------ ------------ ------------ ------------ ------------ ------------
Net realized and unrealized gain (loss)
on investments and foreign currency
related transactions ................ 12,356,268 4,284,456 77,533,535 1,410,121 (1,691,582) 1,251,524
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS .......................... $ 11,968,130 $ 4,688,005 $ 77,637,845 $ 1,349,256 ($ 1,746,671) $ 1,161,885
============ ============ ============ ============ ============ ============
See accompanying notes to financial statements.
19
MATTHEWS ASIAN FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
MATTHEWS PACIFIC MATTHEWS ASIAN
TIGER FUND GROWTH AND INCOME FUND
----------------------------- -----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
FEBRUARY 28, ENDED FEBRUARY 28, ENDED
2002 AUGUST 31, 2002 AUGUST 31,
(UNAUDITED) 2001 (UNAUDITED) 2001
------------ ------------ ------------ -------------
OPERATIONS:
Net investment income (loss) .................................... ($ 388,138) $ 574,328 $ 403,549 $ 1,268,721
Net realized gain (loss) on investments and
foreign currency related transactions ......................... (4,134,341) (2,037,058) 2,531,473 (825,263)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency related transactions ......... 16,490,609 (27,835,776) 1,752,983 (240,759)
------------ ------------ ------------ -------------
Net increase in net assets from operations ...................... 11,968,130 (29,298,506) 4,688,005 202,699
------------ ------------ ------------ -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class I ....................................................... (104,784) (2,614,945) (606,192) (1,065,963)
Class A ....................................................... N/A (34,982) N/A N/A
Realized gains on investments:
Class I ....................................................... (274,572) (7,093,168) -- (1,037,531)
Class A ....................................................... N/A (107,171) N/A N/A
------------ ------------ ------------ -------------
Net decrease in net assets resulting
from distributions ............................................ (379,356) (9,850,266) (606,192) (2,103,494)
------------ ------------ ------------ -------------
CAPITAL SHARE TRANSACTIONS (NET):
Class I ......................................................... 12,820,530 3,667,083 11,312,000 14,878,373
Class A ......................................................... N/A (1,187,737) N/A N/A
------------ ------------ ------------ -------------
Increase in net assets derived from
capital share transactions .................................... 12,820,530 2,479,346 11,312,000 14,878,373
------------ ------------ ------------ -------------
Total increase in net assets ................................. 24,409,304 (36,669,426) 15,393,813 12,977,578
NET ASSETS:
Beginning of period .......................................... 76,503,109 113,172,535 24,446,545 11,468,967
------------ ------------ ------------ -------------
End of period (including undistributed net investment
income (loss) of $(487,127), $42,401, $77,414,
and $280,057, respectively) .................................. $100,912,413 $ 76,503,109 $ 39,840,358 $ 24,446,545
============ ============ ============ =============
N/A Not Applicable
See accompanying notes to financial statements.
20
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800.789.ASIA [2742]
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
MATTHEWS KOREA MATTHEWS CHINA
FUND FUND
----------------------------- -----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
FEBRUARY 28, ENDED FEBRUARY 28, ENDED
2002 AUGUST 31, 2002 AUGUST 31,
(UNAUDITED) 2001 (UNAUDITED) 2001
------------ ------------ ------------ -------------
OPERATIONS
Net investment income (loss) ................................. $ 104,310 $ 830,403 ($ 60,865) $ 376,674
Net realized gain (loss) on investments and
foreign currency related transactions ...................... 7,927,621 (13,729,542) (821,249) (981,137)
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency related transactions ...................... 69,605,914 (1,209,908) 2,231,370 (2,331,876)
------------ ------------ ------------ -------------
Net increase (decrease) in
net assets from operations ...................................... 77,637,845 (14,109,047) 1,349,256 (2,936,339)
------------ ------------ ------------ -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class I ...................................................... (467,505) -- (381,550) (135,340)
Class A ...................................................... N/A -- N/A N/A
Realized gains on investments:
Class I ...................................................... (3,455,469) (29,963,931) -- (259,637)
Class A ...................................................... N/A (12,702,421) N/A N/A
------------ ------------ ------------ -------------
Net decrease in net assets resulting from distributions (3,922,974) (42,666,352) (381,550) (394,977)
------------ ------------ ------------ -------------
CAPITAL SHARE TRANSACTIONS (NET):
Class I ...................................................... 42,614,765 52,883,977 7,881,360 13,942,021
Class A ...................................................... N/A (5,884,513) N/A N/A
------------ ------------ ------------ -------------
Increase in net assets derived from
capital share transactions ................................... 42,614,765 46,999,464 7,881,360 13,942,021
------------ ------------ ------------ -------------
Total increase (decrease) in net assets ......................... 116,329,636 (9,775,935) 8,849,066 10,610,705
NET ASSETS:
Beginning of period .......................................... 117,132,292 126,908,227 19,843,058 9,232,353
------------ ------------ ------------ -------------
End of period (including undistributed
net investment income (loss) of ($412,497),
$121,474, ($83,679), and $358,736, respectively) ........... $233,461,928 $117,132,292 $ 28,692,124 $ 19,843,058
============ ============ ============ =============
N/A Not Applicable
See accompanying notes to financial statements.
21
MATTHEWS ASIAN FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
MATTHEWS JAPAN MATTHEWS ASIAN
FUND TECHNOLOGY FUND
----------------------------- -----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
FEBRUARY 28, ENDED FEBRUARY 28, ENDED
2002 AUGUST 31, 2002 AUGUST 31,
(UNAUDITED) 2001 (UNAUDITED) 2001
------------ ------------ ------------ -------------
OPERATIONS:
Net investment income (loss) ................................. ($ 55,089) ($ 102,884) ($ 89,639) $ 244,064
Net realized loss on investments and
foreign currency related transactions ...................... (2,099,146) (3,446,164) (864,958) (12,868,227)
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency related transactions .............................. 407,564 (4,135,528) 2,116,482 2,014,453
------------ ------------ ------------ -------------
Net increase (decrease) in
net assets from operations ................................. (1,746,671) (7,684,576) 1,161,885 (10,609,710)
------------ ------------ ------------ -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class I .................................................... (182,412) (360,020) (142,101) (615,326)
Class A .................................................... N/A N/A N/A N/A
Realized gains on investments:
Class I .................................................... -- (910,401) -- --
Class A .................................................... N/A N/A N/A N/A
------------ ------------ ------------ -------------
Net decrease in net assets resulting
from distributions ......................................... (182,412) (1,270,421) (142,101) (615,326)
------------ ------------ ------------ -------------
CAPITAL SHARE TRANSACTIONS (NET):
Class I ...................................................... 2,750,218 (7,155,774) 1,482,776 (3,737,856)
Class A ...................................................... N/A N/A N/A N/A
------------ ------------ ------------ -------------
Increase (decrease) in net assets derived from
capital share transactions ................................. 2,750,218 (7,155,774) 1,482,776 (3,737,856)
------------ ------------ ------------ -------------
Total increase (decrease) in net assets ...................... 821,135 (16,110,771) 2,502,560 (14,962,892)
NET ASSETS:
Beginning of period .......................................... 7,758,004 23,868,775 9,607,088 24,569,980
------------ ------------ ------------ -------------
End of period (including undistributed
net investment income (loss) of ($174,792),
$62,709, ($152,861) and $78,879 respectively .............. $ 8,579,139 $ 7,758,004 $ 12,109,648 $ 9,607,088
============ ============ ============ =============
N/A Not Applicable
See accompanying notes to financial statements.
22
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FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The table below sets forth financial data for a share of beneficial interest
outstanding throughout each year presented.
MATTHEWS PACIFIC
TIGER FUND
---------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR
FEBRUARY 28, ENDED ENDED ENDED ENDED
2002 AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
(UNAUDITED) 2001 2000 1999 1998
------------- --------- --------- -------- ---------
Net Asset Value, beginning of period ................ $ 7.91 $ 12.35 $ 10.41 $ 4.07 $ 11.30
------------- --------- --------- -------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss) ..................... (0.04) 0.08 0.20 0.21 0.02
Net realized gain (loss) and unrealized
appreciation (depreciation) on
investments and foreign currency ............... 1.27 (3.37) 2.01 6.15 (7.18)
------------- --------- --------- -------- ---------
Total from investment operations ................. 1.23 (3.29) 2.21 6.36 (7.16)
------------- --------- --------- -------- ---------
LESS DISTRIBUTIONS FROM:
Net investment income ............................ (0.01) (0.31) (0.27) (0.02) (0.01)
Net realized gains on investments ................ (0.03) (0.84) -- -- (0.06)
------------- --------- --------- -------- ---------
Total distributions .............................. (0.04) (1.15) (0.27) (0.02) (0.07)
------------- --------- --------- -------- ---------
Net Asset Value, end of period ................... $ 9.10 $ 7.91 $ 12.35 $ 10.41 $ 4.07
============= ========= ========= ======== =========
TOTAL RETURN ........................................ 15.55%(2) (27.46%) 21.28% 156.28% (63.43%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ................ $100,912 $76,503 $111,502 $109,936 $31,319
Ratio of expenses to average net
assets before reimbursement
and waiver of expenses by
Advisor and Administrator ...................... 1.90%(1) 1.90% 1.88% 1.90% 2.06%
Ratio of expenses to average net
assets after reimbursement
and waiver of expenses by
Advisor and Administrator (Note 2) ............. 1.90%(1) 1.90% 1.81% 1.90% 1.90%
Ratio of net investment income (loss) to average net assets
before reimbursement and waiver of expenses by
Advisor and Administrator ...................... (0.95%)(1) 0.67% 1.49% 3.35% 0.14%
Ratio of net investment income to average net assets
after reimbursement and waiver of expenses by
Advisor and Administrator ...................... (0.95%)(1) 0.67% 1.56% 3.35% 0.30%
Portfolio turnover ............................... 24.26%(2) 63.59% 52.11% 98.74% 73.09%
1 Annualized.
2 Not annualized.
See accompanying notes to financial statements.
23
MATTHEWS ASIAN FUNDS
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The table below sets forth financial data for a share of beneficial interest
outstanding throughout each year presented.
MATTHEWS ASIAN
GROWTH AND INCOME FUND
---------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR
FEBRUARY 28, ENDED ENDED ENDED ENDED
2002 AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
(UNAUDITED) 2001 2000 1999 1998
------------- --------- --------- -------- ---------
Net Asset Value, beginning of period ................ $ 9.08 $ 10.50 $ 9.37 $ 6.54 $ 11.71
------------- --------- --------- -------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income ............................ 0.12 0.55 0.63 0.59 0.13
Net realized gain (loss) and unrealized
appreciation (depreciation) on
investments and foreign currency ............... 1.31 (0.49) 1.09 2.75 (4.15)
------------- --------- --------- -------- ---------
Total from investment operations ................. 1.43 0.06 1.72 3.34 (4.02)
------------- --------- --------- -------- ---------
LESS DISTRIBUTIONS FROM:
Net investment income ............................ (0.20) (0.60) (0.59) (0.51) (0.10)
Net realized gains on investments ................ -- (0.88) -- -- (1.05)
------------- --------- --------- -------- ---------
Total distributions .............................. (0.20) (1.48) (0.59) (0.51) (1.15)
------------- --------- --------- -------- ---------
Net Asset Value, end of period ...................... $ 10.31 $ 9.08 $ 10.50 $ 9.37 $ 6.54
============= ========= ========= ======== =========
TOTAL RETURN ........................................ 15.87%(2) 1.15% 18.68% 52.65% (35.27%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ................ $39,840 $24,447 $11,469 $10,644 $4,063
Ratio of expenses to average net
assets before reimbursement
and waiver of expenses by
Advisor and Administrator ...................... 1.73%(1) 1.90% 1.97% 2.05% 3.76%
Ratio of expenses to average net
assets after reimbursement
and waiver of expenses by
Advisor and Administrator (Note 2) ............. 1.73%(1) 1.90% 1.90% 1.90% 1.90%
Ratio of net investment income (loss) to average net assets
before reimbursement and waiver of expenses by
Advisor and Administrator ...................... 2.79%(1) 7.71% 6.17% 7.98% (0.36%)
Ratio of net investment income (loss) to average net assets
after reimbursement and waiver of expenses by
Advisor and Administrator ...................... 2.79%(1) 7.71% 6.24% 8.13% 1.50%
Portfolio turnover ............................... 29.19%(2) 33.94% 62.23% 34.82% 54.67%
1 Annualized.
2 Not annualized.
See accompanying notes to financial statements.
24
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--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The table below sets forth financial data for a share of beneficial interest
outstanding throughout each year presented.
MATTHEWS KOREA
FUND
---------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR
FEBRUARY 28, ENDED ENDED ENDED ENDED
2002 AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
(UNAUDITED) 2001 2000 1999 1998
------------- --------- --------- -------- ---------
Net Asset Value, beginning of period ................ $ 2.68 $ 5.19 $ 7.49 $ 2.03 $ 6.19
------------- --------- --------- -------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss) ........................ 0.00 0.02 0.03 0.03 (0.03)
Net realized gain (loss) and unrealized
appreciation (depreciation) on
investments and foreign currency .................. 1.57 (0.90) (1.45) 5.43 (4.13)
------------- --------- --------- -------- ---------
Total from investment operations .................... 1.57 (0.88) (1.42) 5.46 (4.16)
------------- --------- --------- -------- ---------
LESS DISTRIBUTIONS FROM:
Net investment income ............................... (0.01) -- -- -- --
Net realized gains on investments ................... (0.07) (1.63) (0.88) -- --
------------- --------- --------- -------- ---------
Total distributions ................................. (0.08) (1.63) (0.88) -- --
------------- --------- --------- -------- ---------
Net Asset Value, end of period................. $ 4.17 $ 2.68 $ 5.19 $ 7.49 $ 2.03
============= ========= ========= ======== =========
TOTAL RETURN ........................................ 58.96%(2) (13.09%) (22.92%) 268.97% (67.21%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ................ $233,462 $117,138 $115,158 $230,846 $66,607
Ratio of expenses to average net assets
before reimbursement and waiver of
expenses by Advisor and Administrator .......... 1.58%(1) 1.78% 1.75% 1.77% 2.07%
Ratio of expenses to average net assets after
reimbursement and waiver of
expenses by Advisor and Administrator (Note 2) . 1.58%(1) 1.78% 1.75% 1.77% 2.06%
Ratio of net investment income (loss) to average net
assets before reimbursement and waiver of expenses
by Advisor and Administrator ................... 0.13%(1) 0.75% 0.42% (0.37%) (1.13%)
Ratio of net investment income (loss) to average
net assets after reimbursement and waiver of expenses
by Advisor and Administrator ................... 0.13%(1) 0.75% 0.42% (0.37%) (1.12%)
Portfolio turnover ............................... 17.84%(2) 81.96% 47.80% 57.06% 94.01%
1 Annualized.
2 Not annualized.
See accompanying notes to financial statements.
25
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
MATTHEWS CHINA
FUND
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR
FEBRUARY 28, ENDED ENDED ENDED ENDED
2002 AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
(UNAUDITED) 2001 2000 1999 1998 (1)
------------- --------- --------- -------- ---------
Net Asset Value, beginning of period ................ $ 9.21 $ 9.93 $ 8.48 $ 4.36 $ 10.00
------------- --------- --------- -------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss)..... (0.04) 0.32 0.12 0.12 0.10
Net realized gain (loss) and unrealized
appreciation (depreciation) on investments
and foreign currency 0.57 (0.61) 1.44 4.11 (5.74)
------------- --------- --------- -------- ---------
Total from investment operations 0.53 (0.29) 1.56 4.23 (5.64)
------------- --------- --------- -------- ---------
LESS DISTRIBUTIONS FROM:
Net investment income............................. (0.15) (0.15) (0.11) (0.11) --
Net realized gains on investments -- (0.28) -- -- --
------------- --------- --------- -------- ---------
Total distributions............................. (0.15) (0.43) (0.11) (0.11) --
------------- --------- --------- -------- ---------
Net Asset Value, end of period....................... $ 9.59 $ 9.21 $ 9.93 $ 8.48 $ 4.36
============= ========= ========= ======== =========
TOTAL RETURN......................................... 5.79%3 (2.23%) 18.54% 97.79% (56.40%)3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 28,692 $19,843 $9,232 $6,245 $1,576
Ratio of expenses to average net assets
before reimbursement and waiver of
expenses by Advisor and Administrator 2.00%(2) 2.00% 2.15% 2.09% 7.84%(2)
Ratio of expenses to average net assets
after reimbursement and waiver of
expenses by Advisor and Administrator
(Note 2)........................................ 2.00%(2) 2.00% 2.00% 2.00% 2.00%(2)
Ratio of net investment income (loss)
to average net assets before
reimbursement and waiver of expenses
by Advisor and Administrator... (0.54%)(2) 2.62% 1.54% 2.93% (3.45%)(2)
Ratio of net investment income (loss)
to average net assets after
reimbursement and waiver of expenses
by Advisor and Administrator.................... (0.54%)(2) 2.62% 1.69% 3.02% 2.38%(2)
Portfolio turnover................................ 23.52%(3) 61.07% 80.90% 40.27% 11.84%(3)
1 The China Fund commenced operations on February 19, 1998.
2 Annualized.
3 Not annualized.
See accompanying notes to financial statements.
26
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--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
MATTHEWS JAPAN
FUND
----------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
FEBRUARY 28, ENDED ENDED ENDED
2002 AUGUST 31, AUGUST 31, AUGUST 31,
(UNAUDITED) 2001 2000 1999(1)
------------- --------- --------- --------
Net Asset Value, beginning of period.................. $ 11.22 $ 20.76 $ 21.70 $ 10.00
------------- --------- --------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss)....................... -- (0.15) (0.11) (0.04)
Net realized gain (loss) and unrealized
appreciation (depreciation) on
investments and foreign currency................. (2.30) (7.99) (0.29) 11.74
------------- --------- --------- ---------
Total from investment operations................. (2.30) (8.14) (0.40) 11.70
------------- --------- --------- ---------
LESS DISTRIBUTIONS FROM:
Net investment income............................. (0.27) (0.37) -- --
Net realized gains on investments.................. -- (1.03) (0.54) --
------------- --------- --------- ---------
Total distributions.............................. (0.27) (1.40) (0.54) --
------------- --------- --------- ---------
Net Asset Value, end of period........................ $ 8.65 $ 11.22 $ 20.76 $ 21.70
============= ========= ========= ==========
TOTAL RETURN.......................................... (20.89%)(3) (40.92%) (1.75%) 117.00%(3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's).................. $ 8,579 $ 7,758 $ 23,869 $ 24,486
Ratio of expenses to average net assets
before reimbursement and waiver
of expenses by Advisor and Administrator......... 2.49%(2) 2.08% 1.88% 3.45%(2)
Ratio of expenses to average net assets
after reimbursement and waiver of
expenses by Advisor and
Administrator (Note 2)........................... 2.00%(2) 2.00% 2.00% 2.00%(2)
Ratio of net investment income (loss) to
average net assets before reimbursement
and waiver of expenses by Advisor
and Administrator................................ (2.00%)(2) (0.90%) (0.36%) (2.54%)(2)
Ratio of net investment income (loss) to
average net assets after
reimbursement and waiver of expenses by Advisor
and Administrator................................ (1.51%)(2) (0.82%) (0.48%) (1.09%)(2)
Portfolio turnover ................................ 50.88%(3) 71.09% 223.00% 28.92%(3)
1 The Japan Fund commenced operations on December 31, 1998.
2 Annualized.
3 Not annualized.
See accompanying notes to financial statements.
27
MATTHEWS ASIAN FUNDS
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented.
MATTHEWS ASIAN
TECHNOLOGY FUND
--------------------------------------
SIX MONTHS
ENDED YEAR PERIOD
FEBRUARY 28, ENDED ENDED
2002 AUGUST 31, AUGUST 31,
(UNAUDITED) 2001 2000 (1)
----------- --------- --------
Net Asset Value, beginning of period................................... $ 3.53 $ 7.61 $ 10.00
--------- --------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss)........................................ (0.04) 0.11 0.26
Net realized gain (loss) and unrealized
appreciation (depreciation) on
investments and foreign currency.................................. 0.39 (3.97) (2.65)
--------- --------- --------
Total from investment operations.................................. 0.35 (3.86) (2.39)
--------- --------- --------
LESS DISTRIBUTIONS FROM:
Net investment income............................................... (0.04) (0.22) --
Net realized gains on investments................................... -- -- --
--------- --------- --------
Total distributions............................................... (0.04) (0.22) --
--------- --------- --------
Net Asset Value, end of period......................................... $ 3.84 $ 3.53 $ 7.61
========= ========= ========
TOTAL RETURN........................................................ 9.92%(3) (51.54%) (23.90%)(3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)................................... $12,110 $9,607 $24,570
Ratio of expenses to average net assets
before reimbursement and waiver
of expenses by Advisor
and Administrator................................................. 2.33%(2) 2.69% 2.66%(2)
Ratio of expenses to average net assets
after reimbursement and waiver of
expenses by Advisor and
Administrator (Note 2)............................................ 2.00%(2) 2.00% 2.00%(2)
Ratio of net investment income (loss) to
average net assets before reimbursement
and waiver of expenses by Advisor
and Administrator................................................. (1.96%)(2) 1.14% 3.75%(2)
Ratio of net investment income (loss) to
average net assets after reimbursement
and waiver of expenses by Advisor
and Administrator................................................. (1.63%)(2) 1.83% 4.41%(2)
Portfolio turnover ................................................. 33.60%(3) 181.24% 50.35%(3)
1 The Asian Technology Fund commenced operations on December 27, 1999.
2 Annualized.
3 Not annualized.
See accompanying notes to financial statements.
28
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--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Matthews Asian Funds (formerly, Matthews International Funds) (the "Company")
is an open-end investment management company registered under the Investment
Company Act of 1940, as amended (the "Act"). The Company currently issues six
separate series of shares (each a "Fund" and collectively, the "Funds"):
Matthews Pacific Tiger Fund, Matthews Asian Growth and Income Fund, Matthews
Korea Fund, Matthews China Fund, Matthews Japan Fund and Matthews Asian
Technology Fund. Matthews Pacific Tiger Fund, Matthews Korea Fund and
Matthews China Fund are authorized to offer two classes of shares: Class I
shares and Class A shares. Currently, only Class I shares are offered.
Matthews Pacific Tiger Fund, Matthews Korea Fund, Matthews China Fund,
Matthews Japan Fund and Matthews Asian Technology Fund seek to maximize
capital appreciation by investing, under normal circumstances, at least 80%
of their total assets in equity securities of Pacific Tiger economies, South
Korean companies, Chinese companies and Japanese companies, respectively.
Pacific Tiger economies include Hong Kong, Singapore, South Korea, Taiwan,
Indonesia, Malaysia, Philippines, Thailand and China. Matthews Asian Growth
and Income Fund seeks capital appreciation and current income by investing,
under normal circumstances, at least 80% of its total assets in the
convertible bonds and dividend-paying equity securities of Asian economies.
Asian economies include Hong Kong, Japan, Singapore, South Korea, Taiwan,
Indonesia, Malaysia, Philippines, Thailand, China and India. The following is
a summary of significant accounting policies consistently followed by the
Funds in the preparation of their financial statements.
A. SECURITY VALUATION: Securities listed on any national securities exchange
are valued at their last sale price on the exchange where the securities are
principally traded or, if there has been no sale on that date, at the mean
between the last reported bid and asked prices. Securities traded
over-the-counter are priced at the mean of the last bid and asked prices. All
other 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 of Trustees.
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 investments 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.
Portfolio securities traded on a foreign exchange are generally valued at the
respective current prevailing exchange rates. The securities' values are
translated into U.S. dollars using these rates. If subsequent to the time a
rate has been established and it has been determined to have materially
changed, the fair value of those securities, (considering the changing
conditions) will be determined by (or under the direction of) the Funds'
Board of Trustees.
B. FORWARD FOREIGN EXCHANGE CONTRACTS: The Funds may engage in forward
foreign exchange contracts for hedging a specific transaction in which the
currency is denominated as deemed appropriate by Matthews International
Capital Management, LLC (the "Advisor"). Forward foreign exchange contracts
are valued at the forward rate and are marked-to-market daily. The change in
market value is recorded by the Funds as an unrealized gain or loss. When the
contract is closed, the Funds record a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate fluctuations
in the underlying prices of the Funds' portfolio securities, but it does
establish a rate of exchange that can be achieved in the future. Although
forward foreign exchange contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that
might result should the value of the currency increase. In addition, the
Funds could be exposed to risks if the counterparties to the contracts are
unable to meet the terms of their contracts.
C. RISKS ASSOCIATED WITH FOREIGN SECURITIES: Investments by the Funds in the
securities of foreign issuers may involve investment risks different from
those of U.S. issuers including possible political or economic instability of
the country of the issuer, the difficulty of predicting international trade
patterns, the possibility of currency exchange controls, the possible
imposition of foreign withholding tax on the interest income payable on such
instruments, the possible establishment of foreign controls, the possible
seizure or nationalization of foreign deposits or assets, or the adoption of
other foreign government restrictions that might adversely affect the foreign
securities held by the Funds. Foreign securities may also be subject to
greater fluctuations in price than securities of domestic corporations or the
U.S. Government.
D. FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to
regulated investment companies and to distribute substantially all of their
taxable income to their shareholders. The Funds have met the requirements of
the Code applicable to regulated investment companies for the six months
ended February 28, 2002. Therefore, no federal income tax provision is
required. Income and capital gains of the Funds are determined in accordance
with both tax regulations and accounting principles generally accepted in the
United States of America. Such may result in temporary and permanent
differences between tax basis earnings and earnings reported for financial
statement purposes. These reclassifications, which have no impact on the net
asset value of the Funds, are primarily
29
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
attributable to certain differences in computation of distributable income
and capital gains under federal tax rules versus accounting principles
generally accepted in the United States of America and the use of the tax
accounting practice known as equalization.
E. DETERMINATION OF GAINS OR LOSSES ON SALES OF SECURITIES: Gains or losses
on the sale of securities are determined on the identified cost basis.
F. ORGANIZATION COSTS: Organization costs are amortized on a straight-line
basis over five years from each Fund's respective commencement of operations
with the exception of the Matthews Japan Fund and Matthews Asian Technology
Fund which were amortized on a straight-line basis over one year from the
Fund's commencement of operations. In the event that any of the initial
shares are redeemed during the period of amortization of the Funds'
organization costs, the redemption proceeds will be reduced by any such
unamortized organization costs in the same proportion as the number of
initial shares being redeemed bears to the number of those shares outstanding
at the time of redemption.
G. DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of Matthews Asian Growth
and Income Fund to distribute net investment income on a semi-annual basis
and capital gains, if any, annually. Matthews Pacific Tiger Fund, Matthews
Korea Fund, Matthews China Fund, Matthews Japan Fund, and Matthews Asian
Technology Fund distribute net investment income and capital gains, if any,
annually. Distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from accounting principles generally
accepted in the United States of America. Net investment losses may not be
utilized to offset net investment income in future periods for tax purposes.
H. FUND AND CLASS ALLOCATIONS: The Funds account separately for the assets,
liabilities and operations of each Fund. Direct expenses of each Fund are
charged to the Fund while general expenses are allocated pro-rata among the
Funds based on net asset value. Through December 15, 2000, income, expenses
(other than class specific expenses), and realized and unrealized gains
(losses) were calculated at the Fund level and allocated daily to each class
of shares based on the relative proportion of net assets of each class.
I. USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
may differ from those estimates.
J. OTHER: Securities transactions are accounted for on the date the
securities are purchased or sold. Interest income is recorded on the accrual
basis and dividend income on the ex-dividend date.
Adoption of new accounting principle -- In order to comply with new
accounting standards mandated by the latest AICPA Audit and Accounting Guide
for Audits of Investment Companies (dated 12/15/00), premiums and discounts
on debt securities are amortized using the interest method beginning this
fiscal year. Also beginning this fiscal year, redemption fees, to the extent
received by the Funds, are credited to capital. The effect of initially
applying changes required by the Guide will have no effect on the net assets
of the Funds.
K. CAPITAL SHARE TRANSACTIONS: Each Fund is authorized to issue an unlimited
number of shares of beneficial interest with a par value of $0.001 per share.
Class A shares were sold with a front-end sales charge of 4.95%.
MATTHEWS
PACIFIC TIGER FUND
------------------------------------------------------------------------------------------------------
CLASS I CLASS A*
------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2002 AUGUST 31, 2001 FEBRUARY 28, 2002 AUGUST 31, 2001
------------------------- ----------------------- ----------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ----------- --------- ----------- --------- ------ --------- -------------
Shares sold............. 5,297,078 $44,611,681 9,483,405 $84,833,523 -- -- 64,314 $ 623,933
Shares issued through
reinvestment of dividends 40,762 366,040 1,053,742 9,155,114 -- -- 15,913 138,734
Shares redeemed......... (3,925,073) (32,157,191) (9.891,330) (90,321,554) -- -- (215,664) (1,950,404)
----------- ----------- ---------- ----------- --------- ------ --------- -------------
Net increase (decrease). 1,412,767 $12,820,530 645,817 $3,667,083 -- -- (135,437) ($ 1,187,737)
=========== =========== ========== =========== ========= ====== ========= =============
*As of December 15, 2000, Class A shares of Pacific Tiger Fund were closed and
exchanged for Class I shares. 155,798 shares were exchanged.
30
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800.789.ASIA [2742]
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NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
MATTHEWS
ASIAN GROWTH AND INCOME FUND
-------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2002 AUGUST 31, 2001
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold ............ 2,320,994 $22,274,143 2,216,555 $20,619,255
Shares issued through
reinvestment of dividends 60,604 586,651 231,759 2,084,304
Shares redeemed ........ (1,208,262) (11,548,794) (849,169) (7,825,186)
---------- ----------- ---------- -----------
Net increase (decrease) 1,173,336 $11,312,000 1,599,145 $14,878,373
========== =========== ========== ===========
MATTHEWS
KOREA FUND
------------------------------------------------------------------------------------------------------
CLASS I CLASS A*
------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2002 AUGUST 31, 2001 FEBRUARY 28, 2002 AUGUST 31, 2001
------------------------- -------------------------- ---------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ----------- ---------- --------- ------ ------ ------ -----------
Shares sold............. 27,697,900 $94,227,921 46,719,161 $139,361,838 -- -- 436,242 $ 1,828,679
Shares issued through
reinvestment of dividends 864,565 3,086,495 14,125,165 35,370,865 -- -- 1,380,958 3,341,918
Shares redeemed......... (16,233,327) (54,699,651) (39,309,187) (121,848,726) -- -- (4,107,637) (11,055,110)
----------- ----------- ----------- ------------ ------ ------ ---------- ------------
Net increase (decrease). 12,329,138 $42,614,765 21,535,139 $ 52,883,977 -- -- (2,290,437) ($ 5,884,513)
=========== =========== =========== ============ ====== ====== ========== ============
MATTHEWS MATTHEWS
CHINA FUND JAPAN FUND
------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2002 AUGUST 31, 2001 FEBRUARY 28, 2002 AUGUST 31, 2001
------------------------- ---------------------- ---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ----------- ---------- --------- ------ ------ ------ ----------
Shares sold............. 1,994,530 $18,302,514 3,045,164 $32,057,967 815,655 $ 7,971,541 639,752 $ 9,296,535
Shares issued through
reinvestment of dividends 37,306 354,407 49,078 392,130 16,933 176,103 79,959 1,232,922
Shares redeemed......... (1,196,325) (10,775,561) (1,868,802) (18,508,076) (532,638 (5,397,426) (1,177,987) (17,685,231)
----------- ----------- ---------- --------- ------ ------------ ----------- ----------
Net increase (decrease). 835,511 $ 7,881,360 1,225,440 $13,942,021 299,950 $ 2,750,218 (458,276) ($7,155,774)
=========== =========== ========= ========== ======= ============ =========== ===========
MATTHEWS
ASIAN TECHNOLOGY FUND
-----------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2002 AUGUST 31, 2001
-----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold............. 2,415,695 $8,677,585 6,956,729 $ 34,380,863
Shares issued through
reinvestment of dividends 33,973 138,271 125,864 610,441
Shares redeemed......... (2,020,594) (7,333,080) (7,584,635) (38,729,160)
--------- ---------- ---------- -------------
Net increase (decrease). 429,074 $1,482,776 (502,042) ($ 3,737,856)
========= ========== ========== ============
*As of December 15, 2000, Class A shares of Korea Fund were closed and exchanged
for Class I shares. 1,092,968 shares were exchanged.
The Funds impose a redemption fee of 2.00% on shares that are redeemed within
ninety days of purchase. The charge is assessed on an amount equal to the net
asset value of the shares at the time of redemption. The redemption fee is
deducted from the proceeds otherwise payable to the redeeming shareholder.
The redemption fees were returned to the assets of the Pacific Tiger Fund,
Asian Growth and Income Fund, Korea Fund, China Fund, Japan Fund and Asian
Technology Fund in the amounts of $112,449, $34,959, $498,250, $63,062,
$35,312 and $32,667, respectively during the period.
31
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MATTHEWS ASIAN FUNDS
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Advisor, a registered investment advisor, provides the Funds with
investment management services. As compensation for these services, the
Advisor charges the Funds a monthly fee of 1/12 of 1% on each Fund's
respective average daily net assets. The Funds reimburse the Advisor any
service fees paid by it to the extent that shareholder service related
expenses are incurred by the Advisor. Certain officers and Trustees of the
Funds are also officers and directors of the Advisor. All officers serve
without direct compensation from the Funds. Investment advisory fees and
other transactions with affiliates, for the six months ended February 28,
2002, are as follows:
EXPENSES
INVESTMENT VOLUNTARY WAIVED AND
ADVISORY EXPENSE ADVISORY REIMBURSED
FEE RATE LIMITATION FEES BY ADVISOR
---------- ---------- -------- -----------
Matthews Pacific Tiger Fund ................ 1.00% 1.90% $407,121 --
Matthews Asian Growth and Income Fund ...... 1.00 1.90 144,484 --
Matthews Korea Fund ........................ 1.00 2.50 793,180 --
Matthews China Fund ........................ 1.00 2.00 112,236 --
Matthews Japan Fund ........................ 1.00 2.00 36,573 17,890
Matthews Asian Technology Fund.............. 1.00 2.00 54,816 18,030
Effective March 1, 2002 the voluntary expense limitation for Matthews Korea
Fund will be reduced to 2.00%.
The investment advisory agreements provide that any reductions made by the
Advisor in its fees are subject to reimbursement by the Funds within the
following three years provided that the Funds are able to effect such
reimbursement and remain in compliance with applicable expense limitations.
During the six months ended February 28, 2002, the Matthews Pacific Tiger
Fund, Matthews Asian Growth and Income Fund and Matthews China Fund
reimbursed expenses to the Advisor totaling $37,644, $17,499 and $4,680,
respectively. As of February 28, 2002, total expenses waived and reimbursed
by the Advisor that are subject to reimbursement by the Matthews Pacific
Tiger Fund, Matthews China Fund, Matthews Japan Fund and Matthews Asian
Technology Fund totaled $47,513, $10,041, $89,250 and $188,216, respectively.
PFPC Inc. ("PFPC"), an indirect wholly-owned subsidiary of PNC Bank, serves
as the Trust's Administrator and, in that capacity, performs various
administrative and accounting services for each Fund. PFPC also serves as the
Trust's Transfer Agent, dividend disbursing agent and registrar. An officer
of PFPC serves as Asst. Treasurer to the Trust. Total fees accrued by PFPC
for the six months ended February 28, 2002 were $229,907 for administrative
and accounting services and $203,260 for transfer agent services.
3. DISTRIBUTOR FEES AND CLASS SPECIFIC EXPENSES
Effective January 2, 2001, PFPC Distributors, Inc. (the "Distributor") began
serving as the Funds' Distributor pursuant to an Underwriting Agreement.
Prior to January 2, 2001, Provident Distributors, Inc. served as the Funds'
distributor. Pursuant to Rule 12b-1 adopted by the Securities and Exchange
Commission under the Act, the Pacific Tiger Fund Class A and the Korea Fund
Class A, have adopted a Plan of Distribution (the "Plan"). The Plan permits
the participating Funds to pay certain expenses associated with the
distribution of their shares. Under the Plan, each Fund offering Class A
shares may pay actual expenses not exceeding, on an annual basis, 0.25% of
each participating Fund's Class A average daily net assets. The Class I
shares of the Funds do not have a distribution plan.
The Funds bear a portion of the fees paid to certain services providers
(exclusive of the Funds' transfer agent) which provide transfer agency and
shareholder servicing to certain shareholders. Fees accrued to pay to such
service providers for the six months ended February 28, 2002 are reflected in
the statement of operations as follows:
TRANSFER AGENT ADMINISTRATION TOTAL
-------------- -------------- -----
Matthews Pacific Tiger Fund.......................... $43,455 $21,727 $65,182
Matthews Asian Growth and Income Fund ............... 9,775 4,887 14,662
Matthews Korea Fund.................................. 55,663 27,831 83,494
Matthews China Fund.................................. 9,265 4,633 13,898
Matthews Japan Fund.................................. 4,141 2,070 6,211
Matthews Asian Technology Fund....................... 5,403 2,702 8,105
32
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--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 2002 (UNAUDITED)
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4. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended February 28, 2002, excluding
temporary short-term investments, were as follows:
PROCEEDS
PURCHASES FROM SALES
----------- ----------
Matthews Pacific Tiger Fund............ $32,989,898 $19,939,501
Matthews Asian Growth and Income Fund.. 18,986,434 8,428,521
Matthews Korea Fund.................... 62,522,086 28,804,768
Matthews China Fund.................... 12,390,673 5,280,613
Matthews Japan Fund.................... 6,221,340 3,792,877
Matthews Asian Technology Fund......... 5,199,532 3,632,539
The Funds invest excess cash in interest bearing deposits at The Bank of New
York.
5. CAPITAL LOSS CARRYOVER
At August 31, 2001, the Funds had capital loss carryovers expiring through
2009 as follows:
FUND EXPIRING ON:
---- ------------
2008 2009
---- ----
Matthews Japan Fund.................... $2,390,436 $3,877,447
Matthews Asia Technology Fund.......... -- 35,094
These amounts are available to offset possible future capital gains of the
Fund.
6. POST OCTOBER LOSS
Under the current tax law, capital losses realized after October 31 and prior
to the Fund's fiscal year end may be deferred as occuring on the first day of
the following year. For the fiscal year ended August 31, 2001, the Funds
elected to defer capital losses as follows:
LOSSES DEFERRED
---------------
FUND SECURITIES FOREIGN CURRENCY
---- ---------- ----------------
Matthews Pacific Tiger................. $1,264,587 $98,857
Matthews Asia Growth and Income........ 940,157 5,242
Matthews Korea......................... 11,180,368 519,336
Matthews China......................... 801,391 --
Matthews Japan ........................ 3,870,740 119,711
Matthews Asia Technology .............. 6,843,754 63,015
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