Mutual Fund Summary Prospectus (497k)
August 30 2013 - 5:02AM
Edgar (US Regulatory)
Matthews China Small Companies Fund
SUMMARY
PROSPECTUS—INVESTOR CLASS
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April
30, 2013
as amended August 30, 2013
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TICKER: MCSMX
Before you invest, you may want to review the Fund’s Prospectus,
which contains more information about the Fund and its risks. You can find the Fund’s Prospectus and other information about
the Fund online at matthewsasia.com/prospectus. You may also obtain this information at no additional cost by calling 800.789.ASIA
(2742) or by sending an e-mail request to prospectus@matthewsasia.com. The Fund’s Prospectus and Statement of Additional
Information, both dated April 30, 2013, are incorporated by reference into this Summary Prospectus.
Investment Objective
Long-term capital appreciation.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay
if you buy and hold shares of this Fund.
SHAREHOLDER FEES
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(fees paid directly from your investment)
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Redemption Fee (as a percentage of amount redeemed on shares sold or exchanged within 90 days after purchase)
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2.00%
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Maximum Account Fee on Redemptions (for wire redemptions only)
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$9
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ANNUAL OPERATING EXPENSES
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(expenses that you pay each year as a percentage of the value of your investment)
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Management Fees
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1.00%
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Distribution (12b-1) Fees
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None
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Other Expenses
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2.26%
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Administration and Shareholder Servicing Fees
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0.15%
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Total Annual Fund Operating Expenses
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3.26%
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Fee Waiver and Expense Reimbursement
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(1.26%)
1
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Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
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2.00%
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1
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Matthews has contractually agreed to waive fees and reimburse expenses until August 31, 2014 to the extent
needed to limit Total Annual Fund Operating Expenses to 2.00%. The amounts
of the waivers and reimbursements are based on estimated Fund expenses. If the expenses fall below the expense limitation in a
year within three years after Matthews has made such a waiver or reimbursement, the Fund may reimburse Matthews up to an amount
not to cause the expenses for that year to exceed the expense limitation. The fee waiver and expense reimbursement may be terminated
at any time by the Board of Trustees or the Trust on behalf of the Fund on 60 days’ written notice.
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EXAMPLE OF FUND EXPENSES
This example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
One year:
$203
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Three years:
$845
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Five years:
$1,555
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Ten years:
$3,441
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PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it
buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual
fund operating expenses or in the example of fund expenses, affect the Fund’s performance. During the most recent fiscal year,
the Fund’s portfolio turnover rate was 34% of the average value of its portfolio.
PS-MCSMX-0813
Principal Investment Strategy
Under normal market conditions, the Matthews China Small Companies
Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment
purposes, in the common and preferred stocks of Small Companies (defined below) located in China. China includes its
administrative and other districts, such as Hong Kong. A company is considered to be “located” in a country or a region
if it has substantial ties to that country or region, including for example, if it (i) is organized under the laws of that country
or any country in that region; (ii) derives at least 50% of its revenues or profits from goods produced or sold, investments made,
or services performed, or has at least 50% of its assets located, within that country or region; (iii) has the primary trading
markets for its securities in that country or region; or (iv) is a governmental entity or an agency, instrumentality or a political
subdivision of that country or any country in that region.
The Fund seeks to invest in smaller companies capable of sustainable
growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size
and stability of cash flow; management’s depth, adaptability and integrity; product lines; marketing strategies; corporate
governance; and financial health. Matthews determines whether a company should be considered to be a small company based on the
size of its revenues, number of employees, net assets, the size and depth of its product line, level of development, and other
factors compared to other companies in its industry, sector or region (“Small Companies”). The Fund shall not invest
in any company that has a market capitalization (the number of the company’s shares outstanding times the market price per
share for such securities) higher than the greater of $3 billion or the market capitalization of the largest company included in
the Fund’s primary benchmark index if, at the time of purchase, more than 20% of the Fund’s assets are already invested
in such companies. The largest company in the Fund’s primary benchmark, the MSCI China Small Cap Index, had a market capitalization
of $3.8 billion on December 31, 2012. Companies in which the Fund invests typically operate in growth industries and possess the
potential to expand their scope of business over time. The Fund may continue to hold a security if its market capitalization increases
above these levels after purchase.
Principal Risks of Investment
There is no guarantee that your investment in the Fund will
increase in value. The value of your investment in the Fund could go down, meaning you could lose money. The principal risks of
investing in the Fund are:
Political, Social and Economic Risks:
The value of the Fund’s assets may be adversely affected
by political, economic, social and religious instability; inadequate investor protection; changes in laws or regulations; international
relations with other nations; natural disasters; corruption and military activity. The economies of China, Hong Kong and Taiwan
may differ from the economies of other countries, especially developed economies, in many respects, such as rate of growth, inflation,
capital reinvestment, resource self-sufficiency, financial system stability, the national balance of payments position and sensitivity
to changes in global trade.
Currency Risks:
When the Fund conducts securities transactions
in a foreign currency, there is the risk of the value of the foreign currency increasing or decreasing against the value of the
U.S. dollar. The value of an investment denominated in a foreign currency will decline in dollar terms if that currency weakens
against the dollar. While the Fund is permitted to hedge currency risks, Matthews does not anticipate doing so at this time. Additionally,
China may utilize formal or informal currency-exchange controls or “capital controls.” Capital controls may impose
restrictions on the Fund’s ability to repatriate investments or income. Such controls may also affect the value of the Fund’s
holdings.
Volatility:
The smaller size and lower levels of liquidity in emerging markets, as well as other factors, may
result in changes in the prices of Asian securities that are more volatile than those of companies in more developed regions.
This volatility can cause the price of the Fund’s shares (NAV) to go up or down dramatically. Because of this volatility,
it is recommended that you invest in the Fund only for the long term (at least five years).
Risks Associated with Emerging and Frontier Markets:
Many
Asian countries are considered emerging or frontier markets. Such markets are often less stable politically and economically than
developed markets such as the United States, and investing in these markets involves different and greater risks. There may be
less publicly available information about companies in many Asian countries, and the stock exchanges and brokerage industries in
many Asian countries typically do not have the level of government oversight as do those in the United States. Securities markets
of many Asian countries are also substantially smaller, less liquid and more volatile than securities markets in the United States.
Trading Markets and Depositary Receipts:
Asian securities
may trade in the form of depositary receipts, including American, European and Global Depositary Receipts. Although depositary
receipts have risks similar to the securities that they represent, they may also involve higher expenses and may trade at a discount
(or premium) to the underlying security. In addition, depositary receipts may not pass through voting and other shareholder rights,
and may be less liquid than the underlying securities listed on an exchange.
Risks Associated with China, Hong Kong and Taiwan
China:
The Chinese government exercises significant control over China’s economy through its industrial policies
(e.g., allocation of resources and other preferential treatment), monetary policy, management of currency exchange rates, and
management of the payment of foreign currency-denominated obligations. Changes in these policies could adversely impact
affected industries or companies. China’s economy, particularly its export-oriented industries, may be adversely
impacted by trade or political disputes with China’s major trading partners, including the U.S. In addition, as its
consumer class emerges, China’s domestically oriented industries may be especially sensitive to changes in government
policy and investment cycles.
Hong Kong:
If China were to exert its authority so as
to alter the economic, political or legal structures or the existing social policy of Hong Kong, investor and business confidence
in Hong Kong could be negatively affected, which in turn could negatively affect markets and business performance and have an adverse
effect on the Fund’s investments.
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2
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MATTHEWS CHINA SMALL COMPANIES
FUND
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Taiwan:
Although the relationship between China and Taiwan
has been improving, there is the potential for future political or economic disturbances that may have an adverse impact on the
values of investments in either China or Taiwan, or make investments in China and Taiwan impractical or impossible.
Risks Associated with Smaller Companies:
Smaller companies
may offer substantial opportunities for capital growth; they also involve substantial risks, and investments in smaller companies
may be considered speculative. Such companies often have limited product lines, markets or financial resources. Smaller companies
may be more dependent on one or few key persons and may lack depth of management. Larger portions of their stock may be held by
a small number of investors (including founders and management) than is typical of larger companies. Credit may be more difficult
to obtain (and on less advantageous terms) than for larger companies. As a result, the influence of creditors (and the impact of
financial or operating restrictions associated with debt financing) may be greater than in larger or more established companies.
The Fund may have more difficulty obtaining information about smaller companies, making it more difficult to evaluate the impact
of market, economic, regulatory and other factors on them. Informational difficulties may also make valuing or disposing of their
securities more difficult than it would for larger companies. Securities of smaller companies may trade less frequently and in lesser
volume than more widely held securities and the securities of such companies generally are subject to more-abrupt or erratic price
movements than more widely held or larger, more-established companies or the market indices in general. The value of securities
of smaller companies may react differently to political, market and economic developments than the markets as a whole or than other
types of stocks.
Past Performance
The bar chart below shows the Fund’s performance for the
first complete calendar year of operations. Also shown are the best and worst quarters for this time period. The table below shows the Fund’s performance over certain periods of time,
along with performance of its benchmark index. The index performance does not take into consideration fees, expenses or taxes.
The information presented below is past performance, before and after taxes, and is not a prediction of future results. Both the
bar chart and performance table assume reinvestment of all dividends and distributions. For the Fund’s most recent month-end
performance, please visit matthewsasia.com or call 800.789.2742.
ANNUAL RETURN FOR YEAR ENDED 12/31
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31,
2012
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Since Inception
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1 year
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(5/31/11)
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Matthews China Small Companies Fund
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Return before taxes
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10.53%
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-14.56%
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Return after taxes on distributions
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10.50%
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-14.59%
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Return after taxes on distributions and sale of Fund shares
1
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6.92%
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-12.28%
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MSCI China Small Cap Index
(refiects no deduction for fees, expenses or taxes)
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22.98%
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-13.16%
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1
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After-tax returns are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an
investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold
their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
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Investment Advisor
Matthews International Capital Management, LLC (“Matthews”)
Portfolio Managers
Lead Manager:
Richard Gao has been a Portfolio Manager
of the China Small Companies Fund since the Fund’s inception in 2011.
Co-Manager:
Henry Zhang, CFA, has been a Portfolio
Manager of the China Small Companies Fund since the Fund’s inception in 2011.
Purchase and Sale of Fund Shares
You may purchase and sell Fund shares directly through the Fund’s
transfer agent by calling 800.789.ASIA (2742) or online at matthewsasia.com. Fund shares may also be purchased and sold through
various securities brokers and benefit plan administrators or their sub-agents. You may purchase and redeem Fund shares by electronic
bank transfer, check, or wire. A 2.00% redemption fee will be assessed on the sale or exchange of Fund shares within 90 days after
the date you purchase Fund shares. Please see page 76 in the statutory prospectus for more details. The minimum initial and subsequent
investment amounts for various types of accounts offered by the Fund are shown below.
Type of Account
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Minimum Initial Investment
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Subsequent Investments
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Non-retirement
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$2,500
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$100
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Retirement and Coverdell
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$500
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$50
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Tax Information
The Fund’s distributions are taxable, and will be taxed
as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual
retirement account. Tax-deferred arrangements may be taxed later upon withdrawal from those accounts.
Payments to Broker-Dealers
and Other Financial Intermediaries
If you purchase Fund shares through a broker-dealer or other
financial intermediary (such as a bank), Matthews may pay the intermediary for the sale of Fund shares and related services. Shareholders
who purchase or hold Fund shares through an intermediary may inquire about such payments from that intermediary. These payments
may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund
over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
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4
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MATTHEWS CHINA SMALL COMPANIES
FUND
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