-----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, RPCpbhaM7WXbHszTf8kYpVpH2aT/ofoBXkJdxgScqTFaudXN4HkSLjh76ZrS87K/ 5ugY/jsP+t7kcubD0KBnDw== 0001036050-98-000718.txt : 19980430 0001036050-98-000718.hdr.sgml : 19980430 ACCESSION NUMBER: 0001036050-98-000718 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980429 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATTHEWS INTERNATIONAL FUNDS CENTRAL INDEX KEY: 0000923184 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08510 FILM NUMBER: 98603556 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 SEMI-ANNUAL REPORT - -------------------------------------------------------------------------------- A Message To Shareholders [ARTWORK APPEARS HERE] - -------------------------------------------------------------------------------- Dear Fellow Shareholders, The six-month period ending February 1998 has been an extremely challenging period for developing Asian economies and financial markets. The "financial crisis" which has gripped Asia since the July 1997 devaluation of Thailand's currency has caused markets and currencies to fall across the region. Economic growth has slowed significantly in most economies and a difficult period of restructuring and recovery lies ahead. We remain convinced the dynamic societies of developing Asia will meet the challenges they face and the long-term economic and investment potential of the region is intact. In the last twenty years, many of the countries of Asia have made enormous strides towards adopting the principles of free and open economies that have long dominated Western economic theory. The adoption of these principles has led to more open trading relationships both within Asia and with the rest of the world. Financial markets from Korea to Thailand have significantly opened to foreign investment. While this progress is commendable, it has not been uniform. The uneven nature of developing Asia's transition to open economies and financial markets has been a root cause of the financial crisis. For example, the maintenance of quasi-fixed exchange rates between Asian currencies and the US Dollar has been an unnecessary anomaly in the general trend toward open markets. Similarly, the very gradualist approach to deregulation in the Korean economy and financial system has, with hindsight, caused short-term distortions in the market that have hindered Korea's development. The rapid adoption of additional free market principles is essential to developing Asia's future. We are encouraged that the response of most Asian leadership to the recent turmoil has been to accelerate deregulation and adopt bold new agendas to hasten the movement towards open markets. With the continuance of this trend, the prospects for the recovery of both economic growth and financial markets are very bright. Innovative new leadership has taken office in China, Korea and Thailand. Hong Kong remains a beacon of free market principles not only for Asia but also for the entire world, despite the return to Chinese sovereignty. We remain concerned about the leadership of Malaysia and especially Indonesia, where narrow political interests continue to dominate policy decisions. The next business cycle in developing Asia should see slower but more lasting and profitable growth with companies operating in a more open and competitive environment. Our four funds, including our new Matthews Dragon Century China Fund, offer long-term investors unique opportunities to participate in the future of this vast and dynamic environment. We greatly appreciate your support and welcome your comments and suggestions. Sincerely, /s/ G. Paul Matthews G. PAUL MATTHEWS - PRESIDENT, [PHOTO OF G. PAUL MATTHEWS APPEARS HERE] CHIEF INVESTMENT OFFICER /s/ Mark W. Headley MARK W. HEADLEY - MANAGING DIRECTOR, [PHOTO OF MARK W. HEADLEY APPEARS HERE] PORTFOLIO MANAGER - -------------------------------------------------------------------------------- Portfolio Managers' Comments - -------------------------------------------------------------------------------- [ARTWORK APPEARS HERE] ================================================================================ MATTHEWS PACIFIC TIGER FUND G. PAUL MATTHEWS, MARK W. HEADLEY The Matthews Pacific Tiger Fund maintained its investment mandate as a fully-invested, diversified portfolio throughout the market turmoil of the last six months. The Fund does not attempt to time markets, but rather seeks to identify superior long-term investment opportunities in developing Asia's most attractive companies. Regular on-site company visits and direct research across the region, combined with our many years of experience investing and living in Asia, underlie this investment approach. In industry jargon, our methodology is best described as bottom-up, growth-at-a-reasonable price investing. As markets and currencies collapsed over a period of several months, we remained convinced that the long-term potential of the securities owned by the Fund would not be diminished. While strategic changes were made, the Fund has not moved into either cash or highly defensive stocks. The Fund remains concentrated in a portfolio of approximately 50 companies which we believe offer both significant growth potential and financial stability. These companies are well diversified across both countries and industries. The property sector is the only area in which the Fund has virtually no exposure, as we remain very wary of the high prices of property found in many areas of the region. We are optimistic that many of the companies in which the Fund holds positions will be beneficiaries of the profound changes that are now sweeping through Asia's developing economies. [ARTWORK APPEARS HERE] ================================================================================ MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND G. PAUL MATTHEWS The Matthews Asian Convertible Securities fund invests primarily in US Dollar denominated convertible bonds issued by Asian ex-Japan corporations. The portfolio is broadly diversified both by country of issue and by industry. During the six month period ending February 28th these securities were adversely impacted by the "financial crisis" in Asia but they did not decline as much as the underlying equity markets. The "hybrid" nature of convertible bonds means that during such periods of equity market weakness they fall to levels which are considered attractive to pure bond investors, providing a degree of protection that is not present in pure equity investments. Furthermore, because the majority of the convertibles in which the fund invests are denominated in US Dollars, they have provided some protection against the general weakness in many Asian currencies that has been a feature of the current fiscal period. The portfolio has been increasing its exposure to convertible bonds issued by Mainland Chinese corporations, all of which are convertible into securities listed on the Hong Kong stock exchange. Such issues now represent approximately 15% of the portfolio. - -------------------------------------------------------------------------------- Portfolio Manager's Comments - -------------------------------------------------------------------------------- [ARTWORK APPEARS HERE] ================================================================================ MATTHEWS KOREA FUND G. PAUL MATTHEWS The Matthews Korea Fund invests in a broad range of Korean equities listed on the domestic Korean stock exchanges. The portfolio consists of approximately 50 Korean companies, including some of the largest capitalization blue chips and a range of smaller companies. The portfolio is generally unhedged, and is therefore exposed to both the potential movement of the Korean currency and to fluctuations in the Korean stock market. The six months ending February 1998 saw an extreme fluctuation in the value of both the Korean stock market and the exchange rate of the Korean won. During this period the Korean won fell by 44.7% against the US Dollar and the stock market declined by 19.6% in local currency terms. The worst of the decline occurred in the final weeks of 1997. This was due to uncertainties relating to IMF's involvement in restoring international confidence in Korea's financial system and to a change in the political leadership causing severe weakness in Korean financial assets. Since the beginning of 1998 a more stable currency and an improving trade account have allowed the Korean market to rally strongly from its lows. As newly-elect President Kim Dae Jung has acknowledged, this will be a very difficult year for the Korean economy. However, as Korea continues to deregulate while maintaining the financial disciplines imposed by the IMF, the prospects for recovery should be increasingly bright. [ARTWORK APPEARS HERE] ================================================================================ MATTHEWS DRAGON CENTURY CHINA FUND G. PAUL MATTHEWS, MARK W. HEADLEY The Matthews Dragon Century China Fund was launched on February 19, 1998 with a mandate to invest in Chinese companies and those companies based in Hong Kong with predominately Chinese businesses. The Fund follows the same growth-at-a-reasonable-price discipline as our more diversified Pacific Tiger Fund. The companies screened for investment include: the "B" shares available for foreign investment on both the Shanghai and Shenzhen stock exchanges in China; the "H" shares of Mainland Chinese companies listed in Hong Kong; and those Hong Kong companies which are predominately doing business in China, commonly known as the "Red Chips". China has demonstrated an ability to reform its economy and open itself to market forces which few observers thought possible only a few years ago. The carefully selected securities found in the Fund should benefit over time from the continued trends of better physical and legal infrastructure, a growing middle class and strong economic growth. Please review the prospectus carefully before investing as it explains the inherent risks in global investing, such as currency fluctuation, market illiquidity, economic and political risks. The Matthews International Funds are distributed by FPS Broker Services Inc., P.O. Box 61503, King of Prussia, PA 19403-0903. Must be preceded or accompanied by a prospectus. DFU 5/98 - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - SCHEDULE OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MARKET SECTOR DIVERSIFICATION As a Percentage of Total Value of Investment in Securities as of February 28, 1998
MATTHEWS MATTHEWS MATTHEWS ASIAN DRAGON PACIFIC CONVERTIBLE MATTHEWS CENTURY TIGER SECURITIES KOREA CHINA FUND FUND FUND FUND -------- ----------- -------- -------- EQUITIES Agricultural Equipment 0.87 % 0.00 % 0.00 % 0.00 % Airlines 2.70 0.00 0.00 0.00 Automotive 1.39 0.00 1.66 6.14 Automotive Parts 0.00 0.00 1.45 0.00 Banking 7.53 0.00 1.57 0.00 Chemical 0.00 0.00 5.57 0.00 Commercial & Industrial 3.16 0.67 9.32 0.00 Communications 0.00 0.00 1.82 0.00 Conglomerate 8.16 0.00 0.00 17.17 Construction 0.00 0.38 0.00 0.00 Consumer 1.34 0.00 0.00 3.65 Electrical 3.06 0.00 9.77 0.00 Electronics 12.66 0.00 18.64 0.00 Financial 4.18 0.00 4.50 0.00 Food 1.22 0.00 0.00 0.00 Food & Beverages 6.07 0.00 5.33 6.90 Gaming 1.87 0.00 0.00 0.00 Hotels 0.74 0.00 0.00 3.98 Hotels/Leisure 0.99 0.00 0.00 0.00 Hotels/Tourism 0.00 0.00 0.00 2.18 Industrial 0.00 3.18 1.02 5.87 Infrastructure 0.00 0.00 0.00 10.15 Insurance 2.63 0.00 3.08 0.00 Machinery & Equipment 1.74 0.00 0.00 0.00 Manufacturing 4.24 0.00 0.00 10.45 Media 2.32 0.00 0.00 0.00 Networking Products 0.00 0.00 0.53 0.00 Paper Products 0.00 0.00 2.21 0.00 Petro-Chemical 0.00 0.00 4.98 0.00 Pharmaceutical 0.00 0.00 2.70 0.00 Property 0.00 0.00 0.00 1.37 Retail 0.82 0.00 0.00 0.00 Road Construction 0.00 0.08 0.00 0.00 Rubber Manufacturer 0.00 0.00 1.08 0.00 Service 2.28 0.00 2.08 0.00 Shipping 0.54 0.00 0.00 0.00 Shipping & Steel 0.00 0.00 5.92 0.00 Software 4.45 0.00 0.00 5.74 Technology 1.49 0.00 0.00 2.41 Telecommunications 8.98 0.00 0.16 10.78
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - SCHEDULE OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MARKET SECTOR DIVERSIFICATION (CONTINUED) As a Percentage of Total Value of Investment in Securities as of February 28, 1998
MATTHEWS MATTHEWS MATTHEWS ASIAN DRAGON PACIFIC CONVERTIBLE MATTHEWS CENTURY TIGER SECURITIES KOREA CHINA FUND FUND FUND FUND -------- ----------- -------- -------- EQUITIES (continued) Trading 3.42 0.00 0.00 0.00 Transportation 0.00 0.00 2.42 0.72 Utility 10.80 0.00 7.95 12.49 Wholesale 0.00 0.00 1.90 0.00 Wholesale & Retail Trade 0.00 0.00 4.13 0.00 ------ ------ ------ ------ Total Equities 99.65 4.31 99.79 100.00 BONDS Automotive 0.00 3.29 0.00 0.00 Banking 0.35 3.31 0.00 0.00 Basic Industry 0.00 3.92 0.00 0.00 Commercial & Industrial 0.00 9.86 0.00 0.00 Conglomerate 0.00 5.42 0.00 0.00 Department Stores 0.00 0.42 0.00 0.00 Electrical 0.00 9.63 0.00 0.00 Electrical Appliance 0.00 2.23 0.00 0.00 Electronics 0.00 11.10 0.21 0.00 Hotels 0.00 7.96 0.00 0.00 Industrial 0.00 3.22 0.00 0.00 Infrastructure 0.00 5.92 0.00 0.00 Petro-Chemical 0.00 6.54 0.00 0.00 Plastics 0.00 2.22 0.00 0.00 Property 0.00 5.68 0.00 0.00 Retail 0.00 4.14 0.00 0.00 Transportation 0.00 2.77 0.00 0.00 Utility 0.00 8.06 0.00 0.00 ------ ------ ------ ------ Total Bonds 0.35 95.69 0.21 0.00 ------ ------ ------ ------ TOTAL INVESTMENTS 100.00 % 100.00 % 100.00 % 100.00 % ====== ====== ====== ======
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - SCHEDULE OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- MATTHEWS PACIFIC TIGER FUND - --------------------------------------------------------------------------------
SHARES VALUE --------- ----------- EQUITIES - 95.80%*** HONG KONG - 49.38% Asia Satellite Telecommunications Holdings, Ltd. ADR 64,000 $ 1,168,000 ASM Pacific Technology, Ltd. 1,030,000 811,497 Cathay Pacific Airways 2,011,000 1,727,243 China Resources Enterprise, Ltd. 868,000 1,894,637 China Telecom (Hong Kong), Ltd.** 896,800 1,627,390 China Travel International Investment Hong Kong, Ltd. 2,154,000 632,917 Citic Pacific, Ltd. 388,000 1,503,393 Dickson Concepts International, Ltd.** 305,000 527,867 Founder Hong Kong, Ltd.** 3,702,954 2,845,673 Guangdong Electric Power Development Co., Ltd. B Shares 1,347,830 814,706 Guangdong Kelon Electric Holding 1,614,000 1,803,181 Guangnan Holdings 2,074,000 1,473,300 Guangzhou Pharmaceutical Co., Ltd.** 5,782,000 836,403 Hong Kong Telecommunications, Ltd. 688,707 1,449,912 HSBC Holdings PLC 92,408 2,673,482 Huaneng Power International, Inc. ADR** 49,000 1,206,625 Li & Fung, Ltd. 1,162,000 1,755,948 Nanjing Posts & Telecommunications Equipment Co., Ltd. B Shares** 1,500,000 588,958 National Mutual Asia, Ltd. 1,888,000 1,682,561 Peregrine Investments Holdings, Ltd. 1,097,000 0 Qingling Motors Co.** 2,230,000 892,866 Shanghai Industrial Holdings, Ltd. 421,000 1,827,010 Shanghai New Asia Group Co., Ltd. B Shares 1,800,000 475,200 Vitasoy International Holdings, Ltd. 4,804,000 1,752,835 Wuxi Little Swan Co., Ltd. B Shares 752,000 912,989 ----------- TOTAL HONG KONG 32,884,593 ----------- INDONESIA - 0.68% PT Modern Photo Film Co. 2,554,000 432,880 PT Tempo Scan Pacific 295,000 21,666 ----------- TOTAL INDONESIA 454,546 ----------- MALAYSIA - 4.03% Berjaya Sports Toto Berhad 426,000 1,193,957 Public Bank Berhad 3 2 Star Publications (Malaysia) 821,000 1,485,616 ----------- TOTAL MALAYSIA 2,679,575 ----------- PHILIPPINES - 6.83% Manila Electric Co. B Shares 347,980 1,037,833 Philippine Long Distance Telephone Co. 76,900 2,071,863 RFM Corp. 4,950,000 781,577 San Miguel Corp. B Shares 398,000 658,344 ----------- TOTAL PHILIPPINES 4,549,617 ----------- SINGAPORE - 9.13% Avimo Group, Ltd. 1,096,000 1,629,449 Electronic Resources, Ltd. 857,000 988,634 Osprey Maritime, Ltd. 717,000 347,218
SHARES VALUE ----------- ----------- Oversea-Chinese Banking Corp., Ltd. 170,000 $ 1,012,021 Sunright, Ltd. 856,000 712,887 Venture Manufacturing (Singapore), Ltd. 363,000 1,388,390 ----------- TOTAL SINGAPORE 6,078,599 ----------- SOUTH KOREA - 15.29% Dae Duck Electronics Co.** 24,760 1,955,933 Hana Bank 166,700 949,363 Korea Electric Power Corp.** 102,740 1,371,544 LG Cable & Machinery** 105,160 495,855 Mirae Co. 7,060 955,456 S1 Corp.** 9,500 1,460,195 Samsung Electronics Co.** 44,470 2,573,431 SK Telecom Co., Ltd. 1,215 416,794 ----------- TOTAL SOUTH KOREA 10,178,571 ----------- THAILAND - 10.46% Advanced Info Service Public Co., Ltd. 256,000 1,948,212 Bangkok Bank Public Co., Ltd. 426,000 1,452,946 Bank of Ayudhya Public Co., Ltd. 321,000 201,090 Srithai Superware Public Co., Ltd. 1,503,000 488,213 Thai Engine Manufacturing Public Co., Ltd.** 217,000 553,828 Thai Farmers Bank Public Co., Ltd. 403,000 1,206,194 Tipco Asphalt Public Co., Ltd. 500,000 1,084,686 Tipco Asphalt Public Co., Ltd. Warrants** 30,600 31,949 ----------- TOTAL THAILAND 6,967,118 ----------- TOTAL EQUITIES (Cost $67,516,015) 63,792,619 ----------- FACE AMOUNT ----------- INTERNATIONAL DOLLAR BONDS (NOTE 1-A) - 0.34% Bangkok Bank Public Co., Ltd. 1.50%, 08/07/06 $ 250,000 226,875 ----------- TOTAL INTERNATIONAL DOLLAR BONDS (Cost $216,532) 226,875 ----------- TOTAL INVESTMENTS - 96.14% (Cost $67,732,547*) 64,019,494 ----------- CASH AND OTHER ASSETS, LESS LIABILITIES - 3.86% 2,571,416 ----------- NET ASSETS - 100% $66,590,910 ===========
* Cost for Federal income tax purposes is $67,732,547 and net unrealized depreciation consists of: Gross unrealized appreciation................................. $ 7,158,040 Gross unrealized depreciation................................. (10,871,093) ------------ Net unrealized depreciation................................. $ (3,713,053) ============
** Non-income producing security *** As a percentage of net assets as of February 28, 1998. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - SCHEDULE OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND - --------------------------------------------------------------------------------
SHARES VALUE ---------- -------- EQUITIES - 4.03%*** HONG KONG - 0.00% Peregrine Investments Holdings, Ltd. 64,000 $ 0 Peregrine Investments Holdings, Ltd. Warrants** 1,400 0 -------- TOTAL HONG KONG 0 -------- MALAYSIA - 0.36% Renong Berhad Warrants** 40,000 6,313 United Engineers (Malaysia) Berhad 8,624 10,466 -------- TOTAL MALAYSIA 16,779 -------- SINGAPORE - 1.99% Jardine Strategic Holdings, Ltd. 32,768 93,389 -------- THAILAND - 1.68% Srithai Superware Public Co., Ltd. 88,000 29,095 Tipco Asphalt Co., Ltd. Warrants** 3,500 3,654 Ton Yi Industrial Corp.** 59,183 45,943 -------- TOTAL THAILAND 78,692 -------- TOTAL EQUITIES (Cost $551,810) 188,860 -------- FACE AMOUNT ---------- INTERNATIONAL DOLLAR BONDS (NOTE 1-A) - 89.56% HONG KONG - 38.45% China Travel International Investment Overseas Finance, Ltd. 4.250%, 11/18/98 $ 150,000 148,500 Goldlion Capital (B.V.I.) 4.875%, 02/01/99 150,000 127,500 Shangri-La Asia Capital, Ltd. 2.875%, 12/16/00 180,000 144,900 Hong Kong & Shanghai Hotels Overseas Finance, Ltd. 5.000%, 01/06/01 150,000 136,500 Paul Y. - ITC Construction Holdings, Ltd. 5.000%, 02/03/01 140,000 93,800 Hong Kong Land Co. 4.000%, 02/23/01 150,000 132,750 New World Infrastructure, Ltd. 5.000%, 07/15/01 150,000 165,750 Qingling Motors, Ltd.(P) 3.500%, 01/22/02 200,000 144,000 First Pacific Capital, Ltd. 2.000%, 03/27/02 250,000 210,000 Zhenhai Refining & Chemical Co., Ltd. 3.000%, 12/19/03 200,000 223,000 Huaneng Power International Public Co., Ltd. 1.750%, 05/21/04 200,000 206,000
FACE AMOUNT VALUE ----------- ---------- Regal Hotels International Holdings, Ltd. 5.250%, 12/13/08 $ 95,000 $ 67,450 ---------- TOTAL HONG KONG 1,800,150 ---------- INDONESIA - 6.68% Asia Pulp & Paper Global Finance V, Ltd. 2.000%, 07/25/00 150,000 141,000 PT Indocement 2.000%, 02/27/06 260,000 171,600 ---------- TOTAL INDONESIA 312,600 ---------- PHILIPPINES - 10.24% Metro Pacific Capital, Ltd. 2.500%, 04/11/03 60,000 45,600 JG Summit (Cayman), Ltd. 3.500%, 12/23/03 80,000 49,400 International Container Terminal Services, Inc. 1.750%, 03/13/04 150,000 121,500 FDC Capital Cayman 2.500%, 05/15/06 90,000 66,600 RFM Capital, Ltd. 2.750%, 05/30/06 60,000 48,900 Philippine Long Distance Telephone Co. 3.500%, 12/31/49 290,000 147,175 ---------- TOTAL PHILIPPINES 479,175 ---------- SINGAPORE - 3.88% Dairy Farm International Holdings, Ltd. 6.500%, 05/10/49 200,000 181,500 ---------- SOUTH KOREA - 12.27% SK Corp. 3.000%, 12/31/01 3,400,000 63,750 Samsung Display Devices Co. 0.250%, 03/12/06 100,000 91,500 Samsung Electronics Co. 0.250%, 12/31/06 160,000 164,400 Daewoo Corp.** 0.000%, 12/31/07 100,000 89,000 LG Electronics, Inc. 0.250%, 12/31/07 200,000 166,000 ---------- TOTAL SOUTH KOREA 574,650 ---------- TAIWAN - 14.55% Nan Ya Plastics Corp. 1.750%, 07/19/01 80,000 97,200 Yageo Corp. 1.250%, 07/24/03 80,000 154,000 Compal Electronics, Inc.(P) 1.000%, 11/21/03 100,000 222,500
- -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - SCHEDULE OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ----------- ---------- Walsin Lihwa Corp. 3.250%, 06/16/04 $ 120,000 $ 97,500 Acer Peripherals, Inc. 1.250%, 11/27/06 80,000 110,000 ---------- TOTAL TAIWAN 681,200 ---------- THAILAND - 3.49% Robinson Department Store Public Co., Ltd. 4.250%, 04/07/04 50,000 18,250 Bangkok Bank Public Co., Ltd. 1.500%, 08/07/06 160,000 145,200 ---------- TOTAL THAILAND 163,450 ---------- TOTAL INTERNATIONAL DOLLAR BONDS (Cost $4,594,339) 4,192,725 ---------- TOTAL INVESTMENTS - 93.59% (Cost $5,146,149*) 4,381,585 ---------- CASH AND OTHER ASSETS, LESS LIABILITIES - 6.41% 300,138 ---------- NET ASSETS - 100% $4,681,723 ==========
* Cost for Federal income tax purposes is $5,146,149 and net unrealized depreciation consists of: Gross unrealized appreciation................................... $ 222,604 Gross unrealized depreciation................................... (987,168) ---------- Net unrealized depreciation................................... $ (764,564) ==========
** Non-income producing security (P)Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At February 28, 1998, the value of these securities amounted to $366,500 or 7.83% of net assets. *** As a percentage of net assets as of February 28, 1998. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - SCHEDULE OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- MATTHEWS KOREA FUND - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ EQUITIES - SOUTH KOREA - 98.56%*** Comtec System Company, Ltd.** 20,300 $ 537,024 Dae Duck Electronics Co.** 20,900 1,651,010 Daeduck Industries** 39,000 2,149,417 Daesung Industrial Co.** 115,670 1,912,486 Daewoo Heavy Industries 450,000 2,347,825 Dongwon Securities Co. 231,640 1,204,301 Han Kuk Carbon Co., Ltd.** 45,356 2,085,867 Han Kuk Paper Manufacturing Co.** 160,290 1,452,720 Handsome Co., Ltd.** 11,170 230,514 Hanjin Heavy Industry** 550,910 3,016,003 Hankook Tire Manufacturing Co. 44,890 1,083,077 Hanmi Pharmaceutical Industrial Co.** 54,024 1,253,833 Hansol Paper Co.** 70,000 414,084 Housing & Commercial Bank, Korea 232,290 1,578,946 Hyosung T & C Co., Ltd.** 188,980 1,724,312 Hyundai Electronics Industries Co.** 90,240 1,530,709 Hyundai Elevator Co.** 20,000 1,028,781 Hyundai Merchant Marine** 385,100 2,546,894 Hyundai Mipo Dockyard Co.** 27,370 395,549 Hyundai Motor Co., Ltd.** 90,170 1,667,565 Keum Kang, Ltd.** 90,150 1,457,415 Kolon Chemical Co.** 62,060 950,091 Kookmin Bank** 360,300 2,294,623 Korea Electric Power Corp.** 450,100 6,008,681 Korea Electric Terminal Co.** 20,960 1,090,998 Korean Air** 427,220 2,438,266 Kyung Nam Bank** 405,910 1,031,553 LG Cable & Machinery** 480,610 2,266,195 LG Chemical, Ltd.** 240,000 2,072,259 LG Electronics, Inc.** 400,100 6,027,224 LG Information & Communication, Ltd.** 56,295 1,833,982 Lotte Chilsung Beverage Co.** 17,240 801,295 Lotte Confectionery Co.** 40,010 3,381,125 Medison Co., Ltd.** 59,010 3,830,409 Mirae Co. 20,000 2,706,674 Nong Shim Co., Ltd. 32,990 1,177,781 Oriental Fire & Marine Insurance 250,640 1,341,453 Pacific Chemical Co.** 177,130 1,974,136 Pohang Iron & Steel Co., Ltd.** 19,480 926,880 S1 Corp.** 13,599 2,090,262 Samsung Display Devices Co.** 65,100 3,787,200 Samsung Electronics Co.** 120,470 6,971,470 Samsung Fire & Marine Insurance 6,500 1,751,377 Seoul City Gas Co., Ltd.** 77,060 1,986,666 Shinhung Co.** 41,270 429,632 Shinsegae Department Store Co. 149,710 2,200,269 Sindo Ricoh Co. 65,250 2,657,148 SK Corp.** 345,190 3,065,066
SHARES VALUE ----------- ------------ SK Corp. GDR** 250,000 $ 468,750 SK Telecom Co., Ltd. 464 158,947 Suheung Capsule 16,200 1,031,720 Young Poong Paper Manufacturing Co. 42,110 350,702 ------------ TOTAL EQUITIES (Cost $85,360,491) 100,371,166 ------------ FACE AMOUNT ----------- INTERNATIONAL DOLLAR BONDS (NOTE 1-A) - 0.21% Samsung Electronics Co. 0.25%, 12/31/06 $210,000 215,775 ------------ TOTAL INTERNATIONAL DOLLAR BONDS (Cost $198,221) 215,775 ------------ TOTAL INVESTMENTS - 98.77% (Cost $85,558,712*) 100,586,941 ------------ CASH AND OTHER ASSETS, LESS LIABILITIES - 1.23% 1,255,568 ------------ NET ASSETS - 100% $101,842,509 ============ * Cost for Federal income tax purposes is $85,558,712 and net unrealized appreciation consists of: Gross unrealized appreciation...................... $ 19,062,653 Gross unrealized depreciation...................... (4,034,424) ------------ Net unrealized appreciation...................... $ 15,028,229 ============
** Non-income producing security *** As a percentage of net assets as of February 28, 1998. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - SCHEDULE OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- MATTHEWS DRAGON CENTURY CHINA FUND - --------------------------------------------------------------------------------
SHARES VALUE ------- --------- EQUITIES - HONG KONG - 84.50%*** Beijing Datang Power Generation Co., Ltd. 144,000 $ 73,465 Beijing Enterprises Holdings, Ltd.** 26,000 74,382 Catic Shenzhen Holdings, Ltd.** 452,000 70,055 Cheung Kong Infrastructure Holdings 50,000 154,020 China Resources Enterprise, Ltd. 70,000 152,793 China Telecom (Hong Kong), Ltd.** 80,000 145,173 China Vanke Co., Ltd. B Shares 74,284 42,023 Citic Pacific, Ltd. 18,000 69,745 Eastern Communications Co., Ltd. B Shares 68,000 70,720 First Tractor Co., Ltd.** 190,000 109,203 Founder Hong Kong, Ltd.** 230,000 176,752 Guangdong Electric Power Development Co., Ltd. B Shares 234,920 141,999 Guangdong Kelon Electric Holding 134,000 149,707 Guangnan Holdings 198,000 140,653 Guangzhou Pharmaceutical Co., Ltd.** 778,000 112,543 Huaneng Power International, Inc. ADR** 2,700 66,488 Huangshan Tourism Development Co., Ltd. B Shares 84,000 67,200 Legend Holdings, Ltd.** 228,000 74,356 Nanjing Posts & Telecommunications Equipment Co., Ltd. B Shares** 296,000 116,221 New World Infrastructure, Ltd.** 60,000 158,864 Ng Fung Hong, Ltd. 68,000 72,018 Qingling Motors Co. 200,000 80,078 Shanghai Industrial Holdings, Ltd. 37,000 160,569 Shanghai New Asia Group Co., Ltd. B Shares 464,600 122,654 Shenzhen Chiwan Wharf Holdings, Ltd. B Shares 75,300 22,174 Tianjin Development Holdings, Ltd.** 74,000 71,682 Wuxi Little Swan Co., Ltd. B Shares 142,000 172,399 Zhejiang Southeast Electric Power Co., Ltd. B Shares** 281,000 102,846 Zhenhai Refining & Chemical Co., Ltd. 304,000 110,920 --------- TOTAL EQUITIES (Cost $2,876,104) 3,081,702 ---------
SHARES VALUE ------ ---------- TOTAL INVESTMENTS - 84.50% (Cost $2,876,104*) $3,081,702 ---------- CASH AND OTHER ASSETS, LESS LIABILITIES - 15.50% 565,417 ---------- NET ASSETS - 100% $3,647,119 ========== * Cost for Federal income tax purposes is $2,876,104 and net unrealized appreciation consists of: Gross unrealized appreciation............................. $ 210,099 Gross unrealized depreciation............................. (4,501) ---------- Net unrealized appreciation............................. $ 205,598 ==========
** Non-income producing security *** As a percentage of net assets as of February 28, 1998. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
MATTHEWS ASIAN MATTHEWS MATTHEWS CONVERTIBLE DRAGON PACIFIC SECURITIES MATTHEWS CENTURY TIGER FUND FUND KOREA FUND CHINA FUND ----------- ----------- ------------ ---------- ASSETS Investments, at value (Cost $67,732,547, $5,146,149, $85,558,712 and $2,876,104, respectively).............. $64,019,494 $4,381,585 $100,586,941 $3,081,702 Cash........................ 2,204,469 170,063 2,129,863 1,665,447 Dividends and interest receivable................. 26,034 33,336 33,661 2,654 Receivable for securities sold....................... 0 0 308,448 0 Receivable for capital shares sold................ 2,148,681 113,119 1,397,862 43,085 Deferred organization costs...................... 10,352 10,352 6,092 11,947 Due from Advisor............ 0 3,487 0 0 Other assets................ 20,171 1,116 44,385 24,385 ----------- ---------- ------------ ---------- Total assets................ 68,429,201 4,713,058 104,507,252 4,829,220 ----------- ---------- ------------ ---------- LIABILITIES Payable for securities purchased.................. 251,557 0 770,343 1,145,903 Payable for capital shares redeemed................... 1,484,148 22,314 1,713,348 0 Due to Advisor.............. 79,827 0 179,632 35,271 Accrued expenses............ 22,709 9,021 0 927 Accrued distribution expense.................... 50 0 1,420 0 ----------- ---------- ------------ ---------- Total liabilities........... 1,838,291 31,335 2,664,743 1,182,101 ----------- ---------- ------------ ---------- NET ASSETS................... $66,590,910 $4,681,723 $101,842,509 $3,647,119 =========== ========== ============ ========== CLASS I SHARES: Net assets (Applicable to 8,649,966, 547,277, 31,132,867 and 343,860 shares of beneficial interest issued and outstanding, respectively, unlimited number of shares authorized with a $0.001 par value)................. $66,295,120 $4,681,723 $ 94,044,921 $3,647,119 =========== ========== ============ ========== Net asset value, offering price and redemption price per Class I share.......... $ 7.66 $ 8.55 $ 3.02 $ 10.61 =========== ========== ============ ========== CLASS A SHARES:* Net assets (Applicable to 38,600, 2,582,677, and 0 shares of beneficial interest issued and outstanding, respectively, unlimited number of shares authorized with a $0.001 par value)................. $ 295,790 N/A $ 7,797,588 $ 0 =========== ========== ============ ========== Net asset value and redemption price per Class A share.................... $ 7.66 N/A $ 3.02 NA =========== ========== ============ ========== Offering price per Class A share (Net asset value / 0.9505).................... $ 8.06 N/A $ 3.18 NA =========== ========== ============ ========== NET ASSETS CONSIST OF: Capital paid-in............. $77,318,114 $5,929,180 $ 97,484,230 $3,440,935 Accumulated undistributed net investment income (loss)..................... (219,267) (1,003) (997,019) 677 Accumulated net realized loss on investments........ (6,793,044) (481,890) (9,673,196) 0 Net unrealized appreciation (depreciation) on investments and foreign currency related transactions............... (3,714,893) (764,564) 15,028,494 205,507 ----------- ---------- ------------ ---------- $66,590,910 $4,681,723 $101,842,509 $3,647,119 =========== ========== ============ ==========
* At February 28, 1998, the Matthews Asian Convertible Securities Fund did not offer Class A shares. N/A Not Applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - STATEMENT OF OPERATIONS FOR THE PERIOD ENDED FEBRUARY 28, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
MATTHEWS MATTHEWS MATTHEWS ASIAN DRAGON PACIFIC CONVERTIBLE MATTHEWS CENTURY TIGER SECURITIES KOREA CHINA FUND FUND FUND FUND ------------ ----------- ----------- -------- INVESTMENT INCOME: Dividends (net of foreign tax withheld of $23,497, $0, $4,719 and $0, respectively) ......... $ 280,694 $ 21,629 $ 24,547 $ 0 Interest.................... 50,381 27,730 48,531 2,654 ------------ ----------- ----------- -------- Total investment income... 331,075 49,359 73,078 2,654 ------------ ----------- ----------- -------- EXPENSES: Investment advisory fees.... 203,625 24,982 179,737 743 Recovery of reimbursed expenses................... 18,717 0 161,389 0 Distribution expenses....... 72 0 1,861 0 Transfer agent fees......... 24,740 9,839 22,359 500 Administration fees......... 9,803 9,246 10,289 694 Accounting fees............. 17,859 10,000 10,565 694 Professional fees........... 16,332 2,084 9,634 312 Custodian fees.............. 57,160 7,453 29,664 175 Directors fees.............. 2,480 2,480 2,480 104 Insurance expense........... 4,894 596 1,367 0 Amortization of organization costs......... 3,339 3,339 1,549 53 Printing expense............ 7,266 744 6,019 63 Registration expenses....... 19,031 7,128 16,784 1,148 Other expenses.............. 2,480 199 496 10 ------------ ----------- ----------- -------- Total expenses............ 387,798 78,090 454,193 4,496 Expenses reimbursed and waived..................... (833) (30,624) (3,415) (3,011) ------------ ----------- ----------- -------- Net expenses.............. 386,965 47,466 450,778 1,485 ------------ ----------- ----------- -------- NET INVESTMENT INCOME (LOSS)...................... (55,890) 1,893 (377,700) 1,169 ------------ ----------- ----------- -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS: Net realized loss on investments................ (7,170,182) (533,395) (9,027,844) 0 Net realized loss on foreign currency related transactions............... (272,772) (2,896) (619,319) (492) Net change in unrealized appreciation (depreciation) on investments and foreign currency related transactions............... (2,555,333) (976,770) 15,742,724 205,507 ------------ ----------- ----------- -------- Net realized loss and unrealized appreciation (depreciation) on investments and foreign currency related transactions............... (9,998,287) (1,513,061) 6,095,561 205,015 ------------ ----------- ----------- -------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............................ $(10,054,177) $(1,511,168) $ 5,717,861 $206,184 ============ =========== =========== ========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
MATTHEWS PACIFIC MATTHEWS ASIAN CONVERTIBLE TIGER FUND SECURITIES FUND ------------------------- ---------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED YEAR FEBRUARY 28, ENDED FEBRUARY 28, ENDED 1998 AUGUST 31, 1998 AUGUST 31, (UNAUDITED) 1997 (UNAUDITED) 1997 ------------ ----------- -------------- ------------ OPERATIONS: Net investment income (loss)................ $ (55,890) $ 109,773 $ 1,893 $ 44,739 Net realized gain (loss) on investments and foreign currency related transactions.. (7,442,954) 376,659 (536,291) 308,176 Net change in unrealized appreciation (depreciation) on investments and foreign currency related transactions.. (2,555,333) (1,348,057) (976,770) 221,863 ------------ ----------- ------------- ------------ Net increase (decrease) in net assets from operations............ (10,054,177) (861,625) (1,511,168) 574,778 ------------ ----------- ------------- ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class I................ 0 (19,824) 0 (44,739) Class A................ 0 0 N/A N/A Realized gains on investments: Class I................ 0 (69,727) (252,306) (86,133) Class A................ 0 0 N/A N/A ------------ ----------- ------------- ------------ Net decrease in net assets resulting from distributions ........ 0 (89,551) (252,306) (130,872) ------------ ----------- ------------- ------------ CAPITAL SHARE TRANSACTIONS (NET): Class I................ 32,733,497 27,450,272 279,205 2,449,726 Class A................ 264,437 0 0 0 ------------ ----------- ------------- ------------ Increase in net assets derived from capital share transactions.... 32,997,934 27,450,272 279,205 2,449,726 ------------ ----------- ------------- ------------ Total increase (decrease) in net assets................ 22,943,757 26,499,096 (1,484,269) 2,893,632 NET ASSETS: Beginning of period.... 43,647,153 17,148,057 6,165,992 3,272,360 ------------ ----------- ------------- ------------ End of period (including undistributed net investment income (loss) of ($219,267), $109,395, ($1,003), $0, respectively)..... $ 66,590,910 $43,647,153 $ 4,681,723 $ 6,165,992 ============ =========== ============= ============
* The Fund commenced operations on February 19, 1998. N/A Not Applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
MATTHEWS MATTHEWS KOREA DRAGON CENTURY FUND CHINA FUND ------------------------- -------------- SIX MONTHS PERIOD ENDED YEAR ENDED FEBRUARY 28, ENDED FEBRUARY 28, 1998 AUGUST 31, 1998 * (UNAUDITED) 1997 (UNAUDITED) ------------ ----------- -------------- OPERATIONS: Net investment income (loss)........ $ (377,700) $ (106,541) $ 1,169 Net realized gain (loss) on investments and foreign currency related transactions............... (9,647,163) (449,242) (492) Net change in unrealized appreciation (depreciation) on investments and foreign currency related transactions............... 15,742,724 (175,375) 205,507 ------------ ----------- ---------- Net increase (decrease) in net assets from operations............. 5,717,861 (731,158) 206,184 ------------ ----------- ---------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class I............................. 0 0 0 Class A............................. 0 0 0 Realized gains on investments: Class I............................. 0 0 0 Class A............................. 0 0 0 ------------ ----------- ---------- Net decrease in net assets resulting from distributions................. 0 0 0 ------------ ----------- ---------- CAPITAL SHARE TRANSACTIONS (NET): Class I............................. 69,777,414 17,365,849 3,440,935 Class A............................. 6,991,213 0 0 ------------ ----------- ---------- Increase in net assets derived from capital share transactions......... 76,768,627 17,365,849 3,440,935 ------------ ----------- ---------- Total increase (decrease) in net assets............................. 82,486,488 16,634,691 3,647,119 NET ASSETS: Beginning of period................. 19,356,021 2,721,330 0 ------------ ----------- ---------- End of period (including undistributed net investment income (loss) of ($997,019), $0 and $677, respectively)...................... $101,842,509 $19,356,021 $3,647,119 ============ =========== ==========
* The Fund commenced operations on February 19, 1998. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The table below sets forth financial data for a share of beneficial interest outstanding throughout each period presented.
MATTHEWS PACIFIC TIGER FUND ------------------------------------------------------------------ PERIOD SIX MONTHS ENDED ENDED YEAR YEAR PERIOD FEBRUARY 28, FEBRUARY 28, ENDED ENDED ENDED 1998 /5/ 1998 AUGUST 31, AUGUST 31, AUGUST 31, (UNAUDITED) 1997 1996 1995 /4/ ------------------------------- ---------- ---------- ---------- CLASS A CLASS I CLASS I CLASS I CLASS I ------------ ------------ ---------- ---------- ---------- Net Asset Value, beginning of period.... $ 10.84 $ 11.30 $ 10.81 $ 9.77 $ 10.00 -------- -------- ------- -------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income.. (0.05) (0.05) 0.02 0.01 0.02 Net realized gain (loss) and unrealized appreciation (depreciation) on investments and foreign currency...... (3.13) (3.59) 0.50 1.03 (0.23) -------- -------- ------- -------- ------- Total from investment operations.......... (3.18) (3.64) 0.52 1.04 (0.21) -------- -------- ------- -------- ------- LESS DISTRIBUTIONS FROM: Net investment income.. 0.00 0.00 (0.01) 0.00 (0.02) Net realized gains on investments........... 0.00 0.00 (0.02) 0.00 0.00 -------- -------- ------- -------- ------- Total distributions.. 0.00 0.00 (0.03) 0.00 (0.02) -------- -------- ------- -------- ------- Net Asset Value, end of period................. $ 7.66 $ 7.66 $ 11.30 $ 10.81 $ 9.77 ======== ======== ======= ======== ======= TOTAL RETURN............ (29.34%)/1/,/3/ (32.21%)/2/ 4.75% 10.64% (2.07%)/2/ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in 000's)..... $ 296 $ 66,295 $43,647 $ 17,148 $ 1,082 Ratio of expenses to average net assets before reimbursement and waiver of expenses by Advisor and Administrator......... 2.09%/1/ 1.90%/1/ 1.97% 4.35% 25.95%/1/ Ratio of expenses to average net assets after reimbursement and waiver of expenses by Advisor and Administrator (Note 2).................... 2.09%/1/ 1.90%/1/ 1.90% 1.90% 2.17%/1/ Ratio of net investment income (loss) to average net assets before reimbursement and waiver of expenses by Advisor and Administrator......... (0.47%)/1/ (0.28%)/1/ 0.20% (2.13%) (23.41%)/1/ Ratio of net investment income (loss) to average net assets after reimbursement and waiver of expenses by Advisor and Administrator......... (0.47%)/1/ (0.28%)/1/ 0.27% 0.32% 0.36%/1/ Portfolio turnover..... 34.44%/2/ 34.44%/2/ 70.73% 124.69% 92.53%/2/ Average commission rate paid.................. $ 0.0033 $ 0.0033 $0.0065 $ 0.0064 N/A
/1/Annualized /2/Not annualized /3/Total return calculation does not reflect sales load. /4/Class I commenced operations on September 13, 1994. /5/Class A commenced operations on October 9, 1997. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The table below sets forth financial data for a share of beneficial interest outstanding throughout each period presented.
MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND ------------------------------------------------- SIX MONTHS ENDED YEAR YEAR PERIOD FEBRUARY 28, ENDED ENDED ENDED 1998 AUGUST 31, AUGUST 31, AUGUST 31, (UNAUDITED) 1997 1996 1995 /3/ ------------ ---------- ---------- ----------- Net Asset Value, beginning of period................ $ 11.71 $ 10.53 $ 9.88 $ 10.00 --------- ------- ------- ----------- INCOME FROM INVESTMENT OPERATIONS Net investment income.... 0.00 0.10 0.25 0.23 Net realized gain (loss) and unrealized appreciation (depreciation) on investments and foreign currency................ (2.68) 1.42 0.75 (0.14) --------- ------- ------- ----------- Total from investment operations............ (2.68) 1.52 1.00 0.09 --------- ------- ------- ----------- LESS DISTRIBUTIONS FROM: Net investment income.... 0.00 (0.10) (0.26) (0.21) Net realized gains on investments............. (0.48) (0.24) (0.09) 0.00 --------- ------- ------- ----------- Total distributions.... (0.48) (0.34) (0.35) (0.21) --------- ------- ------- ----------- Net Asset Value, end of period................... $ 8.55 $ 11.71 $ 10.53 $ 9.88 ========= ======= ======= =========== TOTAL RETURN.............. (22.59%)/2/ 14.67% 10.24% 0.89%/2/ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in 000's).............. $ 4,682 $ 6,166 $ 3,272 $ 863 Ratio of expenses to average net assets before reimbursement and waiver of expenses by Advisor and Administrator........... 3.13%/1/ 4.45% 8.73% 23.11%/1/ Ratio of expenses to average net assets after reimbursement and waiver of expenses by Advisor and Administrator (Note 2)...................... 1.90%/1/ 1.90% 1.85% 2.26%/1/ Ratio of net investment loss to average net assets before reimbursement and waiver of expenses by Advisor and Administrator....... (1.15%)/1/ (1.55%) (4.13%) (18.68%)/1/ Ratio of net investment income (loss) to average net assets after reimbursement and waiver of expenses by Advisor and Administrator....... 0.08%/1/ 1.00% 2.75% 2.17%/1/ Portfolio turnover....... 30.62%/2/ 50.20% 88.16% 121.63%/2/ Average commission rate paid.................... $ 0.0050 $0.0077 $0.0020 N/A
/1/ Annualized /2/ Not annualized /3/ The Fund commenced operations on September 13, 1994. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The table below sets forth financial data for a share of beneficial interest outstanding throughout each period presented.
MATTHEWS DRAGON MATTHEWS KOREA CENTURY CHINA FUND FUND --------------------------------------------------------------------- --------------- PERIOD SIX MONTHS PERIOD ENDED ENDED YEAR YEAR PERIOD ENDED FEBRUARY 28, FEBRUARY 28, ENDED ENDED ENDED FEBRUARY 28, 1998 /6/ 1998 AUGUST 31, AUGUST 31, AUGUST 31, 1998 /7/ (UNAUDITED) 1997 1996 1995 /5/ (UNAUDITED) ------------------------------- ---------- ---------- ---------- --------------- CLASS A CLASS I CLASS I CLASS I CLASS I CLASS I ------------ ------------ ---------- ---------- ---------- --------------- Net Asset Value, beginning of period.... $ 5.32 $ 6.19 $ 7.23 $ 9.13 $ 10.00 $ 10.00 -------- -------- -------- -------- -------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)................ (0.03) (0.03) (0.04)/4/ (0.07) 0.08 0.00 Net realized gain (loss) and unrealized appreciation (depreciation) on investments and foreign currency...... (2.27) (3.14) (1.00)/4/ (1.75) (0.95) 0.61 -------- -------- -------- -------- -------- ------- Total from investment operations.......... (2.30) (3.17) (1.04) (1.82) (0.87) 0.61 -------- -------- -------- -------- -------- ------- LESS DISTRIBUTIONS FROM: Net investment income.. 0.00 0.00 0.00 0.00 0.00 0.00 Net realized gains on investments........... 0.00 0.00 0.00 (0.08) 0.00 0.00 -------- -------- -------- -------- -------- ------- Total distributions.. 0.00 0.00 0.00 (0.08) 0.00 0.00 -------- -------- -------- -------- -------- ------- Net Asset Value, end of period................. $ 3.02 $ 3.02 $ 6.19 $ 7.23 $ 9.13 $ 10.61 ======== ======== ======== ======== ======== ======= TOTAL RETURN............ (43.23%)/1/,/3/ (51.21%)/2/ (14.38%) (20.11%) (8.70%)/2/ 6.10%/2/ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in 000's)..... $ 7,798 $ 94,045 $ 19,356 $ 2,721 $ 504 $ 3,647 Ratio of expenses to average net assets before reimbursement and waiver of expenses by Advisor and Administrator......... 2.71% /1/ 2.52% /1/ 2.90% 11.36% 42.87% /1/ 6.05% /1/ Ratio of expenses to average net assets after reimbursement and waiver of expenses by Advisor and Administrator (Note 2).................... 2.69% /1/ 2.50% /1/ 2.50% 2.23% 0.24% /1/ 2.00% /1/ Ratio of net investment loss to average net assets before reimbursement and waiver of expenses by Advisor and Administrator......... (2.31%)/1/ (2.12%)/1/ (1.81%) (10.44%) (41.79%)/1/ (2.48%)/1/ Ratio of net investment income (loss) to average net assets after reimbursement and waiver of expenses by Advisor and Administrator......... (2.29%)/1/ (2.10%)/1/ (1.41%) (1.31%) 0.84% /1/ 1.57% /1/ Portfolio turnover..... 36.19% /2/ 36.19%/2/ 112.68% 139.71% 42.16% /2/ 0.00% /2/ Average commission rate paid.................. $ 0.0491 $ 0.0491 $ 0.0911 $ 0.1397 N/A $0.0022
/1/Annualized. /2/Not annualized. /3/Total return calculation does not reflect sales load. /4/Calculated using the average shares method. /5/The Korea Fund Class I commenced operations on January 3, 1995. /6/The Korea Fund Class A commenced operations on October 9, 1997. /7/The Dragon Century China Fund Class I commenced operations on February 19, 1998. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Matthews International Funds (the "Company") is an open-end investment management company registered under the Investment Company Act of 1940, as amended, as a series company. The Company currently consists of four separate investment series (each a "Fund" and collectively, the "Funds"): Matthews Pacific Tiger Fund, Matthews Asian Convertible Securities Fund, Matthews Korea Fund and Matthews Dragon Century China Fund. The Matthews Pacific Tiger Fund, Matthews Korea Fund and Matthews Dragon Century China Fund currently offer two classes of shares: Class I shares and Class A shares. The classes offered have different sales charges and other expenses which may affect performance. At February 28, 1998, the Matthews Dragon Century China Fund Class A shares had no assets. The Matthews Pacific Tiger Fund, Matthews Korea Fund and Matthews Dragon Century China 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, South Korean companies and Chinese 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. All other securities are valued through valuations obtained from a commercial pricing service or at the most recent mean of the bid and asked prices provided by investment dealers in accordance with procedures established by the Board of Trustees. The books and records of the Funds are maintained in U.S. dollars. Transactions denominated in foreign currencies are recorded at the current prevailing exchange rates. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the current exchange rate. Translation gains or losses resulting from changes in the exchange rate during the reporting period and realized gains and losses on the settlement of foreign currency transactions are reported in the results of operations for the current period. The Funds do not isolate that portion of gains and losses on investments in equity securities which is due to changes in the foreign exchange rate from that which is due to changes in market prices of equity securities. International dollar bonds are issued offshore, pay interest and principal in U.S. dollars, and are denominated in U.S. dollars. Portfolio securities traded on a foreign exchange are generally valued at the respective current prevailing exchange rates. The securities' values are translated into U.S. dollars using these rates. If subsequent to the time a rate has been established and it has been determined to have materially changed, the fair value of those securities, (considering the changing conditions) will be determined by (or under the direction of) the Funds' Board of Trustees. B. 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. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 period ended February 28, 1998. 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. 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, if any, annually. Matthews Pacific Tiger Fund, Matthews Korea Fund and Matthews Dragon Century China 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 generally accepted accounting principles. Net investment losses may not be utilized to offset net investment income in future periods for tax purposes. 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 were as follows:
MATTHEWS PACIFIC TIGER FUND ---------------------------------------------------------------------- CLASS I CLASS A -------------------------------------------------- ------------------ SIX MONTHS ENDED YEAR ENDED PERIOD ENDED FEBRUARY 28, 1998 AUGUST 31, 1997 FEBRUARY 28, 1998 ------------------------ ------------------------ ------------------ SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ -------- --------- Shares sold 8,287,690 $ 61,975,194 3,849,789 $ 46,641,829 38,600 $ 264,437 Shares issued through reinvestment of divi- dends.................. 0 0 6,471 82,965 0 0 Shares redeemed......... (3,498,729) (29,241,697) (1,581,884) (19,274,522) (0) (0) ---------- ------------ ---------- ------------ ------- --------- Net increase............ 4,788,961 $ 32,733,497 2,274,376 $ 27,450,272 38,600 $ 264,437 ========== ============ ========== ============ ======= ========= MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND -------------------------------------------------- SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 1998 AUGUST 31, 1997 ------------------------ ------------------------ SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ Shares sold............. 322,241 $ 2,924,611 348,345 $ 3,949,981 Shares issued through reinvestment of divi- dends.................. 25,588 204,964 8,922 99,805 Shares redeemed......... (327,003) (2,850,370) (141,726) (1,600,060) ---------- ------------ ---------- ------------ Net increase............ 20,826 $ 279,205 215,541 $ 2,449,726 ========== ============ ========== ============
- -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
MATTHEWS KOREA FUND --------------------------------------------------------------------------- CLASS I CLASS A --------------------------------------------------- ---------------------- SIX MONTHS ENDED YEAR ENDED PERIOD ENDED FEBRUARY 28, 1998 AUGUST 31, 1997 FEBRUARY 28, 1998 ------------------------- ------------------------ ---------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ----------- ------------ ---------- ------------ --------- ----------- Shares sold............. 47,423,642 $126,867,275 4,805,699 $ 30,420,501 2,942,757 $ 8,009,591 Shares issued through reinvestment of divi- dends.................. 0 0 0 0 0 0 Shares redeemed......... (19,416,430) (57,089,861) (2,056,201) (13,054,652) (360,080) (1,018,378) ----------- ------------ ---------- ------------ --------- ----------- Net increase............ 28,007,212 $ 69,777,414 2,749,498 $ 17,365,849 2,582,677 $ 6,991,213 =========== ============ ========== ============ ========= =========== MATTHEWS DRAGON CENTURY CHINA FUND --------------------------------------------------- SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 1998 AUGUST 31, 1997 ------------------------- ------------------------ SHARES AMOUNT SHARES AMOUNT ----------- ------------ ---------- ------------ Shares sold............. 347,987 $ 3,482,167 0 $ 0 Shares issued through reinvestment of divi- dends.................. 0 0 0 0 Shares redeemed......... (4,127) (41,232) (0) (0) ----------- ------------ ---------- ------------ Net increase............ 343,860 $ 3,440,935 0 $ 0 =========== ============ ========== ============
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. 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 period ended February 28, 1998, are as follows:
EXPENSES INVESTMENT VOLUNTARY 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% $203,625 $ 833 $ 0 -- Matthews Asian Convert- ible Securities Fund... 1.00 1.90 24,982 30,624 3,487 -- Matthews Korea Fund..... 1.00 2.50 179,737 3,415 0 $81,604+ Matthews Dragon Century China Fund............. 1.00 2.00 743 3,011 0 --
+ Daewoo Securities is the affiliated broker for the Fund. This amount is the affiliated brokerage commissions paid. * For Funds offering Class A shares, the voluntary expense limitation would include an additional 0.25% for Class A Distributor fees. 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. - -------------------------------------------------------------------------------- MATTHEWS INTERNATIONAL FUNDS - NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 3. DISTRIBUTOR FEES AND CLASS SPECIFIC EXPENSES FPS Broker Services, Inc. (the "Underwriter") serves as the Funds' Distributor pursuant to an Underwriting Agreement. Pursuant to Rule 12b-1 adopted by the Securities and Exchange Commission under the Act, the Pacific Tiger Fund Class A, the Korea Fund Class A and the Dragon Century China Fund Class A, have adopted a Plan of Distribution (the "Plan"). The Plan permits the participating Funds to pay certain expenses associated with the distribution of their shares. Under the Plan, each Fund offering Class A shares may pay actual expenses not exceeding, on an annual basis, 0.25% of each participating Fund's Class A average daily net assets. The Pacific Tiger Fund Class I, the Asian Convertible Securities Fund, the Korea Fund Class I and the Dragon Century China Fund Class I do not have a distribution plan. For the period ended February 28, 1998, the class specific expenses were as follows:
MATTHEWS MATTHEWS PACIFIC MATTHEWS DRAGON CENTURY TIGER FUND KOREA FUND CHINA FUND ----------------- --------------- --------------- CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A -------- -------- ------- ------- ------- ------- Transfer Agent fees.......... $ 22,677 $ 2,063 $20,110 $2,249 $500 $ 0 Registration expenses........ N/A N/A 14,786 1,998 N/A N/A Printing expenses............ 5,456 1,810 2,380 3,639 63 0
4. INVESTMENT TRANSACTIONS Investment transactions for the period ended February 28, 1998, excluding temporary short-term investments, were as follows:
PURCHASES PROCEEDS FROM SALES ----------- ------------------- Matthews Pacific Tiger Fund.................... $47,109,856 $14,163,050 Matthews Asian Convertible Securities Fund..... 1,465,947 1,766,620 Matthews Korea Fund............................ 88,771,203 14,159,874 Matthews Dragon Century China Fund............. 2,876,104 0
The Funds invest excess cash in interest bearing deposits at The Bank of New York. 5. CAPITAL LOSS CARRYOVER At August 31, 1997, the Matthews Korea Fund had a capital loss carryover of $78,721, which expires in 2004, to offset possible future capital gains of the Fund. - -------------------------------------------------------------------------------- Directors and Officers [ARTWORK APPEARS HERE] - -------------------------------------------------------------------------------- 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 Brian B. Stableford INVESTMENT ADVISOR Matthews International Capital Management, LLC 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 FPS Broker Services, Inc. 3200 Horizon Drive P.O. Box 61503 King of Prussia, PA 19406 (800) 892-0382 SHAREHOLDER SERVICES First Data Investor Services Group, Inc. 3200 Horizon Drive King of Prussia, PA 19406 (800) 892-0382 CUSTODIAN The Bank of New York 90 Washington Street New York, NY 10286 LEGAL COUNSEL Paul, Hastings, Janofsky & Walker LLP 345 California Street, 29th Floor San Francisco, CA 94104 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. [ARTWORK APPEARS HERE] MATTHEWS INTERNATIONAL FUNDS INVESTING IN THE DRAGON CENTURY... MATTHEWS PACIFIC TIGER FUND Seeking long-term growth through a diversified portfolio of Asian Tiger companies. With an emphasis on research intensive, "bottom-up" stock selection, the portfolio focuses on quality companies with superior earnings growth and below-average market valuations. MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND Introducing a new asset class, the Fund seeks to participate in the Tiger equity markets with the reduced volatility historically found in convertible bonds. MATTHEWS KOREA FUND A unique, open-ended, single-country fund allowing focused participation in the world's 11th largest economy. MATTHEWS DRAGON CENTURY CHINA FUND This single-country fund allows investors to participate in one of the fastest growing economies in the world. The fund seeks to identify quality companies that are well-positioned to participate in China's emergence into the global marketplace. [GRAPHIC OF DRAGON APPEARS HERE] MATTHEWS PACIFIC TIGER FUND MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND MATTHEWS KOREA FUND MATTHEWS DRAGON CENTURY CHINA FUND MATTHEWS INTERNATIONAL FUNDS 655 Montgomery Street, Suite 1438 San Francisco, CA 94111 1.800.789.ASIA (2742) www.micfunds.com e-mail: asia@micfunds.com Distributed by FPS Broker Services, Inc., 3200 Horizon Drive, King of Prussia, Pennsylvania 19406 SEMI-ANNUAL REPORT -----END PRIVACY-ENHANCED MESSAGE-----