See footnotes on page 15.
See accompanying notes to financial statements.
VALUE
=======================================================================
TOTAL INTERNATIONAL DOLLAR BONDS $237,536,263
(Cost $228,554,866)
- -----------------------------------------------------------------------
TOTAL INVESTMENTS: 96.54%* 1,013,056,853
(Cost $824,981,498****)
CASH AND OTHER ASSETS,
LESS LIABILITIES: 3.46% 36,247,236
- -----------------------------------------------------------------------
NET ASSETS: 100.00% $1,049,304,089
=======================================================================
| * | | As a percentage of net assets as of February 29, 2004. |
| ** | | Non-income producing security. |
| *** | | Security exempt from registration under rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified, institutional buyers. At February 29, 2004, the value of this security amounted to $388,652 or 0.04% of net assets. |
| **** | | Cost for Federal income tax purposes is $824,981,498 and net unrealized appreciation consists of: |
Gross unrealized appreciation..............$190,752,697
Gross unrealized depreciation.............. (2,677,342)
Net unrealized appreciation................$188,075,355
| ADR | | American Depositary Receipt |
| Pfd. | | Preferred |
| Cnv. | | Convertible |
| REIT | | Real Estate Investment Trust |
See accompanying notes to financial statements.
800.789.ASIA [2742] www.matthewsfunds.com 15
M A T T H E W S K O R E A F U N D
| CO-PORTFOLIO MANAGERS | SYMBOL: MAKOX |
G. Paul Matthews
Mark W. Headley
The Matthews Korea Fund is an all-capitalization equity fund with diversified exposure across a wide range of Korean equities.
PORTFOLIO MANAGER COMMENTARY
For the six months ended February 29, 2004, the Matthews Korea Fund gained 15.25%, underperforming its benchmark KOSPI Index, which gained 17.04% over the same period. This result was primarily due to weak performance in the consumer discretionary and consumer staples sectors, combined with strong performance by exporters. Domestic investors continued to stay away from the equity market, while foreign investors continued to buy Korean equities.
Domestic consumption remained weak during the six-month period. Political instability and credit card debt burden continued to put pressure on consumers. Rising prices of goods depressed consumer spending even further.
Exports have been one of the few bright spots in the Korean economy. Korean automakers are gaining global market share despite weak domestic sales growth. Consumer electronics exports also remained strong on the back of strong camera handset and LCD panel demand. The Korean semiconductor industry appears to be gaining momentum as sales of digital products, which require more memory, continue to show strong growth. China has been the key growth driver for Korean exports and has surpassed the United States as the largest export market for Korea.
Over the period we saw positive developments in the financial sector. Citigroup1 recently announced its intention to acquire KorAm Bank,2 Korea’s sixth-largest bank by assets. If executed, the deal would result in the largest foreign investment ever in Korea, and Citigroup’s largest investment in Asia excluding Japan. Citigroup’s entrance into the Korean banking industry might provide a challenging environment for the local Korean banks in the short term but should be a positive catalyst for Korea’s ongoing financial restructuring. Prudential Financial3 has also recently completed a deal to buy two Hyundai Group financial units.
In the short term, the biggest risk for the Korean economy still lies within the consumer sector. The Korean economy is again becoming more dependent on exports for growth. We believe that the trend of increased consumer spending is still intact. However, to sustain growth in consumer spending, we believe that the financial sector requires further restructuring and that political stability needs to be restored.
1, 2, 3 As of February 29, 2004, the Matthews Korea Fund held no positions in Citigroup, KorAm Bank or Prudential Financial.
16 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9 , 2 0 0 4
| FUND HIGHLIGHTS | Inception: 1/3/95 |
- --------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS AS OF FEBRUARY 29, 2004*
- --------------------------------------------------------------------------------------------------------------
6 MTHS 1 YR 3 YRS 5 YRS SINCE
INCEPTION
- --------------------------------------------------------------------------------------------------------------
Matthews Korea Fund 15.25% 56.89% 29.52% 23.23% 0.73%
KOSPI Index(1) 17.04% 56.51% 18.86% 12.78% -5.41%
Lipper Pacific ex-Japan Funds Average(2) 25.09% 63.10% 10.87% 12.38% 1.73%+
- --------------------------------------------------------------------------------------------------------------
+From 12/31/94
- --------------------------------------------------------------------------------------------------------------
MATTHEWS KOREA FUND AVERAGE RETURNS AS OF*:
- --------------------------------------------------------------------------------------------------------------
1 YR 3 YRS 5 YRS SINCE
INCEPTION
- --------------------------------------------------------------------------------------------------------------
December 31, 2003 33.26% 35.11% 19.33% -0.04%
March 31, 2004 81.40% 37.16% 19.53% 1.01%
- --------------------------------------------------------------------------------------------------------------
*Assumes reinvestment of all dividends. Past performance is not indicative of future results. Unusually
high returns may not be sustainable.
- ------------------------------------------------------
OPERATING EXPENSES(3)
- ------------------------------------------------------
For six months ended 02/29/04, annualized** 1.50%
For Fiscal Year 2003 (ended 8/31/03)*** 1.72%
- ------------------------------------------------------
- ------------------------------------------------------
PORTFOLIO TURNOVER(4)
- ------------------------------------------------------
For six months ended 02/29/04, annualized** 17.12%
For Fiscal Year 2003 (ended 8/31/03)*** 29.90%
- ------------------------------------------------------
**Unaudited ***Audited
- -------------------------------------------
COUNTRY ALLOCATION
- -------------------------------------------
South Korea 98%
Cash 2%
- -------------------------------------------
- -------------------------------------------
SECTOR ALLOCATION
- -------------------------------------------
Financials 23%
Information Technology 21%
Telecommunication Services 11%
Industrials 11%
Consumer Discretionary 11%
Consumer Staples 11%
Business Services 5%
Health Care 4%
Utilities 1%
Cash 2%
- -------------------------------------------
- -------------------------------------------
MARKET CAP EXPOSURE
- -------------------------------------------
Large cap (over $5 billion) 39%
Mid cap ($1 $5 billion) 21%
Small cap (under $1 billion) 38%
Cash 2%
- -------------------------------------------
- --------------------------------------------------------------------------------------
NAV ASSETS REDEMPTION FEE 12b-1 FEES
- --------------------------------------------------------------------------------------
$4.52 $238.6 billion 2.00% within 90 days None
- --------------------------------------------------------------------------------------
All data is as of February 29, 2004, unless otherwise noted.
|
| 1 | The South Korea Stock Price Index (KOSPI) is a capitalization-weighted index of all common stocks and preferred shares listed on the Korea Stock Exchange.
|
| 2 | As of 2/29/04, the Lipper Pacific ex-Japan Funds Average consisted of 60 funds for the six-month period, 58 funds for the one-year period, 51 funds for the three-year period, 41 funds for the five-year period, and 20 funds since 12/31/94. Lipper, Inc. fund performance does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains for the stated periods.
|
| 3 | Includes management fee, shareholder services fees and other expenses. Matthews Asian Funds do not charge 12b-1 fees.
|
| 4 | The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
800.789.ASIA [2742] www.matthewsfunds.com 17
M A T T H E W S K O R E A F U N D
SCHEDULE OF INVESTMENTS (Unaudited)
EQUITIES: SOUTH KOREA: 97.72%*
SHARES VALUE
=======================================================================
FINANCIALS: 23.03%
Banks: 12.91%
Hana Bank 662,764 $14,371,158
Kookmin Bank 318,822 13,311,361
Kookmin Bank ADR 75,139 3,120,523
- -----------------------------------------------------------------------
30,803,042
- -----------------------------------------------------------------------
Diversified Financials: 6.02%
Samsung Securities Co., Ltd. 241,885 5,748,882
Shinhan Financial Group Co., Ltd. 468,562 8,626,163
- -----------------------------------------------------------------------
14,375,045
- -----------------------------------------------------------------------
Insurance: 4.10%
Samsung Fire & Marine
Insurance Co., Ltd. 109,303 7,035,916
Samsung Fire & Marine
Insurance Co., Ltd., Pfd. 98,000 2,737,500
- -----------------------------------------------------------------------
9,773,416
- -----------------------------------------------------------------------
Total Financials 54,951,503
=======================================================================
INFORMATION TECHNOLOGY: 20.64%
Electrical & Electronic Equipment: 1.22%
Daeduck GDS Co., Ltd. 324,550 2,897,768
- -----------------------------------------------------------------------
Internet Software & Services: 4.71%
NCsoft Corp. ** 91,086 5,925,237
NHN Corp. 85,392 5,322,477
- -----------------------------------------------------------------------
11,247,714
- -----------------------------------------------------------------------
Office Electronics: 1.38%
Sindo Ricoh Co., Ltd. 61,226 3,295,583
- -----------------------------------------------------------------------
Semiconductor Equipment
& Products: 13.33%
Samsung Electronics Co., Ltd. 56,261 26,073,338
Samsung Electronics Co., Ltd., Pfd. 20,670 5,729,949
- -----------------------------------------------------------------------
31,803,287
- -----------------------------------------------------------------------
Total Information Technology 49,244,352
=======================================================================
SHARES VALUE
=======================================================================
INDUSTRIALS: 11.34%
Commercial Services: 2.34%
S1 Corp. 239,115 $5,571,217
Construction: 2.04%
Tae Young Corp. 139,630 4,868,053
Electrical Products: 2.75%
Korea Electric Terminal Co., Ltd. 137,720 2,447,575
Kumho Electric Inc. 107,610 4,113,154
- -----------------------------------------------------------------------
6,560,729
- -----------------------------------------------------------------------
Manufacturing Industries: 4.21%
Daewoong Pharmaceutical
Co., Ltd. ** 138,000 2,464,286
LG Chem, Ltd. 44,000 2,151,360
LG Life Sciences, Ltd. ** 73,460 2,311,241
Power Logics Co., Ltd. ** 142,810 3,120,933
- -----------------------------------------------------------------------
10,047,820
- -----------------------------------------------------------------------
Total Industrials 27,047,819
=======================================================================
TELECOMMUNICATION SERVICES: 10.99%
Diversified Telecommunication
Services: 3.41%
KT Corp. 59,720 2,209,031
KT Corp. ADR 311,500 5,924,730
- -----------------------------------------------------------------------
8,133,761
- -----------------------------------------------------------------------
Wireless Telecommunication
Services: 7.58%
KT Freetel 140,801 2,418,521
SK Telecom Co., Ltd. 54,595 11,048,988
SK Telecom Co., Ltd. ADR 184,300 4,609,343
- -----------------------------------------------------------------------
18,076,852
- -----------------------------------------------------------------------
Total Telecommunication Services 26,210,613
=======================================================================
CONSUMER DISCRETIONARY: 10.90%
Automobiles: 5.42%
Hyundai Motor Co., Ltd. 176,361 7,498,342
Hyundai Motor Co., Ltd., Pfd. 263,720 5,438,104
- -----------------------------------------------------------------------
12,936,446
- -----------------------------------------------------------------------
Department Stores: 0.75%
Taegu Department Store Co., Ltd. 269,300 1,790,753
- -----------------------------------------------------------------------
18 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9 , 2 0 0 4
SHARES VALUE
=======================================================================
Internet & Catalog Retail: 2.90%
Internet Auction Co., Ltd. ** 84,197 $5,154,918
LG Home Shopping, Inc. 46,483 1,774,734
- -----------------------------------------------------------------------
6,929,652
- -----------------------------------------------------------------------
Retail: 1.83%
Hyundai Department Store Co., Ltd. 150,610 4,354,371
- -----------------------------------------------------------------------
Total Consumer Discretionary 26,011,222
=======================================================================
CONSUMER STAPLES: 10.80%
Beverages: 2.86%
Hite Brewery Co., Ltd. 88,951 6,807,474
- -----------------------------------------------------------------------
Consumer Products: 3.45%
Amorepacific Corp. 43,000 6,215,986
Handsome Co., Ltd. 211,379 2,022,120
- -----------------------------------------------------------------------
8,238,106
- -----------------------------------------------------------------------
Food Products: 4.49%
Nong Shim Co., Ltd. 38,500 6,547,619
ORION Corp. 36,470 2,031,280
Pulmuone Co., Ltd. 50,950 2,135,914
- -----------------------------------------------------------------------
10,714,813
- -----------------------------------------------------------------------
Total Consumer Staples 25,760,393
=======================================================================
BUSINESS SERVICES: 4.83%
Advertising: 0.23%
LG Ad, Inc. 33,110 546,202
- -----------------------------------------------------------------------
Media: 4.60%
Cheil Communications, Inc. 34,090 5,217,857
CJ Entertainment, Inc. 353,357 5,769,094
- -----------------------------------------------------------------------
10,986,951
- -----------------------------------------------------------------------
Total Business Services 11,533,153
=======================================================================
HEALTH CARE: 4.17%
Pharmaceuticals: 4.17%
Hanmi Pharm Co., Ltd. 175,250 4,984,790
Yuhan Corp. 82,205 4,963,078
- -----------------------------------------------------------------------
Total Health Care 9,947,868
=======================================================================
UTILITIES: 1.02%
Korea Electric Power (KEPCO) Corp. 138,610 2,439,819
=======================================================================
TOTAL EQUITIES: SOUTH KOREA $233,146,742
(Cost $163,876,256)
=======================================================================
INTERNATIONAL DOLLAR BONDS:
SOUTH KOREA: 0.66%*
FACE AMOUNT VALUE
=======================================================================
TELECOMMUNICATION
SERVICES: 0.56%
Korea Telecom Corp., Cnv
0.250%, 01/04/07 $925,000 $945,812
Korea Telecom Corp., Cnv
0.250%, 01/04/07 *** 375,000 383,438
- -----------------------------------------------------------------------
Total Telecommunication Services 1,329,250
=======================================================================
FINANCIALS: 0.10%
Insurance: 0.10%
Korea Deposit Insurance Corp., Cnv.
2.250%, 10/11/05 200,000 250,750
=======================================================================
TOTAL INTERNATIONAL DOLLAR
BONDS: SOUTH KOREA 1,580,000
(Cost $1,610,593)
- -----------------------------------------------------------------------
TOTAL INVESTMENTS: 98.38% 234,726,742
(Cost $165,486,849****)
CASH AND OTHER ASSETS,
LESS LIABILITIES: 1.62% 3,870,982
- -----------------------------------------------------------------------
NET ASSETS: 100.00% $238,597,724
=======================================================================
| * | | As a percentage of net assets as of February 29, 2004. |
| ** | | Non-income producing security. |
| *** | | Security exempt from registration under rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified, institutional buyers. At February 29, 2004, the value of this security amounted to $383,438 or 0.16% of net assets. |
| **** | | Cost for Federal income tax purposes is $165,486,849 and net unrealized appreciation consists of: |
Gross unrealized appreciation........$75,651,976
Gross unrealized depreciation........ (6,412,083)
-----------
Net unrealized appreciation..........$69,239,893
===========
ADR American Depositary Receipt
Cnv. Convertible
Pfd. Preferred
See accompanying notes to financial statements.
800.789.ASIA [2742] www.matthewsfunds.com 19
M A T T H E W S C H I N A F U N D
| CO-PORTFOLIO MANAGERS | SYMBOL: MCHFX |
G. Paul Matthews
Mark W. Headley
Richard H. Gao
The Matthews China Fund is an all-capitalization equity fund that invests in a diversified portfolio of Chinese securities.
PORTFOLIO MANAGER COMMENTARY
For the six months ended February 29, 2004, the Matthews China Fund gained 35.25%, while its benchmark MSCI China Free Index was up 43.06% during the same period.
During the six-month period, China-related stocks staged a strong rally, thanks to a continued positive economic outlook, improving corporate earnings and investors’ growing enthusiasm over China. The Fund’s holdings in the consumer discretionary, industrial, financial and utilities sectors were the primary contributors to performance. The Fund’s relative underweight position in the petrochemical sector, which accounted for approximately 25% of the MSCI China Free Index, and its limited exposure to commodity-related stocks were the main reasons behind its underperformance compared with the benchmark.
China recorded strong economic growth of 9.1% for the calendar year 2003 and had an especially impressive fourth quarter, with growth registering 9.9%. Domestic consumption growth has been contributing more to China’s economy as its per-capita GDP recently reached a crucial $1,000, triggering increased demand for various consumer products ranging from home-improvement products to cell phones to cars.
Banking sector reform was another area of development during the period. To help clean up the longstanding bad-debt problem of its state banks, the government recently injected $45 billion of its foreign exchange reserves into two of the country’s largest banks. This capital injection greatly improved the balance sheets of the two banks and cleared the way for their planned listing on the Hong Kong Stock Exchange sometime in 2004. Going forward, China is expected to continue its modest tightening policy that began late last year to combat rising inflationary pressure as a result of surging raw material prices.
The Matthews China Fund remained well diversified across sectors. By the end of February 2004, the Fund was invested in 52 companies across 10 different sectors. Over the period, we shifted more positions into Hong Kong-based China plays from the high-flying Chinese H shares. We also increased our B-share holdings from 3% to 6%. In sector allocations, we increased the Fund’s consumer discretionary position, leaving the remaining sector weightings largely the same.
20 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9, 2 0 0 4
| FUND HIGHLIGHTS | Inception: 2/19/98 |
- ----------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS AS OF FEBRUARY 29, 2004*
- ----------------------------------------------------------------------------------------------------------------
SINCE
6 MTHS 1 YR 3 YRS 5 YRS INCEPTION
- ----------------------------------------------------------------------------------------------------------------
Matthews China Fund 35.25% 73.61% 20.93% 27.70% 9.72%
MSCI China Free Index(1) 43.06% 93.75% 7.19% 5.50% -8.76%
Lipper China Region Funds Average(2) 30.84% 71.49% 9.97% 17.45% 6.83%+
- ----------------------------------------------------------------------------------------------------------------
+From 2/28/98
- ----------------------------------------------------------------------------------------------------------------
MATTHEWS CHINA FUND AVERAGE ANNUAL RETURNS AS OF*:
- ----------------------------------------------------------------------------------------------------------------
SINCE
1 YR 3 YRS 5 YRS INCEPTION
- ----------------------------------------------------------------------------------------------------------------
December 31, 2003 65.00% 22.65% 20.43% 8.23%
March 31, 2004 67.96% 17.42% 23.72% 8.46%
- ----------------------------------------------------------------------------------------------------------------
*Assumes reinvestment of all dividends. Past performance is not indicative of future results.
Unusually high returns may not be sustainable.
- ---------------------------------------------------------------
OPERATING EXPENSES(3)
- ---------------------------------------------------------------
For six months ended 02/29/04, annualized ** 1.49%
For Fiscal Year 2003 (ended 8/31/03)*** 1.79%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
PORTFOLIO TURNOVER(4)
- ---------------------------------------------------------------
For six months ended 02/29/04, annualized** 2.48%
For Fiscal Year 2003 (ended 8/31/03)*** 19.34%
- ---------------------------------------------------------------
**Unaudited ***Audited
- -------------------------------------------
CHINA EXPOSURE(5)
- -------------------------------------------
Hong Kong 33%
China 64%
H Shares 32%
Red Chips 26%
B Shares 6%
Cash 3%
- -------------------------------------------
- -------------------------------------------
SECTOR ALLOCATION
- -------------------------------------------
Consumer Discretionary 27%
Industrials 23%
Financials 13%
Energy 10%
Telecommunications Services 9%
Utilities 7%
Information Technology 5%
Health Care 3%
Cash 3%
- -------------------------------------------
- -------------------------------------------
MARKET CAP EXPOSURE
- -------------------------------------------
Large cap (over $5 billion) 31%
Mid cap ($1-$5 billion) 48%
Small cap (under $1 billion) 18%
Cash 3%
- -------------------------------------------
- ---------------------------------------------------------------------------------------
NAV ASSETS REDEMPTION FEE 12b-1 FEES
- ---------------------------------------------------------------------------------------
$15.53 $464.3 million 2.00% within 90 days None
- ---------------------------------------------------------------------------------------
All data is as of February 29, 2004, unless otherwise noted.
|
| 1 | 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. |
| 2 | As of 2/29/04, the Lipper China Region Funds Average consisted of 22 funds for the six-month, one-year and three-year periods; 20 funds for the five-year period; and 16 funds since 2/28/98. Lipper, Inc. fund performance does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains for the stated periods. |
| 3 | Includes management fee, shareholder services fees and other expenses. Matthews Asian Funds do not charge 12b-1 fees. |
| 4 | The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
| 5 | H shares are Mainland Chinese companies listed on the Hong Kong stock exchange; companies are incorporated in mainland China and approved by the China Securities Regulatory Commission for a listing in Hong Kong. Red Chips are Mainland Chinese companies listed on the Hong Kong stock exchange; companies are incorporated in Hong Kong. B Shares are Mainland Chinese stocks listed on the Shanghai and Shenzhen stock exchanges, available to Chinese and foreign investors. |
800.789.ASIA [2742] www.matthewsfunds.com 21
M A T T H E W S C H I N A F U N D
SCHEDULE OF INVESTMENTS (Unaudited)
EQUITIES: CHINA/HONG KONG: 97.33%*
SHARES VALUE
============================================================================
CONSUMER DISCRETIONARY: 26.81%
Apparel & Textiles: 4.39%
Lerado Group Holding Co., Ltd. 24,089,000 $4,920,638
Texwinca Holdings, Ltd. 6,352,000 4,610,675
Weiqiao Textile Co.,
Ltd. H Shares ** 6,176,000 10,790,753
- ----------------------------------------------------------------------------
20,322,066
- ----------------------------------------------------------------------------
Automobiles & Components: 4.01%
Denway Motors, Ltd. 14,514,600 16,782,363
Great Wall Automobile Holdings
Co., Ltd. H Shares ** 959,000 1,848,057
- ----------------------------------------------------------------------------
18,630,420
- ----------------------------------------------------------------------------
Consumer Durables: 2.61%
TCL International Holdings, Ltd. 26,584,000 12,124,232
- ----------------------------------------------------------------------------
Distributors: 3.19%
Li & Fung, Ltd. 7,592,000 14,825,363
- ----------------------------------------------------------------------------
Hotels, Restaurants & Leisure: 5.46%
Cafe De Coral Holdings, Ltd. 5,440,100 5,276,663
Shangri-La Asia, Ltd. 10,033,600 9,409,904
Tsingtao Brewery Co., Ltd.
H Shares 8,751,000 10,680,383
- ----------------------------------------------------------------------------
25,366,950
- ----------------------------------------------------------------------------
Media: 4.14%
Clear Media, Ltd. ** 7,509,000 6,752,828
Television Broadcasts, Ltd. 2,556,000 12,478,144
- ----------------------------------------------------------------------------
19,230,972
- ----------------------------------------------------------------------------
Retail: 2.37%
Giordano International, Ltd. 10,188,000 6,184,382
Moulin International
Holdings, Ltd. 6,466,000 4,818,027
- ----------------------------------------------------------------------------
11,002,409
- ----------------------------------------------------------------------------
Travel & Recreation: 0.64%
China Travel International
Investment Hong Kong, Ltd. 14,712,000 2,967,406
- ----------------------------------------------------------------------------
Total Consumer Discretionary 124,469,818
============================================================================
INDUSTRIALS: 23.38%
Airlines: 3.46%
Beijing Capital International
Airport Co., Ltd. H Shares 19,230,000 7,226,212
China Southern Airlines Co.,
Ltd. H Shares ** 15,592,000 8,863,814
- ----------------------------------------------------------------------------
16,090,026
- ----------------------------------------------------------------------------
SHARES VALUE
============================================================================
Industrial Conglomerates: 13.54%
Beijing Enterprises Holdings,
Ltd. 1,016,000 $1,311,793
BYD Co., Ltd. H Shares 4,492,500 14,890,639
Cheung Kong Infrastructure
Holdings, Ltd. 6,583,500 16,788,925
China Merchants Holdings
International Co., Ltd. 7,713,000 11,246,690
Cosco Pacific Ltd. 7,370,000 11,219,962
Shanghai Industrial
Holdings, Ltd. 2,825,000 7,421,938
- ----------------------------------------------------------------------------
62,879,947
- ----------------------------------------------------------------------------
Machinery: 1.75%
Shanghai Zhenhua Port Machinery Co.,
Ltd. B Shares 4,609,078 8,111,977
- ----------------------------------------------------------------------------
Transportation: 4.63%
GZI Transport, Ltd. 14,156,000 4,546,593
Sinotrans, Ltd. H Shares 12,316,000 5,458,764
Zhejiang Expressway Co.,
Ltd. H Shares 14,204,000 11,496,265
- ----------------------------------------------------------------------------
21,501,622
- ----------------------------------------------------------------------------
Total Industrials 108,583,572
============================================================================
FINANCIALS: 13.03%
Banks: 3.37%
BOC Hong Kong Holdings, Ltd. 7,665,500 15,658,248
- ----------------------------------------------------------------------------
Diversified Financials: 3.45%
Swire Pacific, Ltd. A Shares 2,289,500 16,030,338
- ----------------------------------------------------------------------------
Insurance: 3.57%
China Insurance International
Holdings Co., Ltd. 8,104,000 4,867,283
China Life Insurance Co.,
Ltd. H Shares** 2,988,760 2,131,030
PICC Property and Casualty Co.,
Ltd. H Shares ** 21,878,000 9,556,351
- ----------------------------------------------------------------------------
16,554,664
- ----------------------------------------------------------------------------
Real Estate: 2.64%
China Vanke Co., Ltd. B Shares 14,164,072 12,264,605
- ----------------------------------------------------------------------------
Total Financials 60,507,855
============================================================================
22 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9, 2 0 0 4
SHARES VALUE
============================================================================
ENERGY: 10.00%
Oil & Gas: 10.00%
China Oilfield Services,
Ltd. H Shares 18,018,000 $5,960,591
CNOOC, Ltd. 4,285,000 8,670,356
Hong Kong and China
Gas Co., Ltd. 8,305,400 14,351,205
PetroChina Co., Ltd. H Shares 15,114,000 8,106,650
Sinopec Zhenhai Refining &
Chemical Co., Ltd. 8,512,000 9,349,820
- ----------------------------------------------------------------------------
Total Energy 46,438,622
============================================================================
TELECOMMUNICATION
SERVICES: 8.94%
Communication Equipment: 1.66%
Comba Telecom Systems
Holdings, Ltd.** 12,478,000 7,734,778
- ----------------------------------------------------------------------------
Telecommunications: 1.48%
China Telecom Corp., Ltd.
H Shares 17,724,000 6,887,992
- ----------------------------------------------------------------------------
Wireless Telecommunication
Services: 5.80%
China Mobile HK, Ltd. 4,414,583 15,624,885
China Mobile HK, Ltd. ADR 50,500 890,315
China Unicom, Ltd. 7,930,000 10,187,761
China Unicom, Ltd. ADR 16,200 206,874
- ----------------------------------------------------------------------------
26,909,835
- ----------------------------------------------------------------------------
Total Telecommunication Services 41,532,605
============================================================================
UTILITIES: 7.14%
Beijing Datang Power Generation,
Co., Ltd. H Shares 16,288,000 13,810,749
Guangdong Electric Power
Development Co., Ltd. B Shares 7,515,926 6,411,448
Huaneng Power International,
Inc. ADR 39,400 2,950,272
Huaneng Power International,
Inc. H Shares 5,264,000 9,975,012
- ----------------------------------------------------------------------------
Total Utilities 33,147,481
============================================================================
SHARES VALUE
============================================================================
INFORMATION TECHNOLOGY: 5.35%
Computer Software: 2.03%
Sina Corp. ** 47,000 $2,076,507
Travelsky Technology, Ltd.
H Shares 6,903,000 7,360,741
- ----------------------------------------------------------------------------
9,437,248
- ----------------------------------------------------------------------------
Computers & Peripherals: 3.32%
Legend Group, Ltd. 25,796,000 10,853,485
TPV Technology, Ltd. 7,476,000 4,538,127
- ----------------------------------------------------------------------------
15,391,612
- ----------------------------------------------------------------------------
Total Information Technology 24,828,860
============================================================================
HEALTH CARE: 2.68%
Biotechnology: 1.08%
Global Bio-chem Technology
Group Co., Ltd. 6,530,000 4,991,553
- ----------------------------------------------------------------------------
Pharmaceuticals: 1.60%
China Pharmaceutical
Group, Ltd. 19,974,000 7,441,639
- ----------------------------------------------------------------------------
Total Health Care 12,433,192
============================================================================
TOTAL INVESTMENTS: 97.33% 451,942,005
(Cost $363,251,937***)
CASH AND OTHER ASSETS,
LESS LIABILITIES: 2.67% 12,382,690
- ----------------------------------------------------------------------------
NET ASSETS: 100.00% $464,324,695
============================================================================
| * | As a percentage of net assets as of February 29, 2004.
|
| ** | Non-income producing security.
|
| *** | Cost for Federal income tax purposes is $363,251,937 and net unrealized appreciation consists of: |
Gross unrealized appreciation.........$90,819,484
Gross unrealized depreciation.........(2,129,416)
-----------
Net unrealized appreciation...........$88,690,068
===========
| ADR | American Depositary Receipt |
See accompanying notes to financial statements.
800.789.ASIA [2742] www.matthewsfunds.com 23
M A T T H E W S J A P A N F U N D
| PORTFOLIO MANAGER | SYMBOL: MJFOX |
Mark W. Headley
The Matthews Japan Fund is an all-capitalization core equity fund with diversified exposure across a wide range of corporate Japan.
PORTFOLIO MANAGER COMMENTARY
The Matthews Japan Fund gained 22.31% over the six months ended February 29, 2004, outperforming its benchmarks, the MSCI Developed Markets Japan and TOPIX indices, which gained 16.59% and 15.76%, respectively, over the same period.
The Fund’s positions in the financial, consumer discretionary and information technology sectors were the main contributors to the strong performance. Banks, brokerages and domestic-related companies moved higher during the period as the country posted a strong GDP figure and deflation appeared to be coming to an end. Select technology stocks in the Fund also performed well. The Fund continued to benefit from its underweight position in export-oriented stocks, which generally underperformed during the period due to the volatile yen.
Despite the recent move higher, we believe that the Japanese stock market remains reasonably valued versus global markets and that expectations remain low. Japan continues to show signs of improving corporate profits, employment trends and stabilizing prices. However, many global investors remain understandably skeptical of the recovery in Japan, given its history of false recoveries. In the past five years, foreign investors have purchased as much as $7 billion worth of Japanese equities in a single week on increased optimism, but have had to sell as the economic recovery proved to be unsustainable.
The Fund has slightly increased its exposure to the consumer discretionary and consumer staples sectors. Overall, the Fund continues to maintain its largest sector weightings in the financial, technology and consumption-oriented sectors. While banks stocks have appreciated considerably in the past few months, they remain one of the biggest beneficiaries of a reflationary environment in Japan.
24 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9, 2 0 0 4
| FUND HIGHLIGHTS | Inception: 12/31/98 |
- ----------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS AS OF FEBRUARY 29, 2004*
- ----------------------------------------------------------------------------------------------------------------
SINCE
6 MTHS 1 YR 3 YRS 5 YRS INCEPTION
- ----------------------------------------------------------------------------------------------------------------
Matthews Japan Fund 22.31% 68.18% 2.33% 6.29% 8.65%
MSCI Developed Markets Japan Index(1) 16.59% 43.20% -2.36% 0.76% 0.43%
TOPIX Index(2) 15.76% 44.43% -1.25% 1.90% 1.73%
Lipper Japanese Funds Average(3) 14.59% 42.83% -3.20% 2.04% 2.02%
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
MATTHEWS JAPAN FUND AVERAGE ANNUAL RETURNS AS OF*:
- ----------------------------------------------------------------------------------------------------------------
SINCE
1 YR 3 YRS 5 YRS INCEPTION
- ----------------------------------------------------------------------------------------------------------------
December 31, 2003 59.54% -0.70% 8.76% 8.76%
March 31, 2004 103.26% 8.00% 5.05% 11.81%
- ----------------------------------------------------------------------------------------------------------------
*Assumes reinvestment of all dividends. Past performance is not indicative of future results. Unusually
high returns may not be sustainable.
- ---------------------------------------------------------------
OPERATING EXPENSES(4)
- ---------------------------------------------------------------
For six months ended 02/29/04, annualized ** 1.48%
For Fiscal Year 2003 (ended 8/31/03)*** 2.00%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
PORTFOLIO TURNOVER(5)
- ---------------------------------------------------------------
For six months ended 02/29/04, annualized** 33.50%
For Fiscal Year 2003 (ended 8/31/03)*** 77.30%
- ---------------------------------------------------------------
**Unaudited ***Audited
- -------------------------------------------
COUNTRY ALLOCATION
- -------------------------------------------
Japan 97%
Cash 3%
- -------------------------------------------
- -------------------------------------------
SECTOR ALLOCATION
- -------------------------------------------
Consumer Discretionary 30%
Financials 23%
Manufacturing 18%
Information Technology 13%
Telecommunications Services 7%
Consumer Staples 6%
Cash 3%
- -------------------------------------------
- -------------------------------------------
MARKET CAP EXPOSURE
- -------------------------------------------
Large cap (over $5 billion) 45%
Mid cap ($1-$5 billion) 29%
Small cap (under $1 billion) 23%
Cash 3%
- -------------------------------------------
- ---------------------------------------------------------------------------------------
NAV ASSETS REDEMPTION FEE 12b-1 FEES
- ---------------------------------------------------------------------------------------
$13.32 $69.7 million 2.00% within 90 days None
- ---------------------------------------------------------------------------------------
| All data is as of February 29, 2004, unless otherwise noted. |
| 1 | The MSCI Developed Markets Japan Index is an unmanaged capitalization-weighted index of Japanese equities listed in Japan. |
| 2 | The Tokyo Price Index (TOPIX) is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. |
| 3 | As of 2/29/04, the Lipper Japanese Funds Average consisted of 49 funds for the six-month and one-year periods, 43 funds for the three-year period, 33 funds for the five-year period, and 33 funds since 12/31/98. Lipper, Inc. fund performance does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains for the stated periods. |
| 4 | Includes management fee, shareholder services fees and other expenses. Matthews Asian Funds do not charge 12b-1 fees. |
| 5 | The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
800.789.ASIA [2742] www.matthewsfunds.com 25
M A T T H E W S J A P A N F U N D
SCHEDULE OF INVESTMENTS (Unaudited)
EQUITIES: 97.25%*
SHARES VALUE
============================================================================
CONSUMER DISCRETIONARY: 29.87%
Apparel & Textiles: 2.84%
Shiseido Co., Ltd. 166,000 $1,969,028
- ----------------------------------------------------------------------------
Automobiles: 6.71%
Gulliver International Co., Ltd. 30,200 2,429,599
Honda Motor Co., Ltd. ADR 103,000 2,246,430
- ----------------------------------------------------------------------------
4,676,029
- ----------------------------------------------------------------------------
Bicycle Manufacturing: 3.67%
Shimano, Inc. 116,000 2,558,667
- ----------------------------------------------------------------------------
Commercial Services: 0.77%
Heian Ceremony Service Co., Ltd. 71,000 539,356
- ----------------------------------------------------------------------------
Household Durables: 6.80%
Makita Corp. 164,000 1,948,307
Nintendo Co., Ltd. 29,015 2,788,372
- ----------------------------------------------------------------------------
4,736,679
- ----------------------------------------------------------------------------
Media: 3.88%
Fuji Television Network, Inc. 533 2,336,692
Usen Corp. ** 1,700 368,287
- ----------------------------------------------------------------------------
2,704,979
- ----------------------------------------------------------------------------
Photography: 2.11%
Fuji Photo Film Co., Ltd. 47,000 1,466,868
- ----------------------------------------------------------------------------
Retail: 3.09%
Belluna Co., Ltd. 24 861
Belluna Co., Ltd. Warrants ** 622 --
Kyoto Kimono Yuzen Co., Ltd. 226 523,320
Paris Miki, Inc. 79,000 1,630,469
- ----------------------------------------------------------------------------
2,154,650
- ----------------------------------------------------------------------------
Total Consumer Discretionary 20,806,256
============================================================================
SHARES VALUE
============================================================================
FINANCIALS: 22.90%
Banks: 10.35%
Mizuho Financial Group, Inc. ** 924 $2,782,317
The Joyo Bank, Ltd. 548,000 1,775,508
The Sumitomo Trust and
Banking Co., Ltd. 492,000 2,647,776
- ----------------------------------------------------------------------------
7,205,601
- ----------------------------------------------------------------------------
Diversified Financials: 5.33%
Monex, Inc. ** 3,281 1,618,579
Nomura Holdings, Inc. 132,000 2,096,101
- ----------------------------------------------------------------------------
3,714,680
- ----------------------------------------------------------------------------
Insurance: 3.45%
Taiyo Life Insurance Co. ** 1,411 2,402,032
- ----------------------------------------------------------------------------
Real Estate: 3.77%
Japan Real Estate Investment Corp.
REIT 77 501,775
Japan Retail Fund Investment Corp.
REIT 338 2,122,167
- ----------------------------------------------------------------------------
2,623,942
- ----------------------------------------------------------------------------
Total Financials 15,946,255
============================================================================
MANUFACTURING: 18.45%
Agricultural: 3.51%
Hokuto Corp. 171,780 2,443,219
- ----------------------------------------------------------------------------
Electronics: 8.70%
Matsushita Electric Industrial
Co., Ltd 180,000 2,624,382
Murata Manufacturing Co., Ltd. 31,700 1,761,111
Sharp Corp. 101,000 1,675,014
- ----------------------------------------------------------------------------
6,060,507
- ----------------------------------------------------------------------------
Industrial Equipment: 1.97%
Yushin Precision Equipment
Co., Ltd. 56,950 1,370,845
- ----------------------------------------------------------------------------
Medical Equipment & Supplies: 2.28%
Nakanishi, Inc. 31,000 1,588,871
- ----------------------------------------------------------------------------
Printing: 1.99%
Toppan Forms Co., Ltd. 121,700 1,386,752
- ----------------------------------------------------------------------------
Total Manufacturing 12,850,194
============================================================================
26 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9, 2 0 0 4
SHARES VALUE
============================================================================
INFORMATION TECHNOLOGY: 12.58%
Electronic Equipment & Instruments: 7.78%
Disco Corp. 31,700 $1,534,807
Niws Co., Ltd. 799 1,872,085
Secom Co., Ltd. 52,000 2,008,420
- ----------------------------------------------------------------------------
5,415,312
- ----------------------------------------------------------------------------
Semiconductor Equipment: 2.21%
Macnica, Inc. 53,100 1,540,609
- ----------------------------------------------------------------------------
Software: 2.59%
Access Co., Ltd. ** 25 1,805,327
- ----------------------------------------------------------------------------
Total Information Technology 8,761,248
============================================================================
TELECOMMUNICATION
SERVICES: 7.13%
Diversified Telecommunication
Services: 7.13%
Nippon Telegraph & Telephone
Corp. ADR 104,025 2,421,702
NTT DoCoMo, Inc. 1,225 2,545,076
- ----------------------------------------------------------------------------
Total Telecommunication Services 4,966,778
============================================================================
SHARES VALUE
============================================================================
CONSUMER STAPLES: 6.32%
Beverages: 2.80%
ITO EN, Ltd. 49,300 $1,949,259
- ----------------------------------------------------------------------------
Food: 3.52%
Nissin Healthcare Food
Service Co., Ltd. 116,600 2,454,512
- ----------------------------------------------------------------------------
Total Consumer Staples 4,403,771
============================================================================
TOTAL INVESTMENTS: 97.25% 67,734,502
(Cost $59,606,611***)
CASH AND OTHER ASSETS,
LESS LIABILITIES: 2.75% 1,917,452
- ----------------------------------------------------------------------------
NET ASSETS: 100.00% $69,651,954
============================================================================
| * | As a percentage of net assets as of February 29, 2004. |
| ** | Non-income producing security. |
| *** | Cost for Federal income tax purposes is $59,606,611 and net unrealized appreciation consists of: |
Gross unrealized appreciation.........$9,063,372
Gross unrealized depreciation......... (935,481)
----------
Net unrealized appreciation...........$8,127,891
==========
| ADR | American Depositary Receipt
|
| REIT | Real Estate Investment Trust |
See accompanying notes to financial statements.
800.789.ASIA [2742] www.matthewsfunds.com 27
M A T T H E W S A S I A N T E C H N O L O G Y F U N D
| CO-PORTFOLIO MANAGERS | SYMBOL: MATFX |
G. Paul Matthews
Mark W. Headley
The Matthews Asian Technology Fund invests in companies located in Asia that derive a substantial portion of their revenue from technology-related industries and services.
PORTFOLIO MANAGER COMMENTARY
For the six-month period ended February 29, 2004, the Matthews Asian Technology Fund gained 18.91%, outperforming its benchmark MSCI/Matthews Asian Technology Index, which gained 9.69% over the same period.
The Asian technology sector’s strong showing during the period was due to the strong performance of wireless telecommunications and software and the substantial growth of digital products such as digital cameras, LCD panels and handsets. Demand for LCD panels is still outpacing supply by a small margin, and the expectations of strong LCD TV sales are prompting LCD panel makers to increase capacity.
The utilization rate among Asian original design manufacturers (ODMs) and foundries remained high, indicating solid order flows ahead from European and U.S. markets. Although growth is slowing a bit, this does not change the fundamental shift in the consumer electronics industry of consumers moving from analog to new digital products. We expect that this transition will continue until most home appliances and gadgets are fully digitized.
Japan was the biggest contributor to Fund performance for the six-month period. Japan’s recovery has been one of the most-discussed topics in the Asian technology sector. After years of falling sales and declining profitability, Japanese companies made a strong comeback on the back of strong demand for high-end components and sophisticated raw materials. While Korean and Taiwanese companies have caught up with Japanese companies on general manufacturing technologies, Japan still leads in the production of high-end semiconductors and manufacturing of high-end components and raw materials.
We are seeing more integration within the Asian region. Increasing numbers of Korean, Japanese and Chinese companies are setting up joint ventures and partnerships to co-develop key technologies and to consolidate their manufacturing bases. We believe that more integration is on the way and that this trend should drive the Asian technology sector to become more competitive in the global market.
We remain positive on the long-term growth prospects of the Asian technology sector as Asian technology companies continue to increase their global market share. However, we are cautious in the short term given the strong earnings expectations and the declining margins in some industries. The growth in China and the rate of recovery in the United States and Japan will be key factors behind the sustainable profitability of Asian technology companies.
28 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9, 2 0 0 4
| FUND HIGHLIGHTS | Inception: 12/27/99 |
- ---------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS AS OF FEBRUARY 29, 2004*
- ---------------------------------------------------------------------------------------------------
SINCE
6 MTHS 1 YR 3 YRS INCEPTION
- ---------------------------------------------------------------------------------------------------
Matthews Asian Technology Fund 18.91% 85.26% 4.41% -13.74%
MSCI/Matthews Asian Technology Index(1) 9.69% 52.37% -2.72% -19.18%
Lipper Science and Technology Funds Average(2) 13.33% 61.10% -10.13% -20.06%+
- ---------------------------------------------------------------------------------------------------
+From 12/31/99
- -----------------------------------------------------------------------------------------------
MATTHEWS ASIAN TECHNOLOGY FUND AVERAGE ANNUAL RETURNS AS OF*:
- -----------------------------------------------------------------------------------------------
SINCE
1 YR 3 YRS INCEPTION
- -----------------------------------------------------------------------------------------------
December 31, 2003 64.95% 5.41% -15.45%
March 31, 2004 96.02% 9.08% -12.92%
- -----------------------------------------------------------------------------------------------
*Assumes reinvestment of all dividends. Past performance is not indicative of future results.
Unusually high returns may not be sustainable.
- ---------------------------------------------------------------
OPERATING EXPENSES(3)
- ---------------------------------------------------------------
For six months ended 02/29/04, annualized ** 2.00%
For Fiscal Year 2003 (ended 8/31/03)*** 2.00%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
PORTFOLIO TURNOVER(4)
- ---------------------------------------------------------------
For six months ended 02/29/04, annualized** 23.89%
For Fiscal Year 2003 (ended 8/31/03)*** 72.03%
- ---------------------------------------------------------------
**Unaudited ***Audited
- -------------------------------------------
COUNTRY ALLOCATION
- -------------------------------------------
Japan 29%
South Korea 25%
China/Hong Kong 18%
Taiwan 11%
Thailand 5%
Singapore 4%
India 2%
Indonesia 2%
Cash 4%
- -------------------------------------------
- -------------------------------------------
SECTOR ALLOCATION
- -------------------------------------------
Information Technology 47%
Telecommunication Services 23%
Manufacturing 12%
Consumer Discretionary 9%
Industrials 5%
Cash 4%
- -------------------------------------------
- -------------------------------------------
MARKET CAP EXPOSURE
- -------------------------------------------
Large cap (over $5 billion) 39%
Mid cap ($1-$5 billion) 28%
Small cap (under $1 billion) 29%
Cash 4%
- -------------------------------------------
- --------------------------------------------------------------------------------
NAV ASSETS REDEMPTION FEE 12b-1 FEES
- --------------------------------------------------------------------------------
$5.11 $37.0 million 2.00% within 90 days None
- --------------------------------------------------------------------------------
| All data is as of February 29, 2004, unless otherwise noted. |
| 1 | The MSCI/Matthews Asian Technology Index is an unmanaged capitalization-weighted index of Asian equities tracking a broad range of technology stocks including semiconductor equipment and products, communications equipment, computers and peripherals, electronic equipment and instruments, office electronics, software, IT consulting and services, Internet software and services, diversified telecommunications services, and wireless telecommunications services. |
| 2 | As of 2/29/04, the Lipper Science and Technology Funds Average consisted of 321 funds for the six-month period, 318 funds for the one-year period, 270 funds for the three-year period, and 140 funds since 12/31/99. Lipper, Inc. fund performance does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains for the stated periods. |
| 3 | Includes management fee, shareholder services fees and other expenses. Matthews Asian Funds do not charge 12b-1 fees. |
| 4 | The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
800.789.ASIA [2742] www.matthewsfunds.com 29
M A T T H E W S A S I A N T E C H N O L O G Y F U N D
SCHEDULE OF INVESTMENTS (Unaudited)
EQUITIES: 96.29%*
SHARES VALUE
============================================================================
JAPAN: 28.69%
Access Co., Ltd. ** 17 $1,227,622
Arisawa Manufacuring Co., Ltd. 17,800 610,928
Disco Corp. 15,100 731,091
Macnica, Inc. 27,100 786,262
Matsushita Electric
Industrial Co., Ltd. 85,000 1,239,292
Nakanishi, Inc. 11,000 563,793
Nintendo Co., Ltd. 12,685 1,219,042
Niws Co., Ltd. 503 1,178,547
NTT DoCoMo, Inc. 605 1,256,956
Pentax Corp. 52,000 266,996
Sharp Corp. 59,000 978,473
Yushin Precision
Equipment Co., Ltd. 22,950 552,430
- ----------------------------------------------------------------------------
Total Japan 10,611,432
============================================================================
SOUTH KOREA: 24.86%
Daeduck GDS Co., Ltd. 62,820 560,893
Intelligent Digital Integrated
Security Co., Ltd. 26,071 282,658
Internet Auction Co., Ltd. ** 20,445 1,251,735
KT Corp. 4,120 152,398
KT Corp. ADR 27,600 524,952
Kumho Electric, Inc. 19,237 735,299
LG Life Sciences, Ltd. ** 11,100 349,235
NCsoft Corp. ** 18,453 1,200,386
NHN Corp. 12,520 780,371
Power Logics Co., Ltd. ** 20,250 442,538
Samsung Electronics Co., Ltd. 3,118 1,444,991
SK Telecom Co., Ltd. 7,259 1,469,083
- ----------------------------------------------------------------------------
Total South Korea 9,194,539
============================================================================
SHARES VALUE
============================================================================
CHINA/HONG KONG: 18.02%
Asia Satellite Telecommunications
Holdings, Ltd. 416,900 $830,174
ASM Pacific Technology, Ltd. 189,000 861,977
BYD Co., Ltd. H Shares 131,000 434,207
China Mobile HK, Ltd. ADR 63,000 1,110,690
Comba Telecom Systems
Holdings, Ltd. ** 1,248,000 773,602
Legend Group, Ltd. 2,327,000 979,069
SINA Corp. ** 4,700 207,651
TCL International Holdings, Ltd. 1,686,000 768,938
TPV Technology, Ltd. 1,152,000 699,294
- ----------------------------------------------------------------------------
Total China/Hong Kong 6,665,602
============================================================================
TAIWAN: 11.67%
Ambit Microsystems Corp. 223,900 651,126
Hon Hai Precision
Industry Co., Ltd. 262,968 1,166,819
LITE-ON IT Corp. 130,750 454,714
Quanta Computer, Inc. 298,100 755,193
Sunplus Technology Co., Ltd. 331,450 745,278
Taiwan Semiconductor
Manufacturing Co., Ltd. ** 285,668 543,844
- ----------------------------------------------------------------------------
Total Taiwan 4,316,974
============================================================================
THAILAND: 4.84%
Advanced Info Service
Public Co., Ltd. 536,400 1,180,926
Shin Satellite Public Co., Ltd. 746,000 607,585
- ----------------------------------------------------------------------------
Total Thailand 1,788,511
============================================================================
30 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9, 2 0 0 4
SHARES VALUE
============================================================================
SINGAPORE: 3.74%
Venture Corp., Ltd. 109,600 $1,384,286
- ----------------------------------------------------------------------------
INDIA: 2.33%
Infosys Technologies, Ltd. 7,689 862,116
- ----------------------------------------------------------------------------
INDONESIA: 2.14%
PT Telekomunikasi Indonesia ADR 46,000 792,120
============================================================================
TOTAL INVESTMENTS: 96.29% 35,615,580
(Cost $29,526,076***)
CASH AND OTHER ASSETS,
LESS LIABILITIES: 3.71% 1,373,988
- ----------------------------------------------------------------------------
NET ASSETS: 100.00% $36,989,568
============================================================================
| * | As a percentage of net assets as of February 29, 2004.
|
| ** | Non-income producing security.
|
| *** | Cost for Federal income tax purposes is $29,526,076 and net unrealized appreciation consists of: |
Gross unrealized appreciation.........$6,827,290
Gross unrealized depreciation......... (737,786)
----------
Net unrealized appreciation...........$6,089,504
==========
| ADR | American Depositary Receipt
|
| GDS | Global Depositary Shares |
See accompanying notes to financial statements.
800.789.ASIA [2742] www.matthewsfunds.com 31
M A T T H E W S A S I A P A C I F I C F U N D
| PORTFOLIO MANAGERS | SYMBOL: MPACX |
This Fund is team-managed.
The Matthews Asia Pacific Fund is an all-capitalization equity fund focusing on the broad range of equity markets in Asia, including Japan.
PORTFOLIO MANAGER COMMENTARY
The Matthews Asia Pacific Fund was launched on October 31, 2003. For the four-month period ended February 29, 2004, the Fund gained 7.70%, versus a gain of 8.74% for its benchmark MSCI All Country Asia Pacific Free Index. The Fund suffered some underperformance due to strong markets in the first days of the portfolio’s existence.
The Fund is now well diversified across the Asia Pacific region and is the most diversified of all the Matthews Asian Funds portfolios. During the four-month period, the Fund saw strong gains from a range of Hong Kong and China-based companies. Companies based in Korea, Thailand and Australia also contributed significantly to the portfolio’s gains. On an industry basis, financials, telecommunications and consumer companies dominated performance. Although Japan was not a significant contributor over this period, more recently Asia’s largest market has been showing signs of strength. The Fund did not receive its license to trade in India until February and has now taken several modest positions in this market.
One of the biggest challenges for the portfolio is determining an appropriate weighting for Japan, which represents approximately 60% of the regional index. While we are generally positive on Japanese companies, we believe that a forward-looking portfolio should not be so dominated by its exposure to this market. We are comfortable with a weighting to Japan of between 30% and 40% of the portfolio, although the weighting could go higher.
Looking forward, we believe that many positive trends are in place across the region, with freer flow of traded goods and capital investment. A massive shift of Japanese manufacturing into China should be positive for both economies over the long run, although in the short term, there are concerns about lost jobs in Japan and China’s ability to digest so much investment rapidly. While political issues are currently dominating headlines, we are more concerned about a global shift to higher interest rates and the accompanying effect on what remains Asia’s most important trading partner, the United States.
32 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9, 2 0 0 4
| FUND HIGHLIGHTS | Inception: 10/31/03 |
- ----------------------------------------------------------------------------------------
TOTAL RETURN AS OF FEBRUARY 29, 2004*
- ----------------------------------------------------------------------------------------
SINCE
INCEPTION
- ----------------------------------------------------------------------------------------
Matthews Asia Pacific Fund 7.70%
MSCI All Country Asia Pacific Free Index(1) 8.74%
- ----------------------------------------------------------------------------------------
*Past performance is not indicative of future results.
- ---------------------------------------------------------------
OPERATING EXPENSES(2)
- ---------------------------------------------------------------
Since inception to 02/29/04, annualized ** 1.90%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
PORTFOLIO TURNOVER(3)
- ---------------------------------------------------------------
Since inception to 02/29/04, annualized** 3.09%
- ---------------------------------------------------------------
**Unaudited
- ----------------------------------------------
COUNTRY ALLOCATION
- ----------------------------------------------
Japan 33%
China/Hong Kong 23%
South Korea 16%
Singapore 8%
Australia 5%
Thailand 3%
India 3%
Taiwan 2%
Indonesia 2%
United Kingdom(1) 1%
Cash 4%
- ----------------------------------------------
- ----------------------------------------------
SECTOR ALLOCATION
- ----------------------------------------------
Financials 29%
Consumer Discretionary 24%
Information Technology 13%
Telecommunication Services 11%
Consumer Staples 7%
Industrials 4%
Manufacturing 3%
Energy 2%
Health Care 2%
Utilities 1%
Cash 4%
- ----------------------------------------------
- ----------------------------------------------
MARKET CAP EXPOSURE
- ----------------------------------------------
Large cap (over $5 billion) 49%
Mid cap ($1-$5 billion) 34%
Small cap (under $1 billion) 13%
Cash 4%
- ----------------------------------------------
- -------------------------------------------------------------------------
NAV ASSETS REDEMPTION FEE 12b-1 FEES
- -------------------------------------------------------------------------
$10.77 $39.7 million 2.00% within 90 days None
- -------------------------------------------------------------------------
| All data is as of February 29, 2004, unless otherwise noted. |
| 1 | The MSCI All Country Asia Pacific Free Index is a free float-adjusted market capitalization index measuring the equity market performance in 14 emerging and developed markets of the Asia Pacific region. As of February 29, 2004, 1.30% of the assets in the Matthews Asia Pacific Fund were invested in the United Kingdom, which is not included in the MSCI All Country Asia Pacific Free Index. |
| 2 | Includes management fee, shareholder services fees and other expenses. Matthews Asian Funds do not charge 12b-1 fees. |
| 3 | The lesser of fiscal year-to-date purchase costs or sales proceeds divided by the average monthly market value of long-term securities. |
800.789.ASIA [2742] www.matthewsfunds.com 33
M A T T H E W S A S I A P A C I F I C F U N D
SCHEDULE OF INVESTMENTS (Unaudited)
EQUITIES: 96.00%*
SHARES VALUE
============================================================================
JAPAN: 33.36%
Access Co., Ltd. ** 1 $72,213
Fuji Photo Film Co., Ltd. 23,000 717,829
Fuji Television Network, Inc. 173 758,439
Gulliver International Co., Ltd. 6,380 513,273
Honda Motor Co., Ltd. 8,700 379,022
Honda Motor Co., Ltd. ADR 9,200 200,652
ITO EN, Ltd. 12,500 494,234
Makita Corp. 38,000 451,437
Matsushita Electric
Industrial Co., Ltd. 38,000 554,036
Mizuho Financial Group, Inc. ** 255 767,847
Nintendo Co., Ltd. 6,500 624,657
Nippon Telegraph & Telephone Corp. 102 472,378
Nippon Telegraph & Telephone
Corp. ADR 9,500 221,160
Nissin Healthcare Food
Service Co., Ltd. 36,600 770,456
Niws Co., Ltd. 279 653,707
Nomura Holdings, Inc. 56,000 889,255
NTT DoCoMo, Inc. 359 745,863
NTT DoCoMo, Inc. ADR 2,900 60,552
Secom Co., Ltd. 21,000 811,093
Sharp Corp. 49,000 812,630
Shimano, Inc. 30,100 663,930
Taiyo Life Insurance Co. ** 486 827,348
The Sumitomo Trust and
Banking Co., Ltd. 148,000 796,485
- ----------------------------------------------------------------------------
Total Japan 13,258,496
============================================================================
SHARES VALUE
============================================================================
CHINA/HONG KONG: 22.41%
ASM Pacific Technology, Ltd. 72,500 $330,653
BYD Co., Ltd. H Shares 151,000 500,498
China Mobile HK, Ltd. 80,500 284,920
China Mobile HK, Ltd. ADR 12,500 220,375
China Pharmaceutical Group, Ltd. 860,000 320,407
China Telecom Corp., Ltd.
H Shares 876,000 340,436
CNOOC, Ltd. 4,700 191,666
CNOOC, Ltd. ADR 62,500 126,464
Cosco Pacific, Ltd. 160,000 243,581
Dah Sing Financial Group 90,600 698,369
Denway Motors, Ltd. 286,000 330,685
Giordano International, Ltd. 1,350,000 819,485
Hong Kong and China
Gas Co., Ltd. 334,000 577,131
Huaneng Power International, Inc.
H Shares 92,000 174,335
Huaneng Power International, Inc.
ADR 2,000 149,760
Legend Group, Ltd. 1,126,000 473,757
PCCW, Ltd. ** 844,000 666,842
PICC Property and Casualty Co.,
Ltd. H Shares ** 912,000 398,363
Sa Sa International Holdings, Ltd. 1,428,000 495,333
Shangri-La Asia, Ltd. 620,000 581,460
Sun Hung Kai Properties, Ltd. 30,000 294,841
Swire Pacific, Ltd. A Shares 98,000 686,164
- ----------------------------------------------------------------------------
Total China/Hong Kong 8,905,525
============================================================================
34 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9, 2 0 0 4
SHARES VALUE
============================================================================
SOUTH KOREA: 15.84%
Amorepacific Corp. 2,810 $406,207
Hyundai Motor Co., Ltd. 14,690 624,575
Internet Auction Co., Ltd. ** 9,308 569,878
Kookmin Bank ** 5,020 209,594
Kookmin Bank ADR 11,640 483,409
LG Home Shopping, Inc. 7,754 296,050
NCsoft Corp. ** 5,520 359,082
Nong Shim Co., Ltd. 2,590 440,476
S1 Corp. 8,600 200,374
Samsung Electronics Co., Ltd. 1,600 741,497
Samsung Fire & Marine
Insurance Co., Ltd. 6,340 408,111
Shinhan Financial Group Co., Ltd. 36,340 669,014
SK Telecom Co., Ltd. 1,580 319,762
SK Telecom Co., Ltd. ADR 22,700 567,727
- ----------------------------------------------------------------------------
Total South Korea 6,295,756
============================================================================
SINGAPORE: 8.39%
DBS Group Holdings, Ltd. 97,700 843,701
Fraser and Neave, Ltd. 91,800 765,787
Great Eastern Holdings, Ltd. 10,000 73,432
Hongkong Land Holdings, Ltd. 306,000 581,400
Hyflux, Ltd. 295,875 278,103
Venture Corp., Ltd. 62,600 790,659
- ----------------------------------------------------------------------------
Total Singapore 3,333,082
============================================================================
AUSTRALIA: 4.73%
Australia and New Zealand
Banking Group, Ltd. 52,075 722,811
AXA Asia Pacific Holdings, Ltd. 272,254 594,464
BHP Billiton, Ltd. 59,625 564,006
- ----------------------------------------------------------------------------
Total Australia 1,881,281
============================================================================
THAILAND: 3.40%
Advanced Info Service
Public Co., Ltd. 278,900 614,020
Bangkok Bank Public Co., Ltd. ** 291,400 737,956
- ----------------------------------------------------------------------------
Total Thailand 1,351,976
============================================================================
SHARES VALUE
============================================================================
INDIA: 2.58%
Dr. Reddy's Laboratories, Ltd. 12,600 $320,541
HDFC Bank, Ltd. 54,767 453,476
Hero Honda Motors, Ltd. 23,000 250,745
- ----------------------------------------------------------------------------
Total India 1,024,762
============================================================================
TAIWAN: 2.02%
Hon Hai Precision Industry Co., Ltd. 181,000 803,118
- ----------------------------------------------------------------------------
INDONESIA: 1.97%
PT Astra International 672,000 429,190
PT Ramayana Lestari Sentosa 822,000 354,855
- ----------------------------------------------------------------------------
Total Indonesia 784,045
============================================================================
UNITED KINGDOM: 1.30%
HSBC Holdings PLC ADR 6,300 515,025
============================================================================
TOTAL INVESTMENTS: 96.00% 38,153,066
(Cost $36,629,610***)
CASH AND OTHER ASSETS,
LESS LIABILITIES: 4.00% 1,588,165
- ----------------------------------------------------------------------------
NET ASSETS: 100.00% $39,741,231
============================================================================
| * | As a percentage of net assets as of February 29, 2004. |
| ** | Non-income producing security. |
| *** | Cost for Federal income tax purposes is $36,629,610 and net unrealized appreciation consists of: |
Gross unrealized appreciation.........$2,138,317
Gross unrealized depreciation......... (614,861)
----------
Net unrealized appreciation...........$1,523,456
==========
| ADR | American Depositary Receipt |
See accompanying notes to financial statements.
800.789.ASIA [2742] www.matthewsfunds.com 35
S T A T E M E N T S O F A S S E T S A N D L I A B I L I T I E S
Matthews Matthews
Pacific Tiger Asian Growth and
Fund Income Fund
Assets:
Investments at value (A) $628,988,906 $1,013,056,853
Cash 22,409,076 38,946,541
Foreign currency at value (B) -- 38
Dividends and interest receivable 698,732 4,509,960
Receivable for securities sold -- --
Receivable for capital shares sold 1,222,553 935,172
Deferred organization costs (Note 1-F) -- --
Other assets 40,940 24,106
- ---------------------------------------------------------------------------------------------------------------
Total Assets 653,360,207 1,057,472,670
- ---------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for securities purchased -- 6,462,677
Payable for capital shares redeemed 566,401 362,291
Administration and accounting fees payable 80,828 139,159
Transfer agent fees payable 2,851 --
Custodian fees payable 104,178 104,124
Due to Advisor (Note 2) 472,584 773,307
Payable for shareholder service fee 29,385 48,101
Accrued expenses payable 177,013 278,922
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities 1,433,240 8,168,581
- ---------------------------------------------------------------------------------------------------------------
Net Assets $651,926,967 $1,049,304,089
===============================================================================================================
Shares Outstanding
(shares of beneficial interest issued
and outstanding, respectively,
unlimited number of shares
authorized with a $0.001 par value) 46,471,595 71,823,303
- ---------------------------------------------------------------------------------------------------------------
Net asset value, offering price and
redemption price $14.03 $14.61
===============================================================================================================
Net Assets Consist of:
Capital paid-in $534,168,339 $847,722,322
Accumulated undistributed net
investment income (loss) (668,805) 642,223
Accumulated net realized gain
(loss) on investments (8,726,136) 12,821,539
Net unrealized appreciation/depreciation
on investments and foreign currency
related transactions 127,153,569 188,118,005
- ---------------------------------------------------------------------------------------------------------------
Net Assets $651,926,967 $1,049,304,089
===============================================================================================================
(A) Investments at cost $501,845,959 $824,981,498
===============================================================================================================
(B) Foreign currency at cost $0 $38
===============================================================================================================
See accompanying notes to financial statements.
36 MATTHEWS ASIAN FUNDS
U N A U D I T E D F E B R U A R Y 2 9 , 2 0 0 4
Matthews Matthews
Matthews Matthews Matthews Asian Technology Asia Pacific
Korea Fund China Fund Japan Fund Fund Fund
$234,726,742 $451,942,005 $67,734,502 $35,615,580 $38,153,066
2,072,715 18,097,706 1,756,136 1,344,156 1,765,726
-- -- -- -- --
2,103,283 533 39,016 55,831 23,427
-- 3,374,907 -- -- --
235,492 2,077,319 249,571 86,232 131,294
-- -- -- -- 29,665
7,217 43,760 6,624 5,842 4,287
- ---------------------------------------------------------------------------------------------------------------------------------------
239,145,449 475,536,230 69,785,849 37,107,641 40,107,465
- ---------------------------------------------------------------------------------------------------------------------------------------
48,540 10,425,487 -- -- 302,622
111,439 224,782 49,818 53,144 --
33,913 53,024 8,958 4,830 4,070
3,400 1,103 -- 234 474
47,371 68,123 3,826 6,826 15,178
179,279 315,939 50,161 39,411 31,948
11,152 19,632 3,120 1,693 1,672
112,631 103,445 18,012 11,935 10,270
- ---------------------------------------------------------------------------------------------------------------------------------------
547,725 11,211,535 133,895 118,073 366,234
- ---------------------------------------------------------------------------------------------------------------------------------------
$238,597,724 $464,324,695 $69,651,954 $36,989,568 $39,741,231
=======================================================================================================================================
52,747,570 29,896,930 5,228,799 7,238,500 3,690,942
- ---------------------------------------------------------------------------------------------------------------------------------------
$4.52 $15.53 $13.32 $5.11 $10.77
=======================================================================================================================================
$159,439,707 $379,224,726 $69,572,563 $48,584,700 $38,312,386
1,690,658 (961,887) (268,610) (223,884) (75,890)
8,193,253 (2,628,212) (7,779,306) (17,461,470) (18,943)
69,274,106 88,690,068 8,127,307 6,090,222 1,523,678
- ---------------------------------------------------------------------------------------------------------------------------------------
$238,597,724 $464,324,695 $69,651,954 $36,989,568 $39,741,231
=======================================================================================================================================
$165,486,849 $363,251,937 $59,606,611 $29,526,076 $36,629,610
=======================================================================================================================================
$0 $0 $0 $0 $0
=======================================================================================================================================
800.789.ASIA [2742] www.matthewsfunds.com 37
S T A T E M E N T S O F O P E R A T I O N S
Matthews Matthews
Pacific Tiger Asian Growth and
Fund Income Fund
Investment Income:
Dividends $2,790,275 $12,057,243
Interest 2,562 1,076,906
Foreign withholding tax (298,294) (907,235)
- ---------------------------------------------------------------------------------------------------------------
Total investment income 2,494,543 12,226,914
- ---------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees (Note 2) 2,078,925 4,043,473
Transfer agent fees 323,112 624,222
Administration and accounting fees 191,654 378,873
Professional fees 16,975 32,998
Custodian fees 188,171 204,640
Trustees fees 6,567 12,890
Shareholder service fee (Note 2) 235,781 453,519
Insurance expense 5,501 10,225
Amortization of organization costs (Note 1-F) -- --
Printing expense 24,176 59,479
Registration expenses 21,037 42,283
Other expenses 2,961 5,752
- ---------------------------------------------------------------------------------------------------------------
Total expenses 3,094,860 5,868,354
- ---------------------------------------------------------------------------------------------------------------
Advisory fee waivers and expenses
waived, reimbursed or recaptured (Note 2) (13,634) (22,726)
- ---------------------------------------------------------------------------------------------------------------
Net expenses 3,081,226 5,845,628
- ---------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) (586,683) 6,381,286
===============================================================================================================
Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency-Related Transactions:
Net realized gain (loss) on investments 2,640,048 19,084,293
Net realized gain (loss) on foreign
currency related transactions (101,265) 14,862
Net change in unrealized appreciation/
depreciation on investments and
foreign currency related transactions 83,586,148 134,327,109
- ---------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on
investments and foreign currency
related transactions 86,124,931 153,426,264
- ---------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets from Operations $85,538,248 $159,807,550
===============================================================================================================
1 The Matthews Asia Pacific Fund commenced operations on October 31, 2003, so the data presented covers four months.
See accompanying notes to financial statements.
38 MATTHEWS ASIAN FUNDS
U N A U D I T E D F O R T H E S I X M O N T H S E N D E D F E B R U A R Y 2 9 , 2 0 0 4
Matthews Matthews
Matthews Matthews Matthews Asian Technology Asia Pacific
Korea Fund China Fund Japan Fund Fund Fund(1)
$2,424,948 $1,055,098 $135,672 $92,190 $45,713
-- 1,962 -- -- 434
(412,697) -- (12,413) (12,358) (6,198)
- ---------------------------------------------------------------------------------------------------------------------------------------
2,012,251 1,057,060 123,259 79,832 39,949
- ---------------------------------------------------------------------------------------------------------------------------------------
1,101,772 1,266,406 264,376 147,234 61,138
173,354 191,704 40,961 22,849 8,478
105,292 115,809 24,406 13,735 5,261
9,022 10,324 2,141 1,198 500
105,919 122,215 13,779 17,514 21,575
3,496 3,983 849 470 183
128,020 140,600 29,744 16,745 6,430
6,225 2,563 627 396 43
-- -- -- -- 13,732
19,331 17,126 3,257 2,707 1,894
14,931 21,693 9,640 9,871 2,961
1,573 1,800 374 210 88
- ---------------------------------------------------------------------------------------------------------------------------------------
1,668,935 1,894,223 390,154 232,929 122,283
- ---------------------------------------------------------------------------------------------------------------------------------------
(5,285) (9,086) 1,647 61,534 (6,444)
- ---------------------------------------------------------------------------------------------------------------------------------------
1,663,650 1,885,137 391,801 294,463 115,839
- ---------------------------------------------------------------------------------------------------------------------------------------
348,601 (828,077) (268,542) (214,631) (75,890)
=======================================================================================================================================
12,942,979 1,053,226 1,012,215 1,376,414 (13,059)
(41,161) 1,728 3,860 (1,576) (5,884)
18,255,356 72,730,274 5,328,477 3,256,282 1,523,678
- ---------------------------------------------------------------------------------------------------------------------------------------
31,157,174 73,785,228 6,344,552 4,631,120 1,504,735
- ---------------------------------------------------------------------------------------------------------------------------------------
$31,505,775 $72,957,151 $6,076,010 $4,416,489 $1,428,845
=======================================================================================================================================
800.789.ASIA [2742] www.matthewsfunds.com 39
S T A T E M E N T S O F C H A N G E S I N N E T A S S E T S
Matthews Pacific Tiger Fund
Six Months Ended
February 29, 2004 Year Ended
(unaudited) August 31, 2003
Operations:
Net investment income (loss) ($586,683) $1,274,408
Net realized gain (loss) on investments and foreign
currency related transactions 2,538,783 (5,218,374)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency related transactions 83,586,148 47,655,905
- ---------------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 85,538,248 43,711,939
- ---------------------------------------------------------------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders from:
Net investment income (1,397,674) --
Realized gains on investments -- --
- ---------------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from distributions (1,397,674) --
- ---------------------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions (net) (Note 1-K): 338,319,456 70,956,917
- ---------------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 422,460,030 114,668,856
- ---------------------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of period 229,466,937 114,798,081
- ---------------------------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income (loss) of ($668,805), $1,315,552,
$642,223, $41,181, $1,60,658 and $1,453,786
respectively) $651,926,967 $229,466,937
==============================================================================================================================================
See accompanying notes to financial statements.
40 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9 , 2 0 0 4
Matthews Asian Growth and Income Fund Matthews Korea Fund
Six Months Ended Six Months Ended
February 29, 2004 Year Ended February 29, 2004 Year Ended
(unaudited) August 31, 2003 (unaudited) August 31, 2003
$6,381,286 $7,056,030 $348,601 $322,453
19,099,155 5,819,944 12,901,818 29,202,117
134,327,109 53,657,051 18,255,356 (17,725,381)
- ---------------------------------------------------------------------------------------------------------------
159,807,550 66,533,025 31,505,775 11,799,189
- ---------------------------------------------------------------------------------------------------------------
(5,780,244) (5,777,923) (111,729) --
(12,255,109) (2,386,434) (22,467,273) (19,371,082)
- ---------------------------------------------------------------------------------------------------------------
(18,035,353) (8,164,357) (22,579,002) (19,371,082)
- ---------------------------------------------------------------------------------------------------------------
374,229,484 322,252,539 12,404,213 (28,164,832)
- ---------------------------------------------------------------------------------------------------------------
516,001,681 380,621,207 21,330,986 (35,736,725)
- ---------------------------------------------------------------------------------------------------------------
533,302,408 152,681,201 217,266,738 253,003,463
- ---------------------------------------------------------------------------------------------------------------
$1,049,304,089 $533,302,408 $238,597,724 $217,266,738
===============================================================================================================
800.789.ASIA [2742] www.matthewsfunds.com 41
S T A T E M E N T S O F C H A N G E S I N N E T A S S E T S
Matthews China Fund
Six Months Ended
February 29, 2004 Year Ended
(unaudited) August 31, 2003
Operations:
Net investment income (loss) ($828,077) $993,917
Net realized gain (loss) on investments
and foreign currency related transactions 1,054,954 (1,736,843)
Net change in unrealized appreciation/
depreciation on investments and
foreign currency related transactions 72,730,274 19,677,070
- --------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 72,957,151 18,934,144
- --------------------------------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders from:
Net investment income (1,173,480) (542,079)
Realized gains on investments -- --
- --------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from distributions (1,173,480) (542,079)
- --------------------------------------------------------------------------------------------------------------
Capital Share Transactions (net) (Note 1-K): 280,590,929 59,882,757
- --------------------------------------------------------------------------------------------------------------
Total increase in net assets 352,374,600 78,274,822
- --------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of period 111,950,095 33,675,273
- --------------------------------------------------------------------------------------------------------------
End of period (including undistributed
net investment income (loss)
of ($961,887), $1,039,670,
($268,610), ($68), ($223,884), $8,943
and ($75,890), respectively) $464,324,695 $111,950,095
==============================================================================================================
1The Matthews Asia Pacific Fund commenced operations on October 31, 2003.
See accompanying notes to financial statements.
42 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9 , 2 0 0 4
Matthews Matthews
Matthews Japan Fund Asian Technology Fund Asia Pacific Fund
Six Months Ended Six Months Ended Period Ended
February 29, 2004 Year Ended February 29, 2004 Year Ended February 29, 2004(1)
(unaudited) August 31, 2003 (unaudited) August 31, 2003 (unaudited)
($268,542) ($94,755) ($214,631) ($43,306) ($75,890)
1,016,075 (347,238) 1,374,838 (1,019,882) (18,943)
5,328,477 2,825,816 3,256,282 4,209,341 1,523,678
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
6,076,010 2,383,823 4,416,489 3,146,153 1,428,845
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
-- -- (18,196) -- --
-- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
-- -- (18,196) -- --
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
39,922,521 11,871,005 13,822,707 8,743,248 38,312,386
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
45,998,531 14,254,828 18,221,000 11,889,401 39,741,231
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
23,653,423 9,398,595 18,768,568 6,879,167 --
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
$69,651,954 $23,653,423 $36,989,568 $18,768,568 $39,741,231
==========================================================================================================================================================
800.789.ASIA [2742] www.matthewsfunds.com 43
F I N A N C I A L H I G H L I G H T S
MATTHEWS PACIFIC TIGER FUND
The table below sets forth financial data for a share of beneficial interest outstanding throughout each period presented.
Six Months Ended
February 29, 2004 Year Ended August 31:
(unaudited) 2003 2002 2001 2000 1999
Net Asset Value, beginning of period $11.20 $8.54 $7.91 $12.35 $10.41 $4.07
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income (loss) (0.08) 0.07 (0.01) 0.02 0.18 0.18
Net realized gain (loss) and unrealized
appreciation (depreciation) on investments
and foreign currency 2.90 2.58 0.66 (3.37) 2.01 6.15
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.82 2.65 0.65 (3.35) 2.19 6.33
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.04) -- (0.01) (0.31) (0.27) (0.02)
Net realized gains on investments -- -- (0.03) (0.84) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.04) 0.00 (0.04) (1.15) (0.27) (0.02)
- ----------------------------------------------------------------------------------------------------------------------------------
Paid-in Capital from Redemption
Fees (Note 1-K) 0.01 0.01 0.02 0.06 0.02 0.03
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $14.03 $11.20 $8.54 $7.91 $12.35 $10.41
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 25.71%(2) 31.15% 8.44% (27.46%) 21.28% 156.28%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $651,927 $229,467 $114,798 $76,503 $111,502 $109,936
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
before reimbursement, waiver or recapture of
expenses by Advisor and Administrator (Note 2) 1.49%(1) 1.75% 1.79% 1.90% 1.88% 1.90%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
after reimbursement, waiver or recapture of
expenses by Advisor and Administrator 1.48%(1) 1.75% 1.87% 1.90% 1.81% 1.90%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets before reimbursement,
waiver or recapture of expenses by
Advisor and Administrator (0.29%)(1) 1.04% (0.17%) 0.67% 1.49% 3.35%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets after reimbursement,
waiver or recapture of expenses by
Advisor and Administrator (0.28%)(1) 1.04% (0.09%) 0.67% 1.56% 3.35%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 2.06%(2) 28.24% 57.00% 63.59% 52.11% 98.74%
- ----------------------------------------------------------------------------------------------------------------------------------
| 1 | Annualized. |
| 2 | Not annualized. |
See accompanying notes to financial statements.
44 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9 , 2 0 0 4
MATTHEWS ASIAN GROWTH AND INCOME FUND
The table below sets forth financial data for a share of beneficial interest outstanding throughout each period presented.
Six Months Ended
February 29, 2004 Year Ended August 31:
(unaudited) 2003 2002 2001 2000 1999
Net Asset Value, beginning of period $12.21 $10.71 $9.08 $10.50 $9.37 $6.54
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT OPERATIONS
Net investment income 0.10 0.23 0.18 0.54 0.61 0.58
Net realized gain (loss) and unrealized
appreciation (depreciation) on investments
and foreign currency 2.59 1.61 1.70 (0.49) 1.09 2.75
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.69 1.84 1.88 0.05 1.70 3.33
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.09) (0.20) (0.27) (0.60) (0.59) (0.51)
Net realized gains on investments (0.20) (0.15) -- (0.88) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.29) (0.35) (0.27) (1.48) (0.59) (0.51)
- ----------------------------------------------------------------------------------------------------------------------------------
Paid-in Capital from Redemption
Fees (Note 1-K) 0.00 0.01 0.02 0.01 0.02 0.01
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $14.61 $12.21 $10.71 $9.08 $10.50 $9.37
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 22.30%(2) 17.81% 21.11% 1.15% 18.68% 52.65%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,049,304 $533,302 $152,681 $24,447 $11,469 $10,644
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
before reimbursement, waiver or recapture of
expenses by Advisor and Administrator (Note 2) 1.45%(1) 1.69% 1.77% 1.90% 1.97% 2.05%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
after reimbursement, waiver or recapture of
expenses by Advisor and Administrator 1.44%(1) 1.69% 1.79% 1.90% 1.90% 1.90%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets before reimbursement,
waiver or recapture of expenses by
Advisor and Administrator 1.57%(1) 2.69% 2.13% 7.71% 6.17% 7.98%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets after reimbursement,
waiver or recapture of expenses by
Advisor and Administrator 1.58%(1) 2.69% 2.11% 7.71% 6.24% 8.13%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 5.21%(2) 13.33% 32.37% 33.94% 62.23% 34.82%
- ----------------------------------------------------------------------------------------------------------------------------------
| 1 | Annualized. |
| 2 | Not annualized. |
See accompanying notes to financial statements.
800.789.ASIA [2742] www.matthewsfunds.com 45
F I N A N C I A L H I G H L I G H T S
MATTHEWS KOREA FUND
The table below sets forth financial data for a share of beneficial interest outstanding throughout each period presented.
Six Months Ended
February 29, 2004 Year Ended August 31:
(unaudited) 2003 2002 2001 2000 1999
Net Asset Value, beginning of period $4.37 $4.42 $2.68 $5.19 $7.49 $2.03
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income (loss) 0.00 0.01 (0.02) (0.01) (0.01) (0.01)
Net realized gain (loss) and unrealized
appreciation (depreciation) on investments
and foreign currency 0.61 0.32 1.81 (0.90) (1.45) 5.43
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.61 0.33 1.79 (0.91) (1.46) 5.42
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.00 -- (0.01) -- -- --
Net realized gains on investments (0.46) (0.39) (0.07) (1.63) (0.88) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.46) (0.39) (0.08) (1.63) (0.88) --
- ----------------------------------------------------------------------------------------------------------------------------------
Paid-in Capital from Redemption
Fees (Note 1-K) 0.00 0.01 0.03 0.03 0.04 0.04
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $4.52 $4.37 $4.42 $2.68 $5.19 $7.49
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 15.25%(2) 8.80% 68.49% (13.09%) (22.92%) 268.97%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $238,598 $217,267 $253,003 $117,138 $115,158 $230,846
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
before reimbursement, waiver or recapture of
expenses by Advisor and Administrator (Note 2) 1.51%(1) 1.72% 1.75% 1.78% 1.75% 1.77%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets after
reimbursement, waiver or recapture of expenses
by Advisor and Administrator 1.50%(1) 1.72% 1.75% 1.78% 1.75% 1.77%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets before reimbursement,
waiver or recapture of expenses by
Advisor and Administrator 0.31%(1) 0.17% (0.64%) 0.75% 0.42% (0.37%)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets after reimbursement,
waiver or recapture of expenses by
Advisor and Administrator 0.32%(1) 0.17% (0.64%) 0.75% 0.42% (0.37%)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 9.22%(2) 29.90% 46.52% 81.96% 47.80% 57.06%
- ----------------------------------------------------------------------------------------------------------------------------------
| 1 | Annualized. |
| 2 | Not annualized. |
See accompanying notes to financial statements.
46 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9 , 2 0 0 4
MATTHEWS CHINA FUND
The table below sets forth financial data for a share of beneficial interest outstanding throughout each period presented.
Six Months Ended
February 29, 2004 Year Ended August 31:
(unaudited) 2003 2002 2001 2000 1999
Net Asset Value, beginning of period $11.54 $8.96 $9.21 $9.93 $8.48 $4.36
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income (loss) (0.07) 0.11 0.05 0.24 0.09 0.07
Net realized gain (loss) and unrealized
appreciation (depreciation) on investments
and foreign currency 4.12 2.59 (0.20) (0.61) 1.44 4.11
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.05 2.70 (0.15) (0.37) 1.53 4.18
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.07) (0.14) (0.15) (0.15) (0.43) (0.11)
Net realized gains on investments -- -- -- (0.28) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.07) (0.14) (0.15) (0.43) (0.11) (0.11)
- ----------------------------------------------------------------------------------------------------------------------------------
Paid-in Capital from Redemption
Fees (Note 1-K) 0.01 0.02 0.05 0.08 0.03 0.05
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $15.53 $11.54 $8.96 $9.21 $9.93 $8.48
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 35.25%(2) 30.88% (1.16%) (2.23%) 18.54% 97.79%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $464,325 $111,950 $33,675 $19,843 $9,232 $6,245
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
before reimbursement, waiver or recapture of
expenses by Advisor and Administrator (Note 2) 1.50%(1) 1.78% 1.97% 2.00% 2.15% 2.09%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
after reimbursement, waiver or recapture of
expenses by Advisor and Administrator 1.49%(1) 1.79% 2.00% 2.00% 2.00% 2.00%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets before reimbursement,
waiver or recapture of expenses by
Advisor and Administrator (0.66)(1) 1.94% 0.99% 2.62% 1.54% 2.93%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets after reimbursement,
waiver or recapture of expenses by
Advisor and Administrator (0.65)(1) 1.93% 0.96% 2.62% 1.69% 3.02%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 1.34%(2) 19.34% 43.84% 61.07% 80.90% 40.27%
- ----------------------------------------------------------------------------------------------------------------------------------
| 1 | Annualized. |
| 2 | Not annualized. |
See accompanying notes to financial statements.
800.789.ASIA [2742] www.matthewsfunds.com 47
F I N A N C I A L H I G H L I G H T S
MATTHEWS JAPAN FUND
The table below sets forth financial data for a share of beneficial interest outstanding throughout each period presented.
Six Months Ended
February 29, 2004 Year Ended August 31:
(unaudited) 2003 2002 2001 2000 1999(1)
Net Asset Value, beginning of period $10.90 $9.60 $11.22 $20.76 $21.70 $10.00
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment loss (0.05) (0.03) (0.07) (0.26) (0.24) (0.06)
Net realized gain (loss) and unrealized
appreciation (depreciation) on investments
and foreign currency 2.41 1.30 (1.39) (7.99) (0.29) 11.74
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.36 1.27 (1.46) (8.25) (0.53) 11.68
- ----------------------------------------------------------------------------------------------------------------------------------
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) --
- ----------------------------------------------------------------------------------------------------------------------------------
Paid-in Capital from Redemption
Fees (Note 1-K) 0.06 0.03 0.11 0.11 0.13 0.02
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $13.32 $10.90 $9.60 $11.22 $20.76 $21.70
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 22.31%(3) 13.54% (12.20%) (40.92%) (1.75%) 117.00%(3)
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $69,652 $23,653 $9,399 $7,758 $23,869 $24,486
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
before reimbursement, waiver or recapture of
expenses by Advisor and Administrator (Note 2) 1.47%(2) 1.92% 1.91% 2.08% 1.88% 3.45%(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
after reimbursement, waiver or recapture of
expenses by Advisor and Administrator 1.48%(2) 2.00% 2.00% 2.00% 2.00% 2.00%(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets before reimbursement,
waiver or recapture of expenses by
Advisor and Administrator (1.01%)(2) (0.97%) (1.25%) (0.90%) (0.36%) (2.54%)(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets after reimbursement,
waiver or recapture of expenses by
Advisor and Administrator (1.02%)(2) (1.05%) (1.34%) (0.82%) (0.48%) (1.09%)(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 18.04%(3) 77.30% 113.23% 71.09% 23.00% 28.92%(3)
- ----------------------------------------------------------------------------------------------------------------------------------
| 1 | The Matthews Japan Fund commenced operations on December 31, 1998. |
| 2 | Annualized. |
| 3 | Not annualized. |
See accompanying notes to financial statements.
48 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9 , 2 0 0 4
MATTHEWS ASIAN TECHNOLOGY FUND
The table below sets forth financial data for a share of beneficial interest outstanding throughout each period presented.
Six Months Ended
February 29, 2004 Year Ended August 31:,
(unaudited) 2003 2002 2001 2000(1)
Net Asset Value, beginning of period $4.30 $3.13 $3.53 $7.61 $10.00
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income (loss) (0.03) (0.01) (0.10) (0.05) 0.22
Net realized gain (loss) and unrealized
appreciation(depreciation) on investments
and foreign currency 0.83 1.16 (0.31) (3.97) (2.65)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.80 1.15 (0.41) (4.02) (2.43)
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income -- -- (0.04) (0.22) --
Net realized gains on investments -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (0.04) (0.22) --
- ---------------------------------------------------------------------------------------------------------------------
Paid-in Capital from Redemption
Fees (Note 1-K) 0.01 0.02 0.05 0.16 0.04
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $5.11 $4.30 $3.13 $3.53 $7.61
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 18.91%(3) 37.38% (10.40%) (51.54%) (23.90%)(3)
=====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $36,990 $18,769 $6,879 $9,607 $24,570
- ---------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
before reimbursement, waiver or recapture of
expenses by Advisor and Administrator (Note 2) 1.58%(2) 2.10% 2.01% 2.69% 2.66%(2)
- ---------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
after reimbursement, waiver or recapture of
expenses by Advisor and Administrator 2.00%(2) 2.00% 2.00% 2.00% 2.00%(2)
- ---------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets before reimbursement,
waiver or recapture of expenses by
Advisor and Administrator (1.04%)(2) (0.71%) (1.56%) 1.14% 3.75%(2)
- ---------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets after reimbursement,
waiver or recapture of expenses by
Advisor and Administrator (1.46%)(2) (0.61%) (1.55%) 1.83% 4.41%(2)
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover 12.86%(3) 72.03% 103.60% 181.24% 50.35%(3)
- ---------------------------------------------------------------------------------------------------------------------
| 1 | The Matthews Asian Technology Fund commenced operations on December 27, 1999. |
| 2 | Annualized. |
| 3 | Not annualized. |
See accompanying notes to financial statements.
800.789.ASIA [2742] www.matthewsfunds.com 49
F I N A N C I A L H I G H L I G H T S
MATTHEWS ASIA PACIFIC FUND
The table below sets forth financial data for a share of beneficial interest outstanding throughout each period presented.
Period Ended
February 29, 2004(1)
(unaudited)
Net Asset Value, beginning of period $10.00
- --------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.02)
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments and foreign currency 0.79
- --------------------------------------------------------------------------------------------------------
Total from investment operations 0.77
- --------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income --
Net realized gains on investments --
- --------------------------------------------------------------------------------------------------------
Total distributions --
- --------------------------------------------------------------------------------------------------------
Paid-in Capital from Redemption Fees (Note 1-K) --
- --------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $10.77
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN 7.70%(3)
========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $39,741
- --------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets before reimbursement, waiver
or recapture of expenses by Advisor and Administrator (Note 2) 2.00%(2)
- --------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets after reimbursement,
waiver or recapture of expenses by Advisor and Administrator 1.90%(2)
- --------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets
before reimbursement, waiver or recapture of expenses
by Advisor and Administrator (1.34%)(2)
- --------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets
after reimbursement, waiver or recapture of expenses by
Advisor and Administrator (1.24%)(2)
- --------------------------------------------------------------------------------------------------------
Portfolio turnover 1.19%(3)
- --------------------------------------------------------------------------------------------------------
| 1 | The Matthews Asia Pacific Fund commenced operations on October 31, 2003. |
| 2 | Annualized. |
| 3 | Not annualized. |
See accompanying notes to financial statements.
50 MATTHEWS ASIAN FUNDS
N O T E S T O F I N A N C I A L S T A T E M E N T S
| 1. | | SIGNIFICANT ACCOUNTING POLICIES Matthews Asian 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 seven 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, Matthews Asian Technology Fund and Matthews Asia Pacific Fund. Matthews Pacific Tiger, 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. Matthews Asia Pacific Fund seeks capital appreciation by investing, under normal circumstances, at least 80% of its assets in the common and preferred stocks of companies located in the Asia Pacific region. Asia Pacific refers to Asian countries plus Australia, New Zealand and Pakistan. 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. When no market quotations are available, the Funds’ equity securities are valued at their fair value as determined in good faith by or under direction of 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 investment in equity securities which is due to changes in the foreign exchange rate from that which is due to changes in market prices of equity securities. International dollar bonds are issued offshore, pay interest and principal in U.S. Dollars, and are denominated in U.S. Dollars.
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 as 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 CURRENCY EXCHANGE CONTRACTS: The Funds may engage in forward foreign currency 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 currency exchange contracts are valued at the forward rate and are marked-to-market daily. The change in |
800.789.ASIA [2742] www.matthewsfunds.com 51
N O T E S T O F I N A N C I A L S T A T E M E N T S
| | | 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 currency 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 currency 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 counterparts to the contract 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 economical instability of the country of the issuer, the difficulty in 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 of 1986, as amended (“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 29, 2004. 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. 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 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 and the use of the tax accounting practice known as equalization.
For Federal income tax purposes, the Funds indicated below have capital loss carryforwards, which expire in the year indicated, as of August 31, 2003, which are available to offset future capital gains, if any: |
LOSSES DEFERRED EXPIRING IN:
2008 2009 2010 2011
Matthews Pacific Tiger Fund $-- $-- $3,234,939 $6,826,389
Matthews China Fund -- -- 1,131,447 1,581,487
Matthews Japan Fund -- 35,094 4,213,197 3,614,216
Matthews Asian Technology Fund 2,390,436 5,375,361 5,967,059 3,461,198
| | | 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 one year from each Fund’s respective commencement of operations. In the event that any of the initial shares are redeemed during the period of amortization of the Fund’s organization costs, the redemption proceeds will be reduced by any such unamortized organization costs in the same proportion as the number of shares being redeemed bears to the number of those shares outstanding at the time of redemption.
|
52 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9 , 2 0 0 4
| | | G. DISTRIBUTION 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, Matthews Asian Technology Fund, and Matthews Asia Pacific 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. Net investment losses may not be utilized to offset net investment income in future periods for tax purposes.
The tax character of distributions paid for the fiscal year ended August 31, 2003 were as follows:
|
2003 TAXABLE DISTRIBUTIONS ORDINARY NET LONG TERM TOTAL TAXABLE
INCOME CAPITAL GAINS DISTRIBUTIONS
Matthews Pacific Tiger Fund $-- $-- $--
Matthews Asian Growth and Income Fund 7,795,759 368,598 8,164,357
Matthews Korea Fund -- 19,371,082 19,371,082
Matthews China Fund 542,079 -- 542,079
Matthews Japan Fund -- -- --
Matthews Asian Technology Fund -- -- --
| | | H. FUND EXPENSE 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 assets.
I. USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.
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.
|
MATTHEWS PACIFIC TIGER FUND SIX MONTHS ENDED
FEBRUARY 29, 2004 (UNAUDITED) YEAR ENDED AUGUST 31, 2003
SHARES AMOUNT SHARES AMOUNT
Shares sold 31,340,773 $406,888,506 15,023,339 $137,306,760
Shares issued through reinvestment of dividends 102,761 1,284,573 -- --
Shares redeemed (5,467,327) (69,853,623) (7,972,026) (66,349,843)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase 25,976,207 $338,319,456 7,051,313 $70,956,917
================================================================================================================================
MATTHEWS ASIAN GROWTH AND INCOME FUND SIX MONTHS ENDED
FEBRUARY 29, 2004 (UNAUDITED) YEAR ENDED AUGUST 31, 2003
SHARES AMOUNT SHARES AMOUNT
Shares sold 31,239,829 $415,913,989 39,973,007 $435,370,172
Shares issued through reinvestment of dividends 1,212,460 15,926,448 669,460 7,282,120
Shares redeemed (4,288,802) (57,610,953) (11,240,758) (120,399,753)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase 28,163,487 $374,229,484 29,401,709 $322,252,539
================================================================================================================================
800.789.ASIA [2742] www.matthewsfunds.com 53
N O T E S T O F I N A N C I A L S T A T E M E N T S
MATTHEWS KOREA FUND SIX MONTHS ENDED
FEBRUARY 29, 2004 (UNAUDITED) YEAR ENDED AUGUST 31, 2003
SHARES AMOUNT SHARES AMOUNT
Shares sold 7,664,211 $33,321,370 26,969,605 $101,436,079
Shares issued through reinvestment of dividends 2,908,912 11,837,023 3,512,115 13,486,520
Shares redeemed (7,508,488) (32,754,180) (38,085,006) (143,087,431)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 3,064,635 $12,404,213 (7,603,286) ($28,164,832)
================================================================================================================================
MATTHEWS CHINA FUND SIX MONTHS ENDED
FEBRUARY 29, 2004 (UNAUDITED) YEAR ENDED AUGUST 31, 2003
SHARES AMOUNT SHARES AMOUNT
Shares sold 24,000,534 $333,139,984 9,399,794 $91,503,345
Shares issued through reinvestment of dividends 81,100 1,089,212 57,638 506,057
Shares redeemed (3,883,013) (53,638,267) (3,517,599) (32,126,645)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase 20,198,621 $280,590,929 5,939,833 $59,882,757
================================================================================================================================
MATTHEWS JAPAN FUND SIX MONTHS ENDED
FEBRUARY 29, 2004 (UNAUDITED) YEAR ENDED AUGUST 31, 2003
SHARES AMOUNT SHARES AMOUNT
Shares sold 5,416,945 $69,868,407 2,461,873 $23,056,012
Shares issued through reinvestment of dividends -- -- -- --
Shares redeemed (2,358,515) (29,945,886) (1,270,520) (11,185,007)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase 3,058,430 $39,922,521 1,191,353 $11,871,005
================================================================================================================================
MATTHEWS ASIAN TECHNOLOGY FUND SIX MONTHS ENDED
FEBRUARY 29, 2004 (UNAUDITED) YEAR ENDED AUGUST 31, 2003
SHARES AMOUNT SHARES AMOUNT
Shares sold 6,039,946 $28,712,554 5,319,636 $18,618,111
Shares issued through reinvestment of dividends 3,666 16,797 -- --
Shares redeemed (3,174,106) (14,906,644) (3,148,718) (9,874,863)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase 2,869,506 $13,822,707 2,170,918 $8,743,248
================================================================================================================================
MATTHEWS ASIA PACIFIC FUND* SIX MONTHS ENDED
FEBRUARY 29, 2004 (UNAUDITED)
SHARES AMOUNT
Shares sold 3,797,684 $39,409,764
Shares issued through reinvestment of dividends -- --
Shares redeemed (106,742) (1,097,378)
- ---------------------------------------------------------------------------------------------
Net increase 3,690,942 $38,312,386
=============================================================================================
*Matthews Asia Pacific Fund commenced operations on October 31, 2003.
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 returned to the assets of the Funds were as follows:
54 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9 , 2 0 0 4
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 (UNAUDITED) AUGUST 31, 2003
Matthews Pacific Tiger Fund $348,823 $200,852
Matthews Asian Growth and Income Fund 156,744 344,510
Matthews Korea Fund 88,925 737,918
Matthews China Fund 279,389 148,090
Matthews Japan Fund 322,109 76,633
Matthews Asian Technology Fund 90,486 70,837
Matthews Asia Pacific Fund 12,079 --
| 2. | | INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Advisor, a registered investment advisor under the Investment Advisers Act of 1940, as amended, provides the Funds with investment management services. As compensation for these services, the Advisor charges the Funds a monthly fee of 1/12th of 1% on each Fund’s respective average daily net assets. Certain officers and Trustees of the Funds are also officers and directors of the Advisor. All officers serve without direct compensation from the Funds. Beginning January 1, 2004, the Advisor voluntarily waived its fee by 0.10% of average daily net assets in the Matthews Asian Funds complex in excess of $2 billion. Investment advisory fees and other transactions with affiliates, for the six months ended February 29, 2004, were as follows: |
INVESTMENT VOLUNTARY ADVISORY FEES
ADVISORY EXPENSE ADVISORY WAIVED BY
FEE RATE LIMITATION FEES THE ADVISOR
Matthews Pacific Tiger Fund 1.00% 1.90% $2,078,925 $13,634
Matthews Asian Growth and Income Fund 1.00% 1.90% 4,043,473 22,726
Matthews Korea Fund 1.00% 2.00% 1,101,772 5,285
Matthews China Fund 1.00% 2.00% 1,266,406 9,086
Matthews Japan Fund 1.00% 2.00% 264,376 1,493
Matthews Asian Technology Fund 1.00% 2.00% 147,234 807
Matthews Asia Pacific Fund 1.00% 1.90% 61,138 734
EXPENSES WAIVED EXPENSES REMAINING
AND REIMBURSED BY RECOUPED BY RECOUPABLE
THE ADVISOR THE ADVISOR EXPENSES AVAILABLE
Matthews Pacific Tiger Fund $-- $-- $--
Matthews Asian Growth and Income Fund -- -- --
Matthews Korea Fund -- -- --
Matthews China Fund -- -- --
Matthews Japan Fund -- 3,140 --
Matthews Asian Technology Fund -- 62,341 37,381
Matthews Asia Pacific Fund 5,710 -- 5,710
| | | Effective January 1, 2004, the Investment Advisory Fee Rate is reduced to 0.90% for average daily net assets in the Matthews Asian Funds complex in excess of $2 billion.
The investment advisory agreements provide that any reductions made by the Advisor in its fees are subject to reimbursements by the Funds within the following three years provided that the Funds are able to effect such reimbursements and remain in compliance with applicable expense limitations.
The Funds have a shareholder servicing plan, pursuant to which, the Funds reimburse the Advisor for shareholder servicing activities. The fee is calculated on average daily net assets in the Matthews Asian Funds complex using the following scale: 0.10% on assets up to $1 billion and 0.05% on assets between $1 billion
|
800.789.ASIA [2742] www.matthewsfunds.com 55
N O T E S T O F I N A N C I A L S T A T E M E N T S
| | | and $2 billion. There is no fee charged on assets above $2 billion. Under the plan, the Funds can be charged a maximum of 0.25%. Fees charged under the shareholder servicing fee arrangement for the six months ended February 29, 2004, were as follows: |
SHAREHOLDER SERVICING FEES
Matthews Pacific Tiger Fund $108,509
Matthews Asian Growth and Income Fund 209,183
Matthews Korea Fund 60,335
Matthews China Fund 65,302
Matthews Japan Fund 13,668
Matthews Asian Technology Fund 7,802
Matthews Asia Pacific Fund 3,088
| | | 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 29, 2004 are reflected in the Statement of Operations as follows: |
TRANSFER SHAREHOLDER
AGENT SERVICING TOTAL
Matthews Pacific Tiger Fund $254,543 $127,272 $381,815
Matthews Asian Growth and Income Fund 488,672 244,336 733,008
Matthews Korea Fund 135,369 67,685 203,054
Matthews China Fund 150,596 75,298 225,894
Matthews Japan Fund 32,153 16,076 48,229
Matthews Asian Technology Fund 17,885 8,943 26,828
Matthews Asia Pacific Fund 6,684 3,342 10,026
| | | PFPC Inc. (“PFPC”), an indirect wholly-owned subsidiary of The PNC Financial Services Group, 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 Assistant Treasurer to the Trust. Total fees received by PFPC for the six months ended February 29, 2004 were $590,325 for administrative and accounting services and $217,244 for transfer agent services. The Bank of New York serves as custodian to the Trust.
PFPC Distributors, Inc. (the “Distributor”) serves as the Fund’s Distributor pursuant to an Underwriting Agreement.
|
| 3. | | INVESTMENT TRANSACTIONS
Investment transactions for the six months ended February 29, 2004, excluding short-term investments, were as follows: |
PURCHASES PROCEEDS FROM SALES
Matthews Pacific Tiger Fund $331,851,356 $8,435,486
Matthews Asian Growth and Income Fund 393,029,912 40,622,046
Matthews Korea Fund 20,394,278 41,855,546
Matthews China Fund 273,112,802 3,374,907
Matthews Japan Fund 47,632,970 9,127,619
Matthews Asian Technology Fund 17,506,920 3,640,359
Matthews Asia Pacific Fund 36,850,667 207,998
56 MATTHEWS ASIAN FUNDS
F E B R U A R Y 2 9 , 2 0 0 4
M A T T H E W S A S I A N F U N D
BOARD OF TRUSTEES
Disinterested Trustees:
Richard K. Lyons, Chairman
Robert K. Connolly
Toshi Shibano
Interested Trustees1:
David FitzWilliam-Lay
G. Paul Matthews
OFFICERS
G. Paul Matthews
Mark W. Headley
James E. Walter
Downey H. Blount
INVESTMENT ADVISOR
Matthews International Capital Management, LLC
456 Montgomery Street, Suite 1200
San Francisco, CA 94104
800-789-ASIA [2742]
ACCOUNT SERVICES
PFPC Inc.
760 Moore Road
King of Prussia, PA 19406
800-789-ASIA [2742]
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
1 As defined under the Investment Company Act of 1940, “Interested” trustees are so defined due to an ownership interest in the Advisor or an office held with the Trust.
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item.
Item 10. Controls and Procedures.
| (a) | | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| (b) | | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s last fiscal half-year (the registrant’s second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 11. Exhibits.
| | (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
| | (b) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Matthews International Funds
By (Signature and Title)* /s/ G. Paul Matthews
G. Paul Matthews, Chairman, Chief Investment Officer & Co-Chief
Executive Officer
(principal executive officer)
Date April 16, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* /s/ G. Paul Matthews
G. Paul Matthews, Chairman, Chief Investment Officer & Co-Chief
Executive Officer
(principal executive officer)
Date April 16, 2004
By (Signature and Title)* /s/ James Walter
James Walter, Vice President, Investment Operations
(principal financial officer)
Date April 16, 2004
* Print the name and title of each signing officer under his or her signature.
Matthews Asian Funds
