-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T5vUjtjwa52zeKHKIqTGywz0ZVtKbhUYRhQokm2lB4lOwlmnF0liTXUGIgDoaxGU zeMFialiskYhLYEBJzZYfQ== 0000950109-96-007023.txt : 19961031 0000950109-96-007023.hdr.sgml : 19961031 ACCESSION NUMBER: 0000950109-96-007023 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961030 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATTHEWS INTERNATIONAL FUNDS CENTRAL INDEX KEY: 0000923184 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-08510 FILM NUMBER: 96649939 BUSINESS ADDRESS: STREET 1: 2 W ELM ST STREET 2: C/O FUND/PLAN SERVICES INC CITY: CONSHOHOCKEN STATE: PA ZIP: 19428 N-30D 1 ANNUAL REPORT Dear Fellow Shareholder: I am pleased to enclose the annual report for the Matthews International Funds for the year ended August 31, 1996. The last twelve months has been an eventful period for the Tiger markets of Asia, reflecting both the considerable progress made by these young economies and the many challenges common to countries developing at such a rapid pace. Many of the region's stock markets have showed strong returns in this period, while a few have suffered from a combination of slowing exports and structural challenges. In general we are pleased with the performance of two of the funds in the series, with Matthews Pacific Tiger Fund showing a total return of 10.64% in the period and Matthews Asian Convertible Securities Fund 10.24%, but we are disappointed with the performance of the Korean market in this period and the Matthews Korea Fund's decline of 20.11%. The economic performance of the Asian Tigers remains impressive, in spite of slowing export growth in general, and weaker demand for electronics exports in particular. The long term attractions of the region continue to be reflected in inward capital investment and Asia's role on the world stage is a growing one. Throughout the region, the current year will see real economic growth after adjusting for inflation of between 5 and 7 percent. While this reflects a generally slower period of growth than many of these countries are accustomed to, it is still substantially higher than that achieved by the majority of developed nations. The economy of mainland China has shown marked signs of slowing to more sustainable levels of growth, while the reported inflation numbers have also shown considerable improvement. In general the stabilization of the mainland economy is one of the most encouraging developments over the last year, as China's potential as a trading partner remains one of the key attractions of the surrounding Tiger countries. For all three of the portfolios in the series we continue our focus on identifying high quality growth companies that will benefit from the long-term growth trends in the region. Thank you for your support. Sincerely, /s/ G. Paul Matthews G. Paul Matthews President, Matthews International Funds ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 - ------------------------------------------------------------------------------- The graph below compares the increase in value of a $10,000 investment in Matthews Pacific Tiger Fund and Matthews Asian Convertible Securities Fund with the performance of the MSCI AC Far East ex Japan Index with gross dividends in U.S. dollars. The average annual total return of Matthews Pacific Tiger Fund and Matthews Asian Convertible Fund for one year was 10.64% and 10.24%, respectively, and from inception, 4.27% and 5.70%, respectively. Pacific Tiger & Asian Conv. Sec. Funds (Assuming $10,000 invested at inception) [LINE GRAPH APPEARS HERE]
Matthews Pacific MSCI AC Far East Matthews Asian Tiger Fund ex Japan Index Conv. Sec. Fund ---------------- ---------------- --------------- 9/12/94 10000 10000 10000 11/94 9720 9329 9930 2/95 9241 8879 9722 5/95 9723 9447 10284 8/95 9793 8873 10089 11/95 9432 8784 10191 2/96 10965 9563 11124 5/96 11186 10185 11228 8/96 10835 9658 11122
The graph below compares the increase in value of a $10,000 investment in Matthews Korea Fund with the performance of the Korea Stock Price Index. The average annual total return of Matthews Korea Fund for one year was (20.11%) and from inception was (18.08%). Korea Fund (Assuming $10,000 invested at inception) [LINE GRAPH APPEARS HERE]
Matthews Korea Korea Stock Fund Price Index -------------- ------------- 1/2/95 10000 10000 2/95 9000 8621 5/95 8960 8590 9/95 9130 8897 11/95 9230 9061 2/96 8404 8301 5/96 8636 8790 8/96 7294 7620
GENERAL MARKET AND ECONOMIC INFORMATION - -------------------------------------------------------------------------------- Asia ex-Japan vs. US and International Stock Markets December 1987 - August 1996 [GRAPH APPEARS HERE]
MSCI All MSCI All Country Far Country Far East (ex East Free Japan) (ex Japan) S&P 500 Index Index Index ----------------------------------------------- Dec-87 100.000 100.000 247.08 Jan-88 111.875 104.964 257.07 Feb-88 118.556 105.719 267.82 Mar-88 121.832 111.196 258.89 Apr-88 133.423 115.877 261.33 May-88 139.647 114.918 262.16 Jun-88 147.028 124.809 273.50 Jul-88 163.590 127.023 272.02 Aug-88 170.696 116.102 261.52 Sep-88 179.540 116.601 271.91 Oct-88 166.082 122.346 278.97 Nov-88 176.672 123.616 273.70 Dec-88 166.649 125.844 277.72 Jan-89 183.769 140.637 297.47 Feb-89 193.006 139.497 288.86 Mar-89 202.814 141.885 294.87 Apr-89 212.544 150.758 309.64 May-89 227.925 143.780 319.05 Jun-89 215.129 133.152 317.98 Jul-89 221.614 144.729 346.08 Aug-89 229.873 141.955 351.45 Sep-89 238.061 151.023 349.15 Oct-89 232.432 148.167 340.36 Nov-89 225.130 154.084 345.99 Dec-89 233.500 161.086 353.40 Jan-90 260.016 160.572 329.08 Feb-90 253.721 166.625 331.89 Mar-90 239.080 167.037 339.94 Apr-90 214.150 159.666 330.80 May-90 209.808 175.043 361.20 Jun-90 189.862 178.792 358.02 Jul-90 196.345 189.255 356.15 Aug-90 159.277 161.669 322.56 Sep-90 136.582 136.631 306.05 Oct-90 152.898 144.822 304.00 Nov-90 158.707 139.158 322.22 Dec-90 163.328 145.503 330.22 Jan-91 159.965 153.079 343.93 Feb-91 182.808 171.604 367.07 Mar-91 187.534 179.033 375.22 Apr-91 194.959 176.564 375.34 May-91 192.401 178.636 389.83 Jun-91 191.723 173.389 371.16 Jul-91 196.134 178.807 387.81 Aug-91 185.375 174.227 395.43 Sep-91 187.801 168.907 387.86 Oct-91 183.901 171.045 392.45 Nov-91 184.664 176.083 375.22 Dec-91 189.158 184.445 417.09 Jan-92 209.405 197.051 408.78 Feb-92 206.851 203.598 412.70 Mar-92 201.532 201.430 403.69 Apr-92 204.854 208.239 414.95 May-92 212.495 222.082 415.35 Jun-92 216.059 225.783 408.14 Jul-92 206.309 219.426 424.22 Aug-92 200.634 211.730 414.03 Sep-92 199.335 215.564 417.80 Oct-92 216.062 234.484 418.68 Nov-92 212.593 225.580 431.35 Dec-92 205.798 218.483 435.71 Jan-93 209.367 225.016 438.78 Feb-93 226.861 237.865 443.38 Mar-93 231.548 237.368 451.67 Apr-93 246.103 257.741 440.19 May-93 255.182 272.184 450.19 Jun-93 247.089 264.651 450.53 Jul-93 246.342 265.800 448.13 Aug-93 257.286 287.582 463.56 Sep-93 266.650 298.129 458.93 Oct-93 305.869 352.642 467.83 Nov-93 312.210 349.753 461.79 Dec-93 391.081 434.341 466.45 Jan-94 376.602 404.280 481.61 Feb-94 355.114 380.620 467.14 Mar-94 321.529 338.337 445.76 Apr-94 338.982 353.451 450.91 May-94 351.207 368.099 456.51 Jun-94 341.442 351.122 444.27 Jul-94 363.292 370.226 458.26 Aug-94 388.622 399.772 475.50 Sep-94 393.384 392.665 462.71 Oct-94 392.537 399.837 472.35 Nov-94 362.554 361.197 453.69 Dec-94 362.133 351.775 459.27 Jan-95 323.158 313.633 470.42 Feb-95 345.043 344.902 487.38 Mar-95 350.315 345.545 500.71 Apr-95 341.778 341.572 514.71 May-95 367.134 382.626 533.40 Jun-95 361.356 376.384 544.75 Jul-95 363.929 381.723 562.06 Aug-95 344.831 362.973 561.88 Sep-95 355.151 368.787 584.41 Oct-95 349.486 362.609 581.50 Nov-95 341.365 358.386 605.37 Dec-95 355.519 375.729 615.93 Jan-96 372.221 409.658 636.02 Feb-96 371.641 407.665 640.43 Mar-96 378.199 410.176 645.50 Apr-96 406.109 420.916 654.17 May-96 395.812 416.105 669.12 Jun-96 393.298 407.157 670.63
Economic Statistics (as of 6/30/96)
Population '96e Real '97e Real '95 GDP 1995 GDP per 1996e Market (millions) GDP Growth GDP Growth (US$ billions) capital (US$) inflation U.S 263 2.0% 1.9% 7,248 27,528 3.0% Japan 125 1.8% 2.3% 5,027 40,072 0.5% China 1,208 10.5% 10.5% 655 533 10.5% Hong Kong 7 5.0% 5.0% 144 23,207 7.8% Indonesia 203 7.4% 7.3% 198 1,014 8.8% Malaysia 21 8.0% 7.5% 86 4,279 3.8% Philippines 68 6.9% 7.5% 74 1,083 8.1% Singapore 3 7.8% 7.3% 84 12,287 1.9% South Korea 45 6.8% 7.3% 456 10,182 5.0% Taiwan 21 5.0% 5.5% 261 12,365 3.1% Thailand 60 8.0% 7.5% 166 2,759 5.8%
1997e Prime Lending '96e Current A/C inflation rates (% of GDP) U.S 3.2% 8.5% (2.1%) Japan 1.0% 1.6% 1.7% China 9.4% 12.1% 0.3% Hong Kong 8.0% 8.8% (1.1%) Indonesia 8.4% 19.3% (4.4%) Malaysia 3.5% 8.2% (7.6%) Philippines 6.4% 14.6% (2.9%) Singapore 2.5% 6.3% 12.4% South Korea 5.0% 10.8% (2.2%) Taiwan 3.4% 7.8% 1.7% Thailand 4.9% 13.8% (8.0%)
MATTHEWS INTERNATIONAL FUNDS -- SCHEDULE OF INVESTMENTS August 31, 1996 - ------------------------------------------------------------------------------- MATTHEWS PACIFIC TIGER FUND
MARKET SHARES VALUE --------- ----------- EQUITIES -- 90.53% HONG KONG -- 48.08% Chen Hsong Holdings...................................... 704,000 $ 405,137 Cheung Kong Holdings, Ltd. .............................. 69,000 484,081 Cheung Kong Infrastructure Holdings**.................... 132,000 215,940 Chevalier International Holdings......................... 1,920,000 335,200 China Resources Enterprises, Ltd. ....................... 520,000 467,366 China Travel International Investment, Ltd. ............. 2,064,000 593,894 Citic Pacific, Ltd. ..................................... 106,000 466,073 Dah Sing Financial Group................................. 99,600 325,873 Giordano International, Ltd. ............................ 402,000 332,717 HSBC Holdings PLC........................................ 31,200 538,648 JCG Holdings, Ltd. ...................................... 470,000 401,153 Joyce Boutique Holdings.................................. 1,066,000 282,605 Li & Fung, Ltd. ......................................... 446,000 403,740 Moulin International Holdings, Ltd. ..................... 800,000 434,518 New Asia Realty & Trust Co. ............................. 120,000 441,502 New World Development Co., Ltd. ......................... 100,000 484,953 New World Infrastructure, Ltd.**......................... 150,000 353,046 Qingling Motors Co. ..................................... 1,154,000 443,978 Sino Hotels Holdings, Ltd. .............................. 1,450,000 421,909 Tingyi Holdings Co.**.................................... 1,764,000 412,901 ----------- TOTAL HONG KONG.......................................... 8,245,234 ----------- INDONESIA -- 2.74% Pt Lippo Life Insurance.................................. 60,000 51,238 Pt Kawasan Industri Jababeka............................. 215,000 282,291 Pt Steady Safe Transportation............................ 162,695 135,463 ----------- TOTAL INDONESIA.......................................... 468,992 ----------- KOREA -- 6.62% Chonggu Housing & Construction........................... 14,000 328,105 Housing & Commercial Bank**.............................. 5,100 110,186 Hyundai Engineering & Construction Co.**................. 3,000 113,885 Kyung Won Century Co.**.................................. 8,000 274,397 Samsung Electronics Co. ................................. 10 779 Samsung Electronics Co. (New)**.......................... 108 8,028 Samsung Securities Co., Ltd. ............................ 10,000 278,303 Samsung Securities Co., Ltd. (New)....................... 800 21,996 ----------- TOTAL KOREA.............................................. 1,135,679 ----------- MALAYSIA -- 13.37% Berjaya Sports Toto Berhad............................... 97,000 359,807 Cycle & Carriage Bintang Berhad, Ltd. ................... 62,000 397,803 DCB Holdings Berhad...................................... 57,000 173,718 Public Bank Berhad....................................... 133,330 255,571
MARKET SHARES VALUE --------- ----------- Resorts World Berhad.................................. 65,000 $ 354,493 Shah Alam Properties Berhad**......................... 80,000 394,594 Talam Corp. Berhad.................................... 250,000 356,899 ----------- TOTAL MALAYSIA........................................ 2,292,885 ----------- PHILIPPINES -- 2.30% Manila Electric Co. .................................. 15,600 119,702 Metropolitan Bank & Trust Co. ........................ 11,492 274,206 ----------- TOTAL PHILIPPINES..................................... 393,908 ----------- SINGAPORE -- 5.79% Osprey Maritime, Ltd. ................................ 257,500 347,625 Parkway Holdings, Ltd. ............................... 110,000 345,509 Wing Tai Holdings, Ltd. .............................. 140,000 300,455 ----------- TOTAL SINGAPORE....................................... 993,589 ----------- THAILAND -- 11.63% Bank of Ayudhya Public Co., Ltd. ..................... 85,250 384,055 Central Pattana Public Co., Ltd. ..................... 99,000 410,788 Industrial Finance Corp. ............................. 100,067 407,307 Siam Cement Public Co., Ltd. ......................... 9,500 364,908 Thai Engine Manufacturing............................. 45,000 426,793 ----------- TOTAL THAILAND........................................ 1,993,851 ----------- TOTAL EQUITIES (Cost $15,401,785)................................... 15,524,138 ----------- FACE MARKET AMOUNT VALUE --------- ----------- INTERNATIONAL DOLLAR BONDS (NOTE 1-A) -- 4.41% Far Eastern Department Stores 3.000%, due 07/06/01................................. $350,000 348,250 President Enterprises 0.000%, due 07/22/01**+.............................. 260,000 407,550 ----------- TOTAL INTERNATIONAL DOLLAR BONDS (Cost $689,666)...................................... 755,800 ----------- TOTAL INVESTMENTS -- 94.94%* (Cost $16,091,451)................................... 16,279,938 ----------- CASH AND OTHER ASSETS, LESS LIABILITIES -- 5.06%............................ 868,119 ----------- NET ASSETS -- 100%.................................... $17,148,057 ===========
* Cost for Federal income tax purposes is $16,091,451 and net unrealized appreciation consists of: Gross unrealized appreciation........... $1,026,801 Gross unrealized depreciation........... (838,314) ---------- Net unrealized appreciation........... $ 188,487 ==========
**Non-income producing securities + Convertible bond with put option See accompanying notes to financial statements. MATTHEWS INTERNATIONAL FUNDS -- SCHEDULE OF INVESTMENTS August 31, 1996 - -------------------------------------------------------------------------------- MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND
MARKET SHARES VALUE -------- ---------- EQUITIES -- 9.03% HONG KONG -- 5.95% China Hong Kong Photo Products, Ltd........................ 21,387 $ 10,095 Citic Pacific (UBS) Warrants**............................. 140,000 29,330 CP Pokphand Co............................................. 25,000 8,487 Cross-Harbour Tunnel Co.................................... 20,000 43,840 HSBC Holdings PLC Warrants** .............................. 4,000 69,057 Peregrine Investment Holdings, Ltd......................... 24,000 33,830 Peregrine Investment Holdings, Ltd. Warrants**............. 1,400 228 ---------- TOTAL HONG KONG............................................ 194,867 ---------- MALAYSIA -- 0.50% Renong Berhad Warrants**................................... 40,000 16,522 ---------- SOUTH KOREA -- 1.90% Korea Kumho Petrochemical.................................. 5,000 31,736 Samsung Electronics Co..................................... 330 25,699 Samsung Electronics Co. (New)**............................ 63 4,683 ---------- TOTAL SOUTH KOREA.......................................... 62,118 ---------- THAILAND -- 0.68% Industrial Finance Corp. Warrants**........................ 11,200 22,130 ---------- TOTAL EQUITIES (Cost $306,109)........................................... 295,637 ---------- FACE MARKET AMOUNT VALUE -------- ---------- INTERNATIONAL DOLLAR BONDS (NOTE 1-A) -- 83.73% CHINA -- 2.36% China Overseas Land & Investment 5.250%, due 12/08/00...................................... $ 80,000 77,200 ---------- HONG KONG -- 27.51% Hysan Development Finance 6.750%, due 06/01/00...................................... 80,000 90,500 New World Development (BVI) 4.375%, due 12/11/00...................................... 60,000 64,575 Shangri-La Asia Capital 2.875%, due 12/16/00...................................... 70,000 57,750 Hong Kong and Shanghai Hotels 5.000%, due 01/06/01...................................... 100,000 109,000
FACE MARKET AMOUNT VALUE -------- ---------- Hong Kong Land Co. 4.000%, due 02/23/01....................................... $ 35,000 $ 30,056 Sino Land 5.000%, due 02/26/01....................................... 100,000 98,500 Hon Kwok Land Capital 5.300%, due 07/05/01....................................... 100,000 100,625 New World Infrastructure, Ltd. 5.000%, due 07/15/01....................................... 60,000 61,425 Bank of East Asia, Ltd. 2.000%, due 07/19/03....................................... 100,000 103,500 Regal Hotels International Holdings 5.250%, due 12/13/08....................................... 95,000 92,863 Amoy Properties, Ltd. 5.500%, due 12/29/49....................................... 100,000 91,625 ---------- TOTAL HONG KONG............................................. 900,419 ---------- INDONESIA -- 2.76% Pt Indocement 2.000%, due 02/27/06....................................... 100,000 90,250 ---------- MALAYSIA -- 4.86% United Engineers Berhad 2.000%, due 03/01/04....................................... 50,000 61,500 Commerce Asset Holdings 1.750%, due 09/26/04....................................... 80,000 97,600 ---------- TOTAL MALAYSIA.............................................. 159,100 ---------- PHILIPPINES -- 4.84% JG Summit (Cayman), Ltd. 3.500%, due 12/23/03....................................... 80,000 64,400 Filinvest Capital 2.500%, due 05/15/06....................................... 90,000 93,938 ---------- TOTAL PHILIPPINES........................................... 158,338 ---------- SINGAPORE -- 7.62% Far East Levingston Shipping 1.500%, due 05/02/01....................................... 60,000 53,550 Jardine Strategic Holdings 7.500%, due 05/07/49....................................... 90,000 98,325 Dairy Farm International Holdings 6.500%, due 05/10/49....................................... 135,000 97,369 ---------- TOTAL SINGAPORE............................................. 249,244 ---------- SOUTH KOREA -- 1.75% Samsung Display Devices 0.250%, due 03/12/06....................................... 60,000 57,150 ----------
See accompanying notes to financial statements. MATTHEWS INTERNATIONAL FUNDS -- SCHEDULE OF INVESTMENTS August 31, 1996 - ------------------------------------------------------------------------------- MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND (continued)
FACE MARKET AMOUNT VALUE -------- ---------- TAIWAN -- 15.59% Acer, Inc. 4.000%, due 06/10/01....................................... $ 20,000 $ 47,100 Far Eastern Department Stores 3.000%, due 07/06/01....................................... 70,000 69,650 Nan Ya Plastic Corp. 1.750%, due 07/19/01....................................... 80,000 86,400 President Enterprises 0.000%, due 07/22/01**+.................................... 40,000 62,700 Yangming Marine Transportation 2.000%, due 10/06/01....................................... 70,000 84,000 Winbond Electronics Corp. 2.000%, due 03/13/03....................................... 100,000 98,500 Walsin Lihwa Corp. 3.250%, due 06/16/04....................................... 70,000 61,950 ---------- TOTAL TAIWAN................................................ 510,300 ---------- THAILAND -- 16.44% Central Pattana Public Co. 2.750%, due 04/10/01....................................... 90,000 94,950 Banpu Public Co., Ltd. 2.750%, due 04/10/03....................................... 110,000 112,750 Hemaraj Land Development 3.500%, due 09/09/03....................................... 40,000 39,000 MDX Public Co., Ltd. 4.750%, due 09/17/03....................................... 65,000 25,350 Sino-Thai Engineering & Construction PLC 1.750%, due 12/17/03....................................... 30,000 32,625 Tanayong Public Co., Ltd. 3.500%, due 03/01/04....................................... 60,000 54,300
FACE MARKET AMOUNT VALUE -------- ---------- Robinson Department Stores 4.250%, due 04/07/04...................................... $ 50,000 $ 58,875 Bangkok Bank Public Co. 1.500%, due 08/07/06...................................... 120,000 120,000 ---------- TOTAL THAILAND............................................. 537,850 ---------- TOTAL INTERNATIONAL DOLLAR BONDS (Cost $2,728,744)......................................... 2,739,851 ---------- MARKET SHARES VALUE -------- ---------- INVESTMENT COMPANY -- 1.47% (Cost $58,292) The India Fund............................................. 6,000 48,000 ---------- TOTAL INVESTMENTS -- 94.23%* (Cost $3,093,145)......................................... 3,083,488 ---------- CASH AND OTHER ASSETS, LESS LIABILITIES -- 5.77%........... 188,872 ---------- NET ASSETS -- 100%......................................... $3,272,360 ==========
* Cost for Federal income tax purposes is $3,093,145 and net unrealized depreciation consists of: Gross unrealized appreciation............. $ 122,062 Gross unrealized depreciation............. (131,719) --------- Net unrealized depreciation............. $ (9,657) =========
**Non-income producing securities +Convertible bond with put option See accompanying notes to financial statements. MATTHEWS INTERNATIONAL FUNDS -- SCHEDULE OF INVESTMENTS August 31, 1996 - ------------------------------------------------------------------------------- MATTHEWS KOREA FUND
MARKET SHARES VALUE ------ ---------- EQUITIES -- KOREA 95.37% Dae Duck Electronics Co. .................................... 3,500 $ 160,207 Daewoo Heavy Industries...................................... 15,000 74,153 Dong-A Pharmaceutical Co., Ltd. ............................. 4,524 108,786 Dong Won Metal Industries**.................................. 4,000 156,729 Halla Engineering & Construction............................. 3,500 101,678 Hankuk Electric Glass........................................ 2,500 68,660 Hyundai Motor Service Co.**.................................. 3,500 120,903 Inchon Iron & Steel Co. (New)**.............................. 2,343 51,479 Keyang Electric Machinery Co. ............................... 1,000 21,971 Keyang Electric Machinery Co. (New).......................... 912 19,370 Korea Industrial Leasing**................................... 8,000 113,274 Korea Reinsurance (New)...................................... 479 13,331 Kun Sul Chemical Industry**.................................. 2,000 124,504 Kyung Nam Bank............................................... 10,000 128,166 Kyung Won Century Co.**...................................... 3,000 102,899 L.G. Securities**............................................ 4,000 34,471 Oriental Chemical Industries Co., Ltd. ...................... 2,000 70,308 Sam Lip Industrial Co.**..................................... 3,140 118,433 Samsung Corp. (New)**........................................ 299 4,329 Samsung Display Devices Co. ................................. 37 2,484 Samsung Electro-Mechanics Co. ............................... 6,000 106,195 Samsung Electronics Co. ..................................... 906 70,556 Samsung Electronics Co. (New)**.............................. 477 35,458 Samsung Securities Co., Ltd. ................................ 4,000 111,321 Samsung Securities Co., Ltd. (New)........................... 560 15,397
MARKET SHARES VALUE ------ ---------- Seoul Bank**................................................. 6,000 $ 38,670 Shin Wha Engineering & Construction Co. ........................................... 5,000 85,444 Shin Wha Engineering & Construction Co. (New) ..................................... 759 12,855 Shindaeyang Paper............................................ 4,670 117,997 Shinhung Co. ................................................ 2,000 69,820 Shinsegae Department Stores (New)**.......................... 2,000 118,401 Suheung Capsule.............................................. 2,000 107,415 Tongyang Merchant Bank**..................................... 7,187 109,666 ---------- TOTAL EQUITIES (Cost $3,134,176)........................................... 2,595,330 ---------- TOTAL INVESTMENTS -- 95.37% (Cost $3,134,176)........................................... 2,595,330 ---------- CASH AND OTHER ASSETS, LESS LIABILITIES -- 4.63%................................... 126,000 ---------- NET ASSETS -- 100%........................................... $2,721,330 ==========
* Cost for Federal income tax purposes is $3,134,176 and net unrealized depreciation consists of: Gross unrealized appreciation........... $ 48,388 Gross unrealized depreciation........... (587,234) --------- Net unrealized depreciation .......... $(538,846) ========= **Non-income producing securities See accompanying notes to financial statements. STATEMENTS OF ASSETS AND LIABILITIES August 31, 1996 - --------------------------------------------------------------------------------
MATTHEWS MATTHEWS ASIAN PACIFIC CONVERTIBLE MATTHEWS TIGER SECURITIES KOREA FUND FUND FUND ----------- ----------- ---------- ASSETS: Investments, at market value (Cost $16,091,451, $3,093,145 and $3,134,176, respectively)............................ $16,279,938 $3,083,488 $2,595,330 Cash...................................... 664,772 202,677 37,825 Dividends and interest receivable......... 37,193 34,478 713 Receivable for securities sold............ 326,027 0 26,224 Receivable for capital stock sold......... 231,348 25,000 35,851 Deferred organization costs (Note 1-E).... 20,426 20,426 10,766 Due from Advisor (Note 2)................. 40,417 47,524 28,717 Other assets.............................. 50 32 9 ----------- ---------- ---------- Total assets............................. 17,600,171 3,413,625 2,735,435 ----------- ---------- ---------- LIABILITIES: Payable for securities purchased.......... 403,297 126,918 0 Payable for capital stock redeemed........ 7,167 0 0 Accrued expenses.......................... 41,650 14,347 14,105 ----------- ---------- ---------- Total liabilities........................ 452,114 141,265 14,105 ----------- ---------- ---------- NET ASSETS: Applicable to 1,586,629, 310,910 and 376,157 shares outstanding, respectively. $17,148,057 $3,272,360 $2,721,330 =========== ========== ========== NET ASSETS CONSIST OF: Capital paid-in........................... $16,869,908 $3,200,249 $3,485,643 Accumulated undistributed net investment income (loss)............................ 19,664 4,788 (27,353) Accumulated undistributed net realized gain (loss) on investments and foreign currency related transactions............ 69,988 76,980 (198,105) Net unrealized appreciation (depreciation) on investments and foreign currency related transactions..................... 188,497 (9,657) (538,855) ----------- ---------- ---------- $17,148,057 $3,272,360 $2,721,330 =========== ========== ========== NET ASSET VALUE AND REDEMPTION PRICE PER SHARE.................................... $10.81 $10.53 $7.23 ====== ====== =====
See accompanying notes to financial statements. STATEMENTS OF OPERATIONS For the Year Ended August 31, 1996 - --------------------------------------------------------------------------------
MATTHEWS MATTHEWS ASIAN PACIFIC CONVERTIBLE MATTHEWS TIGER SECURITIES KOREA FUND FUND FUND --------- ----------- --------- INVESTMENT INCOME: Dividends................................... $ 150,524 $ 38,085 $ 6,954 Interest.................................... 27,620 60,529 7,195 --------- --------- --------- Total investment income.................... 178,144 98,614 14,149 --------- --------- --------- EXPENSES: Investment advisory fees (Note 2)........... 80,273 21,475 15,406 Transfer agent fees......................... 37,495 33,559 31,526 Administration fees......................... 29,671 28,154 27,558 Accounting fees............................. 60,455 51,146 48,000 Auditing fees............................... 21,926 5,676 5,147 Custodian fees.............................. 81,566 17,317 19,235 Directors fees (Note 2)..................... 4,583 4,583 4,583 Legal fees.................................. 1,249 981 651 Insurance expense........................... 1,076 843 492 Amortization of organization costs (Note 1- E)......................................... 6,753 6,753 3,133 Printing expense............................ 2,315 2,125 2,836 Registration expenses....................... 21,458 14,634 16,423 Miscellaneous expenses...................... 253 7 7 --------- --------- --------- Total expenses............................. 349,073 187,253 174,997 Expenses reimbursed and waived (Note 2)..... (196,594) (147,620) (140,698) --------- --------- --------- Net expenses............................... 152,479 39,633 34,299 --------- --------- --------- NET INVESTMENT INCOME (LOSS)................ 25,665 58,981 (20,150) --------- --------- --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS: Net realized gain (loss) on investments..... 87,110 81,718 (199,001) Net realized loss on foreign currency related transactions....................... (5,804) (221) (7,209) Net change in unrealized appreciation (depreciation) on investments and foreign currency related transactions.............. 179,432 (11,326) (512,998) --------- --------- --------- Net realized and unrealized gain (loss) on investments and foreign currency related transactions............................... 260,738 70,171 (719,208) --------- --------- --------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................................. $ 286,403 $ 129,152 $(739,358) ========= ========= =========
See accompanying notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
MATTHEWS PACIFIC MATTHEWS ASIAN CONVERTIBLE MATTHEWS KOREA TIGER FUND SECURITIES FUND FUND ---------------------- ----------------------------- ---------------------- YEAR PERIOD YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED ENDED ENDED AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, 1996 1995* 1996 1995* 1996 1995** ----------- ---------- -------------- ------------- ---------- ---------- OPERATIONS: Net investment income (loss)................. $ 25,665 $ 2,361 $ 58,981 $ 14,571 $ (20,150) $ 2,219 Net realized gain (loss) on investments and foreign currency related transactions... 81,306 (18,241) 81,497 6,074 (206,210) 5,811 Net change in unrealized appreciation (depreciation) on investments and foreign currency related transactions........... 179,432 9,065 (11,326) 1,669 (512,998) (25,857) ----------- ---------- -------------- ------------ ---------- -------- Increase (Decrease) in net assets from operations............. 286,403 (6,815) 129,152 22,314 (739,358) (17,827) ----------- ---------- -------------- ------------ ---------- -------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income... 0 (1,439) (55,874) (12,617) 0 0 Realized gains on investments............ 0 0 (10,864) 0 (7,128) 0 ----------- ---------- -------------- ------------ ---------- -------- 0 (1,439) (66,738) (12,617) (7,128) 0 ----------- ---------- -------------- ------------ ---------- -------- CAPITAL SHARE TRANSACTIONS (NET) -- (NOTE 1-I)............ 15,779,289 1,040,619 2,347,269 802,980 2,963,715 421,928 ----------- ---------- -------------- ------------ ---------- -------- Total increase in net assets................. 16,065,692 1,032,365 2,409,683 812,677 2,217,229 404,101 NET ASSETS: Beginning of period..... 1,082,365 50,000 862,677 50,000 504,101 100,000 ----------- ---------- -------------- ------------ ---------- -------- End of period........... $17,148,057 $1,082,365 $ 3,272,360 $ 862,677 $2,721,330 $504,101 =========== ========== ============== ============ ========== ========
* The Funds commenced operations on September 13, 1994. **The Fund commenced operations on January 3, 1995. See accompanying notes to financial statements. FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for a share of beneficial interest outstanding throughout each period presented.
MATTHEWS PACIFIC MATTHEWS ASIAN CONVERTIBLE MATTHEWS KOREA TIGER FUND SECURITIES FUND FUND ---------------------- ------------------------------- ---------------------- YEAR PERIOD YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED ENDED ENDED AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, 1996 1995* 1996 1995* 1996 1995** ---------- ---------- ------------- ------------- ---------- ---------- Net Asset Value, beginning of period..... $ 9.77 $10.00 $ 9.88 $ 10.00 $ 9.13 $10.00 ------- ------ ------------- ------------ ------- ------ INCOME FROM INVESTMENT OPERATIONS Net investment income (loss).................. 0.01 0.02 0.25 0.23 (0.07) 0.08 *** Net realized and unrealized gain (loss) on investments and foreign currency........ 1.03 (0.23) 0.75 (0.14) (1.75) (0.95)*** ------- ------ ------------- ------------ ------- ------ Total from investment operations............. 1.04 (0.21) 1.00 0.09 (1.82) (0.87) ------- ------ ------------- ------------ ------- ------ LESS DISTRIBUTIONS FROM: Net investment income.... 0.00 (0.02) (0.26) (0.21) 0.00 0.00 Net realized gains on investments............. 0.00 0.00 (0.09) 0.00 (0.08) 0.00 ------- ------ ------------- ------------ ------- ------ Total distributions..... 0.00 (0.02) (0.35) (0.21) (0.08) 0.00 ------- ------ ------------- ------------ ------- ------ Net Asset Value, end of period.................. $ 10.81 $ 9.77 $ 10.53 $ 9.88 $ 7.23 $ 9.13 ======= ====== ============= ============ ======= ====== TOTAL RETURN............. 10.64% (2.07)% 10.24% 0.89% (20.11)% (8.70)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in 000's).............. $17,148 $1,082 $ 3,272 $ 863 $ 2,721 $ 504 Ratio of expenses to average net assets before reimbursement and waiver of expenses by Advisor and Administrator........... 4.35% 25.95%+ 8.73% 23.11%+ 11.36% 42.87%+ Ratio of expenses to average net assets after reimbursement and waiver of expenses by Advisor and Administrator (Note 2)...................... 1.90% 2.17%+ 1.85% 2.26%+ 2.23% 0.24%+ Ratio of net investment loss to average net assets before reimbursement and waiver of expenses by Advisor and Administrator....... (2.13)% (23.41)%+ (4.13)% (18.68)%+ (10.44)% (41.79)%+ Ratio of net investment income (loss) to average net assets after reimbursement and waiver of expenses by Advisor and Administrator....... 0.32% 0.36%+ 2.75% 2.17%+ (1.31)% 0.84%+ Portfolio turnover....... 124.69% 92.53% 88.16% 121.63% 139.71% 42.16% Average commission rate paid.................... $0.0064 N/A $ 0.0020 N/A $0.1397 N/A
+ Annualized * The Funds commenced operations on September 13, 1994. ** The Fund commenced operations on January 3, 1995. *** Calculated using the average shares method. See accompanying notes to financial statements. MATTHEWS INTERNATIONAL FUNDS -- NOTES TO FINANCIAL STATEMENTS August 31, 1996 - ------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Matthews International Funds (the "Company") is a no-load, open-end investment management company registered under the Investment Company Act of 1940, as amended, as a series company. The Company currently consists of three separate investment series (each a "Fund" and collectively, the "Funds"): Matthews Pacific Tiger Fund, Matthews Asian Convertible Securities Fund and Matthews Korea Fund. The Matthews Pacific Tiger Fund and Matthews Korea Fund seek to maximize capital appreciation by investing, under normal circumstances, at least 65% of their total assets in equity securities of Pacific Tiger economies and South Korean companies, respectively. Pacific Tiger economies include Hong Kong, Singapore, South Korea, Taiwan, Indonesia, Malaysia, the Philippines, Thailand and China. The Matthews Asian Convertible Securities Fund seeks capital appreciation and current income by investing, under normal circumstances, at least 65% of its total assets in convertible securities of Asian economies. Asian economies include Hong Kong, Japan, Singapore, South Korea, Taiwan, Indonesia, Malaysia, the Philippines, Thailand, China and India. The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. A. SECURITY VALUATION: Securities listed on any national securities exchange are valued at their last sale price on the exchange where the securities are principally traded or, if there has been no sale on that date, at the mean between the last reported bid and asked prices. Securities traded over-the-counter are priced at the mean of the last bid and asked prices. Securities are valued through valuations obtained from a commercial pricing service or at the most recent mean of the bid and asked prices provided by investment dealers in accordance with procedures established by the Board of Trustees. The books and records of the Funds are maintained in U.S. dollars. Transactions denominated in foreign currencies are recorded at the current prevailing exchange rates. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the current exchange rate. Translation gains or losses resulting from changes in the exchange rate during the reporting period and realized gains and losses on the settlement of foreign currency transactions are reported in the results of operations for the current period. The Funds do not isolate that portion of gains and losses on investments in equity securities which is due to changes in the foreign exchange rate from that which is due to changes in market prices of equity securities. International dollar bonds are issued offshore, pay interest and principal in U.S. dollars, and are denominated in U.S. dollars. Portfolio securities traded on a foreign exchange are generally valued at the respective current prevailing exchange rates. The securities' values are translated into U.S. dollars using these rates. If subsequent to the time a rate has been established and it has been determined to have materially changed, the fair value of those securities, (considering the changing conditions) will be determined by (or under the direction of) the Funds' Board of Trustees. B. RISKS ASSOCIATED WITH FOREIGN SECURITIES: Investments by the Funds in the securities of foreign issuers may involve investment risks different from those of U.S. issuers including possible political or economic instability of the country of the issuer, the difficulty of predicting international trade patterns, the possibility of currency exchange controls, the possible imposition of foreign withholding tax on the interest income payable on such instruments, the possible establishment of foreign controls, the possible seizure or nationalization of foreign deposits or assets, or the adoption of other foreign government restrictions that might adversely affect the foreign securities held by the Funds. Foreign securities may also be subject to greater fluctuations in price than securities of domestic corporations or the U. S. Government. C. FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the year ended August 31, 1996. Therefore, no federal income tax provision is required. D. DETERMINATION OF GAINS OR LOSSES ON SALES OF SECURITIES: Gains or losses on the sale of securities are determined on the identified cost basis. E. ORGANIZATION COSTS: Organization costs are being amortized on a straight-line basis over five years 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 Funds organization costs, the redemption proceeds will be reduced by any such unamortized organization costs in the same proportion as the number of initial shares being redeemed bears to the number of those shares outstanding at the time of redemption. MATTHEWS INTERNATIONAL FUNDS -- NOTES TO FINANCIAL STATEMENTS August 31, 1996 (continued) - ------------------------------------------------------------------------------- F. DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of Matthews Asian Convertible Securities Fund to distribute net investment income on a semi- annual basis and capital gains annually. Matthews Pacific Tiger Fund and Matthews Korea Fund distribute net investment income and capital gains 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 generally accepted accounting principles. G. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles 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. H. 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. I. 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. Transactions in shares of beneficial interest from the commencement of investment operations were as follows:
MATTHEWS MATTHEWS ASIAN CONVERTIBLE PACIFIC TIGER FUND SECURITIES FUND ------------------------------------------- ---------------------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1996 AUGUST 31, 1995 ---------------------- ------------------- ------------------- ------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT --------- ----------- ------- ---------- ------- ---------- ------- ---------- Shares sold............. 1,657,416 $17,743,189 138,867 $1,365,306 259,782 $2,726,198 126,985 $1,254,801 Shares issued through reinvestment of dividends.............. 0 0 144 1,365 5,283 54,160 1,196 11,927 Shares redeemed......... (181,523) (1,963,900) (28,275) (276,052) (41,474) (433,089) (40,862) (413,748) --------- ----------- ------- ---------- ------- ---------- ------- ---------- Net Increase............ 1,475,893 $15,779,289 110,736 $1,090,619* 223,591 $2,347,269 87,319 $ 852,980* ========= =========== ======= ========== ======= ========== ======= ========== MATTHEWS KOREA FUND ------------------------------------------- YEAR ENDED PERIOD ENDED AUGUST 31, 1996 AUGUST 31,1995 ---------------------- ------------------- SHARES AMOUNT SHARES AMOUNT --------- ----------- ------- ---------- Shares sold............. 452,855 $ 3,926,319 59,910 $ 565,969 Shares issued through reinvestment of dividends.............. 801 6,952 0 0 Shares redeemed......... (132,685) (969,556) (4,724) (44,041) --------- ----------- ------- ---------- Net Increase............ 320,971 $ 2,963,715 55,186 $ 521,928* ========= =========== ======= ==========
* Included in these amounts are $50,000, $50,000 and $100,000 in seed money for the Matthews Pacific Tiger Fund, Matthews Asian Convertible Securities Fund and Matthews Korea Fund, respectively. MATTHEWS INTERNATIONAL FUNDS -- NOTES TO FINANCIAL STATEMENTS August 31, 1996 (continued) - ------------------------------------------------------------------------------- 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Matthews International Capital Management (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, the Advisor charges the Funds a monthly fee of 1/12 of 1% on each Fund's respective average daily net assets. In accordance with Blue Sky limitations, the Advisor has agreed to waive its fees and voluntarily reimburse each Fund to the extent total annualized expenses exceed permissible limits applicable to each Fund in any state in which its shares are then qualified for sale. Certain officers and trustees of the Funds are also officers and directors of the Advisor. All officers serve without direct compensation from the Funds. Investment advisory fees and other transactions with affiliates, for the year ended August 31, 1996, are as follows:
EXPENSES INVESTMENT PERMISSIBLE WAIVED AND ADVISORY EXPENSE ADVISORY REIMBURSED DUE FROM DAEWOO FEE RATE LIMITATION FEES BY ADVISOR ADVISOR SECURITIES ---------- ----------- -------- ---------- -------- ---------- Matthews Pacific Tiger Fund................... 1.00% 1.90% $80,273 $196,594 $40,417 -- Matthews Asian Convertible Securities Fund................... 1.00 1.90 21,475 147,620 47,524 -- Matthews Korea Fund..... 1.00 2.50 15,406 140,698 28,717 $11,584**
**Daewoo Securities is the affiliated broker for the Fund. This amount is the affiliated brokerage commissions paid. The investment advisory agreements provide that any reductions made by the Advisor in its fees are subject to reimbursement by the Funds within the following three years provided that Funds are able to effect such reimbursement and remain in compliance with applicable expense limitations. 3. INVESTMENT TRANSACTIONS Investment transactions for the year ended August 31, 1996, excluding temporary short-term investments, are as follows:
PROCEEDS PURCHASES FROM SALES ----------- ---------- Matthews Pacific Tiger Fund............................. $24,647,949 $9,633,492 Matthews Asian Convertible Securities Fund.............. 3,974,785 1,744,459 Matthews Korea Fund..................................... 4,745,280 1,866,463
The Funds invest excess cash in interest bearing deposits at The Bank of New York. 4. CAPITAL LOSS CARRYOVER At August 31, 1996, the Matthews Korea Fund had a capital loss carryover of $198,919 expiring in 2004 to offset possible future capital gains of the Fund. REPORT OF INDEPENDENT AUDITORS - ------------------------------------------------------------------------------- To The Shareholders and Board of Trustees of Matthews International Funds: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Matthews International Funds (comprising Matthews Pacific Tiger Fund, Matthews Asian Convertible Securities Fund and Matthews Korea Fund, collectively referred to as the "Funds") as of August 31, 1996, and the related statements of operations, changes in net assets and financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statement of changes in net assets, and the financial highlights, of the Funds for the periods ended August 31, 1995 were audited by other auditors whose report dated September 29, 1995 expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 1996, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the 1996 financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Matthews International Funds as of August 31, 1996, the results of their operations, the changes in their net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP San Francisco, California October 4, 1996 BOARD OF TRUSTEES G. Paul Matthews John H. Dracott Richard K. Lyons Robert K. Connolly Dong Wook Park David FitzWilliam-Lay Norman J. Berryessa OFFICERS G. Paul Matthews John H. Dracott INVESTMENT ADVISOR Matthews International Capital Management 655 Montgomery Street, Suite 1438 San Francisco, CA 94111 (800) 789-ASIA KOREAN ADVISOR Daewoo Capital Management Co., Ltd. 34-3, Yoido-dong, Yungdungpo-gu Seoul, 150-010 Korea UNDERWRITER Fund/Plan Broker Services, Inc. 2 W. Elm Street Conshohocken, PA 19428 (800) 892-0382 SHAREHOLDER SERVICES Fund/Plan Services, Inc. 2 W. Elm Street Conshohocken, PA 19428 (800) 892-0382 CUSTODIAN The Bank of New York 90 Washington Street New York, NY 10286 LEGAL COUNSEL Shartsis, Friese & Ginsburg One Maritime Plaza, 18th Floor San Francisco, CA 94111 AUDITORS Ernst & Young LLP 555 California Street, Suite 1700 San Francisco, CA 94104 FOR ADDITIONAL INFORMATION ABOUT THE MATTHEWS INTERNATIONAL FUNDS CALL: (800) 789-ASIA This report is submitted for general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. - ------------------------------------------------------------------------------- ANNUAL REPORT AUGUST 31, 1996 (ART) MATTHEWS PACIFIC TIGER FUND MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND MATTHEWS KOREA FUND - ------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - ------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----