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Asia Growth

Matthews Asia ESG Fund MASGX

Snapshot
  • Unconstrained strategy focused on companies that make a positive environmental, social and eco­nomic impact in Asia ex Japan
  • Deep bottom-up fundamental approach with bias toward mid- and small-capitalization companies whose ESG qualities are less appreciated
  • Seeks to generate attractive long-term risk-adjusted returns by investing in well-governed companies

04/30/2015

Inception Date

6.16%

YTD Return

(as of 01/15/2021)

$15.86

Price

(as of 01/15/2021)

$88.03 million

Fund Assets

(as of 12/31/2020)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Asia ESG Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies of any market capitalization located in Asia that Matthews believes satisfy one or more of its environmental, social and governance (“ESG”) standards. The Fund seeks to invest in companies across the market capitalization spectrum that Matthews believes to be undervalued but of high quality and run by management teams with good operating and governance track records. In addition, the Fund seeks to invest in those Asian companies that have the potential to profit from the long-term opportunities presented by global environmental and social challenges as well as those Asian companies that proactively manage long-term risks presented by these challenges.

Risks

Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. Matthews Asia ESG Fund’s consideration of ESG factors in making its investment decisions may impact the Fund’s relative investment performance positively or negatively.

The risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 04/30/2015
Fund Assets $88.03 million (12/31/2020)
Currency USD
Ticker MASGX
Cusip 577-130-727
Portfolio Turnover 29.67%
Benchmark MSCI All Country Asia ex Japan Index
Geographic Focus Asia - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region
Fees & Expenses
Gross Expense Ratio 1.54%
Net Expense Ratio 1.38%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 12/31/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia ESG Fund
MASGX
11.09% 25.34% 42.87% 42.87% 13.22% 13.87% n.a. 10.65% 04/30/2015
MSCI All Country Asia ex Japan Index
6.84% 18.66% 25.36% 25.36% 8.46% 13.90% n.a. 8.07%
As of 12/31/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia ESG Fund
MASGX
11.09% 25.34% 42.87% 42.87% 13.22% 13.87% n.a. 10.65% 04/30/2015
MSCI All Country Asia ex Japan Index
6.84% 18.66% 25.36% 25.36% 8.46% 13.90% n.a. 8.07%
For the years ended December 31st
Name 2020 2019 2018 2017 2016
Matthews Asia ESG Fund
MASGX
42.87% 12.55% -9.73% 33.79% -1.40%
MSCI All Country Asia ex Japan Index
25.36% 18.52% -14.12% 42.08% 5.76%

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

Assumes reinvestment of all dividends and/or distributions before taxes. All performance quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate with market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund’s fees and expenses had not been waived. Performance differences between the Institutional class and the Investor class may arise due to differences in fees charged to each class.

Additional performance, attribution, liquidity, value at risk (VaR), security classification and holdings information is available on request for certain time periods.

Growth of a Hypothetical $10,000 Investment Since Inception

(as of 12/31/2020)

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on dividends, capital gain distributions or redemption of fund shares.

Ratings

  • OVERALL
  • out of 58 funds
  • 3 YEAR
  • out of 58 funds
  • 5 YEAR
  • out of 55 funds
  • 1 YEAR
  • 1st
  • 4 out of 33 funds
  • 3 YEAR
  • 1st
  • 5 out of 32 funds
  • 5 YEAR
  • 2nd
  • 15 out of 29 funds
  • SINCE INCEPTION
  • 2nd
  • 10 out of 29 funds

Ratings agency calculation methodology

Portfolio Managers

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Winnie  Chwang photo
Winnie Chwang

Co-Manager

Portfolio Characteristics

(as of 12/31/2020)
55
Number of Securities

Source: BNY Mellon Investment Servicing (US) Inc.

25.3x
P/E using FY1 estimates
18.5x
P/E using FY2 estimates
$35.0 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 12/31/2020)
Name Sector Country % Net Assets
LG Chem, Ltd., Pfd. Materials South Korea 6.0
Samsung SDI Co., Ltd., Pfd. Information Technology South Korea 5.0
Hong Kong Exchanges & Clearing, Ltd. Financials China/Hong Kong 4.6
Flat Glass Group Co., Ltd. Information Technology China/Hong Kong 4.4
Bandhan Bank, Ltd. Financials India 3.6
Wuxi Biologics Cayman, Inc. Health Care China/Hong Kong 3.3
Shriram City Union Finance, Ltd. Financials India 3.2
IndusInd Bank, Ltd. Financials India 3.0
Phoenix Mills, Ltd. Real Estate India 3.0
Mahindra & Mahindra, Ltd. Consumer Discretionary India 2.8
TOTAL 38.9

Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.

Portfolio Breakdown (%)

(as of 12/31/2020)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 24.6 23.1 1.5
Financials 16.6 17.9 -1.3
Health Care 14.6 5.0 9.6
Industrials 12.9 5.3 7.6
Consumer Discretionary 11.2 19.1 -7.9
Materials 6.0 4.3 1.7
Real Estate 5.2 3.9 1.3
Communication Services 3.7 11.5 -7.8
Consumer Staples 3.5 5.0 -1.5
Energy 0.0 2.8 -2.8
Utilities 0.0 2.2 -2.2
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.

Country Fund Benchmark Difference
China/Hong Kong 37.4 51.6 -14.2
India 21.3 10.4 10.9
South Korea 12.2 15.2 -3.0
Taiwan 11.7 14.2 -2.5
Japan 5.7 0.0 5.7
Bangladesh 3.6 0.0 3.6
Singapore 2.6 2.4 0.2
United States 1.8 0.0 1.8
Thailand 1.3 2.1 -0.8
Vietnam 0.7 0.0 0.7
Indonesia 0.1 1.5 -1.4
Malaysia 0.0 1.7 -1.7
Philippines 0.0 0.8 -0.8
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

Not all countries are included in the benchmark index(es).

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 30.7 64.0 -33.3
Large Cap ($10B-$25B) 17.8 19.7 -1.9
Mid Cap ($3B-$10B) 21.7 14.9 6.8
Small Cap (under $3B) 28.2 1.5 26.7
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

Source: FactSet Research Systems.

Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

Distributions

Record Date Ex, Pay and
Reinvest Date
Ordinary
Income
Short Term
Capital Gains
Long Term
Capital Gains
Total Distributions
Per Share
% of NAV Nondividend Distribution (Return of Capital)
12/15/2020 12/16/2020 $0.00950 $0.39961 $0.43641 $0.84552 6.0% N.A.
12/16/2019 12/17/2019 $0.03010 $0.00000 $0.12078 $0.15088 1.4% N.A.
View History

 

There is no guarantee that the Fund will pay or continue to pay distributions. 

Past performance is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost.

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For the quarter ending September 30, 2020, the Matthews Asia ESG Fund returned 13.27% (Investor Class) and 13.29% (Institutional Class), while its benchmark, the MSCI All Country Asia ex-Japan Index, returned 10.79%.

Market Environment:

Asia ex-Japan equities continued their upward trajectory in the third quarter. Many Asian equity markets and currencies rallied as economic activity slowly resumed, with earlier pandemic-related lockdowns easing. Malaysia, South Korea and India were the best performing markets during the quarter, while South East Asian countries like Indonesia and Thailand were laggards. The Chinese renminbi gained on the U.S. dollar, as did the South Korean won and the Indian rupee, while the Thailand baht and the Indonesian rupiah depreciated.

For the second quarter in a row, small caps outperformed large caps suggesting that investors are anticipating broader improvement in economic activity. With an eye toward mitigating the health care and economic impacts of the pandemic, North Asia countries have generally been more successful, coordinated and effective in their public health response. South and Southeast Asia have had a relatively tougher time combatting the virus with intermittent imposition of localized lockdowns. For global equity investors, exposure to Asia provided meaningful diversification in the quarter through access to more varied return drivers, including positive local interest rates, faster normalization of economic activity and rising domestic consumption.

Performance Contributors and Detractors:

Our South Korean Electric Vehicle (EV) battery holdings LG Chem and Samsung SDI were the biggest contributors to performance this quarter. The EV sales have been strong in Europe this year, driven by the EU’s regulatory targets for carbon emissions for car makers and also driven by post-COVID stimulus that subsidized EV purchases in many countries across Europe. For both LG Chem and Samsung SDI, Europe is a key end market. The startup of Tesla’s China plant also provided boost to LG Chem’s sales as a key battery supplier. Both LG Chem and Samsung SDI continue to build their order book and we remain positive on the long-term growth prospects of both those companies. EVs are still at a very nascent stage of penetration and the current industry leaders continue to invest heavily in researching those emerging technologies themselves. LG Chem had a few industrial accidents at their chemical plants this year and we have engaged the company about health and safety improvements. Very recently LG Chem has announced ‘M-project’— a large scale safety initiative with a goal of achieving zero major environmental and accidents from 2021.

A detractor was Legend Biotech, a China-based global biotech company with a leading CAR-T cell therapy— a form of immunotherapy that helps patients’  T cells to fight cancer—in clinical trials. During the quarter there was news about CEO Frank Zhang being placed under residential surveillance for pending investigation by Chinese customs authorities, dampening investor sentiment toward Legend Biotech. Zhang is also the Chairman of Genscript, the parent company of Legend Biotech. Evidence suggests that the investigation potentially pertains to Genscript’s product line and is unrelated to Legend’s products and pipeline. Legend Biotech has appointed the CFO as an interim-CEO. We continue to believe that the company is well positioned with its innovative CAR-T cell therapy globally including in the U.S., where Johnson & Johnson’s biotech unit Janssen is a partner.

From a country perspective South Korean, Chinese and Bangladeshi holdings contributed most to relative performance during the quarter, while Taiwanese holdings detracted from performance. From a sector perspective, stock selection in financials and industrials contributed to relative performance. On the other hand, stock selection in information technology and consumer discretionary detracted.

Notable Portfolio Changes:

During the quarter, we initiated several new positions, including Marico Industries, a consumer beauty and wellness company in India. Marico is a market leader in key segments of the hair oil industry and also a leader in the healthy cooking oil market in India. Marico, a well-run consumer staples company,  benefited from increased demand for its cooking oil products due to COVID-19 induced work from home situation. Its core hair care products also benefit from customers’ renewed focus on value. Marico has also rolled out several new products to address the increased hygiene/sanitation needs as well as more emphasis on health and wellness as India gets through COVID-19. The company has an excellent ESG profile spanning areas such as water conservation, renewable energy reliance and responsible packaging policies. The company also procures more than half of their agricultural raw materials directly from farmers and has a track record of extensively and successfully working with farmers to improve productivity. Meanwhile, we exited several small positions, including Kingsoft Cloud, after they had a strong run-up in stock prices during the quarter.

Outlook:

The ongoing pandemic continues to highlight the importance of ESG inputs and outcomes in Asia. Access to health care and gainful employment, for example, are key components for maintaining the region’s economic recovery. From an investment perspective, we believe companies with stronger ESG attributes may be well positioned for long-term growth.

Stepping back from some of the near-term issues in the region, we are encouraged by the progress of economic reforms in Asia. Amid the pandemic, many of Asia’s policymakers have accelerated efforts toward further opening capital markets to foreign investments, as well as toward reforming labor laws, giving employers greater flexibility in managing their workforces. While the nature of reforms varies among countries in different stages of economic development, the overall trend is unifying and positive for Asia’s capital markets. These economic reforms, combined with rising household incomes and growing domestic consumption, make Asia an attractive destination in our view for long-term equity investors. We continue to look for companies with real cash flows, sound balance sheets and skilled management teams that may offer compelling growth opportunities.

 

As of 9/30/2020, the securities mentioned comprised the Matthews Asia ESG Fund in the following percentages: LG Chem, Ltd., Pfd., 6.0%; Samsung SDI Co., Ltd., Pfd., 4.1%; Legend Biotech Corp. ADR, 2.3%; Marico, Ltd., 1.5%;  The Fund held no positions in Tesla, Genscript, Johnson & Johnson, or Kingsoft Cloud. Current and future portfolio holdings are subject to change and risk.

Average Annual Total Returns - MASGX as of 12/31/2020
1YR 3YR 5YR 10YR Since Inception Inception Date
42.87% 13.22% 13.87% N.A. 10.65% 04/30/2015

All performance quoted is past performance and is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund's fees and expenses had not been waived. Please see the Fund's most recent month-end performance.

Fees & Expenses
Gross Expense Ratio 1.54%
Net Expense Ratio 1.38%

Matthews has contractually agreed (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class (which is offered through a separate prospectus to eligible investors) to 1.20%, first by waiving class specific expenses (e.g., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving nonclass specific expenses (e.g., custody fees) of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 1.20% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 1.20%. If the operating expenses fall below the expense limitation in a year within three years after Matthews has made a waiver or reimbursement, the Fund may reimburse Matthews up to an amount that does not cause the expenses for that year to exceed the lesser of (i) the expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will remain in place until April 30, 2021 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.

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Index Definitions

The information contained herein has been derived from sources believed to be reliable and accurate at the time of compilation, but no representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Neither the funds nor the Investment Advisor accept any liability for losses either direct or consequential caused by the use of this information.

The views and opinions in the commentary were as of the report date, subject to change and may not reflect current views. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. It should not be assumed that any investment will be profitable or will equal the performance of any securities or any sectors mentioned herein. The information does not constitute a recommendation to buy or sell any securities mentioned.