The Matthews Asia ex Japan Total Return Equity Fund

Why was the Fund renamed?

The Fund’s new name—Matthews Asia ex Japan Total Return Equity Fund—reflects the strong track record of generating attractive total return. Since the Fund’s inception in 2015, the Fund has sought to deliver attractive total return through capital appreciation and the reinvestment of income with a portfolio of Asian growth companies that pay a steady or growing dividend. We believe the Fund offers a differentiated exposure to one of the world’s fastest growing regions—Asia—and provides a core Asia equity exposure in client portfolios.

What is the objective of the Matthews Asia ex Japan Total Return Equity Fund?

The Matthews Asia ex Japan Total Return Equity Fund seeks to generate total return through capital appreciation and current income with a portfolio of Asian companies that pay a steady or growing dividend.

Has the Fund’s investment philosophy or process changed?

The investment philosophy and process remain the same. We continue to believe dividends are an under-recognized component of equity investing in Asia. They comprise a significant portion of long-term returns in Asian equities, and the universe of dividend paying companies has expanded dramatically over the past decade. The team continue to use active, on-the-ground research to find dividend-paying companies across a broad range of sectors and countries, including the fast-growing markets in emerging Asia.

Asia markets can be volatile. How does a focus on dividends generate total return and mitigate volatility?

Companies that generate sufficient cash flow to fund dividend payments and allocate capital prudently tend to have stronger corporate governance than their peers—meaning that they may offer a less volatile way of accessing the market.

Furthermore, dividend-per-share growth has been less volatile than earnings growth in Asia. Thus having exposure to dividend-paying companies through the cycle may help to mitigate portfolio volatility, in our view.

Additionally, dividends are a significant portion of long-term returns in Asian equities, and the universe of dividend-paying companies has expanded dramatically.

What is the universe of dividend-paying companies in Asia?

There are over 9,600 listed dividend-paying companies located in Asia ex Japan today. With a deep opportunity set, our total return approach allows us to capture both constituents of total return—capital appreciation and the reinvestment of income. The portfolio finds opportunities in:

Does the Fund use derivatives to generate total return?

The Fund does not use derivative instruments, such as options, futures and swap contracts. Additionally, we do not enter into forward foreign exchange transactions to generate attractive total return.

How are ESG factors integrated in the portfolio?

The Asia ex Japan Total Return Equity Fund is classified as Article 8 under EU SFDR. It seeks to promote environmental and social characteristics, while adhering to an internally constructed activity and norms-based screening policy, and to actively engaging with companies in an open and constructive dialogue where we deem appropriate.

The Fund is committed to the following three high-level responsibilities:

1. Commit to have a lower greenhouse gas (GHG) emissions profile vs the benchmark and less exposure to companies with significant exposure to the fossil fuel sector
2. Use an activity and norms-based screening process
3. Heightened engagement with companies around potential environmental and social issues

The Portfolio Managers are supported by Kathlyn Collins, VP, Matthews Asia’s Head of Responsible Investing and Stewardship, as well as the Responsible Investing and Stewardship Subcommittee while also leveraging the research and insights of colleagues across the broader investment team.

Tell us about the experience of your Portfolio Managers.

We have recently strengthened the team from within the current resources of the investment personnel. Matthews has been pursuing both growth and dividend investing in Asia and emerging markets for nearly 30 years, and we have maintained depth of expertise across the team and portfolios.

The addition of the new portfolio managers provides coverage and support across sectors and the Asian region, specifically the markets of ASEAN and India. It also formalizes the close collaborative relationships that have grown informally over time between teams in order to ensure individuals are given specific responsibilities that recognize the contribution they currently provide.

The following portfolio managers will ensure the Fund it remains a growth-orientated strategy that uses a dividend lens to identify quality companies and retain exposure to businesses across Asia and the market cap spectrum, with a particular emphasis in small and medium-sized companies.

Sharat Shroff – Sharat joined Matthews Asia in 2005, and is a Lead Manager of the Pacific Tiger Strategy. With Sharat as a Lead Manager on the Asia ex Japan Total Return Equity Strategy, we have added a highly experienced quality-growth portfolio manager to the team.

Kenneth Lowe – Kenny joined Matthews in 2010, and is a Lead Manager of the Asian Growth and Income and Asia Dividend Strategies. By adding Kenny as a Lead Manager on the Asia ex Japan Total Return Equity Strategy, we have formalized the close relationship among the incomeleaning portfolio managers to work across the portfolios. Kenny has deep knowledge of Asia and of the incomeproducing sectors in the region.

InBok Song – InBok initially joined Matthews Asia in 2007, and is a Lead Manager of the Pacific Tiger strategy. InBok has made a significant contribution to the Asia ex Japan Total Return Equity Strategy with her coverage and knowledge in the IT and Technology sectors in addition to her in-depth knowledge of South Korea and Taiwan. Adding InBok as a Co-Manager formally recognizes her contribution to the portfolio and team discussions.

Jeremy Sutch – Jeremy joined Matthews Asia in 2015 and is Co-Manager of both the Asia Small Companies and Emerging Markets Small Companies strategies. Jeremy has been contributing in discussing existing and recommending small- and mid-cap ideas for the Asia ex Japan Total Return Equity Strategy which represent about 60% of the portfolio. He also has invaluable knowledge and coverage of the ASEAN market where we are identifying more opportunities, including Vietnam. Adding Jeremy as a Co-Manager formally recognizes his contribution to the portfolio and team discussions.

Sojung Park – Sojung joined Matthews Asia in 2016 and is a Co-Manager of the Korea Strategy. Adding Sojung as a Co-Manager on the Matthews Asia ex Japan Total Return Equity Strategy formally recognizes the contribution she has been making to Strategy. In addition to her analyst responsibilities conducting research and generating ideas for the portfolio, she has also been active in team discussions over stock selection, portfolio construction discussions.

Contact Matthews Asia
To learn more about Matthews Asia or how the Matthews Asia Funds can complement your globally diversified portfolio, please call +1 (415) 954-4510 or visit global.matthewsasia.com.

Risk Considerations
The value of an investment in the Fund can go down as well as up and possible loss of principal is a risk of investing. Investments in international, emerging and frontier market securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation, which may adversely affect the value of the Fund’s assets. The Fund invests in holdings denominated in foreign currencies, and is exposed to the risk that the value of the foreign currency will increase or decrease. The Fund invests primarily in equity securities, which may result in increased volatility. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends. These and other risks associated with investing in the Fund can be found in the Prospectus.