<PAGE>
UNITED STATES File No. 33-78960
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 File No. 811-8510
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. _____ [_]
Post Effective Amendment No. 5 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 8 [_]
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Matthews International Funds
============================
(Exact name of Registrant as Specified in Charter)
655 Montgomery Street
Suite 1438
San Francisco, CA 94111
- ----------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code 415-788-7553
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G. Paul Matthews, President
Matthews International Capital Management, LLC
655 Montgomery Street, Suite 1438
San Francisco, California 94111
-----------------------------------------
(Name and Address of Agent for Service)
COPIES TO:
Robert D. Evans, Esq. Joseph M. O'Donnell, Esq.
Shartsis, Friese & Ginsburg FPS Services, Inc.
One Maritime Plaza, 18th Floor 3200 Horizon Drive
San Francisco, CA 94111 King of Prussia, Pennsylvania 19406
Approximate date of proposed public offering:
It is proposed that this filing become effective: December 27, 1996
[X] immediately upon filing pursuant to Paragraph (b) of Rule 485.
[_] on (date) , pursuant to Paragraph (b).
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[_] 60 days after filing pursuant to paragraph (a).
[_] on (date) pursuant to paragraph (a) of Rule 485.
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[_] 75 days after filing pursuant to paragraph (a)(ii).
[_] on (date) pursuant to paragraph (a)(ii) of rule 485.
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If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for
previously files post-effective amendment.
================================================================================
Registrant has elected to register an indefinite number of shares of its
securities under this Registration Statement pursuant to Rule 24f-2 of the
Investment Company Act of 1940, as amended. Registrant filed its Notice
pursuant to Rule 24f-2 on October 29, 1996.
As filed with the U.S. Securities and Exchange
Commission on December 27, 1996.
<PAGE>
MATTHEWS INTERNATIONAL FUNDS
Cross Reference Sheet Pursuant to Rule 481a
Part A -- INFORMATION REQUIRED IN A PROSPECTUS
<TABLE>
<CAPTION>
Form N-1A Item Caption in Prospectus
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<S> <C>
1. Cover Page Not Titled
2. Synopsis Prospectus Summary Information
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Objectives; Investment
Policies and Risks; Investment
Strategies and Risks; Risk Factors
5. Management of the Funds Management of the Funds
5A. Management's Discussion of Fund Contained in the Annual Report of
Performance Registrant
6. Capital Stock and Other Securities Net Asset Value; Dividends and Taxes;
General Information
7. Purchase of Securities Being Offered Purchase of Shares; Shareholder Services
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings *
</TABLE>
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<PAGE>
Part B -- INFORMATION REQUIRED IN A STATEMENT OF
ADDITIONAL INFORMATION:
<TABLE>
<CAPTION>
Form N-1A Item Caption in SAI
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<S> <C>
10. Cover Page Not Titled
11. Table of Contents Table of Contents
12. General Information and History The Funds
13. Investment Objectives and Investment Policies and Techniques;
Policies Investment Restrictions
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Control Persons and Principal Holders
Holders of Securities of Securities
16. Investment Advisory and Other Investment Advisory and Other Services
Services
17. Brokerage Allocation Portfolio Transactions and Brokerage
18. Capital Stock and Other Other Information
Securities
19. Purchase, Redemption and Pricing Covered in Part A; Determination of
of Securities Being Offered Net Asset Value
20. Tax Status Taxes
21. Underwriters The Underwriter
22. Calculations of Performance Data Performance Information
23. Financial Statements Reports to Shareholders and Financial
Statements
</TABLE>
Part C -- OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
* Item inapplicable at this time or answer negative.
Page 3
<PAGE>
MATTHEWS INTERNATIONAL FUNDS
655 Montgomery Street, Suite 1438
San Francisco, CA 94111
MATTHEWS PACIFIC TIGER FUND
MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND
MATTHEWS KOREA FUND
PROSPECTUS
December 27, 1996
- --------------------------------------------------------------------------------
Matthews International Funds (the "Company") is a no load, open-end investment
management company which currently consists of three separate investment series
(each a "Fund" and collectively, the "Funds") designed to offer investors a
variety of investment opportunities. Each series has distinct investment
objectives and policies. Information concerning the Funds has been combined into
this one Prospectus to aid investors in understanding the similarities and
differences among the Funds.
The Company is organized as a Delaware business trust. Matthews International
Capital Management, LLC (the "Advisor") serves as the investment advisor to the
Funds and manages the investments of the Funds according to the investment
objectives of each Fund. Daewoo Capital Management Co., Ltd. (the "Korean
Advisor"), an investment advisory subsidiary of Daewoo Securities Co., Ltd.,
acts as the Korean advisor to Matthews Korea Fund.
Matthews Pacific Tiger Fund seeks maximum capital appreciation by investing,
under normal circumstances, at least 65% of its total assets in equity
securities of Pacific Tiger economies. The Pacific Tiger economies include:
Hong Kong, Singapore, South Korea, Taiwan, Indonesia, Malaysia, the Philippines,
Thailand and China. Equity securities in which the Fund may invest include:
common stocks, preferred stocks, warrants, and securities convertible into
common stocks such as convertible bonds and debentures.
Matthews Asian Convertible Securities Fund seeks to provide capital appreciation
and current income by investing at least 65% of its total assets in convertible
securities of the Asian markets. The countries included in this market are:
Hong Kong, Japan, Singapore, South Korea, Taiwan, Indonesia, Malaysia, the
Philippines, Thailand, China and India. Convertible securities include
corporate bonds and preferred stocks which are convertible into common stocks,
as well as debt instruments with warrants or common stock attached.
Matthews Korea Fund seeks long-term capital appreciation through investment
primarily in equity securities of South Korean companies. Under normal
circumstances, the Fund will invest at least 65% of its total assets in equity
securities of South Korean companies. Equity securities include common stocks,
preferred stocks, warrants and securities convertible into common or preferred
stock.
Many convertible securities are not considered investment grade and the Funds
may invest in varying degrees in such securities. Securities of this type
(commonly referred to as "junk bonds") are subject to a greater risk of loss of
principal and interest. Investors should carefully assess these risks before
investing in the Funds. See "RISK FACTORS" and for further information see
"RISKS RELATED TO LOWER GRADE DEBT SECURITIES" in the Statement of Additional
Information.
Shares of each Fund may be purchased directly from the Funds without any sales
charge although the Advisor and other institutions may charge their customers a
fee for services provided in connection with their investments.
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A redemption fee of 1% will be imposed on redemptions made within ninety days of
purchase, the proceeds of which will be retained by the Funds.
The minimum initial investment for each Fund is $1,000. Subsequent investments
will be accepted in minimum amounts of $250. The minimum initial investment for
IRAs, 401(k), 403(b)(7) plans and other retirement plans is $250. Subsequent
investments for any retirement plan is $50.
The Funds' principal Underwriter is FPS Broker Services, Inc. 3200 Horizon
Drive, P.O. Box 61503, King of Prussia, PA 19406-0903.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the above Funds. Investors should read
and retain this Prospectus for future reference. Additional Information about
the Funds is contained in the Statement of Additional Information dated December
27, 1996, which has been filed with the Securities and Exchange Commission and
is available upon request without charge by contacting FPS Broker Services,
Inc., at the address above or by calling (800) 892-0382. The Statement of
Additional Information is incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 5
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TABLE OF CONTENTS
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Page
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PROSPECTUS SUMMARY.......................................................
EXPENSE INFORMATION......................................................
FINANCIAL HIGHLIGHTS.....................................................
INVESTMENT OBJECTIVES....................................................
Matthews Pacific Tiger Fund.........................................
Matthews Asian Convertible Securities Fund..........................
Matthews Korea Fund.................................................
INVESTMENT POLICIES AND RISKS............................................
Common to all Funds.................................................
Specific to Matthews Pacific Tiger Fund.............................
Specific to Matthews Asian Convertible Securities Fund..............
Specific to Matthews Korea Fund.....................................
INVESTMENT STRATEGIES AND RISKS..........................................
Common to all Funds.................................................
Specific to Matthews Asian Convertible Securities Fund..............
Specific to Matthews Korea Fund.....................................
RISK FACTORS.............................................................
Common to all Funds.................................................
Specific to Matthews Asian Convertible Securities Fund..............
Specific to Matthews Korea Fund.....................................
MANAGEMENT OF THE FUNDS..................................................
ADMINISTRATION OF THE FUNDS..............................................
PURCHASE OF SHARES.......................................................
EXCHANGE OF SHARES.......................................................
REDEMPTION OF SHARES and REDEMPTION FEE..................................
SHAREHOLDER SERVICES.....................................................
NET ASSET VALUE..........................................................
DIVIDENDS AND TAXES......................................................
PERFORMANCE INFORMATION..................................................
GENERAL INFORMATION......................................................
APPENDIX
--------
DEBT RATINGS.............................................................
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUNDS TO MAKE
SUCH AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE, DEALER, OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.
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PROSPECTUS SUMMARY
The Company
Matthews International Funds (the "Company") is an open-end investment
management company organized as a business trust under the laws of the state of
Delaware. The Company is organized to offer separate series of shares and is
currently comprised of three separate series of shares - Matthews Pacific Tiger
Fund, Matthews Asian Convertible Securities Fund and Matthews Korea Fund.
Additional series of the Company may be established from time to time at the
discretion of the Board of Trustees of the Company.
Investment Objectives
Matthews Pacific Tiger Fund seeks to maximize capital appreciation by investing,
under normal circumstances, at least 65% of its total assets in equity
securities of Pacific Tiger economies. The Pacific Tiger economies include Hong
Kong, Singapore, South Korea, Taiwan, Indonesia, Malaysia, the Philippines,
Thailand and China. See "INVESTMENT OBJECTIVES," "INVESTMENT POLICIES AND
RISKS" and "RISK FACTORS."
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 the Asian markets. The countries
included in this market are: Hong Kong, Japan, Singapore, South Korea, Taiwan,
Indonesia, Malaysia, the Philippines, Thailand, China and India. See
"INVESTMENT OBJECTIVES," "INVESTMENT POLICIES AND RISKS" and "RISK FACTORS."
Matthews Korea Fund seeks long-term capital appreciation through investment
primarily in equity securities of South Korean companies. The Fund will, under
normal circumstances, invest at least 65% of its total assets in equity
securities of South Korean companies. The Fund is designed primarily for long-
term investment, and investors should not consider it a short-term trading
vehicle. See "INVESTMENT OBJECTIVES," "INVESTMENT POLICIES AND RISKS" and "RISK
FACTORS."
Risk Factors
There is no assurance that the Funds will achieve their investment objectives.
Investing outside of the United States involves special risks, in addition to
the risks which are inherent to all investments. Investing in securities of
South Korean companies and of the government of the Republic of Korea involves
certain considerations not typically associated with investing in securities of
United States companies or the United States government. Among these are the
risks of political, economic and social uncertainty and instability, including
the potential for increasing militarization in North Korea. Relations between
North and South Korea, while improving, remain tense and the possibility of
military action still exists. In the event that military action were to take
place, the value of the Fund's Korean assets are likely to be adversely
affected. The Funds may also be affected by foreign currency fluctuations or
exchange controls, differences in accounting procedures and other risks. The
Funds are also subject to typical stock and bond market risk. In addition,
limitations of foreign ownership currently exist which may impact the price of a
Korean security paid by a Fund. See "RISK FACTORS" and "Security Valuation
Considerations."
Investment Management, Underwriter and Servicing Agents
Matthews International Capital Management LLC (the "Advisor"), 655 Montgomery
Street, Suite 1438, San Francisco, California 94111, a Limited Liability Company
and registered investment advisor, is the investment advisor for the Funds. The
Advisor manages the investments of each Fund according to its investment
objectives. As of December 9, 1996, the Advisor had approximately $70 million
under management or committed to management in various fiduciary or advisory
capacities, primarily from private and institutional accounts. Daewoo Capital
Management Co., Ltd., (the "Korean Advisor"), 34-3, Yoido-dong, Yungdungpo-gu,
Seoul 150-010, Korea, is registered under the U.S. Investment Advisers Act of
1940 and acts as Korean Advisor to Matthews Korea Fund. The Korean Advisor is a
subsidiary of Daewoo Securities Co., Ltd., the largest Korean securities firm
and an affiliate of Daewoo Research Institute. The Advisor is responsible for
the fees of the
Page 7
<PAGE>
Korean Advisor under the terms of a separate agreement. See "MANAGEMENT OF THE
FUNDS." FPS Broker Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903 serves as the Funds' underwriter. The Bank of New York,
90 Washington Street, New York, New York 10286 serves as the custodian of the
Funds' assets. FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903 serves as the Funds' administrator, transfer agent and
fund accounting agent.
Purchase of Shares
The minimum initial investment for each Fund is $1,000 for all accounts.
Subsequent investments will be accepted in minimum amounts of $250 for all
accounts. The Funds do not impose any sales load nor bear any fees pursuant to
a Rule 12b-1 Plan. The public offering price for shares of each Fund is the net
asset value per share next determined after receipt and acceptance of a purchase
order at the transfer agent in proper form with accompanying check or bank wire
arrangements. See "PURCHASE OF SHARES."
Redemption of Shares
Shares of the Funds may be redeemed at the net asset value per share next
determined after receipt by the transfer agent of a redemption request in proper
form. If any shares of a Fund are redeemed within ninety days of the purchase
of those shares, the proceeds of that redemption will be subject to a redemption
fee of 1.00%, the proceeds of which will be retained by the Fund from which the
shares are redeemed. Signature guarantees may be required for certain
redemption requests. See "Redemption Fee" and "REDEMPTION OF SHARES."
Dividends
Each Fund intends to distribute substantially all of its net investment income
and net realized capital gains, if any, to shareholders. Distributions of net
capital gains, if any, will be made annually. All distributions are reinvested
at net asset value, in additional full and fractional shares of each Fund unless
the shareholder notifies the transfer agent in writing requesting payments in
cash. Matthews Pacific Tiger Fund and Matthews Korea Fund intend to declare
and pay dividends annually. Matthews Asian Convertible Securities Fund intends
to declare and pay dividends semi-annually. See "DIVIDENDS AND TAXES."
EXPENSE INFORMATION
<TABLE> <CAPTION>
Shareholder Transaction Expenses for Each Fund:
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)....................... 0.00%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)....................... 0.00%
Contingent Deferred Sales Charge
(as a percentage of original purchase price).............. 0.00%
Redemption Fee (as a percentage of amount redeemed)......... 1.00%*
</TABLE>
* The Redemption Fee of 1.00% applies only to those shares redeemed within
ninety days of purchase. See "Redemption Fee" under the heading "REDEMPTION OF
SHARES."
If you want to redeem shares by wire transfer, the Funds' transfer agent charges
a fee (currently $9.00) for each wire redemption. Purchases and redemptions may
also be made through broker-dealers and others who may charge a commission or
other transaction fee for their services.
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<PAGE>
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Annual Fund Operating Expenses
as a Percentage of Average Net Assets:
<TABLE>
<CAPTION>
Net Expense Ratio
Management 12b-1 Other After
Fund/(1)/ Fees Expenses Expenses Reimbursement/(2)/
<S> <C> <C> <C> <C>
Matthews Pacific Tiger Fund 1.00% None 0.90% 1.90%
Matthews Asian Convertible Securities Fund 1.00% None 0.90% 1.90%
Matthews Korea Fund 1.00% None 1.50% 2.50%
</TABLE>
(1) Matthews Pacific Tiger Fund and Matthews Asian Convertible Securities Fund
commenced operations on September 12, 1994. Matthews Korea Fund commenced
operations on January 3, 1995.
(2) The expense ratios set forth in the table reflect changes in the amounts of
Matthews International Capital Management's voluntary advisory fee waivers
and expense reimbursements. Prior to such changes, Matthews Pacific Tiger
Fund's advisory fee ratio was 1.00%, its other expenses was 3.35%, and its
effective net expense ratio was 1.90%. Prior to such changes, Matthews
Asian Convertible Securities Fund's advisory fee ratio was 1.00%, its other
expenses ratio was 7.73%, and its effective net expense ratio was 1.85%.
Prior to such changes, Matthews Korea Fund's advisory fee ratio was 1.00%,
its other expenses ratio was 10.36%, and its effective net expense ratio
was 2.23%.
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Example
Based on the level of expenses listed above, the total expenses relating to an
investment of $1,000 would be as follows, assuming a 5% annual return,
reinvestment of all dividends and distributions and redemption at the end of
each time period.
<TABLE>
<CAPTION>
Name of Fund 1 Year 3 Years 5 Years 10 Years
------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
Matthews Pacific Tiger Fund $19.15 $59.25 $101.91 $220.76
Matthews Asian Convertible $19.15 $59.25 $101.91 $220.76
Securities Fund
Matthews Korea Fund $25.16 $77.38 $132.27 $282.04
- --------------------------------------------------------------------------------
</TABLE>
The purpose of this table is to assist the investor in understanding the various
costs and expenses that a shareholder will bear directly or indirectly. While
the example assumes a 5% annual return, each Funds' actual performance will vary
and may result in actual returns greater or less than 5%. The above example
should not be considered a representation of past or future expenses or
performance. Actual expenses of the Funds may be greater or less than those
shown.
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FINANCIAL HIGHLIGHTS
Matthews Pacific Tiger Fund
Matthews Asian Convertible Securities Fund
Matthews Korea Fund
The following financial highlights are a part of the Funds' financial statements
which have been audited by Ernst & Young LLP, independent auditors, for the most
recent fiscal year. The following tables should be read in conjunction with
these financial statements and related notes included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
Matthews Matthews
Pacific Asian Matthews
Tiger Convertible Korea
Fund Securities Fund Fund
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<S> <C> <C> <C>
Net Asset Value, beginning of period........................... $ 9.77 $ 9.88 $ 9.13
------ ------ ------
Income from investment operations
Net investment income (loss)................................. 0.01 0.25 (0.07)
Net realized and unrealized gain (loss) on investments
and foreign currency....................................... 1.03 0.75 (1.75)
------ ------ ------
Total from investment operations......................... 1.04 1.00 (1.82)
------ ------ ------
Less Distributions:
From net investment income................................... 0.00 (0.26) 0.00
Net realized gain on investments............................. 0.00 (0.09) (0.08)
Total distributions...................................... 0.00 (0.35) (0.08)
------ ------ ------
Net Asset Value, end of period................................. $10.81 $10.53 $ 7.23
====== ====== ======
Total Return................................................... 10.64% 10.24% (20.11)%
Ratios/Supplemental Data
Net assets, end of period (in 000's)......................... $17,148 $3,272 $2,721
Ratio of expenses to average net assets
before reimbursement and waiver of expenses by
Advisor and Administrator.................................. 4.35%+ 8.73%+ 11.36%+
Ratio of expenses to average net assets
after reimbursement and waiver of expenses by
Advisor and Administrator.................................. 1.90%+ 1.85%+ 2.23%+
Ratio of net investment loss to average net assets
before reimbursement and waiver of expenses by
Advisor and Administrator.................................. (2.13)%+ (4.13)%+ (10.44)%+
Ratio of net investment income (loss) to average net assets
after reimbursement and waiver of expenses by
Advisor and Administrator.................................. 0.32%+ 2.75%+ (1.31%)
Portfolio turnover........................................... 124.69% 88.16% 139.71%
Average commission rate paid............................... $0.0064 $0.0020 $0.1397
</TABLE>
+Annualized
*** Calculated using the average shares method.
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INVESTMENT OBJECTIVES
The investment objective of each Fund is fundamental and may not be changed
without a vote of the holders of the majority of the voting securities of each
respective Fund. Unless otherwise stated in this Prospectus, the Funds'
investment policies are not fundamental and may be changed without shareholder
approval. While an investment policy or restriction may be changed by the
Trustees of the Company without shareholder approval, the Funds intend to notify
shareholders before making any material change to an investment policy or
restriction. Fundamental objectives may not be changed without shareholder
approval. Additional investment policies and restrictions are described in the
Statement of Additional Information.
MATTHEWS PACIFIC TIGER FUND
Matthews Pacific Tiger Fund seeks maximum capital appreciation by investing,
under normal circumstances, at least 65% of its total assets in equity
securities of Pacific Tiger economies. The Pacific Tiger economies include the
following countries: Hong Kong, Singapore, South Korea, Taiwan, Indonesia,
Malaysia, the Philippines, Thailand and China. The Fund will invest, under
normal market conditions, in issuers located in at least three different
countries. The assets of the Fund will be invested with geographic flexibility;
however, there is no limitation on the percentage of assets which may be
invested in the securities of issuers domiciled in any one country.
MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND
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 the Asian markets. The countries
included in this market are: Hong Kong, Japan, Singapore, South Korea, Taiwan,
Indonesia, Malaysia, the Philippines, Thailand, China and India. The Fund may
invest without limit in securities that are not considered investment grade
("junk bonds") and that accordingly have greater risk of loss of principal and
interest. The Fund will primarily invest in Euroconvertible securities that are
denominated in U.S. dollars, Swiss Francs or other currencies. The remaining
35% of the Fund's assets may be invested in non-convertible corporate or fixed-
income securities, common stocks and selected money market instruments of
issuers located outside the Asian markets, including, without limitation, the
United States.
MATTHEWS KOREA FUND
Matthews Korea Fund's investment objective and policies reflect the opinion of
the Advisor that attractive investment opportunities may result from the
potential growth of the South Korean economy and the evolving process of the
liberalization and reform of the securities markets in South Korea. The
emergence of Korea's reputation as a producer of quality goods coupled with its
position as a leading exporter in the Asia Pacific region may contribute
significantly to the potential for accelerated growth in the Korean economy.
Continued liberalization of the securities markets along with an increase in the
number of Korean companies that are available for investment to foreign
investors would enable the Fund to participate in and benefit from such
potential economic growth.
In terms of Gross National Product, industrial standards and level of education,
South Korea is second in Asia only to Japan. It enjoys the benefits of a
diversified economy with well-developed sectors in electronics, automobiles,
textiles and shoe manufacture, steel and shipbuilding among others. The driving
force behind the economy's dynamic growth has been the planned development of an
export-oriented economy in a vigorously entrepreneurial society.
There can be no assurance that such liberalization or economic growth will
continue to occur or that the Fund will be able to participate in and benefit
from any future liberalization or economic growth.
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Matthews Korea Fund seeks long-term capital appreciation through investment
primarily in equity securities of South Korean companies. Under normal
circumstances, the Fund will invest at least 65% of its total assets in equity
securities of South Korean companies. These include securities of companies
which (I) are organized under the laws of South Korea, (ii) regardless of where
organized, derive at least 50% of their revenues or profits from goods produced
or sold, investments made, or services performed or have at least 50% of their
assets located in South Korea, (iii) have the primary trading market for their
securities in South Korea or (iv) are the government, or its agencies or
instrumentalities or other political subdivisions, of South Korea. Securities
will be primarily common stocks.
The remaining 35% of the Fund's total assets may be invested in equity and other
securities of issuers located outside of South Korea, including, without
limitation, the United States, and in non-convertible bonds and other debt
securities issued by foreign issuers and foreign government entities.
INVESTMENT POLICIES AND RISKS COMMON TO ALL FUNDS
The Advisor uses a multi-factor research approach when selecting investments for
the Funds. These factors include evaluation of each country's political
stability, prospects for economic growth (inflation, interest direction, trade
balance and currency strength), identification of long term trends that might
create investment opportunities, the status of the purchasing power of the
people and population and composition of the work force. In reviewing potential
companies in which to invest, the Advisor considers the company's quality of
management, plans for long-term growth, competitive position in the industry,
future expansion plans and growth prospects, valuations compared with industry
average, earnings track record and a debt/equity ratio less than the market
average. In addition, the Advisor will visit countries and companies in person
to derive firsthand information for further evaluation. After evaluation of all
factors, the Advisor attempts to identify those companies in such countries and
industries that are best positioned and managed to take advantage of the varying
economic and political factors.
Many of the debt and convertible securities in which the Funds will invest are
unrated by any rating agency and, therefore, there is no objective standard
against which the Advisor may evaluate such securities. The Advisor seeks to
minimize the risks of investing in lower-rated securities through investment
analysis and attention to current developments in interest rates and economic
conditions. In selecting debt and convertible securities for the Funds, the
Advisor will assess the following factors: 1) potential for capital
appreciation; 2) price of security relative to price of underlying stock, if a
convertible security; 3) yield of security relative to yield of other fixed-
income securities; 4) interest or dividend income; 5) call and/or put features;
6) creditworthiness; 7) price of security relative to price of other comparable
securities; 8) size of issue; 9) currency of issue; and 10) impact of security
on diversification of the portfolios.
The Funds may also invest in securities of foreign issuers in the form of
American Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs").
Generally, ADRs in registered form are dollar denominated securities designed
for use in the U.S. securities markets, which represent and may be converted
into an underlying foreign security. EDRs, in bearer form, are designed for use
in the European securities markets. See "INVESTMENT STRATEGIES AND RISKS."
The Funds may purchase securities on a "when-issued" basis and may purchase or
sell securities on a "forward commitment" basis in order to hedge against
anticipated changes in interest rates and prices. See "INVESTMENT STRATEGIES
AND RISKS".
The investment in securities of other investment companies by the Funds will be
subject to limitations under the Investment Company Act of 1940 (the "1940
Act"). The Funds may invest up to 10% of its assets in other investment
companies. See "INVESTMENT STRATEGIES AND RISKS."
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<PAGE>
The Advisor intends to be fully invested in the economies appropriate to each
Funds' investment objectives as is practicable, in light of economic and market
conditions and the Funds' cash needs. When, in the opinion of the Advisor, a
temporary defensive position is warranted, the Funds are permitted to invest
temporarily and without limitation in money market instruments of U.S. or
foreign issuers or maintain a cash position. Such instruments include but are
not limited to the following: obligations issued or guaranteed by the U.S. or
foreign governments, their agencies or instrumentalities; obligations of
international organizations designed or supported by multiple foreign
governmental entities to promote economic reconstruction or development; bank
obligations, including bankers' acceptances, certificates of deposit, time
deposits, and demand deposits. The Funds' investment objective may not be
achieved at such times when a temporary defensive position is taken. Foreign
investments which are not U.S. dollar denominated may require the Funds to
convert assets into foreign currencies or to convert assets and income from
foreign currencies to U.S. dollars. Normally, exchange transactions will be
conducted on a spot or cash basis at the prevailing rate in the foreign exchange
market.
The Funds may write covered call options and purchase put and call options on
securities to reduce overall risk. The Funds may also purchase put and call
options on foreign currencies to hedge against movements in currency exchange
rates. For the same purpose, the Funds may also purchase and sell foreign
currency futures contracts and write covered call options on such contracts.
Collectively, these securities may be referred to as "derivatives." Foreign
investments which are not U.S. dollar denominated may require the Funds to
convert assets into foreign currencies or to convert assets and income from
foreign currencies to U.S. dollars. Normally, exchange transactions will be
conducted on a spot or cash basis at the prevailing rate in the foreign exchange
market. See "INVESTMENT STRATEGIES AND RISKS".
INVESTMENT POLICIES AND RISKS
SPECIFIC TO MATTHEWS PACIFIC TIGER FUND
Equity securities in which the Fund may invest include common stocks, preferred
stocks, warrants, and securities convertible into common stocks, such as
convertible bonds and debentures.
The Fund may invest up to 35% of its total assets in equity and other securities
of issuers located outside of the Pacific Tiger economies, including, without
limitation, the United States, and in non-convertible bonds and other debt
securities issued by foreign issuers and foreign government entities.
The Fund may invest up to 10% of its total assets in securities rated below
investment grade (securities rated Baa or higher by Moody's Investors Service,
Inc. or BBB or higher by Standard & Poor's Corporation or, if unrated, are
comparable in quality). Debt securities rated below investment grade, commonly
referred to as junk bonds, have speculative characteristics that result in a
greater risk of loss of principal and interest. See "Risks Associated with
Lower Rated Securities" under the heading "RISK FACTORS."
The Fund may invest up to 25% of its total assets in the convertible securities
of companies of the Pacific Tiger economies. Convertible securities are fixed-
income securities such as corporate bonds, notes and preferred stocks that can
be exchanged for stock and other securities (such as warrants) that also offer
equity participation. Convertible securities are hybrid securities, combining
the investment characteristics of both bonds and common stocks. Like a bond, a
convertible security pays a pre-determined interest rate, but may be converted
into common stock at a specific price or conversion rate. The investor has the
right to initiate conversion into a specified quantity of the underlying stock
at a stated price, within a stipulated period of time. Convertible securities
are generally senior to common stock and junior to non-convertible debt. In
addition to the convertible securities denominated in the currency of the
issuer, the Fund may also invest in convertible securities which are denominated
in another currency (i.e., U.S. dollars).
The Advisor may invest where the Advisor believes the potential for capital
growth exists and in companies which have demonstrated the ability to anticipate
and adapt to changing markets. The Fund may invest in the securities of all
types of issuers, large or small, whose earnings are believed by the Advisor to
be in a relatively strong
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growth trend or whose assets are substantially undervalued. Smaller companies
often have limited product lines, markets or financial resources, and they may
be dependent upon one or a few key people for management. The securities of such
companies generally are subject to more abrupt or erratic market movements and
may be less liquid than securities of larger, more established companies or the
market averages in general.
Under normal circumstances, the Advisor expects that the portfolio of the Fund
will be comprised of forty to eighty individual stocks in various countries in
the Pacific Tiger economies. When purchasing portfolio securities for the Fund,
the Advisor's philosophy is a buy and hold strategy versus buying for short-term
trading.
INVESTMENT POLICIES AND RISKS SPECIFIC TO
MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND
Convertible securities are fixed-income securities such as corporate bonds,
notes and preferred stocks that can be exchanged for stock and other securities
(such as warrants) that also offer equity participation. Before conversion from
a debt security to an equity security, convertible securities have
characteristics similar to non-convertible debt securities in that they
ordinarily provide a stream of income with generally higher yields than those of
common stock of the same or similar issuers. Convertible securities are hybrid
securities, combining the investment characteristics of both bonds and common
stocks. Like a bond, a convertible security pays a pre-determined interest
rate, but may be converted into common stock at a specific price or conversion
rate. An investor has the right to initiate conversion into a specified
quantity of the underlying stock, at a stated price, within a stipulated period
of time, into a specified quantity of the underlying stock. Convertible
securities are generally senior to common stock and junior to non-convertible
debt.
Under normal circumstances, the Advisor expects that the portfolio of the Fund
will be comprised of twenty to sixty convertible bonds in various countries in
the Asian markets.
Many Asian convertible securities are unrated or are rated below investment
grade and the Fund may invest without limit in such securities. Investment
grade securities are securities rated Baa or higher by Moody's Investors
Service, Inc. ("Moody's") or BBB or higher by Standard & Poor's Corporation
("S&P") or if unrated are of comparable quality. It is expected that not more
than 50% of the Fund's portfolio will consist of securities rated CCC or lower
by S&P or Caa or lower by Moody's or, if unrated, are of comparable quality, and
are commonly referred to as "junk bonds." These securities are considered by
the rating agencies to be predominantly speculative and involve risk exposures
such as increased sensitivity to interest rate and economic changes and limited
liquidity. The Fund does not intend to invest in issuers which are in default.
See "RISK FACTORS."
Euroconvertible securities are denominated in a Eurocurrency, simultaneously
issued in more than one foreign country and issued by an international
syndicate. Frequently, with Euroconvertible notes and bonds, the currency of
the bond is different from the currency of the stock into which the bond is
convertible. This feature may provide some protection against disadvantageous
local currency movement. An issuer of debt securities purchased by the Fund may
be domiciled in a country other than the country in whose currency the
instrument is denominated. See "Risks Associated with Euroconvertible
Securities" under the heading "RISK FACTORS."
The average maturity of the Fund's portfolio will vary based upon the Advisor's
assessment of economic and market conditions, although it is not currently
expected that the average maturity of the Fund's portfolio will exceed ten
years.
Asian-Pacific Region Opportunity
The Advisor believes that in contrast to more developed economies, the newly
industrialized countries of the Asian markets are in an earlier, more dynamic
growth stage of their development. This growth has been characterized by, among
other factors, low labor costs, strong demand from export markets for consumer
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products, high productivity, long work weeks, pro-business governments and a
strong work ethic. Historically, South Korea, Hong Kong, Singapore and Taiwan
have been examples of these traits. Today, however, the economies of Malaysia,
Indonesia, Thailand and southern China are starting to exhibit many of these
same characteristics and appear to be accelerating.
Many of the stock markets of the Asia-Pacific region are either fully open for
foreign investors or are in the process of opening. The Advisor believes that
the opening of these markets offers particular opportunities for investment in
convertible securities.
INVESTMENT POLICIES AND RISKS
SPECIFIC TO MATTHEWS KOREA FUND
Equity securities in which the Fund may invest include South Korean common
stocks, preferred stocks (including convertible preferred stock), bonds, notes
and debentures convertible into common or preferred stocks, warrants and rights,
equity interests in trusts, partnerships, joint ventures or similar enterprises
and depositary receipts. At present, not all of these types of securities are
available for investment in South Korea.
The Fund may invest up to 35% of its total assets in non-convertible debt
securities provided that such securities are rated, at the time of investment,
BBB or higher by Standard & Poor's Corporation ("S&P") or Baa or higher by
Moody's Investors Service, Inc. ("Moody's") or rated of equivalent credit
quality by an internationally recognized statistical rating organization or, if
not rated, are of equivalent credit quality as determined by the Advisor.
Securities rated BBB by S&P or Baa by Moody's are considered to have speculative
characteristics. Non-convertible debt securities in which the Fund may invest
include U.S. dollar or Won-denominated debt securities issued by the South
Korean government or South Korean companies and obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities. Korean law does not
currently permit foreign investors such as the Fund to acquire debt securities
denominated in Won or equity securities of companies organized under the laws of
Korea that are not listed on the Korea Stock Exchange ("KSE"). At the present
time, however, foreign investors are permitted to invest in debt securities
issued by Korean companies outside of Korea and denominated in currencies other
than Won.
The Fund may invest up to 35% of its total assets in convertible securities.
Convertible securities are fixed-income securities such as corporate bonds,
notes and preferred stocks that can be exchanged for stock and other securities
(such as warrants) that also offer equity participation. Convertible securities
are hybrid securities, combining the investment characteristics of both bonds
and common stocks. Convertible securities are generally senior to common stock
and junior to non-convertible debt.
The Fund may invest up to 35% of its total assets in securities rated below
investment grade (securities rated below Baa by Moody's Investors Service, Inc.
or below BBB by Standard & Poor's Corporation or, if unrated, are comparable in
quality) commonly referred to as "junk bonds". Debt securities rated below
investment grade may have speculative characteristics that result in a greater
risk of loss of principal or interest. See "Risks Associated with Lower Rated
Securities".
The Fund may invest its assets in a broad spectrum of securities of Korean
industries which are believed to have attractive long-term growth potential.
The Fund has the flexibility to invest in both large and small companies, as
deemed appropriate by the Advisor. Smaller companies often have limited product
lines, markets or financial resources, and they may be dependent upon one or a
few key people for management. The securities of such companies generally are
subject to more abrupt or erratic market movements and may be less liquid than
securities of larger, more established companies or the market averages in
general. In selecting industries and companies for investment, the Advisor
considers overall growth prospects, competitive position in export markets,
technology, research and development, productivity, labor costs, raw material
costs and sources, profit margins, capital resources, government regulation,
quality of management and other factors. After evaluation of all factors, the
Advisor attempts to identify those companies and industries that are best
positioned and managed to take advantage of the varying economic and political
factors.
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The Fund may invest up to 10% of its total assets in equity or debt securities
for which there is no ready market. The Fund may therefore not be able to
readily sell such securities. Such securities are unlike securities that are
traded in the open market and which can be expected to be sold immediately. The
sale price of securities that are not readily marketable may be lower or higher
than the Fund's most recent estimate of their fair value. Generally, less public
information is available with respect to the issuers of these securities than
with respect to companies whose securities are traded on an exchange.
Securities not readily marketable are more likely to be issued by start-up,
small or family business and therefore subject to greater economic, business and
market risks than the listed securities of more well-established companies.
The Advisor intends to be as fully invested in the South Korean economy as is
practicable in light of economic and market conditions and the Fund's cash
needs. During periods in which, in the opinion of the Advisor, changes in
Korean market conditions or other economic conditions in Korean political
conditions warrant, the Fund may reduce its position in equity securities and,
subject to any applicable restrictions under Korean law (which currently limit
the amount of Government and corporate bonds that the Fund may acquire to 10% of
the Fund's net asset value), invest temporarily and without limitation in money
market instruments of U.S. or foreign issuers or maintain a cash position. Such
instruments include but are not limited to the following: obligations issued or
guaranteed by the U.S. or foreign governments, their agencies or
instrumentalities; obligations of international organizations designed or
supported by multiple foreign governmental entities to promote economic
reconstruction or development; bank obligations, including bankers' acceptances,
certificates of deposit, time deposits, and demand deposits. The Fund's
investment objective may not be achieved at such times when a temporary
defensive position is taken.
Certain investment practices in which the Fund is authorized to engage, such as
certain currency hedging techniques, the lending of portfolio securities,
forward commitments, standby commitment agreements and the purchase or sale of
put and call options are not currently permitted under Korean laws or
regulations. The Fund may engage in these investment practices to the extent
the practices become permissible under Korean law in the future or with respect
to investments outside of Korea.
The Fund is a non-diversified investment company and is able to invest more than
5% and up to 25% of its total assets at the time of purchase in the securities
of any one issuer. The Fund is also subject to the Korean Securities and
Exchange Commission rule limiting total foreign investment to 20% of each class
of a company's outstanding shares, while a single foreign investor may only
invest up to 3% of each class of outstanding shares. See "RISK FACTORS".
INVESTMENT STRATEGIES AND RISKS
COMMON TO ALL FUNDS
Below are explanations and the associated risks of certain unique securities and
investment techniques. Shareholders should understand that all investments
involve risk and there can be no guarantee against loss resulting from an
investment in the Funds, nor can there be any assurance that the Funds'
investment objectives will be attained.
ADRs and EDRs
For many foreign securities, there are United States dollar denominated American
Depositary Receipts ("ADRs"), which are bought and sold in the United States and
are issued by domestic banks. ADRs represent the right to receive securities of
foreign issuers deposited in the domestic bank or a correspondent bank. ADRs do
not eliminate all the risk inherent in investing in the securities of foreign
issuers. By investing in ADRs rather than directly in foreign issuer's stock
however, the Funds will avoid currency risks during the settlement period for
either purchases or sales. In general, there is a large, liquid market in the
United States for most ADRs. The Funds may also invest in European Depositary
Receipts ("EDRs") which are receipts evidencing an arrangement with a European
bank similar to that for ADRs and are designed for use in the European
securities markets.
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EDRs are not necessarily denominated in the currency of the underlying security.
The Funds have no current intention to invest in unsponsored ADRs and EDRs.
IDRs
IDRs (International Depositary Receipts, also known as GDRs or Global Depositary
Receipts) are similar to ADRs except that they are bearer securities for
investors or traders outside the U.S., and for companies wishing to raise equity
capital in securities markets outside the U.S. Most IDRs have been used to
represent shares although it is possible to use them for bonds, commercial paper
and certificates of deposit. IDRs can be convertible to ADRs in New York making
them particularly useful for arbitrage between the markets. The Funds have no
current intention to invest in unsponsored IDRs.
Borrowing
Each Fund has a fundamental policy that it may not borrow money, except that it
may (1) borrow money from banks for temporary or emergency purposes and not for
leveraging or investment and (2) enter into reverse repurchase agreements for
any purpose, so long as the aggregate amount of borrowings and reverse
repurchase agreements does not exceed one-third of the Funds' total assets less
liabilities (other than borrowings). In the event that such asset coverage
shall at any time fall below 300%, the Fund shall, within three days thereafter
(not including Sunday or holidays) or such longer period as the U.S. Securities
and Exchange Commission may prescribe by rules and regulations, reduce the
amount of its borrowings to such an extent that the asset coverage of such
borrowings shall be at least 300%. Investment securities will not be purchased
while a Fund has an outstanding borrowing that exceeds 5% of the Funds' net
assets.
Foreign Currency Transactions
The Funds may engage in foreign currency transactions in connection with their
investment in foreign securities but will not speculate in foreign currency
exchange. The Funds will conduct their foreign currency exchange transactions
either on a spot (i.e. cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through forward contracts to purchase or sell
foreign currencies. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specified currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
directly between currency traders and their customers.
When a Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the United States
dollar cost or proceeds, as the case may be. By entering into a forward
contract in United States dollars for the purchase or sale of the amount of
foreign currency involved in an underlying security transaction, a Fund is able
to protect itself against a possible loss between trade and settlement dates
resulting from an adverse change in the relationship between the United States
dollar and such foreign currency. This tends to limit potential gains however,
that might result from a positive change in such currency relationships. The
Funds may also hedge their foreign currency exchange rate risk by engaging in
currency financial futures and options transactions.
When the Advisor believes that the currency of a particular foreign country may
suffer a substantial decline against the United States dollar, it may enter into
a forward contract to sell an amount of foreign currency approximating the value
of some or all of the Funds' securities denominated in such foreign currency.
In this situation the Funds may, in the alternative, enter into a forward
contract to sell a different foreign currency for a fixed United States dollar
amount where the Advisor believes that the United States dollar value of the
currency to be sold pursuant to the forward contract will fall whenever there is
a decline in the United States dollar value of the currency in which portfolio
securities of the Funds are denominated ("cross-hedge"). The forecasting of
short-term currency market movement is extremely difficult and whether such a
short-term hedging strategy will be successful is highly uncertain.
The Funds may enter into forward contracts to sell foreign currency with respect
to portfolio positions denominated or quoted in that currency provided that no
more than 15% of the Funds' total assets would be
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required to purchase offsetting contracts. Foreign currency hedging
transactions by Matthews Korea Fund are not currently permitted under Korean
laws and regulations.
Forward Commitments, When-Issued Securities and Delayed Delivery Transactions
The Funds may purchase or sell securities on a when-issued or delayed-delivery
basis and make contracts to purchase or sell securities for a fixed price at a
future date beyond customary settlement time. Debt securities are often issued
on this basis. No income will accrue on securities purchased on a when-issued
or delayed delivery basis until the securities are delivered. Each Fund will
establish a segregated account in which it will maintain cash and U.S.
Government securities or other high-grade debt obligations at least equal in
value to commitments for when-issued securities, forward commitments and
delayed-delivery transactions. Securities purchased or sold on a when-issued,
delayed-delivery or forward commitment basis involve a risk of loss if the value
of the security to be purchased declines prior to the settlement date. Although
the Funds would generally purchase securities on a when-issued, delayed-delivery
or a forward commitment basis with the intention of acquiring the securities,
the Funds may dispose of such securities prior to settlement if the Advisor
deems it appropriate to do so.
Futures Contracts and Related Options
The Funds may invest in futures contracts and options on futures contracts,
including index contracts or foreign currencies for hedging purposes or to
maintain liquidity. A Fund may not purchase or sell a futures contract;
however, unless immediately after any such transaction the sum of the aggregate
amount of margin deposits on its existing futures positions and the amount of
premiums paid for related options is 10% or less of its total assets.
At maturity, a futures contract obligates the Funds to take or make delivery of
certain securities or the cash value of a securities index. A Fund may sell a
futures contract in order to offset a decrease in the market value of its
portfolio securities that might otherwise result from a market decline. A Fund
may do so either to hedge the value of its portfolio of securities as a whole,
or to protect against declines, occurring prior to sales of securities, in the
value of the securities to be sold. Conversely, the Funds may purchase a
futures contract in anticipation of purchases of securities. In addition, a
Fund may utilize futures contracts in anticipation of changes in the composition
of its portfolio holdings.
The Funds may purchase and sell call and put options on futures contracts traded
on an exchange or board of trade. When a Fund purchases an option on a futures
contract, it has the right to assume a position as a purchaser or seller of a
futures contract at a specified exercise price at any time during the option
period. When a Fund sells an option on a futures contract, it becomes obligated
to purchase or sell a futures contract if the option is exercised. In
anticipation of a market advance, the Funds may purchase call options on futures
contracts as a substitute for the purchase of futures contracts to hedge against
a possible increase in the price of securities which the Funds intend to
purchase. Similarly, if the market is expected to decline, the Funds might
purchase put options or sell call options on futures contracts rather than sell
futures contracts. In connection with the Funds' position in a futures contract
or option thereon, the Funds will create a segregated account of liquid assets,
such as cash, U.S. Government securities or other liquid high grade debt
obligations, or will otherwise cover its position in accordance with applicable
requirements of the SEC.
Risk Factors of Options, Futures and Forward Contracts
The primary risks associated with the use of futures contracts and options
(commonly referred to as "derivatives") are: (i) imperfect correlation between
the change in market value of the securities held by the Funds and the price of
futures contracts and options; (ii) possible lack of a liquid secondary market
for a futures contract and the resulting inability to close a futures contract
when desired; (iii) losses, which are potentially unlimited, due to
unanticipated market movements; and (iv) the Advisor's ability to predict
correctly the direction of security prices, interest rates and other economic
factors. For a further discussion see "INVESTMENT POLICIES AND TECHNIQUES" in
the Statement of Additional Information.
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Illiquid Securities
Matthews Pacific Tiger Fund and Matthews Asian Convertible Securities Fund will
not knowingly invest more than 15% and Matthews Korea Fund will not knowingly
invest more than 10% of the value of their net assets in securities that are
illiquid because of restrictions on transferability or other reasons. With
respect to liquidity determinations generally, the Company's Board of Trustees
has the ultimate responsibility for determining whether specific securities,
including restricted securities pursuant to Rule 144A, are liquid or illiquid.
Accordingly, the Board of Trustees is responsible for developing and
establishing the guidelines and procedures for determining the liquidity of Rule
144A securities. Repurchase agreements with deemed maturities in excess of
seven days and securities that are not registered under the Securities Act of
1933 but that may be purchased by institutional buyers under SEC Rule 144A are
subject to this 15% limit. Rule 144A allows for a broader institutional trading
market for securities otherwise subject to restriction on resale to the general
public by establishing a "safe harbor" from the registration requirements of the
Securities Act of 1933 for resales of certain securities to qualified
institutional buyers.
Options
The Funds may purchase and write put and call options on foreign or U.S.
securities and indices and enter into related closing transactions. A call
option enables the purchaser, in return for the premium paid, to purchase
securities from the writer (the seller of the option) of the option at an agreed
price up to an agreed date. The advantage is that the purchaser may hedge
against an increase in the price of securities it ultimately wishes to buy or
may take advantage of a rise in a particular index. A Fund will only purchase
call options to the extent premiums paid on all outstanding call options do not
exceed 10% of that Fund's total assets. The Funds will only write call options
on a covered basis. The Funds will receive premium income from writing call
options, which may offset the cost of purchasing put options and may also
contribute to the Funds' total return. The Funds may lose potential market
appreciation, however, if the Advisor's judgment is incorrect with respect to
interest rates, security prices or the movement of indices.
A put option enables the purchaser of the option, in return for the premium
paid, to sell the security underlying the option to the writer (the seller of
the option) at the exercise price during the option period and the writer of the
option has the obligation to purchase the security from the purchaser of the
option. A Fund will only purchase put options to the extent that the premiums
on all outstanding put options do not exceed 10% of the Fund's total assets.
The advantage is that the purchaser can be protected should the market value of
the security decline or should a particular index decline. The Funds will, at
all times during which they hold a put option, own the security underlying such
option. The Funds will receive premium income from writing put options,
although they may be required, when the put is exercised, to purchase securities
at higher prices than the current market price.
Portfolio Turnover Rate
The Advisor buys and sells securities for the Funds whenever it believes it is
appropriate to do so. The rate of portfolio turnover will not be a limiting
factor in making portfolio decisions. A high rate of portfolio turnover may
result in the realization of substantial capital gains and involves
correspondingly greater transaction costs. It is currently estimated that under
normal market conditions the annual portfolio turnover rate for the Funds will
not exceed 100%. Portfolio turnover rates may vary greatly from year to year as
well as within a particular year. High portfolio turnover rates (i.e. over 100%)
will generally result in higher transaction costs to the Funds and also may
result in a higher level of taxable gain for a shareholder. Portfolio turnover
for the Funds' most recent fiscal period are set forth in "FINANCIAL
HIGHLIGHTS."
Repurchase Agreements
The Funds may enter into repurchase agreements to earn income. The Funds may
only enter into repurchase agreements with financial institutions that are
deemed to be creditworthy by the Advisor, pursuant to guidelines established by
the Funds' Board of Trustees. During the term of any repurchase agreement, the
Advisor will continue to monitor the creditworthiness of the seller. Repurchase
agreements are considered under the 1940 Act to be collateralized loans by the
Funds to the seller secured by the securities transferred to the Funds.
Repurchase agreements under the 1940 Act will be fully collateralized by
securities in which the Funds may invest directly.
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Such collateral will be marked-to-market daily. If the seller of the underlying
security under the repurchase agreement should default on its obligation to
repurchase the underlying security, the Funds may experience delay or difficulty
in exercising its right to realize upon the security and, in addition, may incur
a loss if the value of the security should decline, as well as disposition costs
in liquidating the security. A Fund will not invest more than 15% of its net
assets in repurchase agreements maturing in more than seven days. The Funds
must treat each repurchase agreement as a security for tax diversification
purposes and not as cash, a cash equivalent or receivable. Matthews Korea Fund
is not currently permitted to engage in repurchase transactions in Korea under
Korean laws and regulations.
Securities Lending
To increase return on portfolio securities, a Fund may lend its portfolio
securities on a short-term basis to banks, broker/dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least the
market value of the securities loaned. A Fund will not lend portfolio
securities in excess of 33% of the value of its total assets. There may be
risks of delay in receiving additional collateral or in recovering the
securities loaned or even a loss of rights in the collateral should the borrower
of the securities fail financially. Loans are made only to borrowers deemed by
the Advisor to be of good standing however, and when, in the Advisor's judgment,
the income to be earned from the loan justifies the attendant risks. Lending
portfolio securities by Matthews Korea Fund is not currently permitted under
Korean laws and regulations.
Securities of Other Investment Companies
Matthews Pacific Tiger Fund and Matthews Asian Convertible Securities Fund may
invest in securities issued by other investment companies which invest in
securities in which the Funds are permitted to invest. Matthews Korea Fund may
invest in securities issued by other investment companies which invest a
substantial portion of their assets in Korean securities to the extent permitted
by the 1940 Act. Under the 1940 Act, a Fund may invest up to 10% of its assets
in shares of investment companies and up to 5% of its assets in any one
investment company as long as the investment does not represent more than 3% of
the voting stock of the acquired investment company. As a shareholder of
another investment company, a Fund would bear along with other shareholders, its
pro rata portion of the investment company's expenses, including advisory fees.
In the case of closed-end investment companies, these expenses would be in
addition to the advisory and other expenses that the Funds bear directly in
connection with their own operations.
INVESTMENT STRATEGIES AND RISKS SPECIFIC TO MATTHEWS ASIAN
CONVERTIBLE SECURITIES FUND
Interest Rate Futures Contracts
Matthews Asian Convertible Securities Fund may buy and sell interest rate
futures contracts relating to debt securities and write and buy put and call
options relating to interest rate futures contracts. This Fund may enter into
contracts for the future delivery of fixed-income securities commonly referred
to as "interest rate futures contracts." These futures contracts will be used
only as a hedge against anticipated interest rate changes. The Fund will not
enter into an interest rate futures contract if immediately thereafter more than
5% of the value of the Fund's total assets will be committed to margin. The
Fund also will not enter into an interest rate futures contract if immediately
thereafter the sum of the aggregate futures market prices of financial
instruments required to be delivered under open futures contract purchases would
exceed 20% of the value of the Fund's total assets.
Reverse Repurchase Agreements
In reverse repurchase agreements, the Fund sells a portfolio instrument to
another party, such as a bank or broker-dealer, in return for cash and agrees to
repurchase the instrument at a particular price and time. While a reverse
repurchase agreement is outstanding, the Fund will maintain appropriate liquid
assets in a segregated custodial account, cash, U.S. Government securities or
other liquid, high-grade debt securities in an amount at least equal to the
market value of the securities, plus accrued interest, subject to the agreement.
The Fund will enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by the Advisor. Such transactions
may increase fluctuations in the market value of the Fund's assets and may be
viewed as a form of leverage.
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INVESTMENT STRATEGIES AND RISKS
SPECIFIC TO MATTHEWS KOREA FUND
Short-Selling
Matthews Korea Fund may make short sales, which are transactions in which the
Fund sells a security it does not own in anticipation of a decline in the market
value of that security. The Fund is authorized to make short sales of
securities or maintain a short position only for the purpose of deferring
realization of gain or loss for U.S. federal income tax purposes, provided that
at all times when a short sale position is open the Fund owns an equal amount of
such securities of the same issue as, and equal in amount to, the securities
sold short. To complete such a transaction, the Fund must borrow the security
to make delivery to the buyer. The Fund then is obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. The price at such time may be more or less than the price at which
the security was sold by the Fund. Until the security is replaced, the Fund is
required to pay the lender any dividends or interest which accrue during the
period of the loan. The proceeds of the short sale will be retained by the
broker, to the extent necessary to meet margin requirements, until the short
position is closed out. No securities will be sold short if, after effect is
given to any such short sale, the total market value of all securities sold
short would exceed 10% of the value of the Fund's net assets.
RISK FACTORS
COMMON TO ALL FUNDS
Risks Associated with Lower Rated Securities
Securities rated below investment grade are subject to certain risks that may
not be present with higher rated securities. The prices of fixed income
securities generally increase as interest rates fall and decrease as interest
rates rise. The prices of lower rated securities have been found to be less
sensitive to interest rate changes however, than higher-rated investments and
have been more sensitive to broad economic changes, changes in the equity
markets and individual corporate developments. Thus, periods of economic
uncertainty and change can be expected to result in increased volatility in the
prices and yields of lower rated securities and thus in the Funds' net asset
value.
Many lower-rated securities are not as liquid as higher-grade securities of the
same maturity and amount outstanding. A Fund's responsibility to value
accurately and its ability to sell lower-rated securities at the value placed on
them by the Fund will be made more difficult to the extent that such securities
are thinly traded or illiquid. During such periods, there may be less reliable
objective information available and the judgment of the Company's Board of
Trustees plays a greater role. Further, adverse publicity about either the
economy or a particular issuer may adversely affect investor's perception of the
value, and thus liquidity, of a lower rated security, whether or not such
perceptions are based on a fundamental analysis.
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. There may be less publicly available
information about a foreign company than about a domestic company. Foreign
companies generally are not subject to uniform accounting, auditing, and
financial reporting standards, practices and requirements comparable to those
applicable to domestic companies. There is generally less government regulation
of stock exchanges, brokers, and listed companies abroad than in the United
States,
Page 21
<PAGE>
Matthews International Funds
It only takes a few moments to fill out this step by step application. If you
have any questions, call us at (800) 789-ASIA, from 8:30 A.M. to 5:30 P.M.
Pacific Coast Time or at (800) 892-0382 from 9:00 A.M. to 5:00 P.M. Eastern
Time. Please print your information and send your signed application to Matthews
International Funds, C/O FPS Services, Inc. P.O. Box 61503, 3200 Horizon Drive,
King of Prussia, PA 19406-0903.
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
1 CHOOSE YOUR INVESTMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
There is an initial investment minimum of $1,000.00, $250.00 for a Retirement Plan account.
[ ] Matthews Pacific Tiger $ Make check payable to the appropriate Fund. If you have an
------------------------- account in another Matthews Fund registered under the same name
[ ] Matthews Asian and tax indentification number and would like to use the same
Convertible Securities $ account number below, please indicate the following:
-------------------------
----------------------------- ---------------------------
[ ] Mathews Korea $ First Name Account #
-------------------------
Total Investment $
-------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
2 INVESTMENT METHOD
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] BY CHECK: I have enlosed a check for $ [ ] BY WIRE: Federal Funds were wired on
------------
/ / for Acct #
-------------------- -----------------------------
MO DAY YR.
- -----------------------------------------------------------------------------------------------------------------------------------
3. ACCOUNT REGISTRATION
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] INDIVIDUAL OR JOINT ACCOUNT [ ] TRUST
as trustee(s) of
-------------------------------------------------- --------------------------------------
OWNER'S NAME TRUSTEE(S) NAME
for the benefit of
-------------------------------------------------- ------------------------------------
OWNER'S SOCIAL SECURITY NO. NAME OF TRUST AGREEMENT
-------------------------------------------------- ---------------------------------------------------------
JOINT OWNER'S NAME BENEFICIARY'S NAME
/ /
-------------------------------------------------- ----------------------- ----------------------------
JOINT OWNER'S SOCIAL SECURITY NO. TAX PAYER ID NUMBER DATE OF TRUST AGREEMENT
[ ] GIFT OR TRANSFER TO A MINOR [ ] CORPORATION, PARTNERSHIP OR OTHER ENTITY
as custodian for
-------------------------------- ---------------------------------------------------------
CUSTODIAN NAME NAME OF CORPORATION OR OTHER ENTITY
under the
-------------------------------------- ---------------------------------------------------------
MINOR'S NAME TITLE OF ENTITY
Uniform Gifts/Transfers to Minors Act ---------------------------------------------------------
----------- TAXPAYER ID NUMBER
STATE
- - / /
--------------------------- ------------------
MINORS SOCIAL SECURITY NO. DATE OF BIRTH
- ----------------------------------------------------- -------------------------------------------------------------
4 ADDRESS 5 DIVIDEND OPTIONS
- ----------------------------------------------------- -------------------------------------------------------------
------------------------------------------------- [ ] Receive all dividends and capital gains.
STRRET OR P.O. BOX
------------------------------------------------- [ ] Pay all dividends and capital gains to me by check.
CITY, STATE, ZIP
( ) ( )
----------------------- ------------------------ [ ] Pay all dividends by check and reinvest capital gains.
DAY PHONE EVENING PHONE
CITIZEN OF: All distributions will be reinvested unless otherwise indicated.
[ ] U.S. [ ] OTHER
-------------------
PLEASE SPECIFY
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
6 TELEPHONE OPTIONS
- --------------------------------------------------------------------------------
You automatically have the ability to exchange, redeem and purchase shares by
telephone unless you check the boxes below. Proceeds of telephone redemption
requests are paid by check and mailed to the address of record or wired to your
bank account. Exchanges must be between identically registered accounts. See the
prospectus for details.
TELEPHONE EXCHANGE [_] Yes [_] No Services will be liable for property
acting upon telephone instructions
believed to be genuine. Please attach a
voided check on the Transfer account
and complete below.
TELEPHONE PURCHASE [_] Yes [_] No
---------------------------------------
Name of Bank
---------------------------------------
City State
TELEPHONE REDEMPTION [_] Yes [_] No
---------------------------------------
Bank Exchange Number
I (we) authorize FPS Services to honor
telephone instructions for my (our) ---------------------------------------
account. Neither the Fund nor FPS Account Number [_] Checking [_] Savings
- --------------------------------------------------------------------------------
7 SIGNATURE CERTIFICATION
- --------------------------------------------------------------------------------
The following is required by Federal tax law to avoid 20% backup withholding;
"By signing below, I certify under penalties of perjury that the social security
or taxpayer identification number entered above is correct (or I am waiting for
a number to be issued to me), and that I have not been notified by the IRS that
I am subject to backup withholding unless I have checked the box." If you have
been notified by the IRS that you are subject to backup withholding, check box
[ ]. "The Internal Revenue Service does not require your consent to any
provision of this document other than the certifications required to avoid
backup withholding."
Receipt of current prospectus is hereby acknowledged.
--------------------------------------------------------------
Signature [ ] Owner [ ] Custodian [ ] Trustee Date
--------------------------------------------------------------
Signature of Joint Owner (if applicable) Date
- --------------------------------------------------------------------------------
8 DEALER INFORMATION
- --------------------------------------------------------------------------------
The undersigned ("Dealer") agrees to all applicable provisions in this
application and guarantees the genuineness of the signature on the application.
If the shareholder does not sign this application, the Dealer warrants that this
Application is completed in accordance with the shareholder's instructions and
agrees to indemnify the Fund, the Distributor and FPS Services, Inc. for any
loss or liability from acting or relying upon such instructions.
- ------------------------ ------------------------ ------------------------
DEALER NO. BRANCH NO. REP. NO.
- ------------------------------------ ------------------------------------
FIRM NAME REP'S NAME
- --------------------------------------------------------------------------------
FIRM ADDRESS
- ------------------------------------ ------------------------------------
AUTHORIZED SIGNATURE OF DEALER REP'S SIGNATURE
<PAGE>
Matthews International Funds Automatic Investment Plan
Please complete this application and mail to: Matthews International Funds, C/O
FPS Services, Inc., P.O. Box 61503, 3200 Horizon Drive, King of Prussia, PA
19406-0903.
Shareholder Services:
This letter serves as your authorization to set up an Automatic Investment Plan
for my Matthews International Funds account.
Please start an automatic investment plan. I would like you to invest $_______
($100 Min.) each month. The money should be debited from my bank account on the
[ ]10th [ ]15th [ ]20th of each month and should be invested in the following
account.
[ ] I am in the process of [ ] Matthews Asian Convertible
establishing a new Account. Securities Fund.
[ ] Matthews Pacific Tiger Fund [ ] Matthews Korea Fund
Account Number #
-----------------------
- --------------------------------- ---------------------------------------
Bank Account # Registration of account to be debited
- --------------------------------- ---------------------------------------
Name of Bank Street Address
- ----------------------- ----------------------- -----------------------
City State Zip Code
Bank's ABA Number (9 digits)
----------------------------------------------------
Signature of Bank
account owner(s)
--------------------------------------------------------------
--------------------------------------------------------------
PLEASE ATTACH A VOIDED CHECK OR DEPOSIT SLIP
I (we) understand that my (our) ACH debit will be dated on the day of
each month indicated above. If that day falls on a day in which the NYSE is not
open for business, the debit will occur on the next available business day. I
(we) agree that if such debit is not honored, FPS Services reserves the right to
discontinue this service and any share purchase made upon such deposit will be
cancelled. I (we) further agree that if the net asset value of shares purchased
is less when said purchase is cancelled than when the purchase was made, FPS
Services, Inc. shall be authorized to liquidate other assets or fractions
thereof held in my (our) account to make up the deficiency. This Automatic
Investment Plan may be discontinued by FPS Services, Inc. upon 30 days written
notice or at any time by the investor by written notice to FPS Services, Inc.
which is received no later than 5 business days prior to the above designated
investment date.
<PAGE>
and the absence of negotiated brokerage commissions in certain countries may
result in higher brokerage fees. With respect to certain foreign countries,
there is a possibility of expropriation, nationalization, confiscatory taxation,
or diplomatic developments that could affect investments in those countries.
In addition, brokerage commissions, custodian services, withholding taxes, and
other costs relating to investment in foreign markets generally are more
expensive than in the United States.
Risks Associated with Emerging Markets
Investing in securities of issuers in Asia and the Pacific Basin involves
special risks. First, the Funds' investment focus on that region makes the
Funds particularly subject to political, social, or economic conditions
experienced in that region. Second, many of the countries in Asia and the
Pacific Basin constitute so-called "developing" or "emerging" economies and
markets. The risks of investing in foreign markets generally are greater for
investments in developing markets. Additional risks of investment in such
markets include (I) less social, political, and economic stability; (ii) the
smaller size of the securities markets in such countries and the lower volume of
trading, which may result in a lack of liquidity and in greater price
volatility; (iii) certain national policies which may restrict the Funds'
investment opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests, or expropriation or
confiscation of assets or property, which could result in the Funds' loss of its
entire investment in that market; and (iv) less developed legal structures
governing private or foreign investment or allowing for judicial redress for
injury to private property.
For further information, see "SPECIAL CONSIDERATIONS AFFECTING THE PACIFIC
BASIN" in the Statement of Additional Information.
Risks Associated with Foreign Currency
The U.S. dollar market value of the Funds' investments and of dividends and
interest earned by the Funds may be significantly affected by changes in
currency exchange rates. The value of Funds assets denominated in foreign
currencies will increase or decrease in response to fluctuations in the value of
those foreign currencies relative to the U.S. dollar. Although the Funds may
attempt to manage currency exchange rate risks, there is no assurance that the
Funds will do so at an appropriate time or that they will be able to predict
exchange rates accurately. For example, if the Funds increase their exposure to
a currency and that currency's price subsequently falls, such currency
management may result in increased losses to the Funds. Similarly, if the Funds
decrease their exposure to a currency and the currency's price rises, the Funds
will lose the opportunity to participate in the currency's appreciation. Some
currency prices may be volatile, and there is the possibility of governmental
controls on currency exchange or governmental intervention in currency markets,
which could adversely affect the Funds. Foreign investments which are not U.S.
dollar denominated may require the Funds to convert assets into foreign
currencies or to convert assets and income from foreign currencies to U.S.
dollars. Normally, exchange transactions will be conducted on a spot, cash or
forward basis at the prevailing rate in the foreign exchange market.
RISK FACTORS SPECIFIC TO
MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND
The Asian convertible bond market has developed largely as a result of the
complementary interests of issuers seeking funding in international capital
markets, and international investors seeking to commit capital in the Pacific
Rim. The proceeds of these securities have typically been used to finance
ongoing business activity (such as expansion of operations) or to retire more
costly debt. Proceeds typically have not been used for corporate restructuring
(such as leveraged buyouts). Despite the fact that many of the issuers are well
known in domestic and, sometimes, international capital markets, most Asian
convertible securities (excluding Japan) are unrated and many would likely be
considered below "investment grade" if they were rated. This lack of an
independent credit opinion constitutes an additional risk.
Page 22
<PAGE>
Risks Associated with Euroconvertible Securities
Most of the convertible securities in which the Fund will invest are unrated by
any rating agency and, therefore, there is no objective standard against which
the Advisor may evaluate such securities. Investing in a convertible security
denominated in a currency different from that of the security into which it is
convertible exposes the Fund to currency risk.
The theoretical value of convertible securities varies with a number of factors
including the value and volatility of the underlying stock, the level and
volatility of the interest rates, the passage of time, dividend policy, and
other variables. Euroconvertible securities, specifically, are also influenced
by the level and volatility of the foreign exchange rate between the security's
currency and the underlying stock's currency. While the volatility of
convertible fixed income securities will typically be less than that of the
underlying securities, the volatility of warrants will typically be greater than
that of the underlying securities.
Risks Associated with Fixed-Income Securities
All fixed-income securities are subject to two types of risks: the credit risk
and the interest rate risk. The credit risk relates to the ability of the
issuer to meet interest or principal payments or both as they come due. The
interest rate risk refers to the fluctuations in the net asset value of any
portfolio of fixed-income securities resulting from the inverse relationship
between price and yield of fixed-income securities; that is, when the general
level of interest rates rises, the prices of outstanding fixed-income securities
decline, and when interest rates fall, prices rise.
In addition, if the currency in which a security is denominated appreciates
against the U.S. dollar, the dollar value of the security will increase.
Conversely, a rise in interest rates or a decline in the exchange rate of the
currency would adversely affect the value of the security expressed in dollars.
Fixed-income securities denominated in currencies other than the U.S. dollar or
in multinational currency units are evaluated on the strength of the particular
currency against the U.S. dollar as well as on the current and expected levels
of interest rates in the country or countries.
RISK FACTORS SPECIFIC TO
MATTHEWS KOREA FUND
Because the Fund intends to invest primarily in equity securities of South
Korean companies, an investor in the Fund should be aware of certain risks
relating to South Korea, the Korean securities markets and international
investments generally which are not typically associated with U.S. domestic
investments. In addition, the Fund may be more volatile than a geographically
diverse fund.
Security Valuation Considerations
The Korean government currently imposes significant restrictions and controls
for foreign investors. As a result, the Fund may be limited in its investments
or precluded from investing in certain Korean companies, which may adversely
affect the performance of the Fund. Under the current regulations, foreign
investors are allowed to invest in almost all shares listed on the Korean Stock
Exchange (the "KSE"), subject to a 3% limit by a particular foreign investor and
a 12% limit by all foreign investors as a group. The 3% and 12% limitations are
reduced to 1% and 8%, respectively, for certain government-designated public
corporations with shares listed on the KSE. As a result of these limitations,
many of the securities trade among non-Korean residents at a premium over the
market price. Foreign investors may effect transactions with other foreign
investors off the KSE in the shares of companies that have reached the maximum
aggregate foreign ownership limit through a securities company in Korea. These
transactions typically occur at a premium over prices on the KSE. There can be
no assurance that the Fund, if it purchases such shares at a premium, will be
able to realize such premium on the sale of such shares or that such premium
will not be adversely affected by changes in regulations or otherwise. Such
securities will be valued at fair value as determined in good faith by the Board
of Trustees.
Page 23
<PAGE>
Risks Associated with Investing in Korean Securities
Investments by the Fund in the securities of Korean issuers may involve
investment risks different from those of U.S. issuers, including possible
political, economic or social instability in Korea, and by changes in Korean law
or regulations. In addition, there is the possibility of the imposition of
currency exchange controls, foreign withholding tax on the interest income
payable on such instruments, foreign controls, seizure or nationalization of
foreign deposits or assets, or the adoption of other foreign government
restrictions that might adversely affect the Korean securities held by the Fund.
Political instability and/or military conflict involving North Korea may
adversely affect the value of the Fund's assets. Foreign securities may also be
subject to greater fluctuations in price than securities of domestic
corporations or the U.S. Government. There may be less publicly available
information about a Korean company than about a domestic company. Brokers in
Korea may not be as well capitalized as those in the U.S., so that they are more
susceptible to financial failure in times of market, political, or economic
stress. Additionally, Korean accounting, auditing and financial reporting
standards and requirements differ, in some cases, significantly, from those
applicable to U.S. issuers. In particular the assets and profits appearing on
the financial statements of a Korean issuer may not reflect its financial
position or results of operations in accordance with U.S. generally accepted
accounting principles. There is a possibility of expropriation,
nationalization, confiscatory taxation, or diplomatic developments that could
affect investments in Korea.
In addition, brokerage commissions, custodian services, withholding taxes, and
other costs relating to investment in foreign markets generally are more
expensive than in the United States. Therefore, the operating expense ratio of
the Fund can be expected to be higher than that of a fund investing primarily in
the securities of U.S. issuers.
Risks Associated with the Korean Securities Markets
The Korean securities markets are smaller than the securities markets of the
U.S. or Japan. Specifically, the following considerations should be considered
by investors of the Korean securities markets: (I) certain restrictions on
foreign investment in the Korean securities markets may preclude investments in
certain securities by the Fund and limit investment opportunities for the Fund;
(ii) fluctuations in the rate of exchange between the dollar and the Won with
the resultant fluctuations in the net asset value of the Fund; (iii) substantial
government involvement in, and influence on, the economy and the private sector;
(iv) political, economic and social instability, including the potential for
increasing militarization in North Korea; (v) the substantially smaller size and
lower trading volume of the securities markets for Korean equity securities
compared to the U.S. or Japanese securities markets, resulting in a potential
lack of liquidity and increased price volatility; (vi) the risk that the sale of
portfolio securities by the Korean Securities Stabilization Fund (the
"Stabilization Fund"), a fund established in order to stabilize the Korean
securities markets, or other large Korean institutional investors, may adversely
impact the market value of securities in the Fund's portfolio: (vii) the risk
that less information with respect to Korean companies may be available due to
the fact that Korean accounting, auditing and financial reporting standards are
not equivalent to those applicable to U.S. companies; and (viii) heavy
concentration of market capitalization and trading volume in a small number of
issuers, which result in potentially fewer investment opportunities for the
Fund.
Risks Associated with North Korea
Following World War II, the Korean peninsula was partitioned. The demilitarized
zone at the boundary between Korea and North Korea was established after the
Korean War of 1950-1953 and is supervised by United Nations forces. The United
States maintains a military force in Korea to help deter the ongoing military
threat from North Korean forces. The situation remains a source of tension
although negotiations to ease tensions and resolve the political division of the
Korean peninsula have been carried on from time to time. There also have been
efforts from time to time to increase economic, cultural and humanitarian
contacts between North Korea and Korea. There can be no assurance that such
negotiations or efforts will continue to occur or will result in an easing of
tension between North Korea and Korea.
Political, economic and social uncertainty in North Korea, and the risk of
military action may adversely affect the prices of the Fund's portfolio
securities. Military action or the risk of military action or the economic
collapse of North Korea could have a material adverse effect on Korea, and
consequently, on the ability of the Fund to
Page 24
<PAGE>
achieve its investment objective. Lack of available information regarding North
Korea may be the greatest risk factor.
Risks Associated with the Influence of the Korean Government
The Korean government has historically exercised and continues to exercise
substantial influence over many aspects of the private sector. The Korean
government from time to time has informally influenced the payment of dividends
and the prices of certain products, encouraged companies to invest or to
concentrate in particular industries, induced mergers between companies in
industries suffering from excess capacity and induced private companies to
publicly offer their securities. The Korean government has sought to minimize
excessive price volatility on the KSE through various steps, including the
imposition of limitations on daily price movements of securities.
Risks Associated with a Non-Diversified Investment Company
The Fund is a "non-diversified" investment company, which means that it may
invest a larger portion of its assets in the securities of a single issuer than
a diversified fund. An investment in the Fund therefore will entail greater
risk than an investment in a diversified investment company because a higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio, and economic, political or
regulatory developments may have a greater impact on the value of the Fund's
portfolio than would be the case if the portfolio were diversified among more
issuers. The Fund intends to comply with the diversification and other
requirements however, applicable to regulated investment companies under the
Internal Revenue Code of 1986, as amended. See "Dividends and Taxes."
MANAGEMENT OF THE FUNDS
The Board of Trustees
The Company has a Board of Trustees that establishes the Funds' policies and
supervises and reviews the management of the Funds. The day-to-day operations
of the Funds are administered by the officers of the Company and by the Advisor
pursuant to the terms of the Investment Advisory Agreement with the Funds. The
Funds' Trustees review the various services provided by the Advisor to ensure
that the Funds' general investment policies and programs are being properly
carried out and that administrative services are being provided to the Funds in
a satisfactory manner. Information pertaining to the Trustees and executive
officers of the Trust is set forth below.
G. Paul Matthews*, Chairman of the Board of Trustees and President; 655
Montgomery Street, Suite 1438, San Francisco, CA 94111; President, founder and
Chief Investment Officer of Matthews International Capital Management since
1991; prior thereto President, G.T. Capital Holdings, San Francisco parent of
G.T.'s U.S. operations, with responsibility for all G.T.'s U.S. activities from
1988 through 1989; prior thereto, Managing Director, G.T. Management (Asia),
based in Hong Kong, and member of G.T. Group's London board of directors from
1986 through 1989. Retained overall responsibility for all Asian investments of
the group (excluding Japan); worked with G.T. Group in Hong Kong from 1982
through 1988.
John H. Dracott*, Trustee and Vice-President and Secretary; 655 Montgomery
Street, Suite 1438, San Francisco, CA 94111; International mutual fund
consultant since 1991; President, Tyndall Distributors from 1988 through 1990;
prior thereto Senior Vice President, Integrated Capital Services from 1983
through 1988.
Richard K. Lyons, Trustee; Haas School of Business, University of California,
Berkeley, CA; Assistant Professor (Step V), Haas School of Business, University
of California, Berkeley since Fall 1993; Associate Professor, Graduate School of
Business & School of International and Public Affairs, Columbia University, Fall
Page 25
<PAGE>
1991 to Fall 1993; Professor, Graduate School of Business, Columbia University,
Fall 1987 to Fall 1991; Visiting Scholar, Foundation for Advanced Information
and Research (FAIR), Tokyo, Japan, Summer 1989.
Robert K. Connolly, Trustee; P.O. Box 94, Sonoma, CA 95476; Retired; Most
recently until August 1990, Institutional Sales Manager and Securities Analyst
for Barrington Research Associates; 32 years in Institutional Sales throughout
the U.S. and Europe; for 20 years acted as an Officer and Senior Officer to New
York Stock Exchange Member Firms; including Spencer Trask & Co., A.G. Becker
Paribas and Wheat First Securities.
Dong Wook Park*, Trustee; Director, Portfolio Manager and head of the
International Department, Daewoo Capital Management Co., Ltd., Daewoo Securities
Building, 34-3, Yoido-dong, Yungdungpo-go, Seoul, Korea. Mr. Park has over
twenty years of investing experience and since 1984 has headed the investment
advisory team for a closed-end fund specializing in Korean investments. When
the Korea stock market was opened to foreign investors in 1992, he pioneered in
creating several investment vehicles for foreign investors. Mr. Park has also
launched two international funds which invest in the Pacific Rim and Japan.
David FitzWilliam-Lay, Trustee; 26 Chalfont House, 19 Chesham Street, London,
SWIX 8NG, United Kingdom; Director, USDC Investment Trust PLC and Berry
Starquest PLC; Mr. FitzWilliam-Lay retired in 1993 after three and a half years
as Chairman of G.T. Management PLC, an international investment management
company; prior thereto, Chairman of G.T. Management PLC's principal subsidiary
companies (United States, Japan and Hong Kong) and Group Chief Executive. Mr.
FitzWilliam-Lay joined the G.T. Management Group in 1978 and was involved in
international business development and client services in the United Kingdom,
Europe, South East Asia, Australia, Japan and the United States. He was a
member of the Board of Governors of the National Association of Securities
Dealers, Washington, DC between 1987 and 1990.
Norman Berryesa, Trustee; 100 Bush Street, Suite 1000, San Francisco, CA 94109;
Independent Contractor, Emmett Larkin Co., Inc., since 1983; President & CEO of
Gallegoes Institutional Investors Inc. from 1990 to 1994.
*These Trustees are considered "interested persons" of the Funds as defined
under the Act.
The Trustees of the Funds receive fees and expenses for each meeting of the
Board of Trustees they attend. However, no officer or employee of the Advisor
receives any compensation from the Funds for acting as a Trustee of the Funds.
The officers of the Funds receive no compensation directly from the Fund for
performing the duties of their offices.
The Investment Advisor
The Advisor, which has its offices at 655 Montgomery Street, Suite 1438, San
Francisco, California 94111, serves as the Funds' investment advisor and manager
and is an investment advisor registered under the Investment Advisers Act of
1940, as amended. The Advisor advises private and institutional accounts, which
include both U.S. and non-U.S. investors. The Advisor was founded in 1991 by G.
Paul Matthews to manage international portfolios for North American clients and
to provide U.S. investments for non-U.S. clients. The Advisor specializes in
Asian-Pacific investments and manages assets in a U.S. domiciled partnership,
offshore funds and separate accounts. Total assets under management as of
December 9, 1996 were $70 million. Mr. Matthews may be deemed to be a control
person of the Advisor on the basis of his ownership of stock of the Advisor. The
Advisor recently reorganized its business structure from a corporation to a
limited liability company. In connection with this reorganization, Convergent
Capital Management, Inc. ("Convergent") made an equity investment in the Advisor
and obtained a right of first refusal and an option to purchase additional
interests, the exercise of which could result in a change in control of the
Advisor at some time in the future. Any such change in control would be subject
to the prior approval of the holders of at least a majority of the outstanding
shares of the respective Funds. The Advisor does not presently serve as
investment advisor to any other investment companies in the United States.
The Funds have retained the Advisor to invest the Funds' assets, manage the
Funds' business affairs and supervise its overall day-to-day operations.
Pursuant to an investment advisory agreement with the Funds, the Advisor
provides advice on buying and selling securities in accordance with the Funds'
investment policies, limitations and restrictions. The Advisor also furnishes
the Funds with office space and certain administrative and clerical
Page 26
<PAGE>
services, and provides the personnel needed by the Funds with respect to the
Advisor's responsibilities under the investment advisory agreement.
For providing investment advisory services, the Funds pay the Advisor a monthly
fee calculated daily by applying an annual rate of 1.00% to the Funds' assets.
While the advisory fee paid by the Funds is higher than that paid by most other
investment companies, the fee is comparable to the fees paid by other investment
companies with similar investment objectives and policies. From time to time,
the Advisor may voluntarily waive all or a portion of its management fee and/or
absorb certain expenses of the Funds without further notification of the
commencement or termination of any such waiver or absorption. Any such waiver
or absorption will have the effect of lowering the overall expense ratio of the
Funds and increasing the Funds' overall return to investors at the time any such
amounts are waived and/or absorbed. The Advisor has agreed to waive that
portion of its advisory fee equal to the total expenses of the Funds for any
fiscal year which exceeds the permissible limits applicable to each Fund in any
state in which its shares are then qualified for sale. Any reductions made by
the Advisor in its fees are subject to reimbursement by the Funds within the
following three years provided the Funds are able to effect such reimbursement
and remain in compliance with applicable expense limitations. In addition, the
Advisor may engage certain organizations, at the Advisor's expense, to assist in
the distribution of the shares of the Fund or to provide services to the Funds'
shareholders.
The terms of the Funds' investment advisory agreement permit the Advisor, at its
own expense, to obtain statistical and other factual information and advice as
it deems necessary or desirable to fulfill its investment responsibilities under
the contract.
As of December 29, 1995, the Advisor has voluntarily undertaken to reimburse
Matthews Pacific Tiger Fund, Matthews Asian Convertible Securities Fund and
Matthews Korea Fund for operating expenses in excess of 1.90%, 1.90% and 2.50%,
respectively. Such fee reimbursements may be terminated at the discretion of
the Advisor. The Advisor has also agreed to waive that portion of its advisory
fee equal to the total expenses of a Fund for any fiscal year which exceeds the
permissible limits applicable to a Fund in any state in which its shares are
then qualified for sale.
Daewoo Capital Management Co., Ltd.
Daewoo Capital Management Co., Ltd. acts as Korean Advisor to the Advisor,
pursuant to a Research and Advisory Agreement with the Advisor. The Korean
Advisor has its main offices at 34-3, Yoido-dong, Yungdungpo-gu, Seoul 150-010,
Korea. The Korean Advisor, organized in 1988 under the laws of the Republic of
Korea, is an investment advisor registered under the United States Investment
Advisers Act of 1940. The Korean Advisor is a wholly owned subsidiary of Daewoo
Securities Co., Ltd., the largest Korean securities firm, and an affiliate of
Daewoo Research Institute. Total assets under management as of December
4, 9, 1995 6 were in excess of $2 billion. Daewoo Securities Co.,
Ltd. is affiliated with Daewoo Corporation, a conglomerate headquartered in
Seoul, Korea. Daewoo Corporation and certain affiliates of Daewoo Corporation
own approximately 12% of Daewoo Securities Co., Ltd. Orders for the purchase
and sale of securities of the Fund's portfolio may be placed with Daewoo
Securities Co., Ltd., as well as with other Korean brokers.
The Korean Advisor provides an investment program for Matthews Korea Fund
subject to the supervision of the Advisor in accordance with the objective and
policies of the Fund. The Korean Advisor provides such investment advice,
research and assistance as the Advisor may from time to time request. The
Korean Advisor makes specific investment recommendations, which are then
evaluated by the Advisor's research department and portfolio managers in light
of their own expertise and information from other sources in making investment
decisions for the Fund.
For its services, the Advisor pays the Korean Advisor a monthly fee equal to an
annual rate of 0.50% of the Fund's month-end net assets. For purposes of
computing the monthly fee, the value of the net assets of the Fund is determined
as of the close of business on the last business day of each month. The annual
fee is payable in U.S. dollars.
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Portfolio Management
Investment decisions for the Funds are made by a team of portfolio managers at
Matthews International Capital Management L.L.C., including G. Paul Matthews and
Mark Headley. Mr. Matthews is responsible for overseeing all investments made by
the Funds.
Mr. Matthews is also General Partner and portfolio manager of the M.I.C. Asia-
Pacific L.P. and responsible for the overall management of the Emerging Asian
Strategies Fund and all other investment portfolios managed by Matthews
International Capital Management, L.L.C.
Mark Headley joined Matthews International in April 1995 as Managing Director
and as Senior Analyst on the investment team. He has 8 years of experience in
the Asian Tiger Markets. He was an original member of the team which launched
the first open-ended Asia ex-Japan fund, the Tyndall Newport Tiger Fund (now the
Colonial Newport Tiger Fund) and was Vice President of Newport Pacific
Management. In 1992, Headley moved to Hong Kong, where he served as a Director
of Regent Fund Management. He returned in 1993 to join Litmin/Gregory & Co. as
Director of International Investments.
Both Mr. Headley and Mr. Matthews travel extensively to Asia to conduct research
relating to those markets. See "The Board of Trustees" for further biographical
information on Mr. Headley and Mr. Matthews.
ADMINISTRATION OF THE FUNDS
The Underwriter
FPS Broker Services, Inc. (the "Underwriter"), 3200 Horizon Drive, P.O. Box
61503, King of Prussia, PA 19406-0903, has been engaged as the Underwriter of
the shares of the Company pursuant to a written agreement. The Underwriter's
duties under the agreement are limited to the facilitation of the registration
of shares of the Company under state securities laws.
The Administrator
FPS Services, Inc. ("FPS"), 3200 Horizon Drive, P.O. Box 61503, King of Prussia,
PA 19406-0903 serves as administrator to the Company pursuant to an
Administrative Services Agreement. The services FPS provides to the Company
include: the coordination and monitoring of any third parties furnishing
services to the Funds; providing the necessary office space, equipment and
personnel to perform administrative and clerical functions for the Funds;
preparing, filing and distributing proxy materials and periodic reports to
shareholders, registration statements and other documents; and responding to
shareholder inquiries. Pursuant to this agreement, FPS receives a fee at the
annual rate of .15% on the first $75 million of total average net assets, .10%
on the next $75 million of total average net assets and .05% of total average
net assets in excess of $150 million. Such fee shall not be less than $70,000
per year for all series of the Company.
Fund Expenses
The Funds are responsible for their own operating expenses, including, but not
limited to: advisory fees; expenses for printing and distribution costs of
prospectuses and reports to shareholders; brokerage fees and commissions; fees
for the registration or qualification of Fund shares under federal or state
securities laws; expenses of the organization of the Company or of additional
Funds; transfer agent, custodian, administrator, legal and auditing fees; the
expenses of obtaining quotations of portfolio securities and of pricing the
Funds' shares; trade association dues; all costs associated with shareholder
meetings and the preparation and dissemination of proxy materials; and other
expenses relating to the Funds' operations; costs of liability insurance and
fidelity bonds; fees for Trustees who are not "interested persons" of the
Advisor; and any extraordinary and nonrecurring expenses which are not expressly
assumed by the Advisor.
The Custodian, Transfer Agent and Fund Accounting and Pricing Agent
The Bank of New York, 90 Washington Street, New York, New York 10286 is the
custodian for the cash and securities of the Funds. FPS serves as the Funds'
transfer agent. As transfer agent, it maintains the records of each
shareholder's account, answers shareholder inquiries concerning accounts,
processes purchases and redemptions of the Funds' shares, acts as dividend and
distribution disbursing agent and performs other shareholder service functions.
As fund accounting agent, FPS performs certain accounting and pricing services
for the Funds, including the daily calculation of the Funds' net asset value.
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PURCHASE OF SHARES
In General
Shares of each Fund may be purchased directly from the Funds at the net asset
value next determined after receipt of the order in proper form by the transfer
agent. There is no sales load or charge in connection with the purchase of
shares. Each Fund's shares are offered for sale by FPS Broker Services, Inc.,
the Funds' Underwriter, 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903, (800) 892-0382.
The minimum initial investment for each Fund is $1,000. Subsequent investments
for each Fund will be accepted in minimum amounts of $250. The minimum initial
investment for IRAs, 401(k), 403(b)(7) plans and other retirement plans is $250.
Subsequent investments for any retirement plan is $50.
The Funds reserve the right to reject any purchase order and to suspend the
offering of shares of the Funds. The Funds also reserve the right to vary the
initial investment minimum and minimums for additional investments at any time.
In addition, the Advisor may waive the minimum initial investment requirement
for any investor.
Purchase orders for shares of each Fund that are received by FPS in proper form
by the close of regular trading on the New York Stock Exchange ("NYSE")
(currently 4:00 p.m. Eastern time), on any day that the NYSE is open for
trading, will be purchased at the Fund's next determined net asset value. Orders
for each Fund shares received after 4:00 p.m. Eastern time will be purchased at
the next-determined net asset value determined the business day following
receipt of the order.
Shares of each Fund may be purchased by mail, by wire, by telephone and through
broker/dealers.
Purchases by Mail
Shares of each Fund may be purchased initially by completing the application
accompanying this Prospectus and mailing it to the transfer agent, together with
a check payable to the respective Fund, c/o 3200 Horizon Drive, P.O. Box 61503,
King of Prussia, PA 19406-0903.
Subsequent investments in an existing account in each Fund may be made at any
time by sending a check payable to the respective Fund c/o FPS Services, Inc.,
P.O. Box 412797, Kansas City, MO 64141-2797. Please enclose the stub of your
account statement and indicate the amount of the investment.
Purchases by Wire
Investors who wish to purchase shares of each Fund by federal funds wire should
first call the transfer agent at (800) 892-0382 to advise the transfer agent
that you intend to make an investment by wire and to request an account number
if establishing a new account. You must also furnish the respective Fund with
your social security number or other tax identification number. Following
notification to the transfer agent, federal funds and registration instructions
should be wired through the Federal Reserve System to:
UNITED MISSOURI BANK KC NA
ABA # 10-10-00695
FOR: FPS SERVICES, INC.
A/C 98-7037-071-9
FBO "Matthews Pacific Tiger Fund"
"Matthews Asian Convertible Securities Fund"
OR
"Matthews Korea Fund"
"SHAREHOLDER NAME AND ACCOUNT NUMBER"
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For initial purchases, the shareholder should complete and mail the application
with signature(s) of registrant(s) to the transfer agent subsequent to the
initial wire. Investors should be aware that banks generally impose a
wire service fee. The Funds will not be responsible for the consequence of
delays, including delays in the banking or Federal Reserve wire systems.
Federal funds wires and other direct purchase orders received by FPS by 4:00
p.m., Eastern time and accompanied by check or wire, are confirmed by that day's
public offering price. Direct purchase orders accompanied by check or wire
received by FPS after 4:00 p.m., Eastern time, are confirmed at the public
offering price determined on the following business day.
Purchases through Broker/Dealers
The Funds may accept telephone orders from brokers, financial institutions or
service organizations which have been previously approved by the Funds. It is
the responsibility of such brokers, financial institutions or service
organizations to promptly forward purchase orders and payments for the same to
the respective Fund. Shares of each Fund may be purchased through brokers,
financial institutions, service organizations, banks, and bank trust
departments, each of which may charge the investor a transaction fee or other
fee for its services at the time of purchase. Such fees would not otherwise be
charged if the shares were purchased directly from the Funds.
Wire orders for shares of each Fund received by dealers prior to 4:00 p.m.,
Eastern time, and received by FPS before 5:00 p.m., Eastern time, on the same
day are confirmed at that days's public offering price. Orders received by
dealers after 4:00 p.m., Eastern time, are confirmed at the public offering
price on the following business day. It is the dealer's obligation to place the
order with FPS before 5:00 p.m., Eastern time.
Subsequent Investments
Once an account has been opened, subsequent purchases may be made by mail, bank
wire, exchange, automatic investing or direct deposit. The minimum for
subsequent investments for each Fund is $250. The minimum for subsequent
investments for all retirement accounts is $50.. When making additional
investments by mail, simply return the remittance portion of a previous
confirmation with your investment in the envelope provided with each
confirmation statement. Your check should be made payable to the respective Fund
and mailed to the respective Fund c/o FPS Services, Inc., P.O. Box 412797,
Kansas City, MO 64141-2797. Orders to purchase shares are effective on the day
FPS receives your check or money order.
All investments must be made in U.S. dollars, and, to avoid fees and delays,
checks must be drawn only on banks located in the U.S. A charge (minimum of
$20) will be imposed if any check used for the purchase of shares is returned.
The Funds and FPS each reserve the right to reject any purchase
order in whole or in part.
EXCHANGE OF SHARES
In General
Shares of any of the Funds may be exchanged for shares of any of the other Funds
within the Company, provided such other shares may be sold legally in the state
of the investor's residence. The Company currently consists of three separate
Funds known as: Matthews Pacific Tiger Fund, Matthews Asian Convertible
Securities Fund and Matthews Korea Fund.
Exchanges are subject to the minimum initial investment requirement for the
respective Fund. Requests for telephone exchanges must be received by FPS by the
close of regular trading on the NYSE (currently 4:00 p.m. Eastern time) on any
day that the NYSE is open for regular trading. Shares may be exchanged by: (1)
written request, or (2) telephone, if a special authorization form has been
completed in advance and is on file with the Transfer Agent. A redemption fee
may apply.
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The exchange privilege is a convenient way to respond to changes in your
investment goals or in market conditions. This privilege is not designed for
frequent trading in response to short-term market fluctuations. You may make
exchanges by mail or by telephone if you have previously signed a telephone
authorization on the application form. The telephone exchange privilege may be
difficult to implement during times of drastic economic or market changes. The
purchase of shares for any of the Funds through an exchange transaction is
accepted immediately. You should keep in mind that for tax purposes an exchange
is treated as a redemption, which may result in taxable gain or loss, and a new
purchase, each at net asset value of the appropriate Fund. The Funds and FPS
reserve the right to limit, amend, impose charges upon, terminate or
otherwise modify the exchange privilege on 60 days' prior written notice to
shareholders.
REDEMPTION OF SHARES
In General
Shareholders may redeem their shares of the Funds on any business day that the
NYSE is open for business. Redemptions will be effective at the net asset value
per share next determined after the receipt by the transfer agent of a
redemption request meeting the requirements described below. Such redemption
proceeds may however, be reduced by the amount of any applicable redemption fee.
See "Redemption Fee" below. The Funds normally send redemption proceeds on the
next business day, but in any event redemption proceeds are sent within seven
calendar days of receipt of a redemption request in proper form. Payment may
also be made by wire directly to any bank previously designated by the
shareholder on a shareholder account application. There is a $9.00 charge for
redemptions made by wire. Please note that the shareholder's bank may also
impose a fee for wire service. There may be fees for redemptions made through
brokers, financial institutions and service organizations.
Except as noted below, redemption requests received in proper form by the
transfer agent prior to the close of regular trading hours on the NYSE on any
business day that the Funds calculate their net asset value are effective that
day. Redemption requests received after the close of the NYSE will be effected
at the net asset value per share determined on the next business day following
receipt. No redemption will be processed until the transfer agent has received
a completed application with respect to the account.
The Funds will satisfy redemption requests in cash to the fullest extent
feasible, so long as such payments would not, in the opinion of the Board of
Trustees, result in the necessity of the Funds to sell assets under disadvan-
tageous conditions or to the detriment of the remaining shareholders of the
Funds.
Pursuant to the Funds' Trust Instrument, payment for shares redeemed may be made
either in cash or in kind, or partly in cash and partly in-kind. When payments
are made in-kind the securities used for such payment must be readily
marketable. The Funds have elected, pursuant to Rule 18f-1 under the 1940 Act
however, to redeem its shares solely in cash up to the lesser of $250,000 or 1%
of the net asset value of the Funds, during any 90 day period for any one
shareholder. Payments in excess of this limit will also be made wholly in cash
unless the Board of Trustees believes that economic conditions exist which would
make such a practice detrimental to the best interests of the Funds. Any
portfolio securities paid or distributed in-kind would be valued as described
under "Net Asset Value." In the event that an in-kind distribution is made, a
shareholder may incur additional expenses, such as the payment of brokerage
commissions, on the sale or other disposition of the securities received from
the Funds. In-kind payments need not constitute a cross-section of the Funds'
portfolio. Where a shareholder has requested redemption of all or a part of the
shareholder's investment, and where the Funds complete such redemption in-kind,
the Funds will not recognize gain or loss for federal tax purposes, on the
securities used to complete the redemption but the shareholder will recognize
gain or loss equal to the difference between the fair market value of the
securities received and the shareholder's basis in the Fund shares redeemed.
The Funds may suspend the right of redemption or postpone the date of payment
for more than seven days during any period when (1) trading on the NYSE is
restricted or the NYSE is closed, other than customary weekend and holiday
closings; (2) the Securities and Exchange Commission has by order permitted such
suspension; (3) an emergency, as defined by rules of the Securities and Exchange
Commission, exists making disposal of portfolio investments or determination of
the value of the net assets of the Funds not reasonably practicable.
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Redemption by Mail
Shares may be redeemed by submitting a written request for redemption to FPS,
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903.
A written request must be in good order which means that it must: (i) identify
the shareholder's account name and account number; (ii) state the number of
shares or dollar amount to be redeemed; (iii) be signed by each registered owner
exactly as the shares are registered; and (iv) identify the name of the Fund.
To prevent fraudulent redemptions, a signature guarantee for the signature of
each person in whose name the account is registered is required for any of the
following: (i) on all written redemptions requests over $100,000; (ii) if the
proceeds (any amount) are to be paid to someone other than the registered
owner(s) of the account; or (iii) if the proceeds are to be sent to any address
other than the shareholder's address of record, pre-authorized bank account or
brokerage firm account. Signatures must be guaranteed by an "eligible guarantor
institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934. Eligible guarantor institutions include banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or maintain net capital of
at least $100,000. Notary public endorsement will not be accepted.
Credit unions must be authorized to issue signature guarantees. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program. A notarized signature will not
be sufficient for the request to be in proper form. The transfer agent may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees or guardians and retirement plans.
A redemption request will not be deemed to be properly received until the
transfer agent receives all required documents in proper form. Questions with
respect to the proper form for redemption requests should be directed to the
transfer agent at (800) 892-0382.
Redemption by Telephone
Shareholders who have so indicated on the application, or have subsequently
arranged in writing to do so, may redeem shares by instructing the transfer
agent by telephone. In order to arrange for redemption by wire or telephone
after an account has been opened, or to change the bank or account designated to
receive redemption proceeds, a written request must be sent to the transfer
agent with a signature guarantee at the address listed under "Redemption by
Mail," above.
The Funds reserve the right to refuse a wire or telephone redemption if it is
believed advisable to do so. Pro-cedures for redeeming Fund shares by wire or
telephone may be modified or terminated at any time.
Shares of the Funds may be redeemed through certain brokers, financial
institutions or service organizations, banks and bank trust departments who may
charge the investor a transaction fee or other fee for their services at the
time of redemption. Such fees would not otherwise be charged if the shares were
purchased from the Funds.
Redemption Fee
With certain exceptions, the Funds may impose a redemption fee of 1.00% on
shares that are redeemed within ninety days of purchase. The charge will be
assessed on an amount equal to the net asset value of the shares at the time of
redemption. If imposed, the redemption fee is deducted from the redemption
proceeds otherwise payable to the shareholder. The redemption fee is returned
to the assets of the Funds by the Advisor.
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Minimum Balances
Due to the relatively high cost of maintaining smaller accounts, the Funds
reserve the right to make involuntary redemptions of shares in any account for
their then current net asset value (which will be promptly paid to the
shareholder) if at any time the total investment does not have a value of at
least $1,000 due to redemptions but not market fluctuations. The shareholder
will be notified that the value of his or her account is less than the required
minimum and will be allowed at least 60 days to bring the value of the account
up to at least $1,000 before the redemption is processed.
Telephone Transactions
Shareholders who wish to initiate purchase or redemption transactions by
telephone must first elect the option, as described above. Neither the Funds
nor any of their service contractors will be liable for any loss or expense in
acting upon telephone instructions that are reasonably believed to be genuine.
In this regard, the Funds and their transfer agent require personal
identification information before accepting a telephone redemption. To the
extent that the Funds or their transfer agent fail to use reasonable procedures
to verify the genuineness of telephone instructions, the Funds may be liable for
losses due to fraudulent or unauthorized instructions. Written confirmation
will be provided for all purchase, exchange and redemption transactions
initiated by telephone.
SHAREHOLDER SERVICES
The following special services are available to shareholders. An investor may
change or stop these plans at any time by written notice to the Funds.
Automatic Investing
The Funds offer an automatic monthly investment plan, details of which can be
obtained from the transfer agent. Shareholders simply authorize the automatic
withdrawal of funds from their bank account into the respective Fund. The
minimum subsequent investment pursuant to this plan is $100 per month. The
initial account must be opened first with the $1,000 minimum prior to
participating in this plan. Please complete the appropriate section on the New
Account Application enclosed with this Prospectus indicating the amount of the
automatic investment and bank account information.
Retirement Plans
The Funds are available for investment by pension and profit sharing plans
including Individual Retirement Accounts, 401(k) plans, and 403(b)(7) Retirement
Plans through which investors may purchase Fund shares. For details concerning
any of the retirement plans, please call the Funds at (800) 789-ASIA.
NET ASSET VALUE
The net asset value per share of the Funds is computed once daily as of the
close of regular trading on the NYSE, currently 4:00 p.m. Eastern time.
Currently, the NYSE is closed on the following holidays or days on which the
following holidays are observed: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share is computed by adding the value of all securities
and other assets in the portfolio, deducting any liabilities, and dividing by
the total number of outstanding shares. Expenses are accrued daily and applied
when determining the net asset value. The Funds' equity securities are valued
based on market quotations or, when no market quotations are available, at fair
value as determined in good faith by or under direction of the
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Board of Trustees. Foreign securities are valued as of the close of trading on
the primary exchange on which they trade.
The value is then converted to U.S. dollars using current exchange rates.
Securities listed on any national securities exchange are valued at their last
sale price on the exchange where the securities are principally traded or, if
there has been no sale on that date, at the mean between the last reported bid
and asked prices. Securities traded over-the-counter are priced at the mean of
the last bid and asked prices. Securities are valued through valuations obtained
from a commercial pricing service or at the most recent mean of the bid and
asked prices provided by investment dealers in accordance with procedures
established by the Board of Trustees. Options, futures and options on futures
are valued at the price as determined by the appropriate clearing corporation.
Short-term investments having a maturity of 60 days or less are valued at
amortized cost, which the Board of Trustees believes represents fair value.
When a security is valued at amortized cost, it is valued at its cost when
purchased, and thereafter by assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. All other securities and other assets are
valued at their fair value as determined in good faith under procedures
established by and under the supervision of the Board of Trustees. Foreign
currency exchange rates are generally determined prior to the close of trading
on the NYSE. Occasionally, events affecting the value of foreign investments
and such exchange rates occur between the time at which they are determined and
the close of trading on the NYSE. Such events would not normally be reflected
in a calculation of the Funds' net asset value on that day. If events that
materially affect the value of the Funds' foreign investments or the foreign
currency exchange rates occur during such period, the investments will be valued
at their fair value as determined in good faith by or under the direction of the
Board of Trustees. Foreign securities held by the Funds may be traded on days
and at times when the NYSE is closed. Accordingly, the net asset value of the
Funds may be significantly affected on days when shareholders have no access to
the Funds.
For valuation purposes, quotations of foreign portfolio securities, other assets
and liabilities and forward contracts stated in foreign currency are translated
into U.S. dollar equivalents at the prevailing market rates.
DIVIDENDS AND TAXES
Dividends
Matthews Pacific Tiger Fund and Matthews Korea Fund will distribute its net
investment income annually in December. Matthews Asian Convertible Securities
Fund will distribute its net investment income semi-annually in June and
December. Any net realized gain from the sale of portfolio securities and net
realized gains from foreign currency transactions are distributed at least once
each year unless they are used to offset losses carried forward from prior
years, in which case no such gain will be distributed. Such income dividends
and capital gain distributions are reinvested automatically in additional shares
at net asset value, unless a shareholder elects to receive them in cash.
Distribution options may be changed at any time by requesting a change in
writing.
Any check in payment of dividends or other distributions which cannot be
delivered by the Post Office or which remains uncashed for a period of more than
one year may be reinvested in the shareholder's account at the then current net
asset value and the dividend option may be changed from cash to reinvest.
Dividends are reinvested on the ex-dividend date (the "ex-date") at the net
asset value determined at the close of business on that date. Dividends and
distributions are treated the same for tax purposes whether received in cash or
reinvested in additional shares. Please note that shares purchased shortly
before the record date for a dividend or distribution may have the effect of
returning capital although such dividends and distributions are subject to
taxes.
Taxes
The Funds intend to qualify and elect to be treated as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986. Such
qualification relieves the Funds of liability for Federal income taxes to
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the extent the Funds' earnings are distributed in accordance with the Code. To
so qualify, among other requirements, the Funds will limit its investments so
that, at the close of each quarter of its taxable year, (I) not more than 25% of
the market value of the Funds' total assets will be invested in the securities
of a single issuer, and (ii) with respect to 50% of the market value of its
total assets, not more than 5% of the market value of its total assets will be
invested in the securities of a single issuer, and it will not own more than 10%
of the outstanding voting securities of a single issuer.
An investment in the Funds has certain tax consequences, depending on the type
of account. Distributions are subject to federal income tax and may also be
subject to state and local income taxes. Distributions are generally taxable
when they are paid, whether in cash or by reinvestment in additional shares,
except that distributions declared in October, November or December and paid in
the following January are taxable as if they were paid on December 31. If you
have a qualified retirement account, taxes are generally deferred until
distributions are made from the retirement account.
For federal income tax purposes, income dividends and short-term capital gain
distributions are taxed as ordinary income. Distributions of net capital gains
(the excess of net long-term capital gain over net short-term capital loss) are
usually taxed as long-term capital gains, regardless of how long a shareholder
has held the Funds' shares. The tax treatment of distributions of ordinary
income or capital gains will be the same whether the shareholder reinvests the
distributions or elects to receive them in cash.
Shareholders may be subject to a 31 percent back-up withholding on reportable
dividend and redemption payments ("back-up withholding") if a certified taxpayer
identification number is not on file with the Funds, or if to the Funds'
knowledge, an incorrect number has been furnished. An individual's taxpayer
identification number is his/her social security number.
Shareholders will be advised annually of the source and tax status of all
distributions for federal income tax purposes. Information accompanying a
shareholder's statement will show the portion of those distributions that are
not taxable in certain states. Further information regarding the tax
consequences of investing in the Funds is included in the Statement of
Additional Information. The above discussion is intended for general
information only. Investors should consult their own tax advisors for more
specific information on the tax consequences of particular types of
distributions.
Dividends and interest received by the Funds with respect to foreign securities
may give rise to withholding and other taxes imposed by foreign countries. Tax
consequences between certain countries and the United States may reduce or
eliminate such taxes. In addition, foreign countries generally do not impose
taxes on capital gains with respect to investments by non-resident investors.
Matthews Korea Fund does not intend to engage in activities that will create a
permanent establishment in Korea within the meaning of the Korea-U.S. Tax
Treaty. Therefore, Matthews Korea Fund generally will not be subject to any
Korean income taxes other than Korean withholding taxes. Exemptions or
reductions in these taxes apply if the Korea-U.S. Tax Treaty applies to the
Fund. If the treaty provisions are not, or cease to be, applicable to Matthews
Korea Fund, significant additional withholding taxes would apply.
PERFORMANCE INFORMATION
In General
Performance information such as yield or total return for the Funds may be
quoted in advertisements or in communications to shareholders. Such performance
information may be useful in reviewing the performance of the Funds and for
providing a basis for comparison with other investment alternatives. Since net
investment return of the Funds changes in response to fluctuations in market
conditions, interest rates and the Funds' expenses however, any given
performance quotation should not be considered representative of the Funds'
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performance for any future period. The value of an investment in the Funds will
fluctuate and an investor's shares, when redeemed, may be worth more or less
than their original cost.
Total Return
The Funds' total return is the change in value of an investment in the Funds
over a particular period, assuming that all distributions have been reinvested.
Thus, total return reflects not only income earned, but also variations in share
prices at the beginning and end of the period. Average annual return reflects
the average percentage change per year in the value of an investment in the
Funds. Aggregate total return reflects the total percentage change over the
stated period. Please refer to the Statement of Additional Information for more
information on performance.
Yield
The current yield will be calculated by dividing the net investment income
earned per share by the Funds during the period stated by the maximum net asset
value per share on the last day of the period and annualizing the result on a
semi-annual compounded basis.
You may obtain current performance information about the Funds by calling the
Funds at (800) 789-ASIA.
GENERAL INFORMATION
Organization
Each Fund is a separate series of shares of Matthews International Funds, a
Delaware business trust organized pursuant to a Trust Instrument dated April 8,
1994. The Company is registered under the 1940 Act as an open-end management
investment company, commonly known as a mutual fund. The Trustees of the Company
may establish additional series or classes of shares without the approval of
shareholders. The assets of each series will belong only to that series, and the
liabilities of each series will be borne solely by that series and no other.
Trustees and Officers
The Trustees of the Company have overall responsibility for the operations of
the Funds. The Statement of Additional Information contains general background
information about each Trustee and officer of the Trust. The officers of the
Company who are employees or officers of the Advisor serve without compensation
from the Funds.
Description of Shares
Each Fund is authorized to issue an unlimited number of shares of beneficial
interest with a par value of $0.001. Shares of each Fund represent equal
proportionate interests in the assets of that Fund only and have identical
voting, dividend, redemption, liquidation, and other rights. All shares issued
are fully paid and non-assessable, and shareholders have no preemptive or other
right to subscribe to any additional shares. Currently, there is only one class
of shares issued by the Company. The validity of shares of beneficial interest
offered by this prospectus will be passed on by Shartsis, Friese & Ginsburg
L.L.P., One Maritime Plaza, 18th Floor, San Francisco, California 94111.
Partners and employees of Shartsis, Friese & Ginsburg, L.L.P. may own shares of
the Funds from time to time.
Voting Rights
Each issued and outstanding full and fractional share of each Fund is entitled
to one full and fractional vote in each Fund and all shares of each Fund
participate equally in dividends, distributions, and liquidations. Shareholders
do not have preemptive, conversion or cumulative voting rights.
Shareholder Meetings
The Trustees of the Company do not intend to hold annual meetings of
shareholders of the Funds. The Trustees have undertaken to the SEC, however,
that they will promptly call a meeting for the purpose of voting upon the
question of removal of any Trustee when requested to do so by holders of not
less than 10% of the outstanding
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shares of the respective Fund. In addition, subject to certain conditions,
shareholders of each Fund may apply to the Funds to communicate with other
shareholders to request a shareholders' meeting to vote upon the removal of a
Trustee or Trustees.
Certain Provisions of Trust Instrument
Under Delaware law, the shareholders of the Funds will not be personally liable
for the obligations of any Fund; a shareholder is entitled to the same
limitation of personal liability extended to shareholders of corporations.
Shareholder Servicing Agents
The Funds may enter into Shareholder Servicing Agreements with one or more
unaffiliated Shareholder Servicing Agents. The Shareholder Servicing Agent may,
as agent for its customers, among other things: answer customer inquiries
regarding account history and purchase and redemption procedures; assist
shareholders in designating and changing dividend options, account designations
and addresses; provide necessary personnel and facilities to establish and
maintain shareholder accounts and records; assist in processing purchase and
redemption transactions; arrange for the wiring of funds; transmit and receive
funds with customer orders to purchase or redeem shares; verify and guarantee
shareholder signatures in connection with redemption orders and transfers and
changes in shareholder-designated accounts; furnish monthly and year-end
statements and confirmations of purchases and redemptions; transmit, on behalf
of the Funds, proxy statements, annual reports, updated prospectuses and other
communications to shareholders of the Funds; receive, tabulate and transmit to
the Funds proxies executed by shareholders with respect to meetings of
shareholders of the Funds; and provide such other related services as the Funds
or a shareholder may request. For these services, each Shareholder Servicing
Agent receives fees to cover its out of pocket and operating costs to provide
these services, which may be paid periodically, provided that such fees will not
exceed, on an annual basis, 0.25% of the average daily net assets of the Funds
represented by shares owned during the period for which payment is made. Each
Shareholder Servicing Agent may, from time to time, voluntarily waive all or a
portion of the fees payable to it.
Shareholder Reports and Inquiries
Shareholders will receive annual financial statements which are examined by the
Funds' independent accountants, as well as unaudited semiannual financial
statements. Shareholder inquiries should be addressed to the respective Fund
c/o Matthews International Funds, 655 Montgomery Street, Suite 1438, San
Francisco, CA 94111, (800) 789-ASIA.
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APPENDIX
Bond Ratings
Moody's Investors Service, Inc. ("Moody's") describes classifications of
corporate bonds as follows:
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa Bonds which are rated Baa are considered as medium grade obligations; i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other market
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate and municipal
bond rating system. The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
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Standard & Poor's Corporation ("S&P") describes classification of corporate and
municipal debt as follows:
AAA Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A Debt rated A has a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher-rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
B Debt rated B has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC Debt rated CCC has a current identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayments of principal. In the event
of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.
CC The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC - debt rating.
CI The rating CI is reserved for income bonds on which no interest is being
paid.
D Debt rated D is in default. The D rating is assigned on the day an
interest or principal payment is missed.
NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a
particular type of obligation as a matter of policy.
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BOARD OF TRUSTEES
G. Paul Matthews
John H. Dracott
Richard K. Lyons
Robert K. Connolly
Dong Wook Park
David FitzWilliam-Lay
Norman J. Berryessa
OFFICERS
G. Paul Matthews
John H. Dracott
INVESTMENT ADVISOR
Matthews International Capital Management, LLC
655 Montgomery Street, Suite 1438
San Francisco, CA 94111
(800) 789-ASIA
UNDERWRITER
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
(800) 892-0382
SHAREHOLDER SERVICES
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
(800) 892-0382
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
LEGAL COUNSEL
Shartsis, Friese & Ginsburg, LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
AUDITORS
Ernst & Young LLP
555 California Street, Suite 1700
San Francisco, CA 94104
For Additional Information about the
Matthews International Funds call:
(800) 789-ASIA
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<PAGE>
MATTHEWS INTERNATIONAL FUNDS
----------------------------
MATTHEWS KOREA FUND
MATTHEWS PACIFIC TIGER FUND
MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND
STATEMENT OF ADDITIONAL INFORMATION
December 27, 1996
================================================================================
This Statement of Additional Information provides supplementary information
pertaining to shares representing interests in three investment portfolios of
Matthews International Funds -- Matthews Pacific Tiger Fund, Matthews Asian
Convertible Securities Fund and Matthews Korea Fund. This Statement of
Additional Information dated December 27, 1996 is not a prospectus and should be
read in conjunction with the Prospectus dated December 27, 1996 No investment in
shares should be made without first reading the Prospectus. A copy of each
Prospectus may be obtained without charge from the Company at the addresses and
telephone numbers below.
Underwriter: Advisor:
FPS Services, Inc. Matthews International Capital Management, LLC
3200 Horizon Drive 655 Montgomery Street, Suite 1438
King of Prussia, PA 19406-0903 San Francisco, CA 94111
(800) 892-0382 (800) 789-ASIA
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Prospectus in connection with the offering made by the Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or its distributor. The Prospectus does
not constitute an offering by the Company or by the distributor in any
jurisdiction in which such offering may not lawfully be made.
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TABLE OF CONTENTS
-----------------
THE FUNDS............................................................
INVESTMENT POLICIES AND TECHNIQUES...................................
RISKS RELATED TO LOWER RATED DEBT SECURITIES.........................
SPECIAL CONSIDERATIONS AFFECTING THE PACIFIC BASIN...................
INVESTMENT RESTRICTIONS..............................................
TRUSTEES AND OFFICERS................................................
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..................
INVESTMENT ADVISORY AND OTHER SERVICES...............................
Investment Advisory Agreement................................
Korean Research and Advisory Agreement.......................
The Administrator............................................
The Underwriter..............................................
PORTFOLIO TRANSACTIONS AND BROKERAGE.................................
PORTFOLIO TURNOVER...................................................
DETERMINATION OF NET ASSET VALUE.....................................
TAXES................................................................
PERFORMANCE INFORMATION..............................................
OTHER INFORMATION....................................................
FINANCIAL STATEMENTS.................................................
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THE FUNDS
---------
Matthews International Funds, 655 Montgomery Street, Suite 1438, San Francisco,
California 94111, is a no load, open-end investment company which currently
offers three separate investment series: Matthews Pacific Tiger Fund, Matthews
Asian Convertible Securities Fund and Matthews Korea Fund (collectively referred
to as the "Funds" or individually as a "Fund").
INVESTMENT POLICIES AND TECHNIQUES
----------------------------------
The following supplements the information contained in the Prospectus concerning
the investment policies of the Funds. Except as otherwise stated below or in
the Prospectus, the Funds may invest in the portfolio investments included in
this section. A description of applicable credit ratings is set forth in the
Appendix to the Prospectus.
The investment practices described below, except for the discussion of portfolio
loan transactions, are not fundamental and may be changed by the Board of
Trustees without the approval of the shareholders of the Funds.
Loans of Portfolio Securities
- -----------------------------
The Funds may lend portfolio securities to broker-dealers and financial
institutions, although at the present time they have no intention of lending
portfolio securities in the foreseeable future. The Funds may lend portfolio
securities provided: (1) the loan is secured continuously by collateral marked-
to-market daily and maintained in an amount at least equal to the current market
value of the securities loaned; (2) the Funds may call the loan at any time and
receive the securities loaned; (3) the Funds will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value of
securities loaned by a Fund will not at any time exceed 33% of the total assets
of such Fund.
Collateral will consist of U.S. government securities, cash equivalents or
irrevocable letters of credit. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to maintain the proper
amount of collateral. Therefore, the Funds will only enter into portfolio loans
after a review by the Advisor, under the supervision of the Board of Trustees,
including a review of the creditworthiness of the borrower. Such reviews will
be monitored on an ongoing basis.
Repurchase Agreements
- ---------------------
Although the Funds may purchase repurchase agreements, they do not have the
current intention of doing so in the foreseeable future. The repurchase price
under the repurchase agreements described in the Prospectuses generally equals
the price paid by each Fund plus interest negotiated on the basis of current
short-term rates (which may be more or less than the rate on the securities
underlying the repurchase agreement). Repurchase agreements may be considered
to be loans by the Funds under the Investment Company Act of 1940, as amended
(the "Act").
The financial institutions with whom the Funds may enter into repurchase
agreements are banks and non-bank dealers of U.S. Government securities that are
listed on the Federal Reserve Bank of New York's list of reporting dealers and
banks, if such banks and non-bank dealers are deemed creditworthy by the
Advisor. The Advisor will continue to monitor the creditworthiness of the
seller under a repurchase agreement, and will require the seller to maintain
during the term of the agreement the value of the securities subject to the
agreement at not less than the repurchase price. The Funds will only enter into
a repurchase agreement where the market value of the underlying security,
including interest accrued, will be at all times equal to or exceed the value of
the repurchase agreement.
The Funds may invest in repurchase agreements with foreign parties, or in a
repurchase agreement based on securities denominated in foreign currencies.
Legal structures in foreign countries, including bankruptcy laws,
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may offer less protection to investors such as the Funds, and foreign repurchase
agreements generally involve greater risks than a repurchase agreement in the
United States.
Reverse Repurchase Agreements
- -----------------------------
The Funds may enter into reverse repurchase agreements but they do not currently
have the intentions of doing so in the foreseeable future. Reverse repurchase
agreements involve the sale of securities held by the Funds pursuant to the
Funds' agreement to repurchase the securities at an agreed upon price, date and
rate of interest. Such agreements are considered to be borrowings under the
Act, and may be entered into only for temporary or emergency purposes. While
reverse repurchase transactions are outstanding, the Funds will maintain in a
segregated account cash, U.S. Government securities or other liquid, high grade
debt securities in an amount at least equal to the market value of the
securities, plus accrued interest, subject to the agreement. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Funds may decline below the price of the securities the Funds are obligated to
repurchase such securities.
Securities of Other Investment Companies
- ----------------------------------------
The Funds may invest in the securities of other investment companies and
currently intend to limit their investments in securities issued by other
investment companies so that, as determined immediately after a purchase of such
securities is made: (i) not more than 5% of the value of the Funds' total assets
will be invested in the securities of any one investment company; (ii) not more
than 10% of its total assets will be invested in the aggregate in securities of
investment companies as a group; and (iii) not more than 3% of the outstanding
voting stock of any one investment company will be owned by the respective Fund.
Illiquid Securities
- -------------------
The Board of Trustees has delegated the function of making day to day
determinations of liquidity to Matthews International Capital Management, LLC
pursuant to guidelines reviewed by the Board of Trustees. Matthews
International Capital Management, LLC will monitor the liquidity of securities
held by each Fund and report periodically on such decisions to the Board of
Trustees.
Rule 144A Securities
- --------------------
The Funds may invest in securities that are exempt under SEC Rule 144A from the
registration requirements of the Securities Act of 1933. Those securities,
purchased under Rule 144A, are traded among qualified institutional investors
and are subject to the Fund's limitation on illiquid investment.
Investing in securities under Rule 144A could have the effect of increasing the
levels of the Funds' illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. The
Funds will limit their investments in securities of issuers which the Fund is
restricted from selling to the public without registration under the Securities
Act of 1933 to no more than 15% of the Fund's net assets, excluding restricted
securities eligible for resale pursuant to Rule 144A that have been determined
to be liquid by the Funds' Board of Trustees.
Convertible Securities
- ----------------------
Each Fund may invest in convertible securities of Asia and the Pacific Basin as
well as the United States. Common stock occupies the most junior position in a
company's capital structure. Convertible securities entitle the holder to
exchange the securities for a specified number of shares of common stock,
usually of the same company, at specified prices within a certain period of time
and to receive interest or dividends until the holder elects to convert. The
provisions of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holder's claims on assets and earnings are subordinated to the claims of other
creditors, and are senior to the claims of preferred and common shareholders. In
the case of preferred stock and convertible preferred stock, the holder's claims
on assets and earnings are subordinated to the claims of all creditors but are
senior to the claims of common shareholders.
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To the extent that a convertible security's investment value is greater than its
conversion value, its price will be primarily a reflection of such investment
value and its price will be likely to increase when interest rates fall and
decrease when interest rates rise, as with a fixed-income security. If the
conversion value exceeds the investment value, the price of the convertible
security will rise above its investment value and, in addition, may sell at some
premium over its conversion value. At such times the price of the convertible
security will tend to fluctuate directly with the price of the underlying equity
security.
Forward Commitments, When-Issued Securities and Delayed Delivery Transactions
- -----------------------------------------------------------------------------
Although the Funds may purchase securities on a when-issued basis, or purchase
or sell securities on a forward commitment basis or purchase securities on a
delayed delivery basis, the Funds do not have the current intention of doing so
in the foreseeable future. The Funds will normally realize a capital gain or
loss in connection with these transactions. For purposes of determining the
Funds' average dollar-weighted maturity, the maturity of when-issued or forward
commitment securities will be calculated from the commitment date.
When the Funds purchase securities on a when-issued, delayed delivery or forward
commitment basis, the Funds' custodian will maintain in a segregated account:
cash, U.S. Government securities or other high grade liquid debt obligations
having a value (determined daily) at least equal to the amount of the Funds'
purchase commitments. In the case of a forward commitment to sell portfolio
securities, the custodian will hold the portfolio securities themselves in a
segregated account while the commitment is outstanding. These procedures are
designed to ensure that the Funds will maintain sufficient assets at all times
to cover its obligations under when-issued purchases, forward commitments and
delayed delivery transactions.
Short-Selling
- -------------
Matthews Korea Fund may make short sales. The Fund may incur a loss as a result
of a short sale if the price of the security increases between the date of the
short sale and the date on which the Fund replaced the borrowed security. The
Fund may realize a gain if the security declines in price between those dates.
The amount of any gain will be decreased, and the amount of any loss increased,
by the amount of any premium, dividends or interest the Fund may be required to
pay in connection with a short sale. No securities will be sold short if, after
effect is given to any such short sale, the total market value of all securities
sold short would exceed 10% of the value of the Fund's net assets. The Fund
will place in a segregated account with its custodian bank an amount of cash or
U.S. government securities equal to the difference between the market value of
the securities sold short at the time they were sold short and any cash or U.S.
government securities required to be deposited as collateral with the broker in
connection with the short sale. This segregated account will be marked to
market daily, provided that at no time will the amount deposited in it plus the
amount deposited with the broker as collateral be less than the market value of
the securities at the time they were sold short.
Other Investments
- -----------------
Subject to prior disclosure to shareholders, the Board of Trustees may, in the
future, authorize a Fund to invest in securities other than those listed here
and in the prospectus, provided that such investment would be consistent with
the respective Fund's investment objective and that it would not violate any
fundamental investment policies or restrictions applicable to the respective
Fund.
HEDGING AND DERIVATIVES
- -----------------------
Interest Rate Futures Contracts
- -------------------------------
The Funds may enter into contracts for the future delivery of fixed income
securities commonly referred to as "interest rate futures contracts." These
futures contracts will be used only as a hedge against anticipated interest rate
changes. The Funds will not enter into an interest rate futures contract if
immediately thereafter more than 5% of the value of the respective Fund's total
assets will be committed to margin. The principal risks related to the use of
such instruments are (1) the offsetting correlation between movements in the
market price of the portfolio investments being hedged and in the price of the
futures contract or option may be imperfect; (2) possible lack of a liquid
secondary market for closing out futures or option positions; (3) the need for
additional portfolio management skills and techniques; and (4) losses due to
unanticipated market price movements.
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Futures Transactions
- --------------------
Although the Funds may engage in futures transactions for the purchase or sale
for future delivery of securities, the Funds do not have the current intention
of doing so in the foreseeable future. While futures contracts provide for the
delivery of securities, deliveries usually do not occur. Contracts are
generally terminated by entering into offsetting transactions.
The Funds may engage in futures transactions on U.S. or foreign exchanges or
boards of trade. In the U.S., futures exchanges and trading are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission (CFTC), a
U.S. government agency.
The Funds may enter into such futures contracts to protect against the adverse
effects of fluctuations in security prices, or interest rates, without actually
buying or selling the securities underlying the contract. A stock index futures
contract obligates the seller to deliver (and the purchaser to take) an amount
of cash equal to a specific dollar amount times the difference between the value
of a specific stock index at the close of the last trading day of the contract
and the price at which the agreement was made.
With respect to options on futures contracts, when the Funds are temporarily not
fully invested, they may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates. The purchase of a
call option on a futures contract is similar in some respects to the purchase of
a call option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based, or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities.
The writing of a call option on a futures contract constitutes a partial hedge
against the declining price of the security or foreign currency which is
deliverable upon exercise of the futures contract. The writing of a put option
on a futures contract constitutes a partial hedge against the increasing price
of the security or foreign currency which is deliverable upon exercise of the
futures contract.
To the extent that market prices move in an unexpected direction, the Funds may
not achieve the anticipated benefits of futures contracts or options on futures
contracts or may realize a loss. Further, with respect to options on futures
contracts, the Funds may seek to close out an option position by writing or
buying an offsetting position covering the same securities or contracts and have
the same exercise price and expiration date. The ability to establish and close
out positions on options will be subject to the maintenance of a liquid
secondary market, which cannot be assured.
Restrictions on the Use of Futures Contracts
- --------------------------------------------
The Funds may enter into futures contracts provided that such obligations
represent no more than 20% of the Funds' net assets. Under the Commodity
Exchange Act, the Funds may enter into futures transactions for hedging purposes
without regard to the percentage of assets committed to initial margin and for
other than hedging purposes provided that assets committed to initial margin do
not exceed 5% of the Funds' net assets. To the extent required by law, the
Funds will set aside cash and appropriate liquid assets in a segregated account
to cover its obligations related to futures contracts.
Foreign Currency Hedging Strategies -- Special Considerations
- -------------------------------------------------------------
Although the Funds may use options and futures on foreign currencies and forward
currency contracts to hedge against movements in the values of the foreign
currencies in which the Funds' securities are denominated, the Funds do not
currently intend to use such hedging strategies in the foreseeable future. Such
currency hedges can protect against price movements in a security the Funds own
or intend to acquire that are attributable to changes in the value of the
currency in which it is denominated. Such hedges do not, however, protect
against price movements in the securities that are attributable to other causes.
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The value of hedging instruments on foreign currencies depends on the value of
the underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of such hedging instruments, the
Fund could be disadvantaged by having to deal in the odd lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
The Funds might seek to hedge against changes in the value of a particular
currency when no hedging instruments on that currency are available or such
hedging instruments are more expensive than certain other hedging instruments.
In such cases, the Funds may hedge against price movements in that currency by
entering into transactions using hedging instruments on other currencies, the
values of which the Advisor believes will have a high degree of positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the hedging instrument will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.
Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, the Funds might be required to accept or make delivery of the underlying
foreign currency in accordance with any U.S. or foreign regulations regarding
the maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.
Forward Currency Contracts
- --------------------------
A forward currency contract involves an obligation to purchase or sell a
specific currency at a specified future date, which may be any fixed number of
days from the contract date agreed upon by the parties, at a price set at the
time the contract is entered into.
The Funds may enter into forward currency contracts to purchase or sell foreign
currencies for a fixed amount of U.S. dollars or another foreign currency. The
Fund also may use forward currency contracts for "cross-hedging." Under this
strategy, the Funds would increase their exposure to foreign currencies that the
Advisor believes might rise in value relative to the U.S. dollar, or the Funds
would shift their exposure to foreign currency fluctuations from one country to
another.
The cost to each Fund of engaging in forward currency contracts varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
When the Fund enters into a forward currency contract, it relies on the contra
party to make or take delivery of the underlying currency at the maturity of the
contract. Failure by the contra party to do so would result in the loss of any
expected benefit of the transaction.
As is the case with futures contracts, holders and writers of forward currency
contracts can enter into offsetting closing transactions, similar to closing
transactions on futures, by selling or purchasing, respectively, an instrument
identical to the instrument held or written. Secondary markets generally do not
exist for forward currency contracts, with the result that closing transactions
generally can be made for forward currency contracts only by negotiating
directly with the contra party. Thus, there can be no assurance that the Funds
will in fact be able to close out a forward currency contract at a favorable
price prior to maturity. In addition, in the event of insolvency of the contra
party, the Funds might be unable to close out a forward currency contract at any
time prior to maturity. In either event, the Funds would continue to be subject
to market risk with respect to the position, and would continue to be required
to maintain a position in securities denominated in the foreign currency or to
maintain cash or securities in a segregated account.
The precise matching of forward currency contracts amounts and the value of the
securities involved generally will not be possible because the value of such
securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, the Funds might need to purchase
or sell foreign currencies
Page 47
<PAGE>
in the spot (cash) market to the extent such foreign currencies are not covered
by forward contracts. The projection of short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain.
Limitations on the Use of Forward Currency Contracts
- ----------------------------------------------------
The Funds may enter into forward currency contracts or maintain a net exposure
to such contracts only if (1) the consummation of the contracts would not
obligate the Funds to deliver an amount of foreign currency in excess of the
value of its portfolio securities or other assets denominated in that currency,
or (2) the Funds maintain cash, U.S. government securities or liquid, high-grade
debt securities in a segregated account in an amount not less than the value of
its total assets committed to the consummation of the contract and not covered
as provided in (1) above, as marked to market daily.
Options
- -------
The Funds may buy put and call options and write covered call and secured put
options but have no current intention of actively engaging in such transactions.
Such options may relate to particular securities, stock indices, or financial
instruments and may or may not be listed on a national securities exchange and
issued by the Options Clearing Corporation. Options trading is a highly
specialized activity which entails greater than ordinary investment risk.
Options on particular securities may be more volatile than the underlying
securities, and therefore, on a percentage basis, an investment in options may
be subject to greater fluctuation than an investment in the underlying
securities themselves.
The Funds will write call options only if they are "covered." In the case of a
call option on a security, the option is "covered" if a Fund owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or, if additional cash
consideration is required, liquid assets, such as cash, U.S. Government
securities or other liquid high grade debt obligations, in such amount held in a
segregated account by its custodian) upon conversion or exchange of other
securities held by it. For a call option on an index, the option is covered if
a Fund maintains with its custodian a diversified stock portfolio, or liquid
assets equal to the contract value. A call option is also covered if a Fund
holds a call on the same security or index as the call written where the
exercise price of the call held is (i) equal to or less than the exercise price
of the call written; or (ii) greater than the exercise price of the call written
provided the difference is maintained by the Fund in liquid assets such as cash,
U.S. Government securities and other high-grade debt obligations in a segregated
account with its custodian. The Funds will write put options only if they are
"secured" by liquid assets maintained in a segregated account by the Funds'
custodian in an amount not less than the exercise price of the option at all
times during the option period.
Purchasing Call Options
- -----------------------
The Funds may purchase call options to the extent that premiums paid by the
Funds do not aggregate more than 10% of the Funds' total assets. When the Funds
purchase a call option, in return for a premium paid by the Fund to the writer
of the option, the Fund obtains the right to buy the security underlying the
option at a specified exercise price at any time during the term of the option.
The writer of the call option, who receives the premium upon writing the option,
has the obligation, upon exercise of the option, to deliver the underlying
security against payment of the exercise price. The advantage of purchasing
call options is that the Fund may alter portfolio characteristics and modify
portfolio maturities without incurring the cost associated with transactions.
The Funds may, following the purchase of a call option, liquidate their position
by effecting a closing sale transaction. This is accomplished by selling an
option of the same series as the option previously purchased. The Funds will
realize a profit from a closing sale transaction if the price received on the
transaction is more than the premium paid to purchase the original call option;
the Funds will realize a loss from a closing sale transaction if the price
received on the transaction is less than the premium paid to purchase the
original call option.
Although the Funds will generally purchase only those call options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an Exchange will exist for any
Page 48
<PAGE>
particular option, or at any particular time, and for some options no secondary
market on an Exchange may exist. In such event, it may not be possible to effect
closing transactions in particular options, with the result that the Funds would
have to exercise their options in order to realize any profit and would incur
brokerage commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Funds may expire without any value
to the Funds, in which event the Funds would realize a capital loss which will
be short-term unless the option was held for more than one year.
Covered Call Writing
- --------------------
Although the Funds may write covered call options from time to time on such
portions of their portfolios, the Funds do not have the current intention of
doing so in the foreseeable future. The Funds may write covered call options,
without limit, as the Advisor determines is appropriate in pursuing a Fund's
investment objective. The advantage to the Funds of writing covered calls is
that each Fund receives a premium which is additional income. However, if the
security rises in value, the respective Fund may not fully participate in the
market appreciation. The Funds' obligation under a covered call option is
terminated upon the expiration of the option or upon entering a closing purchase
transaction. In a closing purchase transaction, a Fund, as writer of an option,
terminates its obligation by purchasing an option of the same series as the
option previously written.
Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable the Fund to write
another call option on the underlying security with either a different exercise
price or expiration date or both. The Funds may realize a net gain or loss from
a closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. A closing purchase transaction cannot be effected with respect
to an option once the option writer has received an exercise notice for such
option.
The Funds will write call options only on a covered basis, which means that the
Fund will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected,
the Fund would be required to continue to hold a security which it might
otherwise wish to sell or deliver a security it would want to hold. The
exercise price of a call option may be below, equal to or above the current
market value of the underlying security at the time the option is written.
Purchasing Put Options
- ----------------------
Although each Fund may invest up to 10% of its total assets in the purchase of
put options, the Funds do not have the current intention of doing so in the
foreseeable future. Each Fund will, at all times during which it holds a put
option, own the security covered by such option. With regard to the writing of
put options, each Fund will limit the aggregate value of the obligations
underlying such put options to 50% of its total net assets. The purchase of the
put on substantially identical securities held will constitute a short sale for
tax purposes, the effect of which is to create short-term capital gain on the
sale of the security and to suspend running of its holding period (and treat it
as commencing on the date of the closing of the short sale) or that of a
security acquired to cover the same if at the time the put was acquired, the
security had not been held for more than one year.
A put option purchased by a Fund gives it the right to sell one of its
securities for an agreed price up to an agreed date. Each Fund intends to
purchase put options in order to protect against a decline in the market value
of the
Page 49
<PAGE>
underlying security below the exercise price less the premium paid for the
option ("protective puts"). The Funds may sell a put option which it has
previously purchased prior to the sale of the securities underlying such option.
Such sale will result in a net gain or loss depending on whether the amount
received on the sale is more or less than the premium and other transaction
costs paid on the put option which is sold.
The Funds may sell a put option purchased on individual portfolio securities.
Additionally, the Funds may enter into closing sale transactions. A closing
sale transaction is one in which the Funds, when they are the holder of an
outstanding option, liquidate their respective position by selling an option of
the same series as the option previously purchased.
Writing Put Options
- -------------------
Although the Funds may also write put options on a secured basis, the Funds do
not have the current intention of doing so in the foreseeable future. Writing
put options on a secured basis means that each Fund will maintain in a
segregated account with its custodian, cash or U.S. Government securities in an
amount not less than the exercise price of the option at all times during the
option period. The amount of cash or U.S. Government securities held in the
segregated account will be adjusted on a daily basis to reflect changes in the
market value of the securities covered by the put option written by the
respective Fund. Secured put options will generally be written in circumstances
where the Advisor wishes to purchase the underlying security for the Funds'
portfolio at a price lower than the current market price of the security.
Following the writing of a put option, the Fund may wish to terminate the
obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Fund may not, however, effect such
a closing transaction after it has been notified of the exercise of the option.
Foreign Currency Transactions
- -----------------------------
Although the Funds value their assets daily in U.S. dollars, they are not
required to convert their respective holdings of foreign currencies to U.S.
dollars on a daily basis. The Funds' foreign currencies generally will be held
as "foreign currency call accounts" at foreign branches of foreign or domestic
banks. These accounts bear interest at negotiated rates and are payable upon
relatively short demand periods. If a bank became insolvent, the Funds could
suffer a loss of some or all of the amounts deposited. The Funds may convert
foreign currency to U.S. dollars from time to time. Although foreign exchange
dealers generally do not charge a stated commission or fee for conversion, the
prices posted generally include a "spread", which is the difference between the
prices at which the dealers are buying and selling foreign currencies.
RISKS RELATED TO LOWER RATED DEBT SECURITIES
--------------------------------------------
Debt securities rated lower than Baa by Moody's Investor's Service or BBB by
Standard & Poor's Corporation (commonly referred to as "junk bonds") are
considered to be of poor standing and predominantly speculative. Such securities
are subject to a substantial degree of credit risk. There can be no assurance
that the Funds would be protected from widespread bond defaults brought about by
a sustained economic downturn or other market and interest rate changes.
The value of lower-rated debt securities will be influenced not only by changing
interest rates, but also by the bond market's perception of credit quality and
the outlook for economic growth. When economic conditions appear to be
deteriorating, low and medium-rated bonds may decline in market value due to
investors' heightened concern over credit quality, regardless of prevailing
interest rates. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the value and liquidity (liquidity
refers to the ease or difficulty which the Fund could sell a security at its
perceived value) of lower-rated securities held by a Fund, especially in a
thinly traded foreign market.
Page 50
<PAGE>
To the extent that an established secondary market does not exist and a
particular lower rated debt security is thinly traded, that security's fair
value may be difficult to determine because of the absence of reliable objective
data. As a result, a Fund's valuation of the security and the price it could
obtain upon its disposition could differ. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of lower-rated securities held by the Funds, especially in
a thinly traded market.
The credit ratings of S&P and Moody's are evaluations of the safety of principal
and interest payments, not market value risk, of lower-rated securities. These
ratings are available as an Appendix to the Matthews Pacific Tiger Fund /
Matthews Asian Convertible Securities Fund prospectus. Also, credit rating
agencies may fail to change timely the credit ratings to reflect subsequent
events. Therefore, in addition to using recognized rating agencies and other
sources, the Advisor may perform its own analysis of issuers in selecting
investments for the Funds. The Advisor's analysis of issuers may include, among
other things, historic and current financial condition and current and
anticipated cash flows.
SPECIAL CONSIDERATIONS AFFECTING THE PACIFIC BASIN
--------------------------------------------------
The Advisor believes that, in contrast to more developed economies, the newly
industrialized countries of the Asia-Pacific region are in an earlier, more
dynamic growth stage of their development. This growth has been characterized
by, among other things, low labor costs, strong demand from export markets for
consumer products, high productivity, long work weeks, pro-business governments
and a strong work ethic. Historically, South Korea, Hong Kong, Singapore and
Taiwan have been examples of these traits. Today, however, the economies of
Malaysia, Indonesia, Thailand and southern China are starting to exhibit many of
these same characteristics and appear to be accelerating.
In terms of Gross National Product, industrial standards and level of education,
South Korea is second only to Japan in Asia. It enjoys the benefits of a
diversified economy with well-developed sectors in electronics, automobiles,
textiles and shoe manufacture, steel and shipbuilding among others. The driving
force behind the economy's dynamic growth has been the planned development of an
export-oriented economy in a vigorously entrepreneurial society.
The Advisor believes that over the next five to fifteen years the growth of the
less developed economies of the Asia-Pacific region will be higher on average
than that of the more developed economies of the United States and Western
Europe, although no assurances can be given that this will happen.
The Tiger economies are separated by different cultures, political systems and
economic policies and are highly diverse in natural resources. Despite these
differences, they share certain characteristics such as the hard work and
enterprise ethic, as well as an emphasis on thrift, which have enabled their
economies to sustain rapid growth since the 1960's. However, some of the Asian
countries in which the Funds may invest may be subject to a greater degree of
political, social or economic instability than in the U.S. or western Europe.
This may result from a number of factors including: authoritarian governments or
military involvement in the political, social or economic arena; ethnic,
religious or racial tensions; popular unrest in connection with demands for
improved political, social or economic conditions; and border disputes with
neighboring countries.
In general, however, overall levels of democracy and stability in Asia are
increasing as a result of rising standards of living and education.
INVESTMENT RESTRICTIONS
-----------------------
The investment restrictions set forth below are fundamental policies and may not
be changed as to a Fund without the approval of a majority of the outstanding
voting shares (as defined in the Act) of the Fund. Unless otherwise indicated,
all percentage limitations listed below apply to the Funds and apply only at the
time of the transaction.
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<PAGE>
Accordingly, if a percentage restriction is adhered to at the time of
investment, a later increase or decrease in the percentage which results from a
relative change in values or from a change in a Fund's total assets will not be
considered a violation.
Except as set forth under "INVESTMENT OBJECTIVES AND POLICIES" and "INVESTMENT
STRATEGIES" in the Prospectus, each Fund may not:
(1) As to 75% of the total assets of Matthews Pacific Tiger Fund and
Matthews Asian Convertible Securities Fund, purchase the securities of
any one issuer (other than securities issued by the U.S. Government or
its agencies or instrumentalities) if immediately after such purchase
more than 5% of the value of the respective Fund's total assets would
be invested in securities of such issuer;
(2) As to the total assets of the Matthews Korea Fund, purchase the
securities of any issuer, if, as a result, more than 25% of the Fund's
total assets would be invested in securities of such issuer.
(3) Purchase or sell real estate (but this restriction shall not prevent
the Funds from investing directly or indirectly in portfolio
instruments secured by real estate or interests therein or acquiring
securities of real estate investment trusts or other issuers that deal
in real estate), real estate limited partnership interests, interests
in oil, gas and/or mineral exploration or development programs or
leases;
(4) Purchase or sell commodities or commodity contracts, except that a
Fund may purchase or sell currencies, may enter into futures contracts
on securities, currencies, or on indexes of such securities or
currencies, or any other financial instruments, and may purchase or
sell options on such futures contracts;
(5) Make investments in securities for the purpose of exercising control;
(6) Purchase the securities of any one issuer if, immediately after such
purchase, a Fund would own more than 10% of the outstanding voting
securities of such issuer;
(7) Sell securities short or purchase securities on margin, except for
such short-term credits as are necessary for the clearance of
transactions. For this purpose, the deposit or payment by a Fund for
initial or maintenance margin in connection with futures contracts is
not considered to be the purchase or sale of a security on margin
(notwithstanding the foregoing, Matthews Korea Fund may make short
sales, but no securities will be sold short if, after effect is given
to any such short sale, the total market value of all securities sold
short would exceed 10% of the value of the Fund's net assets);
(8) Make loans, except that this restriction shall not prohibit (a) the
purchase and holding of debt instruments in accordance with a Fund's
investment objectives and policies, (b) the lending of portfolio
securities, or (c) entry into repurchase agreements with banks or
broker-dealers;
(9) Borrow money or issue senior securities, except that each Fund may
borrow from banks and enter into reverse repurchase agreements for
temporary purposes in amounts up to one-third of the value of its
total assets at the time of such borrowing; or mortgage, pledge, or
hypothecate any assets, except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of the total assets of the Fund at the
time of its borrowing. All borrowings will be done from a bank and
asset coverage of at least 300% is required. A Fund will not purchase
securities when borrowings exceed 5% of that Fund's total assets;
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<PAGE>
(10) Purchase the securities of issuers conducting their principal business
activities in the same industry (other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities)
if immediately after such purchase the value of a Fund's investments
in such industry would exceed 25% of the value of the total assets of
the Fund;
(11) Act as an underwriter of securities, except that, in connection with
the disposition of a security, a Fund may be deemed to be an
"underwriter" as that term is defined in the Securities Act of 1933;
(12) Invest in puts, calls, straddles or combinations thereof except to the
extent disclosed in the Prospectus; and
(13) Invest more than 5% of its total assets in securities of companies
less than three years old. Such three-year period shall include the
operation of any predecessor company or companies.
Although not considered fundamental, in order to comply with certain state "blue
sky" restrictions, the Funds will not invest: (1) more than 5% of their
respective net assets in warrants, including within that amount no more than 2%
in warrants which are not listed on the New York or American Stock Exchanges,
except warrants acquired as a result of its holdings of common stocks; and (2)
purchase or retain the securities of any issuer if, any officer or director of
the Fund or of its investment manager owns beneficially more than 1/2 of 1% of
the outstanding securities of such issuer, and such officers and directors of
the Fund or of its investment manager who own more than 1/2 of 1%, own in the
aggregate, more than 5% of the outstanding securities of such issuer.
TRUSTEES AND OFFICERS
---------------------
Information pertaining to the Trustees and executive officers of the Company is
set forth below.
<TABLE>
<CAPTION>
Aggregate Compensa- Total Compensation
Position(s) Principal Occupation tion From Trust for From Trust and Fund
Name, Address Held with During Past Five Fiscal Year Ended Complex Paid to
and Age Registrant Years Aug 31, 19956 Trustees
- ----------------- ---------- --------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
G. Paul Matthews* 40 Chairman Chief Investment
655 Montgomery Street of the Officer of Matthews N/A N/A
Suite 1438 Board and International Cap.
San Francisco, CA 94111 President Mgmt. since 1991
President GT Cap.
Holdings
John H. Dracott* 68 Trustee Vice-President,
655 Montgomery Street Secretary and Trustee N/A N/A
Suite 1438 International mutual
San Francisco, CA 94111 fund consultant since
1991. President,
Tyndall Distributors.
</TABLE>
Page 53
<PAGE>
<TABLE>
<CAPTION>
Aggregate Compensa- Total Compensation
Position(s) Principal Occupation tion From Trust for From Trust and Fund
Name, Address Held with During Past Five Fiscal Year Ended Complex Paid to
and Age Registrant Years Aug 31, 19956 Trustees
- ----------------- ---------- --------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Richard K. Lyons 35 Trustee Professor
University of California Haas School of $5,000 $5,000
350 Barrows Hill Business since 1995,
Berkeley, CA 94720 Assistant Professor
1993-1995. Associate
Professor, Grad School
of Business & School
Int'l & Public Affairs,
Columbia Univ
Assistant Professor
Robert K. Connolly 64 Trustee Retired; Until Aug.
P.O. Box 94 1990. Institutional $5,000 $5,000
Sonoma, CA 95476 Sales Manager and
Securities Analysis for
Barrington Research
Associates.
Dong Wook Park* 49 Trustee Director. Portfolio
Daewoo Capital Mgmt Co. Ltd. Mgr. & head of the N/A N/A
Daewoo Securities Building, 34-3 International Dept. of
Yoido-dong, Yungdungpo-go, Daewoo.
Seoul, Korea
David FitzWilliam-Lay 65 Director, USDC In-
26 Chalfont House, vestment Trust PLC $1,250 $1,250
19 Chesham Street & Berry Starquest
London SWIX 8NG PLC. Retured in 1993
United Kingdom after 3 1/2 yrs. as
Chairman of GT
Mgmt. PLC
Norman Berryesa 68 Trustee; Independent
100 Bush Street Contractor, Emmett $3,000 $3,000
Suite 1000 Larkin Co., Inc.,
San Francisco, CA 94109 since 1983; President
& CEO of Gallegoes
Institutional Investors
Inc. from 1990 to
1994.
</TABLE>
* These Trustees and officers are considered "interested persons" of the Funds
as defined under the Act.
The Trustees of the Funds receive a retainer of $4,000 per year, plus $250 per
meeting and expenses for each meeting of the Board of Trustees they attend.
However, no officer or employee of Matthews International Capital Management,
LLC receives any compensation from the Funds for acting as a Trustee of the
Funds. The officers of the Funds receive no compensation directly from the Funds
for performing the duties of their offices.
Set forth below are the total fees which were paid to each of the Trustees
who are not "interested persons" during the fiscal period ended October 31,
1996.
<TABLE>
<CAPTION>
Trustees Aggregate Fees Paid by the Trust
-------- --------------------------------
<S> <C>
Robert K. Connolly $5,000
Richard K. Lyons $5,000
David Fitz-William Lay $1,250
Norman Berryessa $2,500
</TABLE>
Page 54
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
---------------------------------------------------
As of December 9, 1996, the Trustees and officers as a group owned less than 1%
of the outstanding shares of the Fund.
As of December 9, 1996, the following persons owned of record or beneficially
more than 5% of the outstanding voting shares of the:
<TABLE>
<CAPTION>
MATTHEWS PACIFIC TIGER FUND
Name & Address of Beneficial Owners Number of Shares Percentage
- ----------------------------------- ---------------- ----------
<S> <C> <C>
Alan Moore 197,664.960 8.98
P.O. Box 740725
Dallas, TX 75374
</TABLE>
<TABLE>
<CAPTION>
MATTHEWS KOREA FUND
Name & Address of Beneficial Owners Number of Shares Percentage
- ----------------------------------- ---------------- ----------
<S> <C> <C>
Daewoo Securities America Ltd 32,050.312 6.97
Attn: Jennifer Choi
101 E. 52nd Street, 28th Floor
New York, NY 10022
Donaldson Lufkin Jenrette 374,056.097 6.74
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
--------------------------------------
Investment Advisory Agreement
- -----------------------------
The advisory services provided by Matthews International Capital Management, LLC
(the "Advisor"), and the fees received by it for such services, are described in
each Prospectus. As stated in each Prospectus, the Advisor may from time to time
voluntarily waive its advisory fees with respect to any Fund. In addition, if
the total expenses
Page 55
<PAGE>
borne by any Fund in any fiscal year exceed the expense limitations imposed by
applicable state securities regulations, the Advisor will bear the amount of
such excess to the extent required by such regulations. The Advisor has agreed
to waive its advisory fee in an amount equal to the total expenses of a Fund for
any fiscal year which exceeds the permissible limits applicable to that Fund in
any state in which its shares are then qualified for sale.
Under the respective Investment Advisory Agreements, the Advisor is not liable
for any error of judgment or mistake of law or for any loss suffered by the
Company or a Fund in connection with the performance of the Advisory Agreement,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard of its
duties and obligations thereunder.
Under its terms, the Advisory Agreements will continue from year to year
thereafter, provided continuance of the Advisory Agreement is approved at least
annually by the vote of the holders of at least a majority of the outstanding
shares of the respective Fund, or by the Trustees of the respective Fund. The
Advisory Agreements are terminable with respect to a Fund by vote of the Board
of Trustees or by the holders of a majority of the outstanding voting securities
of the Fund, at any time without penalty, on 60 days' written notice to the
Advisor. The Advisor may also terminate its advisory relationship with respect
to a Fund on 60 days' written notice to the Company. The Advisory Agreements
terminate automatically in the event of its assignment.
Under the respective Advisory Agreement, each Fund pays the following expenses:
(1) the fees and expenses of the Company's disinterested directors; (2) the
salaries and expenses of any of the Company's officers or employees who are not
affiliated with the Advisor; (3) interest expenses; (4) taxes and governmental
fees; (5) brokerage commissions and other expenses incurred in acquiring or
disposing of portfolio securities; (6) the expenses of registering and
qualifying shares for sale with the SEC and with various state securities
commissions; (7) accounting and legal costs; (8) insurance premiums; (9) fees
and expenses of the Company's custodian, Administrator and Transfer Agent and
any related services; (10) expenses of obtaining quotations of the Funds'
portfolio securities and of pricing the Funds' shares; (11) expenses of
maintaining the Company's legal existence and of shareholders' meetings; (12)
expenses of preparation and distribution to existing shareholders of reports,
proxies and prospectuses; and (13) fees and expenses of membership in industry
organizations.
The ratio of each Fund's expenses to its relative net assets can be expected to
be higher than the expense ratios of funds investing solely in domestic
securities, since the cost of maintaining the custody of foreign securities and
the rate of investment management fees paid by each Fund generally are higher
than the comparable expenses of such other funds.
General expenses of the Company (such as costs of maintaining corporate
existence, legal fees, insurance, etc.) and expenses shares by the Funds will be
allocated among the Funds on a basis deemed fair and equitable, which may be
based on the relative net assets of the Funds or the nature of the services
performed and relative applicability to each Fund. Expenses which relate
exclusively to a particular Fund, such as certain registration fees, brokerage
commissions and other portfolio expenses, will be borne directly by that Fund.
During the fiscal year ended August 31, 1996; Matthews Pacific Tiger Fund paid
the Advisor fees aggregating $80,273, Matthews Asian Convertible Securities Fund
paid the Advisor fees aggregating $21,475, and Matthews Korea Fund paid the
Advisor fees aggregating $15,406.
Korean Research and Advisory Agreement
- --------------------------------------
Pursuant to a Research and Advisory Agreement ("Research Agreement") between
Matthews International Capital Management, LLC and Daewoo Capital Management
Co., Ltd. (the "Korean Advisor"), the Korean Advisor provides an investment
program for Matthews Korea Fund, including investment research and the
determination from time to time of the securities that will be purchased and
sold by the Fund, subject to the supervision of the Advisor and
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<PAGE>
the Board of Trustees of the Company. As compensation for its services, the
Korean Advisor receives from the Advisor an annual fee of 0.50%.
Under the Research Agreement, the Korean Advisor is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or the Trust in
connection with the performance of the Research Agreement, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard of its duties and
obligations thereunder.
The Research Agreement is initially effective for two years. The Agreement may
be renewed by the parties after its initial term only so long as such renewal
and continuance are specifically approved at least annually by the Board of
Trustees or by a vote of a majority of the outstanding securities of the Fund,
and only if the terms of the renewal thereof have been approved by the vote of
the majority of the Trustees of the Company who are not parties thereto or
interested persons of any such party, cast in person at the meeting called for
the purpose of voting on such approval. The Research Agreement will terminate
automatically upon termination of the investment advisory agreement between the
Advisor and Matthews Korea Fund (accompanied by simultaneous notice to the
Korean Advisor) or upon sixty days' written notice to the Korean Advisor that
such investment advisory agreement has been terminated by the Trustees or by the
holder of a majority of the outstanding voting securities of the Fund. The
Research Agreement will terminate automatically in the event of its assignment.
The Administrator
- -----------------
FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903 (the "Administrator"), provides certain administrative services to
the Company pursuant to an Administrative Services Agreement. The administrator
receives a fee at the annual rate of 0.15% of the first $50 million of average
daily net assets of the Company, 0.10% of the next $50 million of such average
daily net assets, and 0.05% on assets in excess of $100 million.
Under the Administrative Services Agreement, the Administrator: (1) coordinates
with the Custodian and Transfer Agent and monitors the services they provide to
the Funds; (2) coordinates with and monitors any other third parties furnishing
services to the Funds; (3) provides the Funds with necessary office space,
telephones and other communications facilities and personnel competent to
perform administrative and clerical functions; (4) supervises the maintenance by
third parties of such books and records of the Funds as may be required by
applicable federal or state law; (5) prepares or supervises the preparation by
third parties of all federal, state and local tax returns and reports of the
Funds required by applicable law; (6) prepares and, after approval by the Funds,
files and arranges for the distribution of proxy materials and periodic reports
to shareholders of the Funds as required by applicable law; (7) prepares and,
after approval by the Funds, arranges for the filing of such registration
statements and other documents with the SEC and other federal and state
regulatory authorities as may be required by applicable law; (8) reviews and
submits to the officers of the Company for their approval invoices or other
requests for payment of the Funds' expenses and instructs the Custodian to issue
checks in payment thereof; and (9) takes such other action with respect to the
Company or the Funds as may be necessary in the opinion of the Administrator to
perform its duties under the agreement.
For the fiscal year ending August 31, 1996, the Administrator received
administration fees of $29,671, $28,154 and $27,558 from Matthews Pacific Tiger
Fund, Matthews Asian Convertible Securities Fund and Matthews Korea Fund,
respectively.
The Underwriter
- ---------------
FPS Broker Services, Inc. ("FPSB"), 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903, acts as an underwriter of the Funds' shares for the
purpose of facilitating the registration of shares of the Funds under state
securities laws and to assist in sales of shares pursuant to an underwriting
agreement (the "Underwriting Agreement") approved by the Company's Trustees.
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In this regard, FPSB has agreed at its own expense to qualify as a broker-dealer
under all applicable federal or state laws in those states which the Company
shall from time to time identify to FPSB as states in which it wishes to offer
its shares for sale, in order that state registrations may be maintained for the
Funds.
FPSB is a broker-dealer registered with the SEC and a member in good standing of
the National Association of Securities Dealers, Inc.
The Underwriting Agreement may be terminated by either party upon 60 days' prior
written notice to the other party, and if so terminated, the pro-rated portion
of the unearned fee will be returned to the Advisor.
PORTFOLIO TRANSACTIONS AND BROKERAGE
------------------------------------
The Advisor is responsible for decisions to buy and sell securities for the
Funds and for the placement of its portfolio business and the negotiation of
commissions, if any, paid on such transactions. Fixed-income securities and
many equity securities in which the Funds invest are traded in over-the-counter
markets. These securities are generally traded on a net basis with dealers
acting as principal for their own accounts without a stated commission. In
over-the-counter transactions, orders are placed directly with a principal
market-maker unless a better price and execution can be obtained by using a
broker. Brokerage commissions are paid on transactions in listed securities,
futures contracts and options thereon.
The Advisor is responsible for effecting portfolio transactions and will do so
in a manner deemed fair and reasonable to the Funds. The primary consideration
in all portfolio transactions will be prompt execution of orders in an efficient
manner at the most favorable price. In selecting and monitoring broker-dealers
and negotiating commissions, the Advisor may consider a number of factors,
including, for example, net price, reputation, financial strength and stability,
efficiency of execution and error resolution, block trading and block
positioning capabilities, willingness to execute related or unrelated difficult
transactions in the future, order of call, offering to the Advisor on-line
access to computerized data regarding the Funds' accounts, and other matters
involved in the receipt of brokerage services generally. The Advisor may also
purchase from a broker or allow a broker to pay for certain research services,
economic and market information, portfolio strategy advice, industry and company
comments, technical data, recommendations, general reports, consultations,
performance measurement data and on-line pricing and news service and periodical
subscription fees. The Advisor may pay a brokerage commission in excess of that
which another broker\dealer might charge for effecting the same transaction in
recognition of the value of these research services. In such a case, however,
the Advisor will determine in good faith that such commission is reasonable in
relation to the value of brokerage and research provided by such broker/dealer,
viewed in terms of either the specific transaction or the Advisor's overall
responsibilities to the portfolios over which Applicant exercises investment
authority. Research services furnished by brokers through whom the Advisor
intends to effect securities transactions may be used in servicing all of the
Advisor's accounts; not all of such services may be used by the Advisor in
connection with accounts which paid commissions to the broker providing such
services. In conducting all of its soft dollar relationships, the Advisor will
seek to take advantage of the safe harbor provided by Section 28(e) of the
Securities Exchange Act of 1934, as amended.
The Advisor will attempt to equitably allocate portfolio transactions among the
Funds and other accounts whenever concurrent decisions are made to purchase or
sell securities by the Funds and other accounts. In making such allocations
between the Funds and others, the main factors to be considered are the
respective investment objectives, the relative size of portfolio holdings of the
same or comparable securities, the availability of cash for investment, the size
of investment commitments generally held, and the opinions of the persons
responsible for recommending investments to the Funds and the others. In some
cases, this procedure could have an adverse effect on the Fund. In the opinion
of the Advisor, however, the results of such procedures will, on the whole, be
in the best interests of each of the clients.
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For the fiscal year ended August 31, 1996, the investment operations brokerage
commissions paid by Matthews Pacific Tiger Fund, Matthews Asian Convertible
Securities Fund and Matthews Korea Fund were , $204,164.35, $2,686.68 and
$31,763.53 respectively.
PORTFOLIO TURNOVER
------------------
The portfolio turnover rate for the Funds is calculated by dividing the lesser
of purchases or sales of portfolio investments for the reporting period by the
monthly average value of the portfolio investments owned during the reporting
period. The calculation excludes all securities, including options, whose
maturities or expiration dates at the time of acquisition are one year or less.
Portfolio turnover may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements which enable the Fund to receive favorable tax
treatment.
The portfolio turnover rates for the fiscal year ended August 31, 1996 were
124.69%, 88.16%, 139.71% for Matthews Pacific Tiger Fund, Matthews Asian
Convertible Fund and Matthews Korea Fund. The rate of portfolio turnover will
not be a limiting factor in making portfolio decisions. A high rate of portfolio
turnover may result in the realization of substantial capital gains and involves
correspondingly greater transaction costs.
DETERMINATION OF NET ASSET VALUE
--------------------------------
A more complete discussion of the Funds' determination of net asset value is
contained in each Fund's Prospectus. Generally, the net asset value of a Fund
will be determined as of the close of trading on each day the New York Stock
Exchange is open for trading. The Funds do not determine net asset value on
days that the New York Stock Exchange is closed and at other times described in
the respective Prospectus. The New York Stock Exchange is closed on New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. Additionally, if any of the aforementioned
holidays falls on a Saturday, the New York Stock Exchange will not be open for
trading on the preceding Friday and when such holiday falls on a Sunday, the New
York Stock Exchange will not be open for trading on the succeeding Monday,
unless unusual business conditions exist, such as the ending of a monthly or the
yearly accounting period.
Trading in securities on Asian and Pacific Basin securities exchanges and over-
the-counter markets is normally completed well before the close of the business
day in New York. In addition, Far Eastern securities trading may not take place
on all business days in New York. Furthermore, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days which are
not business days the New York Stock Exchange is open and therefore the Fund's
respective net asset values are not calculated.
The calculation of the Funds' net asset values may not take place
contemporaneously with the determination of the prices of portfolio securities
held by the Funds. Events affecting the values of portfolio securities that
occur between the time their prices are determined and the close of the New York
Stock Exchange will not be reflected in the Funds' calculation of net asset
value unless the Board of Trustees deems that the particular event would
materially affect the net asset value, in which case an adjustment will be made.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value of the Funds'
shares into U.S. dollars at the prevailing market rates. The fair value of all
other assets is added to the value of securities to arrive at the total assets.
Portfolio securities for Matthews Korea Fund which are traded on the Korean
exchange are valued at the most recent sale price reported on the exchange. If
no sale occurred, the security is then valued at the calculated mean between the
most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation is used. All other securities are
valued (and would be considered illiquid securities and subject to the 10%
limitation) at fair value as determined in good faith by the Board of Trustees
including certain
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<PAGE>
investments in Korean equity securities that have met the limit for aggregate
foreign ownership and for which premiums to the local stock exchange prices are
offered by prospective foreign investors.
TAXES
-----
In General
- ----------
Each Fund intends to qualify each year as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In
order to so qualify for any taxable year, a fund must, among other things, (i)
derive at least 90% of its gross income from dividends, interest, payments with
respect to certain securities loans, gains from the sale of securities or
foreign currencies, or other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; (ii) derive less than 30% of
its gross income from gains from the sale or other disposition of securities or
certain futures and options thereon held for less than three months; (iii)
distribute at least 90% of its dividend, interest and certain other taxable
income each year; and (iv) at the end of each fiscal quarter maintain at least
50% of the value of its total assets in cash, government securities, securities
of other regulated investment companies, and other securities of issuers which
represent, with respect to each issuer, no more than 5% of the value of a fund's
total assets and 10% of the outstanding voting securities of such issuer, and
have no more than 25% of its assets invested in the securities (other than those
of the government or other regulated investment companies) of any one issuer or
of two or more issuers which the fund controls and which are engaged in the
same, similar or related trades and businesses.
To the extent the Funds qualify for treatment as a regulated investment company,
they will not be subject to federal income tax on income paid to shareholders in
the form of dividends or capital gains distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any, of the
Funds' "required distributions" over actual distributions in any calendar year.
Generally, the "required distribution" is 98% of a fund's ordinary income for
the calendar year plus 98% of its capital gain net income recognized during the
one-year period ending on October 31 plus undistributed amounts from prior
years. The Funds intend to make distributions sufficient to avoid imposition of
the excise tax. For a distribution to qualify as such with respect to a
calendar year under the foregoing rules, it must be declared by the Funds during
October, November or December to shareholders of record during such month and
paid by January 31 of the following year. Such distributions will be taxable in
the year they are declared, rather than the year in which they are received.
Shareholders will be subject to federal income taxes on distributions made by
the Funds whether received in cash or additional shares of the Funds.
Distributions of net investment income and net short-term capital gains, if any,
will be taxable to shareholders as ordinary income. Distributions of net long-
term capital gains, if any, will be taxable to shareholders as long-term capital
gains, without regard to how long a shareholder has held shares of the Fund. A
loss on the sale of shares held for six months or less will be treated as a
long-term capital loss to the extent of any long-term capital gain dividend paid
to the shareholder with respect to such shares. Dividends paid by the Funds may
qualify in part for the 70% dividends received deduction for corporations,
provided however, that those shares have been held for at least 45 days.
The Funds will notify shareholders each year of the amount of dividends and
distributions, including the amount of any distribution of long-term capital
gains, and the portion of its dividends which qualify for the 70% deduction.
Foreign Taxes
- -------------
Foreign governments may withhold taxes from dividends or interest paid with
respect to foreign securities typically at a rate between 10% and 35%. Tax
conversions between certain countries and the United States may reduce or
eliminate such taxes. The Funds intend to elect to pass-through foreign taxes
paid in order for a shareholder to take a credit or deduction if, at the close
of its fiscal year, more than 50% of a Fund's total assets are invested in
securities of foreign issuers.
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Under the United States-Korea income tax treaty, as presently in effect, the
government of Korea imposes a nonrecoverable withholding tax and resident tax
aggregating 16.125% on dividends and 12.9% on interest paid to Matthews Korea
Fund by Korean issuers. Under United States-Korea income tax treaty, there is
no Korean withholding tax on realized capital gains.
Options, Futures and Foreign Currency Transactions
- --------------------------------------------------
When the Funds write a call, or purchase a put option, an amount equal to the
premium received or paid by them is included in the Funds' accounts as an asset
and as an equivalent liability. In writing a call, the amount of the liability
is subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the last sale
price on the principal exchange on which such option is traded or, in the
absence of a sale, the mean between the last bid and asked prices. If an option
which a Fund has written expires on its stipulated expiration date, the Fund
recognizes a short-term capital gain. If the Fund enters into a closing
purchase transaction with respect to an option which the Fund has written, the
Fund realizes a short-term gain (or loss if the cost of the closing transaction
exceeds the premium received when the option was sold) without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a call option which the Fund has written is
exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received.
The premium paid by the Fund for the purchase of a put option is recorded in the
Fund's assets and liabilities as an investment and subsequently adjusted daily
to the current market value of the option. For example, if the current market
value of the option exceeds the premium paid, the excess would be unrealized
appreciation and, conversely, if the premium exceeds the current market value,
such excess would be unrealized depreciation. The current market value of a
purchased option is the last sale price on the principal exchange on which such
option is traded or, in the absence of a sale, the mean between the last bid and
asked prices. If an option which the Fund has purchased expires on the
stipulated expiration date, the Fund realizes a short-term or long-term capital
loss for federal income tax purposes in the amount of the cost of the option.
If the Fund exercises a put option, it realizes a capital gain or loss (long-
term or short-term, depending on the holding period of the underlying security)
from the sale which will be decreased by the premium originally paid.
Accounting for options on certain stock indices will be in accordance with
generally accepted accounting principles. The amount of any realized gain or
loss on closing out such a position will result in a realized gain or loss for
tax purposes. Such options held by a Fund at the end of each fiscal year on a
broad-based stock index will be required to be "marked-to-market" for federal
income tax purposes. Sixty percent of any net gain or loss recognized on such
deemed sales or on any actual sales will be treated as long-term capital gain or
loss, and the remainder will be treated as short-term capital gain or loss
("60/40 gain or loss"). Certain options, futures contracts and options on
futures contracts utilized by the Fund are "Section 1256 contracts." Any gains
or losses on Section 1256 contracts held by the Fund at the end of each taxable
year (and on October 31 of each year for purposes of the 4% excise tax) are
"marked-to-market" with the result that unrealized gains or losses are treated
as though they were realized and the resulting gain or loss is treated as a
60/40 gain or loss.
The above discussion and the related discussion in the Prospectus are not
intended to be complete discussions of all applicable federal tax consequences
of an investment in the Funds. The law firm of Shartsis, Friese & Ginsburg has
expressed no opinion in respect thereof. Dividends and distributions also may
be subject to state and local taxes. Shareholders are urged to consult their
tax advisors regarding specific questions as to federal, state and local taxes.
The foregoing discussion relates solely to U.S. federal income tax law. Non-
U.S. investors should consult their tax advisors concerning the tax consequences
of ownership of shares of the Funds, including the possibility that
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<PAGE>
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).
PERFORMANCE INFORMATION
-----------------------
In General
- ----------
From time to time, the Company may include general comparative information, such
as statistical data regarding inflation, securities indices or the features or
performance of alternative investments, in advertisements, sales literature and
reports to shareholders. The Company may also include calculations, such as
hypothetical compounding examples or tax-free compounding examples, which
describe hypothetical investment results in such communications. Such
performance examples will be based on an express set of assumptions and are not
indicative of the performance of any Fund.
From time to time, the yield and total return of a Fund may be quoted in
advertisements, shareholder reports or other communications to shareholders.
Total Return Calculation
- ------------------------
The Funds compute their average annual total return by determining the average
annual compounded rate of return during specified periods that equate the
initial amount invested to the ending redeemable value of such investment. This
is done by dividing the ending redeemable value of a hypothetical $1,000 initial
payment by $1,000 and raising the quotient to a power equal to one divided by
the number of years (or fractional portion thereof) covered by the computation
and subtracting one from the result. This calculation can be expressed as
follows:
ERV = P (1 + T)/n/
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in
terms of years.
T = average annual total return.
The Funds compute their aggregate total return by determining the aggregate
compounded rate of return during specified period that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
Aggregate Total Return = [ ERV - 1 ]
---
P
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
Based upon the foregoing calculations, the average annual total return for:
Matthews Pacific Tiger Fund, Matthews Asian Convertible Securities Fund and
Matthews Korea Fund for the fiscal year end August 31, 1996 were 10.64%, 10.24%
and (20.11%) respectively.
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<PAGE>
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
Since performance will fluctuate, performance data for the Funds should not be
used to compare an investment in the Funds' shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed-upon
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.
Yield Calculation
- -----------------
Yield, in its simplest form, is the ratio of income per share derived from the
Fund's investments to a current maximum offering price expressed in terms of
percent. The yield is quoted on the basis of earnings after expenses have been
deducted. The yield of a Fund is calculated by dividing the net investment
income per share earned during a 30-day (or one month) period by the maximum
offering price per share on the last day of the period and annualizing the
result. The Funds' net investment income per share earned during the period is
based on the average daily number of shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period minus expenses accrued for the period, net of reimbursements. This
calculation can be expressed as follows:
6
YIELD = 2 [ ( a - b + 1) - 1 ]
-------
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = maximum offering price per share on the last day of the period.
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by a
Fund is recognized by accruing 1/360 of the stated dividend rate of the security
each day that the security is in the Fund. Except as noted below, interest
earned on any debt obligations held by the Fund is calculated by computing the
yield to maturity of each obligation held by that Fund based on the market value
of the obligation (including actual accrued interest) at the close of business
on the last business day of the month, the purchase price (plus actual accrued
interest) and dividing the result by 360 and multiplying the quotient by the
market value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is held by that Fund. For purposes of this
calculation, it is assumed that each month contains 30 days. The date on which
the obligation reasonably may be expected to be called or, if none, the maturity
date. With respect to debt obligations purchased at a discount or premium, the
formula generally calls for amortization of the discount or premium. The
amortization schedule will be adjusted monthly to reflect changes in the market
values of such debt obligations.
Expenses accrued for the period (variable "b" in the formula) include all
recurring fees charged by a Fund to all shareholder accounts in proportion to
the length of the base period and the Fund's mean (or median) account size.
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<PAGE>
Undeclared earned income will be subtracted from the offering price per capital
share (variable "d" in the formula).
Performance and Advertisements
- ------------------------------
From time to time, in marketing and other fund literature, the Funds'
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, may be cited. Lipper performance figures are
based on changes in net asset value, with all income and capital gains dividends
reinvested. Such calculations do not include the effect of any sales charges
imposed by other funds. The Funds will be compared to Lipper's appropriate fund
category, that is, by fund objective and portfolio holdings. The Funds'
performance may also be compared to the average performance of its Lipper
category.
The Funds' performance may also be compared to the performance of other mutual
funds by Morningstar, Inc. which ranks funds on the basis of historical risk and
total return. Morningstar's rankings range from five stars (highest) to one
star (lowest) and represent Morningstar's assessment of the historical risk
level and total return of a fund as a weighted average for three, five and ten
year periods. Ranks are not absolute or necessarily predictive of future
performance.
The Funds may compare their performance to a wide variety of indices including
the Morgan Stanley Pacific Basin Index (excluding Japan) and the Peregrine Asia
100 Index. The Peregrine Asia 100 Index tracks stocks representative of foreign
interest in eight markets: Hong Kong, Singapore, Malaysia, Indonesia, Korea and
Taiwan. Coverage by the 118 constituent stocks is over 50 percent of total
market capitalization. The index is expressed in US dollars to provide a
benchmark for US dollar denominated investors.
In assessing such comparisons of yield, return, or volatility, an investor
should keep in mind that the composition of the investments in the reported
indices and averages is not identical to those of the Funds, that the averages
are generally unmanaged, and that the items included in the calculations of such
averages may not be identical to the formula used by a Fund to calculate its
figures.
Because the Funds' investments primarily are denominated in foreign currencies,
the strength or weakness of the U.S. dollar as against these currencies may
account for part of the Funds' investment performance. Historical information
regarding the value of the dollar versus foreign currencies may be used from
time to time in advertisements concerning the Funds. Marketing materials may
cite country and economic statistics and historical stock market performance for
any of the countries in which the Funds invest. Sources for such statistics may
include official publications of various foreign governments, exchanges, or
investment research firms.
OTHER INFORMATION
-----------------
Statements contained in the Prospectuses or in this Statement of Additional
Information as to the contents of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectuses and this Statement of Additional Information
forms a part. Each such statement is qualified in all respects by such
reference.
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Custodian
- ---------
The Bank of New York, 90 Washington Street, New York, New York 10286 is
custodian of the Company's assets pursuant to a custodian agreement. Under the
custodian agreement, The Bank of New York (i) maintains a separate account or
accounts in the name of each Fund (ii) holds and transfers portfolio securities
on account of each Fund, (iii) accepts receipts and makes disbursements of money
on behalf of each Fund, (iv) collects and receives all income and other payments
and distributions on account of each Fund's securities and (v) makes periodic
reports to the Board of Trustees concerning each Fund's operations.
Independent Accountants
- -----------------------
Ernst & Young LLP, 555 California Street, Suite 1700, San Francisco, CA 94101
have been selected as the independent accountants for the Company. Ernst & Young
LLP provide audit services and assistance and consultation with respect to
regulatory filings with the SEC. The books of each Fund will be audited at least
once each year by Ernst & Young LLP.
Reports to Shareholders
- -----------------------
Shareholders will receive unaudited semi-annual reports describing the Funds'
investment operations and annual financial statements audited by independent
certified public accountants. Inquiries regarding the Funds may be directed to
the Advisor at (800) 789-ASIA.
Financial Statements
- --------------------
The Funds' financial statements, including the notes thereto, dated as of
August 31, 1996, are incorporated by reference from the Funds' 1996 Annual
Report to Shareholders, as filed with the Securities and Exchange Commission on
form N-30D.
Page 65
<PAGE>
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<PAGE>
MATTHEWS INTERNATIONAL FUNDS
----------------------------
Form N-1A
Part C - Other Information
Item 24. Financial Statements and Exhibits
- ------- ---------------------------------
(a) Financial Statements Included in Part A:
Financial Highlights
Financial Statements Included in Part B:
From Annual Report to Shareowners dated August 31, 1996
(b) Exhibits filed pursuant to Form N-1A:
(1) Charter. Trust Instrument and Certificate of Trust are filed
herewith.
(2) By-Laws. By-Laws are filed herewith.
(3) Voting Trust Agreement. Not Applicable.
(4) Instruments defining the rights of holders of the securities.
Not Applicable. Registrant proposes to maintain investments as
non-certificated book entry shares
(5) Investment Advisory Contracts.
(a) Investment Advisory Agreement for Matthews Pacific Tiger
Fund with Matthews International Capital Management,
effective September 12, 1994, filed herewith.
(b) Investment Advisory Agreement for Matthews Asian
Convertible Securities Fund with Matthews International
Capital Management, effective September 12, 1994, filed
herewith.
(c) Investment Advisory Agreement for Matthews Korea Fund
with Matthews International Capital Management, effective
December 13, 1994, filed herewith.
(d) Research and Advisory Agreement between Matthews
International Capital Management, Inc. and Daewoo Capital
Management Co., Ltd., effective December 13, 1994, filed
herewith.
(6) Underwriting Contracts:
(a) Underwriting Agreement for Matthews International Funds
with FPS Broker Services, Inc., effective August 12,
1994, filed herewith.
(b) Amended Underwriting Agreement adding Matthews Korea
Fund, effective December 13, 1994, filed herewith.
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<PAGE>
(7) Bonus, profit sharing, pension or other similar contracts.
Not Applicable.
(8) Custodian Contracts:
(a) Custody Administration Agreement for Matthews
International Funds with FPS Services, Inc., effective
August 12, 1994, filed herewith.
(b) Amended Custody Agreement adding Matthews Korea Fund,
effective December 13, 1994, filed herewith.
(c) Custodial Services Agreement for Matthews International
Funds with Citibank, N.A., effective August 1994, is
incorporated herein by reference to and was filed
electronically with Post-Effective Amendment No. 4 on
December 29, 1995.
(d) Custodial Services Agreement for Matthews International
Funds on behalf of Matthews Korea Fund with Citibank,
N.A., effective October 15, 1994 is incorporated herein
by reference to and was filed electronically with Post-
Effective Amendment No. 4 on December 29, 1995.
(e) Custody Agreement with The Bank of New York,
effective June 1, 1995 is incorporated herein by
reference to and was electronically filed with Post-
Effective Amendment No. 4 on December 29, 1995.
(9) Other material contracts not made in the ordinary course of
business.
(a)(i) Transfer Agent Services Agreement for Matthews Inter-
national Funds with FPS Services, Inc., effective
August 12, 1994, filed herewith.
(ii) Amended Transfer Agent Services Agreement adding
Matthews Korea Fund, effective December 13, 1994, filed
herewith.
(b)(i) Administration Agreement for Matthews International
Funds with FPS Services, Inc., effective August 12,
1994, filed herewith.
(ii) Amended Administration Agreement adding Matthews
Korea Fund, effective December 13, 1994, filed
herewith.
(c)(i) Accounting Services Agreement for Matthews
International Funds with FPS Services, Inc., effective
August 12, 1994, filed herewith.
(ii) Amended Accounting Services Agreement adding Matthews
Korea Fund, effective December 13, 1994, filed
herewith.
(10) (a) Consent of Counsel. Not Applicable.
(b) See Opinion of Counsel filed as attachment to
Registrant's Rule 24f-2 Notice filed October 29, 1996,
and incorporated herein by reference.
(11) Copies of any other opinions, appraisals or rulings.
(a) Consent of Independent Auditors. Filed herewith.
Page 68
<PAGE>
(12) All financial statements omitted from Item 23. Not
Applicable.
(13) Agreements or understandings made in consideration for
providing the initial capital between or among the Registrant.
Not Applicable.
(14) Model plan used in establishment of any retirement plan in
conjunction with which Registrant offers its securities.
Not Applicable.
(15) Plan entered into by Registrant pursuant to Rule 12b-1.
Not Applicable.
(16) Schedule for Computation of Performance Quotations.
Not Applicable.
(17) Electronic Filers. Financial Data Schedules filed herewith.
(18) Powers of attorney for: (a) G. Paul Matthews; (b) John
Dracott; (c) Robert K. Connolly; and (e) Richard K. Lyons.
Filed herewith.
Item 25. Persons Controlled by or under Common Control with Registrant
- -------- -------------------------------------------------------------
None
Item 26. Number of Holders of Securities as of December 9, 1996:
- -------- -------------------------------------------------------
Matthews Pacific Tiger Fund 150
Matthews Asian Convertible Securities Fund 68
Matthews Korea Fund 78
Item 27. Indemnification
- -------- ---------------
Section 10.2 of the Registrant's Trust Instrument provides as
follows:
10.2 Indemnification. The Trust shall indemnify each of
----------------
its Trustees against all liabilities and expenses (including
amounts paid in satisfaction of judgments, in compromise, as fines
and penalties, and as counsel fees) reasonably incurred by him in
connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be
involved or with which he may be threatened, while as a Trustee or
thereafter, by reason of his being or having been such a Trustee
except with respect to any matter as to which he shall have been
------
adjudicated to have acted in bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties, provided that as to
--------
any matter disposed of by a compromise payment by such person,
pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be provided
unless the Trust shall have received a written opinion from
independent legal counsel approved by the Trustees to the effect
that if either the matter of willful misfeasance, gross negligence
or reckless disregard of duty, or the matter of bad faith had been
adjudicated, it would in the opinion of such counsel have been
adjudicated in favor of such person. The rights accruing to any
person under these provisions shall not exclude any other right to
which he may be lawfully entitled, provided that no person may
--------
satisfy any right of indemnity or reimbursement hereunder except
out of the property of the Trust. The Trustees may make advance
payments in connection with the indemnification under this Section
10.2, provided that the indemnified person shall have given a
--------
written undertaking to
Page 69
<PAGE>
reimburse the Trust in the event it is subsequently determined that
he is not entitled to such indemnification.
The Trust shall indemnify officers, and shall have the power to
indemnify representatives and employees of the Trust, to the same
extent that Trustees are entitled to indemnification pursuant to
this Section 10.2
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the SEC such indemnification is against public policy as
expressed in that Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid
by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted
by such trustee, officer or controlling person in connection with
the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in that Act and will be governed by the final
adjudication of such issue.
Section 10.3 of the Registrant's Trust Instrument, filed herein as
Exhibit 1, also provides for the indemnification of shareholders of
the Registrant. Section 10.3 states as follows:
10.3 Shareholders. In case any Shareholder or former Shareholder
------------
of any Series shall be held to be personally liable solely by
reason of his being or having been a shareholder of such Series and
not because of his acts or omissions or for some other reason, the
Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or, in the case of a
corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against
all loss and expense arising from such liability. The Trust, on
behalf of the affected Series, shall, upon request by the
Shareholder, assume the defense of any claim made against the
Shareholder for any act or obligation of the Trust and satisfy any
judgment thereon from the assets of the Series.
In addition, Registrant currently has a trustees' and officers'
liability policy covering certain types of errors and omissions.
Item 28. Business and Other Connections of Advisor and Korean Advisor:
- -------- -------------------------------------------------------------
Matthews International Capital Management provides investment
advisory services to individual and institutional investors, and as
of December 9, 1996 had approximately $70 million in assets under
management.
For information as to any other business, vocation or employment of
a substantial nature in which each Trustee or officer of the
Registrant's investment advisor has been engaged for his own
account or in the capacity of Trustee, officer, employee, partner
or trustee, reference is made to the Form ADV (File #801-39520)
filed by it under the Investment Advisers Act of 1940.
Daewoo International Capital Management, Ltd. (the "Korean
Advisor") was organized in February 1988 under the laws of the
Republic of Korea. The Korean Advisor is wholly owned by Daewoo
Securities Co., Ltd., Daewoo Securities Building, 34-3 Yoido-dong,
Yungdungpo-gu, Seoul, Korea, the largest Korean securities firm in
terms of paid-in capital and revenues in 1992. Daewoo Securities
Co., Ltd. is affiliated with Daewoo Corporation, a conglomerate
headquartered in Seoul, Korea. Daewoo Corporation and certain
affiliates of Daewoo Corporation own approximately 12% of Daewoo
Securities Co., Ltd. For information as to any other business,
vocation or employment of a substantial nature in which each
Trustee or officer
Page 70
<PAGE>
of the Registrant's Korean Advisor has been engaged for his own
account or in the capacity of Trustee, officer, employee, partner
or trustee, reference is made to the Form ADV (File #801-32282)
filed by it under the Investment Advisers Act of 1940.
Item 29. Principal Underwriter
- -------- ---------------------
(a) FPS Broker Services, Inc. ("FPSB"), the principal underwriter
for the Registrant's securities, currently acts as principal
underwriter for the following entities:
The Brinson Funds
CT&T Funds
Fairport Funds
Farrell Alpha Strategies
Focus Trust, Inc.
IAA Trust Mutual Funds
Matthews International Funds
McM Funds
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
The Timothy Plan
Trainer, Wortham First Mutual Funds
(b) The table below sets forth certain information as to the
Underwriter's Directors, Officers and Control Persons:
<TABLE>
<CAPTION>
Position Position and
Name and Principal and Offices Offices with
Business Address with Underwriter Registrant
---------------- ---------------- ------------
<S> <C> <C>
Kenneth J. Kempf Director and President None
3200 Horizon Drive
King of Prussia, PA 19406-0903
Lynne M. Cannon Vice President None
3200 Horizon Drive and Principal
King of Prussia, PA 19406-0903
Rocco C. Cavalieri Director and None
3200 Horizon Drive Vice President
King of Prussia, PA 19406-0903
Gerald J. Holland Director, Senior Vice None
3200 Horizon Drive President and Principal
King of Prussia, PA 19406-0903
Joseph M. O'Donnell, Esq. Director and None
3200 Horizon Drive Vice President
King of Prussia, PA 19406-0903
Sandra L. Adams Assistant Vice President None
3200 Horizon Drive and Principal
King of Prussia, PA 19406-0903
</TABLE>
Page 71
<PAGE>
<TABLE>
<S> <C> <C>
John H. Leven Treasurer None
3200 Horizon Drive
King of Prussia, PA 19406-0903
Mary P. Efstration Secretary None
3200 Horizon Drive
King of Prussia, PA 19406-0903
</TABLE>
James W. Stratton may be considered a control person of the Underwriter due to
his direct or indirect ownership of FPS Services, Inc., the parent of the
Underwriter.
(c) Not Applicable.
Item 30. Location of Accounts and Records
- -------- --------------------------------
All records described in Section 31(a) of the 1940 Act and the
Rules 17 CFR 270.31a-1 to 31a-31 promulgated thereunder, are
maintained by the Fund's Investment Advisor, Matthews International
Capital Management, 655 Montgomery Street, Suite 1438, San
Francisco, CA 94111, except for those maintained by the Fund's
Custodian, The Bank of New York, and the Fund's Administrator,
Transfer Agent and Fund Accounting Services Agent, FPS Services
Inc. 3200 Horizon Drive, King of Prussia, 19406-0903.
Item 31. Management Services
- -------- -------------------
There are no management-related service contracts not discussed in
Part A or Part B.
Item 32. Undertakings
- -------- ------------
(a) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of
removal of any director or directors when requested in writing
to do so by the record holders of not less than 10 percent of
the Registrant's outstanding shares and to assist its
shareholders in accordance with the requirements of Section
16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
(b) Registrant hereby undertakes to furnish a copy of the
Registrant's most recent Annual Report, upon request and
without charge, to every person for whom a Prospectus is
delivered.
Page 72
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Francisco, and State of California on the 27th day of December 1996.
Matthews International Funds
Registrant
By /s/ G. Paul Matthews*
-------------------------------------------
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement of Matthews International Funds has been signed below by the following
persons in the capacities and on the date indicated.
Signature Capacity Date
- --------- -------- ----
/s/ G. Paul Matthews* As President and December 27, 1996
- -------------------------- Principal Executive Officer
G. Paul Matthews
/s/ John Dracott* As Vice President, Secretary, December 27, 1996
- -------------------------- Trustee and Principal Accounting
John Dracott and Financial Officer
/s/ Robert K. Connolly* As Trustee December 27, 1996
- --------------------------
Robert K. Connolly
/s/ Richard K. Lyons* As Trustee December 27, 1996
- --------------------------
Richard K. Lyons
/s/ D. W. Park* As Trustee December 27, 1996
- --------------------------
D.W. Park
/s/ David FitzWilliam-Lay* As Trustee December 27, 1996
- --------------------------
David FitzWilliam-Lay
/s/ Norman J. Berryessa* As Trustee December 27, 1996
- --------------------------
Norman J. Berryessa
- ---------------------------------
*By: /s/ Michelle A. Whalen, as
Attorney-in-Fact and Agent
pursuant to Power of Attorney
Page 73
<PAGE>
Exhibit 24(b)(1)
MATTHEWS INTERNATIONAL FUNDS
----------------------------
TRUST INSTRUMENT
DATED APRIL 8, 1994
Principal Place of Business:
655 Montgomery Street, Suite 1438
San Francisco, CA 94111
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - NAME AND DEFINITIONS.............................................1
--------------------
Section 1.1 Name...................................................1
Section 1.2 Definitions............................................1
ARTICLE II - BENEFICIAL INTEREST.............................................2
-------------------
Section 2.1 Shares of Beneficial Interest..........................2
Section 2.2 Issuance of Shares.....................................2
Section 2.3 Register of Shares and Share Certificates..............2
Section 2.4 Transfer of Shares.....................................3
Section 2.5 Treasury Shares........................................3
Section 2.6 Establishment of Series................................3
Section 2.7 Investment in the Trust................................4
Section 2.8 Assets and Liabilities of Series.......................4
Section 2.9 No Preemptive Rights...................................5
Section 2.10 Personal Liability of Shareholders.....................5
Section 2.11 Assent to Trust Instrument.............................5
ARTICLE III - THE TRUSTEES...................................................5
------------
Section 3.1 Management of the Trust................................5
Section 3.2 Initial Trustee........................................6
Section 3.3 Term of Office of Trustees.............................6
Section 3.4 Vacancies and Appointment of Trustees..................6
Section 3.5 Temporary Absence of Trustee...........................7
Section 3.6 Number of Trustees.....................................7
Section 3.7 Effect of Death, Resignation, Etc. of a Trustee........7
Section 3.8 Ownership of Assets of the Trust.......................7
ARTICLE IV - POWERS OF THE TRUSTEES..........................................7
----------------------
Section 4.1 Powers.................................................7
Section 4.2 Issuance and Repurchase of Shares.....................10
Section 4.3 Trustees and Officers as Shareholders.................10
Section 4.4 Action by the Trustees and Committees.................10
Section 4.5 Chairman of the Trustees..............................11
Section 4.6 Principal Transactions................................11
Trust Instrument: M.I.C Funds
================================================================================
Date Drafted: November 26, 1996 Page ii of 26 pages.
<PAGE>
ARTICLE V - EXPENSES OF THE TRUST...........................................11
---------------------
Section 5.1 General...............................................11
Section 5.2 Expenses of Series....................................11
ARTICLE VI -INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
------------------------------------------
ADMINISTRATOR AND TRANSFER AGENT............................................12
- --------------------------------
Section 6.1 Investment Adviser....................................12
Section 6.2 Principal Underwriter.................................12
Section 6.3 Administrator.........................................12
Section 6.4 Transfer Agent........................................12
Section 6.5 Parties to Contract...................................13
ARTICLE VII - SHAREHOLDERS' VOTING POWERS AND MEETINGS......................13
----------------------------------------
Section 7.1 Voting Powers.........................................13
Section 7.2 Meetings..............................................13
Section 7.3 Quorum and Required Vote..............................14
Section 7.4 Action by Written Consent.............................14
ARTICLE VIII - CUSTODIAN....................................................14
---------
Section 8.1 Appointment and Duties................................14
Section 8.2 Central Certificate System............................15
ARTICLE IX - DISTRIBUTIONS AND REDEMPTIONS..................................15
-----------------------------
Section 9.1 Distributions.........................................15
Section 9.2 Redemptions...........................................16
Section 9.3 Determination of Net Asset Value and Valuation of
Portfolio Assets......................................16
Section 9.4 Suspension of the Right of Redemption.................17
Section 9.5 Redemption of Shares in Order to Qualify as
Regulated Investment Company..........................17
ARTICLE X - LIMITATION OF LIABILITY AND INDEMNIFICATION.....................18
-------------------------------------------
Section 10.1 Limitation of Liability...............................18
Section 10.2 Indemnification.......................................18
Section 10.3 Shareholders..........................................18
Trust Instrument: M.I.C Funds
================================================================================
Date Drafted: November 26, 1996 Page iii of 26 pages.
<PAGE>
ARTICLE XI - MISCELLANEOUS..................................................19
-------------
Section 11.1 Trust Not a Partnership...............................19
Section 11.2 Trustees' Good Faith Action, Expert Advice, No Bond
or Surety.............................................19
Section 11.3 Establishment of Record Dates.........................19
Section 11.4 Termination of Trust or Series........................20
Section 11.5 Reorganization........................................20
Section 11.6 Filing of Copies, References, Heading.................21
Section 11.7 Applicable Law........................................21
Section 11.8 Amendments............................................22
Section 11.9 Fiscal Year...........................................22
Section 11.10 Use of Name "Matthews International Funds"............22
Section 11.11 Provisions in Conflict with Law.......................22
Trust Instrument: M.I.C Funds
================================================================================
Date Drafted: November 26, 1996 Page iv of 26 pages.
<PAGE>
MATTHEWS INTERNATIONAL FUNDS
----------------------------
TRUST INSTRUMENT, made this 8th day of April, 1994 by John Dracott (the
"Trustee").
WHEREAS, the Trustee desires to establish a business trust under the
Delaware Business Trust Act for the investment and reinvestment of funds
contributed thereto;
NOW, THEREFORE, the Trustee declares that all money and property
contributed to the trust hereunder shall be held and managed in trust under this
Trust Instrument as herein set forth below.
ARTICLE I
---------
NAME AND DEFINITIONS
--------------------
Section 1.1 Name. The name of the trust created hereby is the "Matthews
-----
International Funds".
Section 1.2 Definitions. Wherever used herein, unless otherwise required
-----------
by the context or specifically provided:
(a) "By-laws" means the by-laws referred to in Article IV, Section
4.1(e) hereof, as from time to time amended;
(b) The terms "Affiliated Person," "Assignment," "Commission,"
"Interested Person" and "Principal Underwriter" shall have the meanings given
them in the 1940 Act. "Majority Shareholder Vote" shall have the same meaning as
the term "vote of a majority of the outstanding voting securities" is given in
the 1940 Act;
(c) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article IX, Section 9.3 hereof;
(d) "Outstanding Shares" means those Shares recorded from time to time
in the books of the Trust or its Transfer Agent as then issued and outstanding,
but shall not include Shares which have been redeemed or repurchased by the
Trust and which are at the time held in the treasury of the Trust;
(e) "Series" means a series (or class) of Shares of the Trust
established in accordance with the provisions of Article II, Section 2.6 hereof;
(f) "Shareholder" means a record owner of Outstanding Shares of the
Trust;
(g) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or class thereof shall be divided and may
Trust Instrument: M.I.C Funds
================================================================================
Date Drafted: November 26, 1996 Page 1 of 22 pages.
<PAGE>
include fractions of Shares as well as whole Shares;
(h) The "Trust" refers to Matthews International Funds and reference
to the Trust, when applicable to one or more Series of the Trust, shall refer to
any such Series ;
(i) The "Trustee" or "Trustees" means the person or persons who has
or have signed this Trust Instrument, so long as such person or persons shall
continue in office in accordance with the terms hereof, and all other persons
who may from time to time be duly qualified and serving as Trustees in
accordance with the provisions of Article III hereof and reference herein to a
Trustee or to the Trustees shall refer to the individual Trustees in their
capacity as Trustees hereunder;
(j) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more of the Trust or any Series, or the Trustees on behalf of the Trust or any
Series.
(k) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time.
ARTICLE II
----------
BENEFICIAL INTEREST
-------------------
Section 2.1 Shares of Beneficial Interest. The beneficial interest in the
-----------------------------
Trust shall be divided into such transferable Shares of one or more separate and
distinct Series or classes of a Series as the Trustees shall from time to time
create and establish. The number of Shares of each Series, and class thereof,
authorized hereunder is unlimited. Each Share shall have a par value of $0.001.
All Shares issued hereunder, including, without limitation, Shares issued in
connection with a dividend in Shares or a split or reverse split of Shares,
shall be fully paid and nonassessable.
Section 2.2 Issuance of Shares. The Trustees in their discretion may, from
------------------
time to time, without vote of the Shareholders, issue Shares to such party or
parties and for such amount and type of consideration, subject to applicable
law, including cash or securities (including Shares of a different Series), at
such time or times and on such terms as the Trustees may deem appropriate, and
may in such manner acquire other assets (including the acquisitions of assets
subject to, and in connection with, the assumption of liabilities). In
connection with any issuance of Shares, the Trustees may issue fractional Shares
and Shares held in the treasury. The Trustees may from time to time divide or
combine the Shares of any Series or class into a greater or lesser number
without thereby changing the proportionate beneficial interests in the Trust.
Section 2.3 Register of Shares and Share Certificates. A register shall be
-----------------------------------------
kept at the principal office of the Trust or an office of the Trust's transfer
agent which shall contain the names and addresses of the Shareholders of each
Series, the number of Shares of that Series (or any class or classes thereof)
held by them respectively and a record of all transfers thereof. As to Shares
for which
Trust Instrument: M.I.C Funds
================================================================================
Date Drafted: November 26, 1996 Page 2 of 22 pages.
<PAGE>
no certificate has been issued, such register shall be conclusive as to who are
the holders of the Shares and who shall be entitled to receive dividends or
other distributions or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or other distribution, nor to have notice given to him as herein or in
the By-laws provided, until he has given his address to the transfer agent or
such other officer or agent of the Trustees as shall keep the said register for
entry thereon. The Trustees, in their discretion, may authorize the issuance of
share certificates and promulgate appropriate rules and regulations as to their
use. In the event that one or more certificates are issued, whether in the name
of a shareholder or a nominee, such certificate or certificates shall constitute
evidence of ownership of Shares for all purposes, including transfer, assignment
or sale of such Shares, subject to such limitations as the Trustees may, in
their discretion, prescribe.
Section 2.4 Transfer of Shares. Except as otherwise provided by the
------------------
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer, together with a Share certificate, if one is
outstanding, and such evidence of the genuineness of each such execution and
authorization and of such other matters as may be required by the Trustees. Upon
such delivery the transfer shall be recorded on the register of the Trust. Until
such record is made, the Shareholder of record shall be deemed to be the holder
of such Shares for all purposes hereunder and neither the Trustees nor the
Trust, nor any transfer agent or registrar nor any officer, employee or agent of
the Trust shall be affected by any notice of the proposed transfer.
Section 2.5 Treasury Shares. Shares held in the treasury shall, until
---------------
reissued pursuant to Section 2.2 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 2.6 Establishment of Series. The Trust created hereby shall consist
-----------------------
of one or more Series and separate and distinct records shall be maintained by
the Trust for each Series and the assets associated with any such Series shall
be held and accounted for separately from the assets of the Trust or any other
Series. The Trustees shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series of the Trust, to establish and designate and to
change in any manner any such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or classes thereof
into a greater or lesser number, to classify or reclassify any issued Shares or
any Series or classes thereof into one or more Series or classes of Shares, and
to take such other action with respect to the Shares as the Trustees may deem
desirable. The establishment and designation of any Series shall be effective
upon the adoption of a resolution by the Trustees setting forth such
establishment and designation and the relative rights and preferences of the
Shares of such Series. A Series may issue any number of Shares and need not
issue shares.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof, as the context may require. All
provisions herein relating to the Trust shall
Trust Instrument: M.I.C Funds
================================================================================
Date Drafted: November 26, 1996 Page 3 of 22 pages.
<PAGE>
apply equally to each Series of the Trust, and each class thereof, except as the
context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive distributions of income and capital gains, if any,
which are made with respect to such Series and which are attributable to such
Shares. Upon redemption of Shares, such Shareholder shall be paid solely out of
the funds and property of such Series of the Trust.
Section 2.7 Investment in the Trust. The Trustees shall accept investments
-----------------------
in any Series of the Trust from such persons and on such terms as they may from
time to time authorize. At the Trustees' discretion, such investments, subject
to applicable law, may be in the form of cash or securities in which the
affected Series is authorized to invest, valued as provided in Article IX,
Section 9.3 hereof. Investments in a Series shall be credited to each
Shareholder's account in the form of full or fractional Shares at the Net Asset
Value per Share next determined after the investment is received; provided,
however, that the Trustees may, in their sole discretion, (a) fix the Net Asset
Value per Share of the initial capital contribution, or (b) impose sales or
other charges upon investments in the Trust.
Section 2.8 Assets and Liabilities of Series. All consideration received by
--------------------------------
the Trust for the issue or sale of Shares of a particular Series, together with
all assets in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be, shall
be held and accounted for separately from the other assets of the Trust and of
every other Series and may be referred to herein as "assets belonging to" that
Series. The assets belonging to a particular Series shall belong to that Series
for all purposes, and to no other Series, subject only to the rights of
creditors of that Series. In addition, any assets, income, earnings, profits or
funds, or payments and proceeds with respect thereto, which are not readily
identifiable as belonging to any particular Series shall be allocated by the
Trustees between and among one or more of the Series in such manner as the
Trustees, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all Series
for all purposes, and such assets, income, earnings, profits or funds, or
payments and proceeds with respect thereto shall be assets belonging to that
Series. The assets belonging to a particular Series shall be so recorded upon
the books of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series. The assets belonging to each
particular Series shall be charged with the liabilities of that Series and all
expenses, costs, charges and reserves attributable to that Series. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees between or among any one or more of the Series in
such manner as the Trustees in their sole discretion deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Shareholders of
all Series for all purposes. Without limitation of the foregoing provisions of
this Section 2.8, but subject to the right of the Trustees in their discretion
to allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
enforceable against the assets of such Series only, and not
Trust Instrument: M.I.C Funds
================================================================================
Dated Drafted: November 26, 1996 Page 4 of 22 pages.
<PAGE>
against the assets of the Trust generally. Notice of this contractual limitation
on inter-Series liabilities shall be set forth in the certificate of trust of
the Trust (whether originally or by amendment) as filed or to be filed in the
Office of the Secretary of State of the State of Delaware pursuant to the
Delaware Business Trust Act (the "Act"), and upon the giving of such notice in
the certificate of trust, the statutory provisions of the Delaware Business
Trust Act relating to limitations on inter-Series liabilities (and the statutory
effect under the Act of setting forth such notice in the certificate of trust)
shall become applicable to the Trust and each Series. Any person extending
credit to, contracting with or having any claim against any Series may satisfy
or enforce any debt, liability, obligation or expense incurred, contracted for
or otherwise existing with respect to that Series from the assets of that Series
only. No Shareholder or former Shareholder of any Series shall have a claim on
or any right to any assets allocated or belonging to any other Series.
Section 2.9 No Preemptive Rights. Shareholders shall have no preemptive or
--------------------
other right to subscribe to any additional Shares or other securities issued by
the Trust or the Trustees, whether of the same or other Series.
Section 2.10 Personal Liability of Shareholders. Each Shareholder of the
----------------------------------
Trust and of each Series shall not be personally liable for the debts,
liabilities, obligations and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or by or on behalf of any Series. The
Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust or to a Series shall include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets (but the omission of such a recitation shall not operate to bind any
Shareholder or Trustee of the Trust).
Section 2.11 Assent to Trust Instrument. Every Shareholder, by virtue of
--------------------------
having purchased or otherwise acquired a Share, shall become a Shareholder and
shall be held to have expressly assented and agreed to be bound by the terms
hereof.
ARTICLE III
-----------
THE TRUSTEES
------------
Section 3.1 Management of the Trust. The Trustees shall have exclusive and
-----------------------
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, in any
and all commonwealths, territories, dependencies, colonies, or possessions of
the United States of America, and in any foreign jurisdiction and to do all such
other things and execute all such instruments as they deem necessary, proper or
desirable in order to
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promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive. In construing the
provisions of this Trust Instrument, the presumption shall be in favor of a
grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall not be
construed as limiting the aforesaid power. The powers of the Trustees may be
exercised without order of or resort to any court.
Except for the Trustee named herein or Trustees appointed to fill vacancies
pursuant to Section 3.4 of this Article III, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders.
Section 3.2 Initial Trustee. The initial Trustee shall be the person named
---------------
herein.
Section 3.3 Term of Office of Trustees. The Trustees shall hold office
--------------------------
during the existence of this Trust, and until its termination as herein
provided; except (a) that any Trustee may resign his trust by written instrument
signed by him and delivered to the Chairman, President, Secretary, or other
Trustees of the Trust, which shall take effect upon such delivery or upon such
later date as is specified therein; (b) that any Trustee may be removed at any
time by written instrument, signed by at least two-thirds of the number of
Trustees prior to such removal, specifying the date when such removal shall
become effective; (c) that any Trustee who requests in writing to be retired or
who has died, become physically or mentally incapacitated by reason of disease
or otherwise, or is otherwise unable to serve, may be retired by written
instrument signed by a majority of the other Trustees, specifying the date of
his retirement; and (d) that a Trustee may be removed at any meeting of the
Shareholders of the Trust by a vote of Shareholders owning at least two-thirds
of the outstanding Shares.
Section 3.4 Vacancies and Appointment of Trustees. In case of the
-------------------------------------
declination to serve, death, resignation, retirement, removal, physical or
mental incapacity by reason of disease or otherwise of a Trustee, or a Trustee
is otherwise unable to serve, or an increase in the number of Trustees, a
vacancy shall occur. Whenever a vacancy in the Board of Trustees shall occur,
until such vacancy is filled, the other Trustees shall have all the powers
hereunder and the certificate of the other Trustees of such vacancy shall be
conclusive. In the case of an existing vacancy, the remaining Trustees shall
fill such vacancy by appointing such other person as they in their discretion
shall see fit consistent with the limitations under the 1940 Act.
An appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.4 shall have accepted this trust,
he shall be deemed a Trustee hereunder.
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Section 3.5 Temporary Absence of Trustee. Any Trustee may, by power of
----------------------------
attorney, delegate his power for a period not exceeding six months at any one
time to any other Trustee or Trustees, provided that in no case shall less than
two Trustees personally exercise the other powers hereunder except as herein
otherwise expressly provided.
Section 3.6 Number of Trustees. The number of Trustees shall be one, or
------------------
such other number as shall be fixed from time to time by the Trustees.
Section 3.7 Effect of Death, Resignation, Etc. of a Trustee. The
------------------------------------------------
declination to serve, death, resignation, retirement, removal, incapacity, or
inability of the Trustees, or any one of them, shall not operate to terminate
the Trust or to revoke any existing agency created pursuant to the terms of this
Trust Instrument.
Section 3.8 Ownership of Assets of the Trust. Legal title in and beneficial
--------------------------------
ownership of all of the assets of the Trust shall at all times be considered as
vested in the Trust, except that the Trustees may cause legal title in and
beneficial ownership of any Trust Property to be held by, or in the name of one
or more of the Trustees acting for and on behalf of the Trust, or in the name of
any person as nominee acting for and on behalf of the Trust. No Shareholder
shall be deemed to have a severable ownership interest in any individual asset
of the Trust or of any Series or any right of partition or possession thereof,
but each Shareholder shall have, except as otherwise provided for herein, a
proportionate undivided beneficial interest in the Trust or Series. The Shares
shall be personal property giving only the rights specifically set forth in this
Trust Instrument. The Trust, or at the determination of the Trustees one or more
of the Trustees or a nominee acting for and on behalf of the Trust, shall be
deemed to hold legal title and beneficial ownership of any income earned on
securities of the Trust issued by any business entities formed, organized, or
existing under the laws of any jurisdiction, including the laws of any foreign
country.
ARTICLE IV
----------
POWERS OF THE TRUSTEES
----------------------
Section 4.1 Powers. The Trustees in all instances shall act as principals,
------
and are and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider necessary
or appropriate in connection with the management of the Trust. The Trustees
shall have full authority and power to make any and all investments which they,
in their sole discretion, shall deem proper to accomplish the purpose of this
Trust. Subject to any applicable limitation in this Trust Instrument, the
Trustees shall have power and authority:
(a) To invest and reinvest cash and other property, and to hold cash
or other property uninvested, and to sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the Trust;
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(b) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
business;
(c) To borrow money and in this connection issue notes or other evidence of
indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; to endorse, guarantee, or undertake
the performance of an obligation or engagement of any other person and to lend
Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a Principal Underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt By-laws not inconsistent with this Trust Instrument providing
for the conduct of the business of the Trust and to amend and repeal them to the
extent that they do not reserve that right to the Shareholders, which By-laws
shall be deemed a part of this Trust Instrument and are incorporated herein by
reference;
(f) To elect and remove such officers and appoint and terminate such agents
as they consider appropriate;
(g) To appoint custodians of any assets of the Trust, subject to the 1940
Act and to any conditions set forth in this Trust Instrument;
(h) To retain one or more transfer agents and shareholder servicing agents,
or both;
(i) To set record dates in the manner provided herein or in the By-laws;
(j) To delegate such authority (which delegation may include the power to
subdelegate) as they consider desirable to any officers of the Trust and to any
investment adviser, manager, administrator, custodian, underwriter or other
agent or independent contractor;
(k) To purchase and pay for entirely out of Trust Property such insurance
as they may deem necessary or appropriate for the conduct of the business of the
Trust, including insurance policies insuring the Trust Property and payment of
distributions and principal on its investments, and insurance policies insuring
the Shareholders, Trustees, officers, representatives, employees, agents,
investment advisers, managers, administrators, custodians, underwriters, or
independent contractors of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such person in such capacity, including any action taken
or omitted that may be determined to constitute negligence, whether or not the
Trust would have the power to indemnify such person against such liability.
(l) To sell or exchange any or all of the assets of the Trust, subject to
the provisions of Article XI, Section 11.4(b) hereof;
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(m) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(n) To exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities;
(o) To hold any security or property in a form not indicating any trust,
whether in bearer, book entry, unregistered or other negotiable form; or either
in the name of the Trust or in the name of a custodian or a nominee or nominees;
(p) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish classes of
such Series having relative rights, powers and duties as they may provide
consistent with applicable law;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(s) To make distributions of income and of capital gains to Shareholders in
the manner hereinafter provided;
(t) To establish, from time to time, a minimum investment for Shareholders
in the Trust or in one or more Series or class, and to require the redemption of
the Shares of any Shareholders whose investment is less than such minimum upon
giving notice to such Shareholder;
(u) To establish one or more committees composed of one or more of the
Trustees, and to delegate any of the powers of the Trustees to said committees,
subject to the provisions of the 1940 Act;
(v) To interpret the investment policies, practices or limitations of any
Series;
(w) To establish a registered office and have a registered agent in the
state of Delaware; and
(x) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either
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alone or in association with others, and to do every other act or thing
incidental or appurtenant to or growing out of or connected with the aforesaid
business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees. Any action by one or
more of the Trustees in their capacity as such hereunder shall be deemed an
action on behalf of the Trust or the applicable Series, and not an action in an
individual capacity.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the application
of any payments made or property transferred to the Trustees or upon their
order.
Section 4.2 Issuance and Repurchase of Shares. The Trustees shall have the
---------------------------------
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, exchange, and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
Section 4.3 Trustees and Officers as Shareholders. Any Trustee, officer or
-------------------------------------
other agent of the Trust may acquire, own and dispose of Shares to the same
extent as if such person were not a Trustee, officer or agent; and the Trustees
may issue and sell or cause to be issued and sold Shares to and buy such Shares
from any such person or any firm or company in which such person is interested,
subject to the general limitations herein contained as to the sale and purchase
of such Shares.
Section 4.4 Action by the Trustees and Committees. The Trustees (and any
-------------------------------------
committee thereof) may act at a meeting held in person or in whole or in part by
conference telephone equipment or other communications technology. One-third,
but (except at such times as there is only one Trustee) no less than two, of the
Trustees shall constitute a quorum at any meeting. Except as the Trustees may
otherwise determine, one-third of the members of any committee shall constitute
a quorum at any meeting. The vote of a majority of the Trustees (or committee
members) present at a meeting at which a quorum is present shall be the act of
the Trustees (or any committee thereof). The Trustees (and any committee
thereof) may also act by written consent signed by a majority of the Trustees
(or committee members). Regular meetings of the Trustees may be held at such
places and at such times as the Trustees may from time to time determine.
Special meetings of the Trustees (and meetings of any committee thereof) may be
called orally or in writing by the Chairman of the Board of Trustees (or the
chairman of any committee thereof) or by any two other Trustees. Notice of the
time, date and place of all meetings of the Trustees (or any committee thereof)
shall be given by the party calling the meeting to each Trustee (or committee
member) by telephone, telefax, or telegram sent to the person's home or business
address at least twenty-four hours in advance of the meeting or by written
notice mailed to the person's home or business address at least seventy-two
hours in advance of the meeting. Notice of all proposed written consents of
Trustees (or committees thereof) shall be given to each Trustee (or committee
member) by telephone, telefax, telegram, or first class mail sent to the
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<PAGE>
person's home or business address. Notice need not be given to any person who
attends a meeting without objecting to the lack of notice or who executes a
written consent or a written waiver of notice with respect to a meeting. Written
consents or waivers may be executed in one or more counterparts. Execution of a
written consent or waiver and delivery thereof may be accomplished by telefax.
Section 4.5 Chairman of the Trustees. The Trustees shall appoint one of
------------------------
their number to be Chairman of the Board of Trustees. The Chairman shall preside
at all meetings of the Trustees at which he is present and may be (but is not
required to be) the chief executive officer of the Trust.
Section 4.6 Principal Transactions. Except to the extent prohibited by
----------------------
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust to, any Trustee
or officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with any investment
adviser, distributor or transfer agent for the Trust or with any Interested
Person of such person; and the Trust may employ any such person, or firm or
company in which such person is an Interested Person, as broker, legal counsel,
registrar, investment adviser, distributor, transfer agent, dividend disbursing
agent, custodian or in any other capacity upon customary terms.
ARTICLE V
---------
EXPENSES OF THE TRUST
---------------------
Section 5.1 General. The Trustees shall have the power to incur and pay or
-------
be reimbursed from the assets of the Trust or the assets of the appropriate
Series any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of the Trust or such Series, and to
pay reasonable compensation from the funds of the Trust to themselves as
Trustees. The Trustees shall fix the compensation of all officers, employees and
Trustees, and shall be reimbursed from the assets of the Trust or the assets of
the appropriate Series for expenses reasonably incurred by themselves on behalf
of the Trust.
Section 5.2 Expenses of Series. The Trustees shall have the power to
------------------
allocate and charge all expenses which are not readily identifiable as belonging
to any particular Series between or among any one or more of the Series as set
forth in Article II, Section 2.8 of this Trust Instrument.
ARTICLE VI
----------
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER, ADMINISTRATOR
--------------------------------------------------------
AND TRANSFER AGENT
------------------
Section 6.1 Investment Adviser. The Trustees may in their discretion, from
------------------
time to time, enter into an investment advisory or management contract or
contracts with respect to the Trust or any Series whereby the other party or
parties to such contract or contracts shall undertake to furnish the Trust with
such management, investment advisory, statistical and research facilities and
services and
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<PAGE>
such other facilities and services, if any, and all upon such terms and
conditions, as the Trustees may in their discretion determine; provided,
however, that the initial approval and entering into of such contract or
contracts shall be subject to a Majority Shareholder Vote. Notwithstanding any
other provision of this Trust Instrument, the Trustees may authorize any
investment adviser (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales or exchanges of
portfolio securities, other investment instruments of the Trust, or other Trust
Property on behalf of the Trustees, or may authorize any officer, agent, or
Trustee to effect such purchases, sales or exchanges pursuant to recommendations
of the investment adviser (and all without further action by the Trustees). Any
such purchases, sales and exchanges shall be deemed to have been authorized by
the Trustees.
The Trustees may authorize, subject to applicable requirements of the 1940
Act, the investment adviser to employ, from time to time, one or more sub-
advisers to perform such of the acts and services of the investment adviser, and
upon such terms and conditions, as may be agreed upon between the investment
adviser and sub-adviser. Any reference in this Trust Instrument to the
investment adviser shall be deemed to include such sub-advisers, unless the
context otherwise requires.
Section 6.2 Principal Underwriter. The Trustees may in their discretion
---------------------
from time to time enter into an exclusive or non-exclusive underwriting contract
or contracts providing for the sale of Shares, whereby the Trust may either
agree to sell Shares to the other party to the contract or appoint such other
party its sales agent for such Shares. In either case, the contract may also
provide for the repurchase or sale of Shares by such other party as principal or
as agent of the Trust.
Section 6.3 Administrator. The Trustees may in their discretion from time
-------------
to time enter into one or more contracts whereby the other party or parties
shall undertake to furnish the Trust with administrative services. The contract
or contracts shall be on such terms and conditions as the Trustees may in their
discretion determine.
Section 6.4 Transfer Agent. The Trustees may in their discretion from time
--------------
to time enter into one or more transfer agency and Shareholder service contracts
whereby the other party or parties shall undertake to furnish the Trustees with
transfer agency and Shareholder services. The contract or contracts shall be on
such terms and conditions as the Trustees may in their discretion determine.
Section 6.5 Parties to Contract. Any contract described in this Article VI
-------------------
or any contract described in Article VIII hereof may be entered into with any
corporation, firm, partnership, trust or association, although one or more of
the Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such contract
shall be invalidated or rendered void or voidable by reason of the existence of
any relationship, nor shall any person holding such relationship be disqualified
from voting on or executing the same in his capacity as Shareholder and/or
Trustee, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VI or Article VIII hereof. The
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same person (including a firm, corporation, partnership, trust, or association)
may be the other party to contracts entered into pursuant to this Article VI or
pursuant to Article VIII hereof, and any individual may be financially
interested or otherwise affiliated with persons who are parties to any or all of
the contracts mentioned in this Section 6.5.
ARTICLE VII
-----------
SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------
Section 7.1 Voting Powers. The Shareholders shall have power to vote only
-------------
(i) for the election of Trustees as provided in Article III, Section 3.1 hereof,
(ii) for the removal of Trustees as provided in Article III, Section 3.3(d)
hereof, and (iii) with respect to such additional matters relating to the Trust
as may be required by law, by this Trust Instrument, or as the Trustees may
consider desirable. On any matter submitted to a vote of the Shareholders, all
Shares shall be voted separately by individual Series, except (i) when required
by the 1940 Act, Shares shall be voted in the aggregate and not by individual
Series; and (ii) when the Trustees have determined that the matter affects the
interests of more than one Series, then the Shareholders of all such Series
shall be entitled to vote thereon. The Trustees may also determine that a matter
affects only the interests of one or more classes of a Series, in which case any
such matter shall be voted on by such class or classes. Each whole Share shall
be entitled to one vote as to any matter on which it is entitled to vote, and
each fractional Share shall be entitled to a proportionate fractional vote.
There shall be no cumulative voting in the election of Trustees. Shares may be
voted in person or by proxy or in any manner provided for in the By-laws. A
proxy may be given in writing, by telefax, or in any other manner provided for
in the By-laws. Anything in this Trust Instrument to the contrary
notwithstanding, in the event a proposal by anyone other than the officers or
Trustees of the Trust is submitted to a vote of the Shareholders of one or more
Series or of the Trust, or in the event of any proxy contest or proxy
solicitation or proposal in opposition to any proposal by the officers or
Trustees of the Trust, Shares may be voted only in person or by written proxy.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required or permitted by law, this Trust Instrument or
any of the By-laws of the Trust to be taken by Shareholders.
Section 7.2 Meetings. Meetings of Shareholders may be held within or
--------
without the State of Delaware. Special meetings of the Shareholders of any
Series may be called by the Trustees and shall be called by the Trustees upon
the written request of Shareholders owning at least one-tenth of the Outstanding
Shares entitled to vote. Whenever ten or more Shareholders meeting the
qualifications set forth in Section 16(c) of the 1940 Act seek the opportunity
of furnishing materials to the other Shareholders with a view to obtaining
signatures on such a request for a meeting, the Trustees shall comply with the
provisions of said Section 16(c) with respect to providing such Shareholders
access to the list of the Shareholders of record of the Trust or the mailing of
such materials to such Shareholders of record, subject to any rights provided to
the Trust or any Trustees provided by said Section 16(c). Notice shall be sent,
by mail or such other means determined by the Trustees, at least 15 days prior
to any such meeting.
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Section 7.3 Quorum and Required Vote. One-third of Shares entitled to vote
------------------------
in person or by proxy shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any lesser number shall be sufficient for adjournments.
Any adjourned session or sessions may be held without the necessity of further
notice. Except when a larger vote is required by law or by any provision of this
Trust Instrument, a majority of the Shares voted in person or by proxy shall
decide any questions and a plurality shall elect a Trustee, provided that where
any provision of law or of this Trust Instrument permits or requires that the
holders of any Series shall vote as a Series (or that the holders of any class
shall vote as a class), then a majority of the Shares present in person or by
proxy of that Series or, if required by law, a Majority Shareholder Vote of that
Series (or class), voted on the matter in person or by proxy shall decide that
matter insofar as that Series (or class) is concerned.
Section 7.4 Action by Written Consent. Any action which may be taken by the
-------------------------
Shareholders of the Trust or of a Series may be taken without a meeting if
Shareholders holding more than a majority of the Shares entitled to vote, except
when a larger vote is required by law or by any provision of this Trust
Instrument, shall consent to the action in writing. If the consents of all
Shareholders entitled to vote have not been solicited in writing and if the
unanimous written consent of all such Shareholders shall not have been received,
the Secretary shall give prompt notice to all Shareholders of actions approved
by the Shareholders without a meeting.
ARTICLE VIII
------------
CUSTODIAN
---------
Section 8.1 Appointment and Duties. The Trustees shall at all times employ
----------------------
a bank, a company that is a member of a national securities exchange, or a trust
company, each having capital, surplus and undivided profits of at least two
million dollars ($2,000,000) as custodian with authority as its agent:
(1) to hold the securities owned by the Trust and deliver the same upon
written order or oral order confirmed in writing;
(2) to receive and receipt for any moneys due to the Trust and deposit the
same in its own banking department or elsewhere as the Trustees may direct; and
(3) to disburse such funds upon orders or vouchers; and the Trust may also
employ such custodian as its agent:
(4) to keep the books and accounts of the Trust or of any Series or class
and furnish clerical and accounting services; and
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(5) to compute, if authorized to do so by the Trustees, the Net Asset Value
of any Series, or class thereof, in accordance with the provisions hereof;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian.
In accordance with the 1940 Act, the Trustees may also authorize the
custodian to employ one or more sub-custodians from time to time to perform such
of the acts and services of the custodian, and upon such terms and conditions,
as may be agreed upon between the custodian and such sub-custodian and approved
by the Trustees.
Section 8.2 Central Certificate System. Subject to the 1940 Act, the
--------------------------
Trustees may direct the custodian to deposit all or any part of the securities
owned by the Trust in a system for the central handling of securities
established by a national securities exchange or a national securities
association, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodians, subcustodians or other agents.
ARTICLE IX
----------
DISTRIBUTIONS AND REDEMPTIONS
-----------------------------
Section 9.1 Distributions.
-------------
(a) The Trustees may from time to time declare and pay dividends or
other distributions with respect to any Series, or class thereof. The amount of
such dividends or distributions and the payment of them and whether they are in
cash or any other Trust property shall be wholly in the discretion of the
Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. All dividends and other distributions on Shares of a particular
Series shall be distributed pro rata to the Shareholders of that Series in
proportion to the number of Shares of that Series they held on the record date
established for such payment, except that such dividends and distributions shall
reflect expenses allocated to a particular class of such Series. The Trustees
may adopt and offer to Shareholders such dividend reinvestment plans, cash
dividend payout plans or related plans as the Trustees shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary
notwithstanding, the Trustees may at any time declare and distribute a stock
dividend pro rata among the Shareholders of a particular Series, or class
thereof, as of the record date of that Series fixed as provided in Section (b)
hereof.
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Date Drafted: November 26, 1996 Page 15 of 26 pages.
<PAGE>
Section 9.2 Redemptions. In case any holder of record of Shares of a
-----------
particular Series desired to dispose of his Shares or any portion thereof, he
may deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees may
from time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.2; and the Shareholder so requesting shall be
entitled to require the Series to purchase, and the Series or the Principal
Underwriter of the Series shall purchase his said Shares, but only at the Net
Asset Value thereof (as described in Section 9.3 of this Article IX). The Series
shall make payment for any such Shares to be redeemed, as aforesaid, in cash or
property from the assets of that Series and payment for such Shares shall be
made by the Series or the Principal Underwriter of the Series to the Shareholder
of record within seven (7) days after the date upon which the request is
effective. Upon redemption, shares shall become Treasury shares and may be re-
issued from time to time.
Section 9.3 Determination of Net Asset Value and Valuation of Portfolio
-----------------------------------------------------------
Assets. The term "Net Asset Value" of any Series shall mean that amount of which
- -------
the assets of that Series exceed its liabilities, all as determined by or under
the direction of the Trustees. Such value shall be determined separately for
each Series and shall be determined on such days and at such times as the
Trustees may determine. Such determination shall be made with respect to
securities for which market quotations are readily available, at the market
value of such securities; and with respect to other securities and assets, at
the fair value as determined in good faith by the Trustees; provided, however,
that the Trustees, without Shareholder approval, may alter the method of valuing
portfolio securities consistent with the 1940 Act. The Trustees may delegate any
of their powers and duties under this Section 9.3 with respect to valuation of
assets and liabilities. The resulting amount, which shall represent the total
Net Asset Value of the particular Series, shall be divided by the total number
of shares of that Series outstanding at the time and the quotient so obtained
shall be the Net Asset Value per Share of that Series. At any time the Trustees
may cause the Net Asset Value per Share last determined to be determined again
in similar manner and may fix the time when such redetermined value shall become
effective. If, for any reason, the net income of any Series, determined at any
time, is a negative amount, the Trustees shall have the power with respect to
that Series (i) to offset each Shareholder's pro rata share of such negative
amount from the accrued dividend account of such Shareholder, or (ii) to reduce
the number of Outstanding Shares of such Series by reducing the number of Shares
in the amount of each Shareholder by a pro rata portion of that number of full
and fractional Shares which represents the amount of such excess negative net
income, or (iii) to cause to be recorded on the books of such Series an asset
account in the amount of such negative net income (provided that the same shall
thereupon become the property of such Series and shall not be paid to any
Shareholder), which account may be reduced by the amount, of dividends declared
thereafter upon the Outstanding Shares of such Series on the day such negative
net income is experienced, until such asset account is reduced to zero; (iv) to
combine the methods described in clauses (i) and (ii) and (iii) of this
sentence; or (v) to take any other action they deem appropriate, in order to
cause (or in order to assist in causing) the Net Asset Value per Share of such
Series to remain at a constant amount per Outstanding Share immediately after
each such determination and declaration. The Trustees shall also have the power
not to declare a dividend out of net income for the purpose of causing the Net
Asset Value per Share to be increased. The Trustees shall not be required to
adopt, but may at any time
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Date Drafted: November 26, 1996 Page 16 of 26 pages.
<PAGE>
adopt, discontinue or amend the practice of maintaining the Net Asset Value per
Share of the Series at a constant amount.
Section 9.4 Suspension of the Right of Redemption. The Trustees may declare
-------------------------------------
a suspension of the right of redemption or postpone the date of payment as
permitted under the 1940 Act. Such suspension shall take effect at such time as
the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share next determined after the termination of
the suspension. In the event that any Series is divided into classes, the
provisions of this Section 9.4, to the extent applicable as determined in the
discretion of the Trustees and consistent with applicable law, may be equally
applied to each such class.
Section 9.5 Redemption of Shares in Order to Qualify as Regulated
-----------------------------------------------------
Investment Company. If the Trustees shall be of the opinion that direct or
- -------------------
indirect ownership of Shares of any Series has or may become concentrated in any
Person to an extent which would disqualify any Series as a regulated investment
company under the Internal Revenue Code, then the Trustees shall have the power
(but not the obligation) by lot or other means deemed equitable by them (i) to
call for redemption by any such person of a number, or principal amount, of
Shares sufficient to maintain or bring the direct or indirect ownership of
Shares into conformity with the requirements for such qualification and (ii) to
refuse to transfer or issue Shares to any person whose acquisition of the Shares
in question would result in such disqualification. The redemption shall be
effected at the redemption price and in the manner provided in this Article IX.
The holders of Shares shall upon demand disclose to the Trustees in writing such
information with respect to direct and indirect ownership of Shares as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code, or to comply with the requirements of any other taxing authority.
ARTICLE X
---------
LIMITATION OF LIABILITY AND INDEMNIFICATION
-------------------------------------------
Section 10.1 Limitation of Liability. A Trustee, when acting in such
-----------------------
capacity, shall not be personally liable to any person other than the Trust or a
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission in his capacity
as Trustee, or for any act or omission of any officer or employee of the Trust
or of any other person or party, provided that nothing contained herein or in
the Delaware Business Trust Act shall protect any Trustee against any liability
to the Trust or to Shareholders to which he would otherwise be subject by reason
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee hereunder.
Section 10.2 Indemnification. The Trust shall indemnify each of its
---------------
Trustees against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as counsel
fees) reasonably incurred by him in connection with the defense or
Trust Instrument: M.I.C Funds
================================================================================
Date Drafted: November 26, 1996 Page 17 of 26 pages.
<PAGE>
disposition of any action, suit or other proceeding, whether civil or criminal,
in which he may be involved or with which he may be threatened, while as a
Trustee or thereafter, by reason of his being or having been such a Trustee
except with respect to any matter as to which he shall have been adjudicated to
- ------
have acted in bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties, provided that as to any matter disposed of by a
--------
compromise payment by such person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless the Trust shall have received a written opinion from independent
legal counsel approved by the Trustees to the effect that if either the matter
of willful misfeasance, gross negligence or reckless disregard of duty, or the
matter of bad faith had been adjudicated, it would in the opinion of such
counsel have been adjudicated in favor of such person. The rights accruing to
any person under these provisions shall not exclude any other right to which he
may be lawfully entitled, provided that no person may satisfy any right of
--------
indemnity or reimbursement hereunder except out of the property of the Trust.
The Trustees may authorize advance payments in connection with the
indemnification under this Section 10.2, provided that the indemnified person
--------
shall have given a written undertaking to reimburse the Trust in the event it is
subsequently determined that he is not entitled to such indemnification.
The Trust shall indemnify officers, and shall have the power to indemnify
representatives and employees of the Trust, to the same extent that Trustees are
entitled to indemnification pursuant to this Section 10.2.
Section 10.3 Shareholders. In case any Shareholder or former Shareholder of
------------
any Series shall be held to be personally liable solely by reason of his being
or having been a Shareholder of such Series and not because of his acts or
omissions or for some other reason, the Shareholder or former Shareholder (or
his heirs, executors, administrators or other legal representatives, or, in the
case of a corporation or other entity, its corporate or other general successor)
shall be entitled out of the assets belonging to the applicable Series to be
held harmless from and indemnified against all loss and expense arising from
such liability. The Trust, on behalf of the affected Series, shall, upon request
by the Shareholder, assume the defense of any claim made against the Shareholder
for any act or obligation of the Series and satisfy any judgment thereon from
the assets of the Series.
ARTICLE XI
----------
MISCELLANEOUS
-------------
Section 11.1 Trust Not a Partnership. It is hereby expressly declared that
-----------------------
a trust and not a partnership is created hereby. No Trustee hereunder shall have
any power to bind personally either the Trust's officers or any Shareholder. All
persons extending credit to, contracting with or having any claim against the
Trust or the Trustees may satisfy or enforce any debt, liability, obligation or
expense incurred, contracted for or otherwise existing with respect to the Trust
from the assets of the Trust only; and neither the Shareholders nor the
Trustees, nor any of their agents, whether past, present or future, shall be
personally liable therefor.
Trust Instrument: M.I.C Funds
================================================================================
Date Drafted: November 26, 1996 Page 18 of 26 pages.
<PAGE>
Section 11.2 Trustees' Good Faith Action, Expert Advice, No Bond or Surety.
--------------------------------------------------------------
The exercise by the Trustees of their powers and discretions hereunder in good
faith and with reasonable care under the circumstances then prevailing shall be
binding upon everyone interested. Subject to the provisions of Article X hereof,
the Trustees shall not be liable for errors of judgment or mistakes of fact or
law. The Trustees may take advice of counsel or other experts with respect to
the meaning and operation of this Trust Instrument, and subject to the
provisions of Article X hereof, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is obtained.
Section 11.3 Establishment of Record Dates. The Trustees may close the
-----------------------------
Share transfer books of the Trust for a period not exceeding ninety (90) days
preceding the date of any meeting of Shareholders, or the date for the payment
of any dividends or other distributors, or the date for the allotment of rights,
or the date when any change or conversion or exchange of Shares shall go into
effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding ninety (90) days preceding the
date of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares shall into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend
or other distribution, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of Shares, and in
such case such Shareholders and only such Shareholders as shall be Shareholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend or other distribution,
or to receive such allotment or rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any Shares on the books of the Trust
after any such record date fixed as aforesaid.
Section 11.4 Termination of Trust or Series.
------------------------------
(a) This Trust shall continue without limitation of time but subject
to the provisions of sub-section (b) of this Section 11.4.
(b) The Trustees may
(i) sell and convey all or substantially all of the assets
of the Trust or any Series to another trust, partnership,
association or corporation, or to a separate series of shares
thereof, organized under the laws of any state, for adequate
consideration which may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or contingent, of
the Trust or any Series, and which may include shares of beneficial
interest, stock or other ownership interests of such trust,
partnership, association or corporation or of a series thereof; or
(ii) at any time sell and convert into money all of the
assets of the Trust or any Series.
Trust Instrument: M.I.C Funds
================================================================================
Date Drafted: November 26, 1996 Page 19 of 26 pages.
<PAGE>
Upon making reasonable provision, in the determination of the Trustees, for
the payment of all such liabilities in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) of each Series (or class) ratably among the holders of Shares
of that Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in subsection (b), the Trust or any affected
Series shall terminate and the Trustees and the Trust shall be discharged of any
and all further liabilities and duties hereunder and the right, title and
interest of all parties with respect to the Trust or Series shall be cancelled
and discharged.
Upon termination of the Trust, following completion of winding up of its
business, the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Business Trust
Act, which certificate of cancellation may be signed by any one Trustee.
Section 11.5 Reorganization. Anything in this Trust Instrument to the
--------------
contrary notwithstanding, the Trustees, in order to change the form of
organization and/or domicile of the Trust, may, without prior Shareholder
approval, (i) cause the Trust to merge or consolidate with or into one or more
trusts, partnerships, associations or corporations which is formed, organized or
existing under the laws of a state, commonwealth possession or colony of the
United States or (ii) cause the Trust to incorporate under the laws of Delaware.
Any agreement of merger or consolidation or certificate of merger may be signed
by a majority of the Trustees. Pursuant to and in accordance with the provisions
of Section 3815(f) of the Delaware Business Trust Act, and notwithstanding
anything to the contrary contained in this Trust Instrument, an agreement of
merger or consolidation approved by the Trustees in accordance with this Section
11.5 may effect any amendment to the Trust Instrument or effect the adoption of
a new trust instrument of the Trust if it is the surviving or resulting trust in
the merger or consolidation. Any merger or consolidation of the Trust other than
as described in the foregoing provisions of this Section 11.5 shall, in addition
to the approval of the Trustees, require the approval of the holders of a
majority of the Outstanding Shares.
Section 11.6 Filing of Copies, References, Headings. The original or a copy
--------------------------------------
of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been made and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust Instrument. All
expressions like "his", "he" and "him", shall be deemed to include the feminine
and neuter, as well as masculine, genders. Headings are placed herein for
convenience of reference only and in case of any conflict, the text of this
Trust Instrument rather than the
Trust Instrument: M.I.C Funds
================================================================================
Date Drafted: November 26, 1996 Page 20 of 26 pages.
<PAGE>
headings, shall control. This Trust Instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Section 11.7 Applicable Law. The trust set forth in this instrument is made
--------------
in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Business
Trust Act and the laws of said State; provided, however, that there shall not be
applicable to the Trust, the Trustees or this Trust Instrument (a) the
provisions of Section 3540 of Title 12 of the Delaware Code or (b) any
provisions of the laws (statutory or common) of the State of Delaware (other
than the Delaware Business Trust Act) pertaining to trusts which relate to or
regulate (i) the filing with any court or governmental body or agency of trustee
accounts or schedules of trustee fees and charges, (ii) affirmative requirements
to post bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards or responsibilities or limitations on the acts or powers of
trustees, which are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees set forth or referenced in this Trust
Instrument. The Trust shall be of the type commonly called a "business trust",
and without limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust under Delaware law. The Trust
specifically reserves the right to exercise any of the powers or privileges
afforded to trusts or actions that may be engaged in by trusts under the
Delaware Business Trust Act, and the absence of a specific reference herein to
any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
Section 11.8 Amendments. Except as specifically provided herein, the
----------
Trustees may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated trust instrument. Shareholders shall have the right to vote
(i) on any amendment which would affect their right to vote granted in Section
7.1 of Article VII hereof, (ii) on any amendment to this Section 11.8, (iii) on
any amendment as may be required by law and (iv) on any amendment submitted to
them by the Trustees. Any amendment required or permitted to be submitted to
Shareholders which, as the Trustees determine, shall affect the Shareholders of
one or more Series shall be authorized by vote of the Shareholders of each
Series affected and no vote of shareholders of a Series not affected shall be
required. Anything in this Trust Instrument to the contrary notwithstanding, any
amendment to Article X hereof shall not limit the rights to indemnification or
insurance provided therein with respect to action or omission of Covered Persons
prior to such amendment.
Section 11.9 Fiscal Year. The fiscal year of the Trust shall end on a
-----------
specified date as determined from time to time by the Trustees.
Trust Instrument: M.I.C Funds
================================================================================
Date Drafted: November 26, 1996 Page 21 of 26 pages.
<PAGE>
Section 11.10 Use of the Name "Matthews International Funds". The name
----------------------------------------------
"Matthews International Funds", and all rights to the use thereof belong to
Matthews International Capital Management ("M.I.C."), the investment adviser of
the Trust. M.I.C. has consented to the use by the Trust of such name.
Section 11.11 Provisions in Conflict with Law. The provisions of this Trust
-------------------------------
Instrument are severable, and if the Trustees shall determine, with the advice
of counsel, that any of such provisions is in conflict with the 1940 Act, the
regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted prior
to such determination. If any provision of this Trust Instrument shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provisions in any other jurisdiction or any
other provision of this Trust Instrument in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being the initial Trustee of the
Trust, has executed this instrument this 8 day of April, 1994.
/s/ John Dracott
-------------------------------------
Initial Trustee
Trust Instrument: M.I.C Funds
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Date Drafted: November 26, 1996 Page 22 of 26 pages.
<PAGE>
Exhibit 24(b)(1)
CERTIFICATE OF TRUST
OF
MATTHEWS INTERNATIONAL FUNDS
This Certificate of Trust is being executed as of April 8, 1994 for the
purpose of organizing a business trust pursuant to the Delaware Business Trust
Act, 12 Del. C. (S)(S) 3801 et seq. (the "Act").
The undersigned hereby certifies as follows:
1. Name. The name of the business trust is Matthews International Funds
-----
(the "Trust").
2. Registered Investment Company. The Trust is or will become a
------------------------------
registered investment company under the Investment Company Act of 1940, as
amended.
3. Registered Office and Registered Agent. The registered office of the
---------------------------------------
Trust in the State of Delaware is located at Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware 19801. The name of the registered agent of
the Trust for service of process at such location is The Corporation Trust
Company.
4. Notice of Limitation of Liabilities of Series. Notice is hereby given
----------------------------------------------
that the Trust is or may hereafter be constituted a series trust. The debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to any particular series shall be enforceable against the
assets of such series only, and not against the assets of the Trust generally.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust,
has duly executed this Certificate of Trust as of the day and year first above
written.
TRUSTEE
/s/ John Dracott
---------------------------------------
John Dracott
655 Montgomery Street, Suite 1438
San Francisco, CA 94111
<PAGE>
Exhibit 24(b)(2)
MATTHEWS INTERNATIONAL FUNDS
----------------------------
BY-LAWS
These By-laws of Matthews International Funds (the "Trust"), a Delaware
business trust, are subject to the Trust Instrument of the Trust dated April 8,
1994, as from time to time amended, supplemented or restated (the "Trust
Instrument"). Capitalized terms used herein which are defined in the Trust
Instrument are used as therein defined.
ARTICLE I
---------
PRINCIPAL OFFICE
----------------
The principal office of the Trust shall be located in such location as the
Trustees may from time to time determine. The Trust may establish and maintain
such other offices and places of business as the Trustees may from time to time
determine.
ARTICLE II
----------
OFFICERS AND THEIR ELECTION
---------------------------
Section 2.1 Officers. The officers of the Trust shall be a President, a
--------
Treasurer, a Secretary, and such other officers as the Trustees may from time to
time elect. It shall not be necessary for any Trustee or other officer to be a
holder of Shares in the Trust.
Section 2.2 Election of Officers. Two or more offices may be held by a
--------------------
single person. Subject to the provisions of Section 2.3 hereof, the officers
shall hold office until their successors are chosen and qualified and serve at
the pleasure of the Trustees.
Section 2.3 Resignations. Any officer of the Trust may resign by filing a
------------
written resignation with the President, the Secretary or the Trustees, which
resignation shall take effect on being so filed or at such later time as may be
therein specified.
ARTICLE III
-----------
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
------------------------------------------
Section 3.1 Chief Executive Officer. Unless the Trustees have designated
-----------------------
the Chairman as the chief executive officer of the Trust, the President shall be
the chief executive officer of the Trust. Subject to the direction of the
Trustees, the chief executive officer shall have general administration of the
business and policies of the Trust. Except as the Trustees may
<PAGE>
otherwise order, the chief executive officer shall have the power to grant,
issue, execute or sign such powers of attorney, proxies, agreements or other
documents as may be deemed advisable or necessary in the furtherance of the
interests of the Trust or any Series thereof. He shall also have the power to
employ attorneys, accountants and other advisers and agents and counsel for the
Trust. If the President is not the chief executive officer, he shall perform
such duties as the Trustees or the chief executive officer may from time to time
designate and, at the request or in the absence or disability of the chief
executive officer, may perform all the duties of the chief executive officer
and, when so acting, shall have all the powers of and be subject to all the
restrictions upon the chief executive officer.
Section 3.2 Treasurer. The Treasurer shall be the principal financial and
---------
accounting officer of the Trust. He shall deliver all funds and securities of
the Trust which may come into his hands to such company as the Trustees shall
employ as Custodian in accordance with the Trust Instrument and applicable
provisions of law. He shall make annual reports regarding the business and
condition of the Trust, which reports shall be preserved in Trust records, and
he shall furnish such other reports regarding the business and condition of the
Trust as the Trustees may from time to time require. The Treasurer shall
perform such additional duties as the Trustees or the chief executive officer
may from time to time designate.
Section 3.3 Secretary. The Secretary shall record in books kept for the
---------
purpose all votes and proceedings of the Trustees and the Shareholders at their
respective meetings. He shall have the custody of the seal of the Trust. The
Secretary shall perform such additional duties as the Trustees or the chief
executive officer may from time to time designate.
Section 3.4 Vice President. Any Vice President of the Trust shall perform
--------------
such duties as the Trustees or the chief executive officer may from time to time
designate. At the request or in the absence or disability of the President, the
most senior Vice President present and able to act may perform all the duties of
the President and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the President.
Section 3.5 Assistant Treasurer. Any Assistant Treasurer of the Trust
-------------------
shall perform such duties as the Trustees or the Treasurer may from time to time
designate, and, in the absence of the Treasurer, the most senior Assistant
Treasurer present and able to act may perform all the duties of the Treasurer.
Section 3.6 Assistant Secretary. Any Assistant Secretary of the Trust
-------------------
shall perform such duties as the Trustees or the Secretary may from time to time
designate, and, in the absence of the Secretary, the most senior Assistant
Secretary present and able to act my perform all the duties of the Secretary.
Section 3.7 Subordinate Officers. The Trustees from time to time may
--------------------
appoint such other officers or agents as they may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Trustees may determine.
2
<PAGE>
Section 3.8 Surety Bonds. The Trustees may require any officer or agent
------------
of the Trust to execute a bond (including, without limitation, any bond required
by the Investment Company Act of 1940 ("1940 Act") in such sum and with such
surety or sureties as the Trustees may determine, conditioned upon the faithful
performance of his duties to the Trust including responsibility for negligence
and for the accounting of any of the Trust's property, funds or securities that
may come into his hands.
Section 3.9 Removal. Any officer may be removed from office at any time
-------
by the Trustees.
Section 3.10 Remuneration. The salaries or other compensation, if any, of
------------
the officers of the Trust shall be fixed from time to time by resolution of the
Trustees.
ARTICLE IV
----------
SHAREHOLDERS' MEETINGS
----------------------
Section 4.1 Notices. Notices of any meeting of the Shareholders shall be
-------
given by the Secretary by delivering or mailing, postage prepaid, to each
Shareholder entitled to vote at said meeting, written or printed notification of
such meeting at least fifteen days before the meeting, to such address as may be
registered with the Trust by the Shareholder. Notice of any Shareholder meeting
need not be given to any Shareholder if a written waiver of notice, executed
before or after such meeting, is filed with the record of such meeting, or to
any Shareholder who shall attend such meeting in person or by proxy. Notice of
adjournment of a Shareholders' meeting to another time or place need not be
given, if such time and place are announced at the meeting or reasonable notice
is given to persons present at the meeting.
Section 4.2 Voting-Proxies. Subject to the provisions of the Trust
--------------
Instrument, Shareholders entitled to vote may vote either in person or by proxy,
provided that either (i) an instrument authorizing such proxy to act is executed
by the Shareholder in writing and dated not more than eleven months before the
meeting, unless the instrument specifically provides for a longer period or (ii)
the Trustees adopt by resolution an electronic, telephonic, computerized or
other alternative to execution of a written instrument authorizing the proxy to
act, which authorization is received not more than eleven months before the
meeting. Proxies shall be delivered to the Secretary of the Trust or other
person responsible for recording the proceedings before being voted. A proxy
with respect to Shares held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice to the contrary from any one of them. Unless
otherwise specifically limited by their terms, proxies shall entitle the holder
thereof to vote at any adjournment of a meeting. A proxy purporting to be
exercised by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior too its exercise and the burden or proving invalidity
shall rest on the challenger. At all meetings of the Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualifications
of voters, the validity of proxies, and the
3
<PAGE>
acceptance or rejection of votes shall be decided by the Chairman of the
meeting. Except as otherwise provided herein or in the Trust Instrument, all
matters relating to the giving, voting or validity of proxies shall be governed
by the General Corporation Law of the State of Delaware relating to proxies, and
judicial interpretations thereunder, as if the Trust were a Delaware corporation
and the Shareholders were shareholders of a Delaware corporation.
Section 4.5 Place of Meeting. All meetings of the Shareholders shall be
----------------
held at such places as the Trustees may designate.
ARTICLE V
---------
SHARES OF BENEFICIAL INTEREST
-----------------------------
Section 5.1 Share Certificate. No certificates certifying the ownership
-----------------
of Shares shall be issued except as the Trustees may otherwise authorize. The
Trustees may issue certificates to a Shareholder of any Series or class thereof
for any purpose and the issuance of a certificate to one or more Shareholders
shall not require the issuance of certificates generally. In the event that the
Trustees authorize the issuance of Share certificates, such certificates shall
be in the form prescribed from time to time by the Trustees and shall be signed
by the President or a Vice President and by the Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary. Such signatures may be facsimiles if the
certificate is signed by a transfer or shareholder services agent or by a
registrar, other than a Trustee, officer or employee of the Trust. In case any
officer who has signed or whose facsimile signature has been placed on such
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Trust with the same effect as if he or she were
such officer at the time of its issue.
Section 5.2 Loss of Certificate. In case of the alleged loss or
-------------------
destruction or the mutilation of a Share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees may prescribe.
Section 5.3 Discontinuance of Issuance of Certificates. The Trustees may
------------------------------------------
at any time discontinue the issuance of Share certificates and may, by written
notice to each Shareholder, require the surrender of Share certificates to the
Trust for cancellation. Such surrender and cancellation shall not affect the
ownership of Shares of the Trust.
ARTICLE VI
----------
INSPECTION OF BOOKS
-------------------
The Trustees shall from time to time determine whether and to what extent,
and at what times and places, and under what conditions and regulations the
accounts and books of
4
<PAGE>
the Trust or any of them shall be open to the inspection of the Shareholders;
and no Shareholder shall have any right to inspect any account or book or
document of the Trust except as conferred by law or otherwise by the Trustees.
ARTICLE VII
-----------
SEAL
----
The seal of the Trust shall be circular in form bearing the inscription:
"MATTHEWS INTERNATIONAL FUNDS -- 1994
THE STATE OF DELAWARE"
The form of the seal shall be subject to alteration by the Trustees and the
seal may be used by causing it or a facsimile to be impressed or affixed or
printed or otherwise reproduced.
Any officer or Trustee of the Trust shall have authority to affix the seal
of the Trust to any document, instrument or other paper executed and delivered
by or on behalf of the Trust; however, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on and its absence shall
not impair the validity of any document, instrument, or other paper executed by
or on behalf of the Trust.
ARTICLE VIII
------------
AMENDMENTS
----------
These By-laws may be amended from time to time by the Trustees.
ARTICLE IX
----------
HEADINGS
--------
Headings are placed in these By-laws for convenience of reference only and,
in case of any conflict, the text of these By-laws rather than the headings
shall control.
<PAGE>
Exhibit 24(b)(5)(a)
INVESTMENT ADVISORY AGREEMENT
-----------------------------
AGREEMENT made this 12th day of September, 1994 by and between Matthews
International Funds, a Delaware Business Trust (the "Trust") and Matthews
International Capital Management, a California corporation (the "Advisor").
1. Duties of Advisor. The Trust hereby appoints the Advisor to act as
-----------------
investment advisor to the Matthews Pacific Tiger Fund (the "Series") for the
---------------------------
period and on such terms set forth in this Agreement. The Trust employs the
Advisor to manage the investment and reinvestment of the assets of the Series,
to determine in it discretion the assets to be held uninvested, to provide the
Trust with records concerning the Advisor's activities which the Trust is
required to maintain, and to render regular reports to the Trust's officers and
Board of Trustees concerning the Advisor's discharge of the foregoing
responsibilities. The Advisor shall discharge the foregoing responsibilities
subject to the control of the officers and the Board of Trustees of the Trust,
and in compliance with the objectives, policies and limitations set forth in the
Trust's Prospectus and Statement of Additional Information. The Advisor accepts
such employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings, equipment and the personnel required by
it to perform the services on the terms and for the compensation provided
herein.
2. Portfolio Transactions. The Advisor shall provide the Series with a
----------------------
trading department. The Advisor shall select the brokers or dealers that will
execute the purchases and sales of securities for the Series and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Series are obtained. The Series
will bear all expenses associated with its investment activities, including,
without limitation, brokerage commissions and custody expenses. Subject to
policies established by the Board of Trustees of the Trust and communicated to
the Advisor, it is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Series, or be in breach of any obligation owing to the Trust or in respect
of the Series under this Agreement, or otherwise, solely by reason of its having
caused the Series to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Series in excess of
the amount of commission another member of an exchange, broker or dealer would
have charged if the
================================================================================
Investment Advisory Agreement between Matthews International Funds and Matthews
International Capital Management; f/b/o Matthews Pacific Tiger Fund
Date Drafted: November 26, 1996 Page 1 of 4 pages.
<PAGE>
Advisor determines in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such member, broker
or dealer, viewed in terms of that particular transaction or the Advisor's
overall responsibilities with respect to the accounts, including the Series, as
to which it exercises investment discretion. The Advisor will promptly
communicate to the officers and directors of the Trust such information relating
to Series transactions as they may reasonably request.
3. Compensation of the Advisor. For the services to be rendered by the
---------------------------
Advisor as provided in Section 1 and 2 of this Agreement, the Series shall pay
to the Advisor within five business days after the end of each calendar month, a
monthly fee of one twelfth of 1.00% of the Series' average daily net assets for
the month. The net asset value shall be calculated in the manner provided in
the Series' prospectus and statement of additional information then in effect.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rate basis, based on the number of days when
this Agreement was in effect.
4. Reports. The Series and the Advisor agree to furnish to each other
-------
such information regarding their operations with regard to their affairs as each
may reasonably request.
5. Status of Advisor. The services of the Advisor to the Series are not
-----------------
to be deemed exclusive, and the Advisor shall be free to render similar services
to others so long as its services to the Series are not impaired thereby.
6. Liability of Advisor. In the absence of willful misfeasance, bad
--------------------
faith, gross negligence or reckless disregard by the Advisor of its obligations
and duties hereunder, the Advisor shall not be subject to any liability
whatsoever to the Series, or to any shareholder of the Series, for any error of
judgment, mistake of law or any other act or omission in the course of, or
connected with, rendering services hereunder including, without limitation, for
any losses that may be sustained in connection with the purchase, holding,
redemption or sale of any security on behalf of the Series.
7. Duration and Termination. This Agreement shall become effective on
------------------------
September 12, 1994 provided that first it is approved by the Board of Trustees
of the Trust, including a majority of those trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
section 15(c) of the Investment
================================================================================
Investment Advisory Agreement between Matthews International Funds and Matthews
International Capital Management; f/b/o Matthews Pacific Tiger Fund
Page 2 of 4 pages.
Date Drafted: November 26, 1996
<PAGE>
Company Act of 1940, and by the holders of a majority of the outstanding voting
securities of the Series; and shall continue in effect until September 12, 1996.
Thereafter, this Agreement may continue in effect only if such continuance is
approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the
vote of a majority of the outstanding voting securities of the Series; and in
either event by a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party in the manner
provided in section 15(c) of the Investment Company Act of 1940. This Agreement
may be terminated by the Trust at any time, without the payment of any penalty,
by the Board of Trustees of the Trust or by vote of the holders of a majority of
the outstanding voting securities of the Series on 60 days' written notice to
the Advisor. This Agreement may be terminated by the Advisor at any time,
without the payment of any penalty, upon 60 days' written notice to the Trust.
This Agreement will automatically terminate in the event of its assignment. Any
notice under this Agreement shall be given in writing, addressed and delivered
or mailed postpaid, to the other party at the principal office of such party.
As used in this Section 8, the terms "assignment" "interested person", and
"a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
8. Name of Advisor. The parties agree that the Advisor has a proprietary
---------------
interest in the name "Matthews," and the Trust agrees to promptly take such
action as may be necessary to delete from its corporate name and/or the name of
the Series any reference to the name of the Advisor on the name "Matthews"
promptly after receipt from the Advisor of a written request therefore.
9. Severability. If any provisions of this Agreement shall be held or
------------
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
10. Governing Law. This agreement shall be governed by and construed and
-------------
interpreted in accordance with the laws of the State of California.
================================================================================
Investment Advisory Agreement between Matthews International Funds and Matthews
International Capital Management; f/b/o Matthews Pacific Tiger Fund
Date Drafted: November 26, 1996 Page 3 of 4 pages.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of 12th day of September, 1994.
ATTEST: MATTHEWS INTERNATIONAL FUNDS
/s/ John Dracott /s/ G. Paul Matthews
- ------------------------------ ------------------------------
John Dracott, Secretary G. Paul Matthews, President
ATTEST: MATTHEWS INTERNATIONAL
CAPITAL MANAGEMENT
/s/ John Dracott /s/ G. Paul Matthews
- ------------------------------ ------------------------------
John Dracott, Secretary G. Paul Matthews, President
================================================================================
Investment Advisory Agreement between Matthews International Funds and Matthews
International Capital Management; f/b/o Matthews Pacific Tiger Fund
Date Drafted: November 26, 1996 Page 4 of 4 pages.
<PAGE>
Exhibit 24(b)(5)(b)
INVESTMENT ADVISORY AGREEMENT
-----------------------------
AGREEMENT made this 12th day of September, 1994 by and between Matthews
International Funds, a Delaware Business Trust (the "Trust") and Matthews
International Capital Management, a California corporation (the "Advisor").
1. Duties of Advisor. The Trust hereby appoints the Advisor to act as
-----------------
investment advisor to the Matthews Asian Convertible Securities Fund (the
------------------------------------------
"Series") for the period and on such terms set forth in this Agreement. The
Trust employs the Advisor to manage the investment and reinvestment of the
assets of the Series, to determine in it discretion the assets to be held
uninvested, to provide the Trust with records concerning the Advisor's
activities which the Trust is required to maintain, and to render regular
reports to the Trust's officers and Board of Trustees concerning the Advisor's
discharge of the foregoing responsibilities. The Advisor shall discharge the
foregoing responsibilities subject to the control of the officers and the Board
of Trustees of the Trust, and in compliance with the objectives, policies and
limitations set forth in the Trust's Prospectus and Statement of Additional
Information. The Advisor accepts such employment and agrees to render the
services and to provide, at its own expense, the office space, furnishings,
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein.
2. Portfolio Transactions. The Advisor shall provide the Series with a
----------------------
trading department. The Advisor shall select the brokers or dealers that will
execute the purchases and sales of securities for the Series and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Series are obtained. The Series
will bear all expenses associated with its investment activities, including,
without limitation, brokerage commissions and custody expenses. Subject to
policies established by the Board of Trustees of the Trust and communicated to
the Advisor, it is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Series, or be in breach of any obligation owing to the Trust or in respect
of the Series under this Agreement, or otherwise, solely by reason of its having
caused the Series to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Series in excess of
the amount of commission another member of an exchange, broker or dealer would
have charged if the
===============================================================================
Investment Advisory Agreement between Matthews International Funds and
Matthews International Capital Management; f/b/o Matthews Asian
Convertible Securities Fund
Date Drafted: November 26, 1996 Page 1 of 4 pages.
<PAGE>
Advisor determines in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such member, broker
or dealer, viewed in terms of that particular transaction or the Advisor's
overall responsibilities with respect to the accounts, including the Series, as
to which it exercises investment discretion. The Advisor will promptly
communicate to the officers and directors of the Trust such information relating
to Series transactions as they may reasonably request.
3. Compensation of the Advisor. For the services to be rendered by the
---------------------------
Advisor as provided in Section 1 and 2 of this Agreement, the Series shall pay
to the Advisor within five business days after the end of each calendar month, a
monthly fee of one twelfth of 1.00% of the Series' average daily net assets for
the month. The net asset value shall be calculated in the manner provided in
the Series' prospectus and statement of additional information then in effect.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rate basis, based on the number of days when
this Agreement was in effect.
4. Reports. The Series and the Advisor agree to furnish to each other
-------
such information regarding their operations with regard to their affairs as each
may reasonably request.
5. Status of Advisor. The services of the Advisor to the Series are not
-----------------
to be deemed exclusive, and the Advisor shall be free to render similar services
to others so long as its services to the Series are not impaired thereby.
6. Liability of Advisor. In the absence of willful misfeasance, bad
--------------------
faith, gross negligence or reckless disregard by the Advisor of its obligations
and duties hereunder, the Advisor shall not be subject to any liability
whatsoever to the Series, or to any shareholder of the Series, for any error of
judgment, mistake of law or any other act or omission in the course of, or
connected with, rendering services hereunder including, without limitation, for
any losses that may be sustained in connection with the purchase, holding,
redemption or sale of any security on behalf of the Series.
7. Duration and Termination. This Agreement shall become effective on
------------------------
September 12, 1994 provided that first it is approved by the Board of Trustees
of the Trust, including a majority of those trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
section 15(c) of the Investment
===============================================================================
Investment Advisory Agreement between Matthews International Funds and
Matthews International Capital Management; f/b/o Matthews Asian
Convertible Securities Fund
Date Drafted: November 26, 1996 Page 2 of 4 Pages
<PAGE>
Company Act of 1940, and by the holders of a majority of the outstanding voting
securities of the Series; and shall continue in effect until September 12, 1996.
Thereafter, this Agreement may continue in effect only if such continuance is
approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the
vote of a majority of the outstanding voting securities of the Series; and in
either event by a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party in the manner
provided in section 15(c) of the Investment Company Act of 1940. This Agreement
may be terminated by the Trust at any time, without the payment of any penalty,
by the Board of Trustees of the Trust or by vote of the holders of a majority of
the outstanding voting securities of the Series on 60 days' written notice to
the Advisor. This Agreement may be terminated by the Advisor at any time,
without the payment of any penalty, upon 60 days' written notice to the Trust.
This Agreement will automatically terminate in the event of its assignment. Any
notice under this Agreement shall be given in writing, addressed and delivered
or mailed postpaid, to the other party at the principal office of such party.
As used in this Section 8, the terms "assignment" "interested person", and
"a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
8. Name of Advisor. The parties agree that the Advisor has a proprietary
---------------
interest in the name "Matthews," and the Trust agrees to promptly take such
action as may be necessary to delete from its corporate name and/or the name of
the Series any reference to the name of the Advisor or the name "Matthews,"
promptly after receipt from the Advisor of a written request therefore.
9. Severability. If any provisions of this Agreement shall be held or
------------
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
10. Governing Law. This agreement shall be governed by and construed and
-------------
interpreted in accordance with the laws of the State of California.
===============================================================================
Investment Advisory Agreement between Matthews International Funds and
Matthews International Capital Management; f/b/o Matthews Asian
Convertible Securities Fund
Date Drafted: November 26, 1996 Page 3 of 4 pages.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of 12th day of September, 1994.
ATTEST: MATTHEWS INTERNATIONAL FUNDS
/s/ John Dracott /s/ G. Paul Matthews
- ------------------------------ ------------------------------
John Dracott, Secretary G. Paul Matthews, President
ATTEST: MATTHEWS INTERNATIONAL
CAPITAL MANAGEMENT
/s/ John Dracott /s/ G. Paul Matthews
- ------------------------------ ------------------------------
John Dracott, Secretary G. Paul Matthews, President
===============================================================================
Investment Advisory Agreement between Matthews International Funds and
Matthews International Capital Management; f/b/o Matthews Asian
Convertible Securities Fund
Date Drafted: November 26, 1996 Page 4 of 4 pages.
<PAGE>
Exhibit 24(b)(5)(c)
INVESTMENT ADVISORY AGREEMENT
-----------------------------
AGREEMENT made this 13th day of December, 1994 by and between Matthews
International Funds, a Delaware Business Trust (the "Trust") and Matthews
International Capital Management, a California corporation (the "Adviser").
1. Duties of Adviser. The Trust hereby appoints the Adviser to act as
-----------------
investment adviser to the Matthews Korea Fund (the "Series") for the period and
-------------------
on such terms set forth in this Agreement. The Trust employs the Adviser to
manage the investment and reinvestment of the assets of the Series, to determine
in its discretion the assets to be held uninvested, to provide the Trust with
records concerning the Adviser's activities which the Trust is required to
maintain, and to render regular reports to the Trust's officers and Board of
Trustees concerning the Adviser's discharge of the foregoing responsibilities.
The Adviser shall discharge the foregoing responsibilities subject to the
control of the officers and the Board of Trustees of the Trust, and in
compliance with the objectives, policies and limitations set forth in the
Trust's Prospectus and Statement of Additional Information. The Adviser accepts
such employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings, equipment and the personnel required by
it to perform the services on the terms and for the compensation provided
herein.
2. Portfolio Transactions. The Adviser shall provide the Series with a
----------------------
trading department. The Adviser shall select the brokers or dealers that will
execute the purchases and sales of securities for the Series and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Series are obtained. The Series
will bear all expenses associated with its investment activities, including,
without limitation, brokerage commissions and custody expenses. Subject to
policies established by the Board of Trustees of the Trust and communicated to
the Adviser, it is understood that the Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Series, or be in breach of any obligation owing to the Trust or in respect
of the Series under this Agreement, or otherwise, solely by reason of its having
caused the Series to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Series in excess of
the amount
================================================================================
Investment Advisory Agreement between Matthews International Funds and Matthews
International Capital Management; f/b/o Matthews Korea Fund
Date Drafted: November 26, 1996 Page 1 of 4 pages.
<PAGE>
of commission another member of an exchange, broker or dealer would have charged
if the Adviser determines in good faith that the commission paid was reasonable
in relation to the brokerage or research services provided by such member,
broker or dealer, viewed in terms of that particular transaction or the
Adviser's overall responsibilities with respect to the accounts, including the
Series, as to which it exercises investment discretion. The Adviser will
promptly communicate to the officers and directors of the Trust such information
relating to Series transactions as they may reasonably request.
3. Compensation of the Adviser. For the services to be rendered by the
---------------------------
Adviser as provided in Section 1 and 2 of this Agreement, the Series shall pay
to the Adviser within five business days after the end of each calendar month, a
monthly fee of one twelfth of 1.00% of the Series' average daily net assets for
the month. The net asset value shall be calculated in the manner provided in
the Series' prospectus and statement of additional information then in effect.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rate basis, based on the number of days when
this Agreement was in effect.
4. Reports. The Series and the Adviser agree to furnish to each other
-------
such information regarding their operations with regard to their affairs as each
may reasonably request.
5. Status of Adviser. The services of the Adviser to the Series are not
-----------------
to be deemed exclusive, and the Adviser shall be free to render similar services
to others so long as its services to the Series are not impaired thereby.
6. Liability of Adviser. In the absence of willful misfeasance, bad
--------------------
faith, gross negligence or reckless disregard by the Adviser of its obligations
and duties hereunder, the Adviser shall not be subject to any liability
whatsoever to the Series, or to any shareholder of the Series, for any error of
judgment, mistake of law or any other act or omission in the course of, or
connected with, rendering services hereunder including, without limitation, for
any losses that may be sustained in connection with the purchase, holding,
redemption or sale of any security on behalf of the Series.
7. Duration and Termination. This Agreement shall become effective on
------------------------
January 2, 1995 provided that first it is approved by the Board of Trustees of
the Trust, including a majority of those trustees who are not parties to this
Agreement or interested
================================================================================
Investment Advisory Agreement between Matthews International Funds and Matthews
International Capital Management; f/b/o Matthews Korea Fund
Date Drafted: November 26, 1996 Page 2 of 4 pages.
<PAGE>
persons of any party hereto, in the manner provided in section 15(c) of the
Investment Company Act of 1940, and by the holders of a majority of the
outstanding voting securities of the Series; and shall continue in effect until
January 5, 1997. Thereafter, this Agreement may continue in effect only if such
continuance is approved at least annually by: (i) the Trust's Board of Trustees
or, (ii) by the vote of a majority of the outstanding voting securities of the
Series; and in either event by a vote of a majority of those trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party in the manner provided in section 15(c) of the Investment Company Act of
1940. This Agreement may be terminated by the Trust at any time, without the
payment of any penalty, by the Board of Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities of the Series on 60
days' written notice to the Adviser. This Agreement may be terminated by the
Adviser at any time, without the payment of any penalty, upon 60 days' written
notice to the Trust. This Agreement will automatically terminate in the event of
its assignment. Any notice under this Agreement shall be given in writing,
addressed and delivered or mailed postpaid, to the other party at the principal
office of such party.
As used in this Section 8, the terms "assignment" "interested person", and
"a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and
Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
8. Name of Adviser. The parties agree that the Adviser has a
---------------
proprietary interest in the name "Matthews," and the Trust agrees to promptly
take such action as may be necessary to delete from its corporate name and/or
the name of the Series any reference to the name of the Adviser or the name
"Matthews," promptly after receipt from the Adviser of a written request
therefore.
9. Severability. If any provisions of this Agreement shall be held or
------------
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
10. Governing Law. This agreement shall be governed by and construed and
-------------
interpreted in accordance with the laws of the State of California.
================================================================================
Investment Advisory Agreement between Matthews International Funds and Matthews
International Capital Management; f/b/o Matthews Korea Fund
Date Drafted: November 26, 1996 Page 3 of 4 pages.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of 13th day of December, 1994.
ATTEST: MATTHEWS INTERNATIONAL
FUNDS
/s/ John Dracott /s/ G. Paul Matthews
- ------------------------------- ---------------------------------
John Dracott, Secretary G. Paul Matthews, President
ATTEST: MATTHEWS INTERNATIONAL
CAPITAL MANAGEMENT
/s/ John Dracott /s/ G. Paul Matthews
- ------------------------------- ---------------------------------
John Dracott, Secretary G. Paul Matthews, President
================================================================================
Investment Advisory Agreement between Matthews International Funds and Matthews
International Capital Management; f/b/o Matthews Korea Fund
Date Drafted: November 26, 1996 Page 4 of 4 pages.
<PAGE>
Exhibit 24(b)(5)(d)
RESEARCH AND ADVISORY AGREEMENT
-------------------------------
AGREEMENT made this 13th day of December , 1994 by and between
-------- --------------
Matthews International Capital Management (hereinafter referred to as the
"Adviser") and Daewoo Capital Management Co., Ltd. (hereinafter referred to as
the "Korean Adviser"), which Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one instrument.
WITNESSETH
WHEREAS, the Adviser has entered into an Investment Advisory Agreement (the
"Advisory Agreement") dated as of November 28, 1994 with Matthews Korea Fund
(the "Fund"), a series of Matthews International Funds, a Delaware business
trust, pursuant to which the Adviser acts as investment adviser to and manager
of the Fund.
WHEREAS, the Adviser wishes to engage the services of the Korean Adviser to
assist the Adviser in the performance of its obligations under the Advisory
Agreement.
NOW THEREFORE, in consideration of the mutual agreements herein contained
and intending to be bound, the parties agree as follows.
1. Duties of Korean Adviser. The Korean Adviser agrees to furnish to
------------------------
the Adviser such information, research and analysis, investment recommendations,
advice and assistance with respect to the purchase and sale of securities, as
the Adviser shall from time to time reasonably request subject to oversight by
the Board of Trustees and the supervision of the Adviser. The Korean Adviser
agrees with respect to the services provided to the Fund that it:
(a) shall provide the Adviser with records concerning the Korean
Adviser's activities which the Fund is required to maintain, and to render
regular reports to the Adviser and Board of Trustees concerning the Korean
Adviser's discharge of the foregoing responsibilities. The Korean Adviser shall
discharge the foregoing responsibilities subject to the control of the Adviser
and the Board of Trustees and in compliance with the objectives, policies and
limitations set forth in the Fund's Prospectus and Statement of Additional
Information. The Korean Adviser accepts such employment and agrees to render the
services and to provide, at its own expense, the office space, furnishings,
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein;
(b) shall pay the fees and expenses of any directors or officers of
the Fund who are directors, officers or employees of the Korean Adviser or any
of the Korean Adviser's affiliates, except that the Fund shall bear travel
expenses of one (but not more than one) director, officer or employee of the
Korean Adviser or any of the Korean Adviser's affiliates who is not a resident
in the United States to the extent such expenses relate to his/her
Matthews Korea
=================================================================
Fund - Research and Advisory Agreement
Page 1
<PAGE>
attendance as a director at meetings of the Board of Trustees of the Fund in the
United States, and shall also bear the travel expenses of any other director,
officer or employee of the Korean Adviser or of any of the Korean Adviser's
affiliates who is resident in the United States to the extent such expenses
relate to his/her attendance as a director at meetings of the Board of Trustees
outside of the United States.
(c) shall maintain books and records with respect to the securities
transactions for the Fund, furnish to the Adviser and the Board of Trustees such
periodic and special reports as they may request with respect to the Fund, and
provide in advance to the Adviser all of the Korean Adviser's reports to the
Board of Trustees for examination and review within a reasonable time prior to
the Fund's Board meetings.
2. Portfolio Transactions. The Korean Adviser shall provide the Fund
----------------------
with a trading department and will place orders pursuant to its investment
determination for the Fund either directly with any broker or dealer, or with
the issuer. The Korean Adviser shall select the brokers or dealers that will
execute the purchases and sales of securities for the Fund and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities for the Fund are obtained. Subject to policies
established by the Board of Trustees of the Fund and communicated to the
Adviser, it is understood that the Korean Adviser will not be deemed to have
acted unlawfully, or to have breached a fiduciary duty to the Fund or in respect
of the Series, or be in breach of any obligation owing to the Fund or in respect
of the Fund under this Agreement, or otherwise, solely by reason of its having
caused the Fund to pay a member of a securities exchange, a broker or a dealer a
commission for effecting a securities transaction for the Fund in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged if the Adviser determines in good faith that the commission paid was
reasonable in relation to the brokerage or research services provided by such
member, broker or dealer, viewed in terms of that particular transaction or the
Korean Adviser's overall responsibilities with respect to the accounts,
including the Fund, as to which it exercises investment discretion. The Korean
Adviser will promptly communicate to the officers and trustees of the Fund such
information relating to Fund transactions as they may reasonably request.
The Korean Adviser agrees with respect to the portfolio transactions
executed on behalf of the Fund that it:
(a) will telecopy trade information to Fund/Plan Services, Inc., 2
West Elm Street, Conshohocken, Pennsylvania, United States 19428 on the close of
business on the day the trade was executed and cause broker confirmations to be
sent directly to the Adviser. If by facsimile the number shall be (610) 834-
3496.
(b) will give prior notification of all trades, wherever possible, to
the Adviser, either by telephone or fax. In the event that such notification is
not possible and the trade or trades in question are not in compliance with the
investment objectives of the Fund as set forth in the Prospectus and Statement
of Additional Information, the Adviser reserves the right to reject execution of
the trade or trades, even where such trade or trades do not represent willful
Matthews Korea
==================================================================
Fund - Research and Advisory Agreement
Page 2
<PAGE>
misfeasance, bad faith or gross negligence on the part of the Korean Adviser.
In such case, the Adviser will not be subject to any liability arising from the
action of the Korean Adviser.
3. Compensation of the Korean Adviser. As compensation for the services
----------------------------------
enumerated herein, the Adviser will pay the Korean Adviser, in United States
dollars, a monthly fee which, on an annual basis, is equal to 0.50% per annum of
the value of the Fund's net assets provided that the Adviser realizes its full
fees under the Advisory Agreement. In the event the Adviser realizes less than
its full Advisory fee as set forth in the Advisory Agreement, the Korean Adviser
agrees to accept as its fee in any given month a sum equal to 1/2 of the fee
realized by the Adviser.
For purposes of computing the monthly fee, the value of the net
assets of the Fund shall be determined as of the close of business on the last
business day of each month; provided, however, that the fee for the period from
the end of the last month ending prior to termination of this Agreement, for
whatever reason, to date of termination shall be based on the value of net
assets of the Fund determined as of the close of business on the date of
termination and the fee for such period through the end of the month in which
such proceeds are received shall be prorated according to the proportion which
such period bears to a full monthly period. Each payment of a monthly fee shall
be made by the Adviser to the Korean Adviser within the fifteen days next
following the day as of which such payment is so computed.
The value of the net assets of the Fund shall be determined pursuant
to the applicable provisions of the Trust Instrument and By-laws of the Fund.
Until such time as the Adviser shall have recouped its out of pocket expenses
incurred in organizing the Fund, the Korean Adviser shall waive the compensation
payable to it hereunder. The Korean Adviser acknowledges that during such period
the investment advisory fee payable by the Fund to the Adviser shall be
increased by the amount of the fee waived hereunder.
The Adviser agrees to work with the Korean Adviser, in order to make
the relationship as productive as possible for the benefit of the Fund, to
further the development of the Korean Adviser's ability to provide the services
contemplated by Section 1. To this end the Adviser agrees to work with the
Korean Adviser to assist the Korean Adviser in developing research techniques,
procedures and analysis. The Korean Adviser agrees not to furnish, without the
Adviser's consent, to any person other than the Adviser's personnel and
directors and representatives of the Fund any tangible research material that is
prepared by the Korean Adviser, that is not publicly available, and that has
been stamped or otherwise clearly indicated by the Korean Adviser as being
confidential.
4. Status of Korean Adviser. It is expressly understood and agreed that
------------------------
the services to the Fund are not to be deemed exclusive, and the Korean Adviser
shall be free to provide similar services to others so long as its ability to
provide the services provided for in this Agreement shall not be materially
impaired thereby. Nothing herein shall be construed as constituting the Korean
Adviser an agent of the Adviser or of the Fund. The Korean Adviser represents
and warrants that they are registered as an investment adviser under the U.S.
Matthews Korea
=================================================================
Fund - Research and Advisory Agreement
Page 3
<PAGE>
Investment Advisers Act of 1940, as amended. The Korean Adviser agrees to
maintain such registration in effect during the term of this Agreement.
Neither the Korean Adviser nor any of its affiliate shall receive any
compensation in connection with the placement or execution of any transaction
for the purchase or sale of securities or for the investment of funds on behalf
of the Fund, except that the Korean Adviser or its affiliates may receive a
commission, fee or other remuneration for acting as broker in connection with
the sale of securities to or by the Fund, if permitted under the U.S. Investment
Company Act of 1940, as amended.
5. Liability of Korean Adviser. The Adviser and the Fund agree that the
---------------------------
Korean Adviser may rely on information believed by the Korean Adviser to be
accurate and reliable. The Adviser and the Fund further agree that neither the
Korean Adviser nor the Korean Adviser's officers, directors, employees or agents
shall be subject to any liability for any act or omission in the course of,
connected with or arising out of any services to be rendered hereunder except by
reason of willful misfeasance, bad faith or gross negligence in the performance
of the Korean Adviser's duties or by reason of reckless disregard of the Korean
Advisor's obligations and duties under this Agreement.
6. Duration and Termination. This Agreement shall continue in effect
------------------------
for a period of two years from the effective date. Thereafter, this Agreement
may continue in effect only so long as such continuance is specifically approved
at least annually by the affirmative vote of (i) a majority of the members of
the Fund's Board of Trustees who are not interested persons of the Fund, the
Korean Adviser or the Adviser, cast in person at a meeting called for the
purpose of voting on such approval; and (ii) a majority of the Fund's Board of
Trustees or the holders of a majority of the outstanding voting securities of
the Fund. This Agreement may nevertheless be terminated at any time, without
penalty, by the Fund's Board of Trustees or by vote of holders of a majority of
the outstanding voting securities of the Fund, upon 60 days' written notice
delivered or sent by registered mail, postage prepaid, to the Korean Adviser, at
the Korean Adviser's address given above or at any other address of which the
Korean Adviser shall have notified the Adviser in writing, or by the Korean
Adviser upon 60 days' written notice to the Adviser and to the Fund, and shall
automatically be terminated in the event of its assignment or of the termination
(due to assignment or otherwise) of the Advisory Agreement, provided that an
assignment to a corporate successor to all or substantially all of the Korean
Adviser's business or to a wholly-owned subsidiary of such corporate successor
which does not result in a change of actual control or management of the Korean
Adviser's business shall not be deemed to be an assignment for purposes of this
Agreement. Any such notice shall be deemed given when received by the
addressee.
This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by either party hereto. It may be amended by
mutual agreement, but only after authorization of such amendment by the
affirmative vote of (i) the holders of a majority of the outstanding voting
securities of the Fund; and (ii) a majority of the members of the Fund's Board
of Trustees who are not interested persons of the Fund, the Korean Adviser or
the Adviser, cast in person at a meeting called for the purpose of voting on
such approval.
Matthews Korea
==================================================================
Fund - Research and Advisory Agreement
Page 4
<PAGE>
Any notice hereunder shall be in writing and shall be delivered in
person or by facsimile (followed by mailing such notice, air mail postage paid,
the day on which such facsimile is sent.
If to Matthews International Capital Management, to:
Matthews International Capital Management
655 Montgomery Street, Suite 1438
San Francisco, California 94111
Attention: President
(Facsimile No. 415-788-6237)
If to Daewoo Capital Management Co., Ltd., to:
Daewoo Capital Management Co., Ltd.
34-3, Yoido-dong, Yungdungpo-gu
Seoul 150-010, Korea
Attention: President
(Facsimile No. 011-822-768-4286)
or to such other address as to which the recipient shall have informed the other
party.
Notice given as provided above shall be deemed to have been given, if
by personal delivery, on the day of such delivery, and if by facsimile and mail,
the date on which such facsimile and confirmatory letter are sent.
7. Severability. If any provisions of this Agreement shall be held or
------------
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
8. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, provided, however, that
nothing herein shall be construed as being inconsistent with the U.S. Investment
Company Act of 1940, as amended. As used herein the terms "interested person",
"assignment", and "vote of a majority of the outstanding voting securities"
shall have the meanings set forth in the U.S. Investment Company Act of 1940, as
amended.
Matthews Korea
==================================================================
Fund - Research and Advisory Agreement
Page 5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date herein above first written.
ATTEST: MATTHEWS INTERNATIONAL
CAPITAL MANAGEMENT
/s/ John Dracott By: /s/ G. Paul Matthews
- ------------------------------- -----------------------------
John Dracott, Secretary G. Paul Matthews, President
ATTEST: DAEWOO CAPITAL
MANAGEMENT CO., LTD.
By:
- ------------------------------- -----------------------------
, Secretary President
The foregoing Agreement is hereby accepted by:
ATTEST: MATTHEWS KOREA FUND
/s/ John Dracott By: /s/ G. Paul Matthews
- ---------------------------------- -------------------------------
John Dracott, Secretary G. Paul Matthews, President
Matthews Korea
================================================================================
Fund - Research and Advisory Agreement
Page 6
<PAGE>
Exhibit 24(b)(6)(a)
UNDERWRITING AGREEMENT
This Agreement, dated as of the 12th day of August, 1994, made by and
------
between Matthews International Funds, a Delaware business trust (the "Trust")
----------------------------
operating as a registered investment company under the Investment Company Act of
1940, as amended (the "Act"), duly organized and existing under the laws of the
State of Delaware; Matthews International Capital Management, ("the Advisor"), a
registered investment adviser existing as a corporation duly organized and
existing under the laws of the State of California; and Fund/Plan Broker
----------------
Services, Inc. ("Fund/Plan"), a corporation duly organized and existing under
- --------------
the laws of the State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue separate
series of shares representing interests in separate investment portfolios (the
"Series"), which Series are identified on Schedule "C" attached hereto, and
which Schedule "C" may be amended from time to time by mutual agreement among
the Parties; and
WHEREAS, the Advisor has been appointed investment adviser to the Trust;
and
WHEREAS, Fund/Plan is a broker-dealer registered with the U.S. Securities
and Exchange Commission and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Parties are desirous of entering into an agreement providing
for the distribution by Fund/Plan of shares of the Series of the Trust (the
"Shares"), and that Fund/Plan be compensated by the Advisor for providing such
services.
NOW, THEREFORE, in consideration of the promises and agreements of the
Parties contained herein, the Parties agree as follows:
1. Appointment.
-----------
The Trust hereby appoints Fund/Plan as its exclusive agent for the
distribution of the Shares, and Fund/Plan hereby accepts such appointment
under the terms of this Agreement. The Trust agrees that it will not sell
any shares to any person except to fill orders for the shares received
through Fund/Plan; provided, however, that the foregoing exclusive right
shall not apply: (a) to shares issued or sold in connection with the merger
or consolidation of any other investment company with the Trust or the
================================================================================
Underwriting Agreement between Matthews International Funds, Matthews
International Capital Management and Fund/Plan Broker Services, Inc.
Date drafted November 25, 1996 Page 1 of 9 pages.
<PAGE>
acquisition by purchase or otherwise of all or substantially all of the
assets of any investment company or substantially all of the outstanding
shares of any such company by the Trust; (b) to shares which may be offered
by the Trust to its stockholders for reinvestment of cash distributed from
capital gains or net investment income of the Trust; or (c) to shares which
may be issued to shareholders of other funds who exercise any exchange
privilege set forth in the Trust's Prospectus. Notwithstanding any other
provision hereof, the Trust may terminate, suspend, or withdraw the offering
of the Shares whenever in its sole discretion, it deems such action to be
desirable.
2. Sale and Repurchase of Shares.
-----------------------------
(a) Fund/Plan is hereby granted the right as agent for the Trust, to sell
Shares to the public against orders therefor at the public offering
price (as defined in sub-paragraph 2.(c) hereof).
(b) Fund/Plan will also have the right to take, as agent for the Trust, all
actions which, in Fund/Plan's judgment, are necessary to carry into
effect the distribution of the Shares.
(c) The public offering price shall be the net asset value of the Shares
then in effect.
(d) The net asset value of the Shares shall be determined in the manner
provided in the then current prospectus, and statement of additional
information relating to the Shares and when determined shall be
applicable to all transactions as provided in the prospectus. The net
asset value of the Shares shall be calculated by the Trust or by
another entity on behalf of the Trust. Fund/Plan shall have no duty to
inquire into or liability for the accuracy of the net asset value per
Share as calculated.
(e) On every sale, the Trust shall receive the applicable net asset value
of the Shares promptly.
(f) Upon receipt of purchase instructions, Fund/Plan will transmit such
instructions to the Trust or its transfer agent for registration of the
Shares purchased.
(g) Nothing in this Agreement shall prevent Fund/Plan or any affiliated
================================================================================
Underwriting Agreement between Matthews International Funds, Matthews
International Capital Management and Fund/Plan Broker Services, Inc.
Date drafted November 25, 1996 Page 2 of 9 pages.
<PAGE>
person (as defined in the Act) of Fund/Plan from acting as underwriter
or distributor for any other person, firm or corporation (including
other investment companies) or in any way limit or restrict Fund/Plan
or such affiliated person from buying, selling or trading any
securities for its or their own account or for the accounts of others
for whom it or they may be acting; provided, however, that Fund/Plan
expressly agrees that it will not for its own account purchase any
shares of the Trust except for investment purposes and that it will not
for its own account sell any such shares except by redemption of such
shares by the Trust, and that it will not undertake in any activities
which, in its judgment, will adversely affect the performance of its
obligations to the Trust under this Agreement.
(h) Fund/Plan may repurchase Shares at such prices and upon such terms and
conditions as shall be specified in the Prospectus.
3. Rules of Sale of Shares.
-----------------------
Fund/Plan does not agree to sell any specific number of Shares. Fund/Plan,
as Underwriter for the Trust, undertakes to sell Shares on a best efforts
basis and only against orders received therefor.
The Trust reserves the right to terminate, suspend or withdraw the sale of
its Shares for any reason deemed adequate by it and the Trust reserves the
right to refuse at any time or times to sell any of its Shares to any person
for any reason deemed adequate by it.
4. Rules of NASD.
-------------
(a) Fund/Plan will conform to the Rules of Fair Practice of the NASD and
the securities laws of any jurisdiction in which it directly or
indirectly sells any Shares.
(b) Fund/Plan will require each dealer with whom Fund/Plan has a selling
agreement to conform to the applicable provisions of the Prospectus,
with respect to the public offering price of the Shares, and Fund/Plan
shall not cause the Trust to withhold the placing of purchase orders so
as to make a profit thereby.
(c) The Trust agrees to furnish to Fund/Plan sufficient copies of any
================================================================================
Underwriting Agreement between Matthews International Funds, Matthews
International Capital Management and Fund/Plan Broker Services, Inc.
Date drafted November 25, 1996 Page 3 of 9 pages.
<PAGE>
agreements, plans, communications with the public or other materials it
intends to use in connection with any sales of Shares in adequate time
for Fund/Plan to file and clear (unless Fund/Plan and the Trust agree
that any such material may be filed subsequent to distribution) such
materials with the proper authorities before they are put in use unless
Fund/Plan and the Trust agree that any such material may be filed
subsequent to distribution. In addition, the Trust agrees not to use
any such materials until so filed and cleared for use by appropriate
authorities and Fund/Plan.
(d) Fund/Plan, at its own expense, will qualify as a dealer or broker, or
otherwise, under all applicable state or federal laws required in order
that the Shares may be sold in such states as may be mutually agreed
upon by the Parties.
(e) Fund/Plan shall remain registered with the U.S. Securities and Exchange
Commission and a member of the National Association of Securities
Dealers for the term of this Agreement.
(f) Fund/Plan shall not, in connection with any sale or solicitation of a
sale of the Shares, make or authorize any representative, Service
Organization, broker or dealer to make, any representations concerning
the Shares except those contained in the Prospectus covering the Shares
and in communications with the public or sales materials approved by
Fund/Plan and the Trust as information supplemental to such Prospectus.
Copies of the Prospectus will be supplied by the Trust to Fund/Plan in
reasonable quantities upon request.
5. Records to be Supplied by the Trust.
-----------------------------------
The Trust shall furnish to Fund/Plan copies of all information, financial
statements and other papers which Fund/Plan may reasonably request for use
in connection with the distribution of the Shares including, but not be
limited to, one certified copy of all financial statements prepared for the
Trust by its independent public accountants.
6. Expenses.
--------
(a) The Trust will bear the following expenses:
================================================================================
Underwriting Agreement between Matthews International Funds, Matthews
International Capital Management and Fund/Plan Broker Services, Inc.
Date drafted November 25, 1996 Page 4 of 9 pages.
<PAGE>
(i) preparation, setting in type, and printing of sufficient copies
of the prospectuses and statements of additional information for
distribution to shareholders, and the distribution of same to
the shareholders;
(ii) preparation, printing and distribution of reports and other
communications to shareholders;
(iii) registration of the Shares under the federal securities laws;
(iv) qualification of the Shares for sale in the jurisdictions
mutually agreed upon by the Trust and Fund/Plan;
(v) maintaining facilities for the issue and transfer of the Shares;
(vi) supplying information, prices and other data to be furnished by
the Trust under this Agreement; and
(vii) any original issue taxes or transfer taxes applicable to the
sale or delivery of the Shares or certificates therefor.
(b) the Advisor will pay all other expenses incident to the sale and
distribution of the Shares sold hereunder.
7. Term and Compensation.
---------------------
(a) The term of this Agreement shall commence on the date on which the
Trust's registration statement is declared effective by the U.S.
Securities and Exchange Commission ("Effective Date").
(b) This Agreement shall remain in effect for two (2) years from the
Effective Date. The Agreement shall continue thereafter for periods not
exceeding one (1) year if approved at least annually (i) by a vote of a
majority of the outstanding voting securities of each Series or by a
vote of the Trustees of the Trust, and (ii) by a vote of a majority of
the trustees of the Trust who are not interested persons or parties to
this Agreement (other than as Trustees of the Trust), cast in person at
a meeting called for the purpose of voting on such approval.
(c) Fees payable to Fund/Plan shall by paid by the Advisor as set forth in
Schedule "B" attached and shall be fixed for the two (2) years period
commencing on the Effective Date of this Agreement. Thereafter, the fee
schedule will be subject to annual review and adjustment.
(d) This Agreement (i) may at any time be terminated without the payment of
any
================================================================================
Underwriting Agreement between Matthews International Funds, Matthews
International Capital Management and Fund/Plan Broker Services, Inc.
Date drafted November 25, 1996 Page 5 of 9 pages.
<PAGE>
penalty, either by a vote of the Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of each Series with
respect to such Series, on sixty (60) days' written notice to
Fund/Plan; and (ii) may be terminated by Fund/Plan on sixty (60) days'
written notice to the Trust with respect to any Series.
(e) This Agreement shall automatically terminate in the event of its
assignment.
8. Indemnification of Fund/Plan by Advisor.
---------------------------------------
The Advisor will indemnify and hold Fund/Plan harmless for the actions of
its employees registered with the NASD as Fund/Plan representatives and will
undertake to maintain compliance with all rules and regulations concerning
any and all sales presentations made by such employees.
9. Liability of Fund/Plan.
----------------------
(a) Fund/Plan, its directors, officers, employees, shareholders and agents
shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Trust in connection with the performance of
this Agreement, except a loss resulting from a breach of Fund/Plan's
obligation pursuant to Section 4 of this Agreement, a breach of
fiduciary duty with respect to the receipt of compensation for services
or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of Fund/Plan in the performance of its
obligations and duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
(b) The Trust agrees to indemnify and hold harmless Fund/Plan against any
and all liability, loss, damages, costs or expenses (including
reasonable counsel fees) which Fund/Plan may incur or be required to
pay hereafter, in connection with any action, suit or other proceeding,
whether civil or criminal, before any court or administrative or
legislative body, in which Fund/Plan may be involved as a party or
otherwise or with which Fund/Plan may be threatened, by reason of the
offer or sale of the Trust shares by persons other that Fund/Plan,
prior to the execution of this Agreement.
(c) Any person, even though also a director, officer, employee, shareholder
or agent of Fund/Plan, who may be or become an officer, director,
trustee,
================================================================================
Underwriting Agreement between Matthews International Funds, Matthews
International Capital Management and Fund/Plan Broker Services, Inc.
Date drafted November 25, 1996 Page 6 of 9 pages.
<PAGE>
employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the Trust (other
than services or business in connection with Fund/Plan's duties
hereunder), to be rendering such services to or acting solely for the
Trust and not as a director, officer, employee, shareholder or agent,
or one under the control or direction of Fund/Plan even though
receiving a salary from Fund/Plan.
(d) The Trust agrees to indemnify and hold harmless Fund/Plan, and each
person, who controls Fund/Plan within the meaning of Section 15 of the
Securities Act of 1933, as amended (the "Securities Act"), or Section
20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any and all losses, claims, damages and liabilities,
joint or several (including any reasonable investigative, legal and
other expenses incurred in connection therewith) to which they, or any
of them, may become subject under the Act, the Securities Act, the
Exchange Act or other federal or state law or regulation, at common law
or otherwise insofar as such losses, claims, damages or liabilities (or
actions, suits or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a
material fact contained in a prospectus, statement of additional
information, supplement thereto, sales literature or other written
information prepared by the Trust and furnished by the Trust to
Fund/Plan for Fund/Plan's use hereunder, disseminated by the Trust or
arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading.
Such indemnity shall not, however, inure to the benefit of Fund/Plan
(or any person controlling Fund/Plan) on account of any losses, claims,
damages or liabilities (or actions, suits or proceedings in respect
thereof) arising from the sale of the shares of the Trust to any person
by Fund/Plan (i) if such untrue statement or omission or alleged untrue
statement or omission was made in the prospectus, statement of
additional information, or supplement, sales or other literature, in
reliance upon and in conformity with information furnished in writing
to the Trust by Fund/Plan specifically for use therein or (ii) if such
================================================================================
Underwriting Agreement between Matthews International Funds, Matthews
International Capital Management and Fund/Plan Broker Services, Inc.
Date drafted November 25, 1996 Page 7 of 9 pages.
<PAGE>
losses, claims, damages or liabilities arise out of or are based upon
an untrue statement or omission or alleged untrue statement or omission
found in any prospectus, statement of additional information,
supplement, sales or other literature, subsequently corrected, but,
negligently distributed by Fund/Plan and a copy of the corrected
prospectus was not delivered to such person at or before the
confirmation of the sale to such person.
10. Amendments.
----------
No provision of this Agreement may be amended or modified, in any manner
whatsoever except by a written agreement properly authorized and executed by
the Parties.
11. Section Headings.
----------------
Section and Paragraph headings are for convenience only and shall not be
construed as part of this Agreement.
12. Reports.
-------
Fund/Plan shall prepare reports for the Board of Trustees of the Trust on a
quarterly basis showing such information as from time to time shall be
reasonably requested by such Board.
13. Severability.
------------
If any part, term or provision of this Agreement is held by any court to be
illegal, in conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not affected, and the
rights and obligations of the parties shall be construed and enforced as if
the Agreement did not contain the particular part, term or provision held to
be illegal or invalid provided that the basic agreement is not thereby
substantially impaired.
14. Governing Law.
-------------
This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania and the venue of any action arising under this Agreement shall
be Montgomery County, Commonwealth of Pennsylvania if the suit is instituted
by the Trust or the Advisor. If a suit is instituted by Fund/Plan, the venue
of such action arising under this Agreement shall be San Francisco,
California.
================================================================================
Underwriting Agreement between Matthews International Funds, Matthews
International Capital Management and Fund/Plan Broker Services, Inc.
Date drafted November 25, 1996 Page 8 of 9 pages.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement consisting of
nine type written pages, together with Schedules "A", "B" and "C", to be signed
by their duly authorized officers, as of the day and year first above written.
Matthews International Capital
------------------------------
Management
----------
/s/ G. Paul Matthews
--------------------------------------
By: G. Paul Matthews,
President
Matthews International Funds
----------------------------
/s/ John Dracott
--------------------------------------
By: John Dracott,
Vice President & Secretary
Fund/Plan Broker Services, Inc.
-------------------------------
/s/ Nancy E. Kuhn
- ---------------------------------------
By: Nancy E. Kuhn,
President
================================================================================
Underwriting Agreement between Matthews International Funds, Matthews
International Capital Management and Fund/Plan Broker Services, Inc.
Date drafted November 26, 1996 Page 9 of 9 pages.
<PAGE>
Schedule "A"
============
Underwriter/Distributor Services
for
Matthews International Funds
I. Underwriter/Sponsor Services
----------------------------
A) Preparation and execution of Underwriter and 12B-1 Plan Agreements
Monitoring accruals
Monitoring expenses
Disbursements for expenses and trail commissions
B) Quarterly 12B-1 Reports to Board of Directors and/or Trustees
C) Literature review, recommendations and submission to the NASD
D) All NASD required files and bookkeeping
E) Initial NASD Licensing and Transfers of Registered Representatives
This includes: U-4 Form and Fingerprint Submission to NASD
Supplying Series 6 and 63 written study material
Registration for Exam Preparation classes
Renewals and Terminations of Representatives
F) Written supervisory procedures and manuals for Registered
Representatives
G) Ongoing compliance and updates for Representatives regarding sales
practices, written correspondence and other communications with the
public.
================================================================================
Underwriting Agreement between Matthews International Funds, Matthews
International Capital Management and Fund/Plan Services, Inc.
Date drafted: November 25, 1996 Schedule "A"
<PAGE>
Schedule "B"
============
Underwriter and Distribution Fee Schedule
for
Matthews International Funds
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
I. A) Underwriter/Sponsor Services
----------------------------
The annual fee of $15,000 for services rendered as primary
Underwriter/Sponsor of the Trust and primary licensing/regulatory
agent for Trust personnel.
B) FPBS will maintain annual NASD and state license renewals and the
monitoring required of representative activities as follows:
Up to 2 States - $1,000 per Representative per Year
3 to 30 States - $2,500 per Representative per Year
31 to 50 States - $3,500 per Representative per Year
II. Out-of-Pocket Expenses
----------------------
The Advisor will reimburse Fund/Plan Services monthly for all out-of-
pocket expenses, including postage, telecommunications (telephone and
fax), special reports, record retention, special transportation costs as
incurred.
================================================================================
Underwriting Agreement between McM Funds, McMorgan & Company and
Fund/Plan Services, Inc.
Date Drafted: April 18, 1994 Schedule "B"
<PAGE>
Schedule "C"
============
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of the Agreement:
"Matthews International Funds"
============================
1. Matthews Pacific Tiger Fund
2. Matthews Asian Convertible Securities Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
================================================================================
Underwriting Agreement between Matthews International Funds, Matthews
International Capital Management and Fund/Plan Services, Inc.
Date drafted November 25, 1996 Schedule "C"
<PAGE>
Exhibit 24(b)(6)(b)
AMENDMENT TO UNDERWRITING AGREEMENT
This Agreement, dated as of the 13th day of December, 1994, made by and
between Matthews International Funds, a Delaware Business Trust (the "Trust")
operating as an open-end management investment company registered under the
Investment Company Act of 1940, as amended, duly organized and existing under
the laws of the State of Delaware, Matthews International Capital Management,
Inc. (the "Adviser"), an investment adviser registered under the Investment
Advisory Act of 1940, as amended, and Fund/Plan Broker Services, Inc.
("Fund/Plan"), a corporation duly organized and existing under the laws of the
State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and Fund/Plan have entered into an agreement dated
August 12, 1994 wherein Fund/Plan agreed to act as underwriter to the Trust
(Underwriting Agreement); and
WHEREAS, the Parties wish to amend the Underwriting Agreement to include
under its terms one additional separate series of shares identified as:
Matthews Korea Fund;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree to amend Schedule "A" to the Underwriting Agreement in the form attached
hereto as Schedule "A".
This Agreement shall take effect upon the date which the amendment to the
registration statement of the Trust registering Matthews Korea Fund becomes
effective.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of one typewritten page, together with Schedule "A", to be signed by
their duly authorized officers and their corporate seals hereunto duly affixed
and attested, as of the day and year first above written.
Matthews International Capital Management Fund/Plan Broker Services, Inc.
/s/ G. Paul Matthews /s/ Joseph M. O'Donnell
- --------------------------------- ---------------------------------
By: G. Paul Matthews, President By: Joseph M. O'Donnell, Director
Vice-President
Matthews International Funds
/s/ John Dracott
- ---------------------------------
By: John Dracott, Vice President & Secretary
Amendment to Underwriting Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Dated: September , 1994
<PAGE>
SCHEDULE "A"
============
AS AMENDED ON NOVEMBER 28, 1994
===============================
IDENTIFICATION OF SERIES
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
MATTHEWS INTERNATIONAL FUNDS
Matthews Pacific Tiger Fund
Matthews Asian Convertible Securities Fund
Matthews Korea Fund
This Schedule "A" may be amended from time to time by agreement of the Parties.
Amendment to Underwriting Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Dated: September , 1994
<PAGE>
Exhibit 24(b)(8)(a)
CUSTODY ADMINISTRATION AND AGENCY AGREEMENT
This AGREEMENT, dated as of the 12th day of August, 1994 made by and
------
between Matthews International Funds, a Delaware Business Trust (the "Trust")
----------------------------
operating as an open end management investment company registered under the
Investment Company Act of 1940, as amended, duly organized and existing under
the laws of the State of Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a
------------------------
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue separate
series of shares representing interests in separate investment portfolios (the
"Series"), which Series are identified on Schedule "B" attached hereto and which
Schedule "B" may be amended from time to time by mutual agreement of the Trust
and Fund/Plan; and
WHEREAS, the Trust desires to retain Fund/Plan to perform certain custody
administration services; and
WHEREAS, the Trust desires that Fund/Plan act as its agent for the specific
purpose of taking receipt of, and making payment for, custody services performed
on the Trust's behalf by Bank of New York pursuant to an agreement between Bank
of New York and the Trust; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
functions upon the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree as follows:
APPOINTMENT OF FUND/PLAN AS AGENT
Section 1. The Trust hereby appoints Fund/Plan as an agent of the Trust,
----------
and Fund/Plan hereby accepts such appointment, for the limited purpose of: (i)
accepting invoices charged to the Trust for custody services performed by Bank
of New York on the Trust's behalf, and (ii) remitting payment to Bank of New
York for such services performed in amounts as set forth in Schedule "A"
attached hereto.
CUSTODY ADMINISTRATION SERVICES
Section 2. As Custody Administrator, Fund/Plan shall:
----------
a) coordinate and process portfolio trades through client terminal links
with Bank of
Custody Administration and Agency Agreement between Matthews International Funds
and Fund/Plan Services, Inc.
================================================================================
November 25, 1996 Page 1 of 5 pages.
<PAGE>
New York
b) input and verify portfolio trades
c) monitor pending and failed security trades
d) coordinate communications between brokers and banks to resolve any
operational problems
e) advise the Trust of any corporate action information, address and follow
up on any dividend or interest discrepancies
f) process the Trusts' expenses
g) interface with the accounting services provider and the transfer agent
to research and resolve Custody cash problems
h) provide daily and monthly reports
TERM and FEES
Section 3.
----------
(a) The term of this Agreement shall be for a period of three (3)
years, commencing on the date on which the Trust's registration statement is
declared effective with the U.S. Securities and Exchange Commission ("Effective
Date").
(b) The fee schedule set forth in Schedule "A" attached shall be
fixed for (2) years commencing on the Effective Date of this Agreement.
Thereafter, the fee schedule will be subject to annual review and adjustment.
(c) If a successor to any of Fund/Plan's duties or responsibilities
under this Agreement is designated by the Trust by written notice to Fund/Plan
in connection with the termination of this Agreement, Fund/Plan shall promptly
upon such termination and at the expense of the Trust, transfer all records and
shall cooperate in the transfer of such duties and responsibilities.
For the purpose of determining fees payable to Fund/Plan, the value of
Fund's net assets shall be computed at the times and in the manner specified in
Fund's then current Prospectus and Statement of Additional Information.
During the term of this Agreement, should the Trust seek services or
functions in addition to those stated, a written amendment to this Agreement
specifying the additional services and corresponding compensation shall be
executed by both Fund/Plan and the Trust.
Custody Administration and Agency Agreement between Matthews International Funds
and Fund/Plan Services, Inc.
================================================================================
November 25, 1996 Page 2 of 5 pages.
<PAGE>
GENERAL PROVISIONS
Section 4.
----------
(a) Fund/Plan, its directors, officers, employees, shareholders and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by the Trust in connection with the performance of this
Agreement that results from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer, trustee,
employee, or agent of the Trust, shall be deemed, when rendering services to
such entity or acting on any business of the Trust, (other than services or
business in connection with Fund/Plan's duties hereunder), to be rendering such
services to or acting solely for the Trust and not as a director, officer,
employee, shareholder or agent of, or one under the control or direction of
Fund/Plan even though that person is being paid salary by Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless Fund/Plan, its directors, officers,
employees, shareholders and agents from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in fact or law) of any
and every nature which Fund/Plan may sustain or incur or which may be asserted
against Fund/Plan by any person by reason of, or as a result of (i) any action
taken or omitted to be taken by Fund/Plan in good faith hereunder or (ii) any
action taken or omitted to be taken by Fund/Plan in connection with its
appointment under this agreement, which action or omission was taken in good
faith in reliance upon any law, act, regulation or interpretation of the same
even though the same may thereafter have been altered, changed, amended, or
repealed. Indemnification under this subparagraph, however, shall not apply to
actions or omissions of Fund/Plan or its directors, officers, employees,
shareholders, or agents in cases of its or their willful misfeasance, bad faith,
gross negligence or reckless disregard of its or their duties hereunder.
(d) Fund/Plan shall give written notice to the Trust within thirty
(30) business days of receipt by Fund/Plan of a written assertion or claim of
any threatened or pending legal proceeding which may be subject to this
indemnification. The failure to notify the Trust of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve the Trust
of any liability arising under this Section or otherwise, except to the extent
Custody Administration and Agency Agreement between Matthews International Funds
and Fund/Plan Services, Inc.
================================================================================
November 25, 1996 Page 3 of 5 pages.
<PAGE>
that failure to give notice prejudices the Trust.
(e) For any legal proceeding giving rise to this indemnification,
the Trust shall be entitled to defend or prosecute any claim in the name of
Fund/Plan at its own expense and through counsel of its own choosing if it gives
written notice to Fund/Plan within thirty (30) business days of receiving notice
of such claim. Notwithstanding the foregoing, Fund/Plan may participate in the
litigation at its own expense through counsel of its own choosing. In the event
the Trust chooses to defend or prosecute such claim, the parties shall cooperate
in the defense or prosecution thereof and shall furnish such records and other
information as are reasonably necessary.
(f) The Trust shall not settle any claim under (d) and (e) above
without Fund/Plan's express written consent, which consent shall not be
unreasonably withheld. Fund/Plan shall not settle any such claim under (d) and
(e) above without the Trust's express written consent which likewise shall not
be unreasonably withheld.
Section 5. This Agreement may be amended from time to time by a
----------
supplemental agreement executed by the Trust and Fund/Plan.
Section 6. Except as otherwise provided in this Agreement, any notice or
----------
other communication required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in person or sent by first
class mail, postage prepaid, to the respective parties as follows:
Matthews International Funds: Fund/Plan:
----------------------------- ----------
Matthews International Funds Fund/Plan Services, Inc.
655 Montgomery St. Suite 1438 2 West Elm Street
San Francisco, CA 94111 Conshohocken, PA 19428
Attention: G. Paul Matthews, Attention: Kenneth J. Kempf,
President President
Section 7. The Trust represents and warrants to Fund/Plan that the
----------
execution and delivery of this Agreement by the undersigned officers of the
Trust has been duly and validly authorized by resolution of the Board of
Trustees of the Trust.
Section 8. This Agreement may be executed in two or more counterparts,
----------
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 9. This Agreement shall extend to and shall be binding upon the
----------
Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be
Custody Administration and Agency Agreement between Matthews International Funds
and Fund/Plan Services, Inc.
================================================================================
November 25, 1996 Page 4 of 5 pages.
<PAGE>
assignable by the Trust without the written consent of Fund/Plan or by Fund/Plan
without the written consent of the Trust, authorized or approved by a resolution
of their respective Boards of Directors.
Section 10. This Agreement shall be governed by the laws of the
-----------
Commonwealth of Pennsylvania and the venue of any action arising under this
Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 11. No provision of this Agreement may be amended or modified, in
-----------
any manner except in writing, properly authorized and executed by Fund/Plan and
the Trust.
Section 12. If any part, term or provision of this Agreement is held by
-----------
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid provided that the basic Agreement is not thereby
--------
substantially impaired.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement,
consisting in its entirety of five type written pages, together with Schedules
"A" and "B" to be signed by their duly authorized officers, as of the day and
year first above written.
Matthews International Funds Fund/Plan Services, Inc.
- ---------------------------- ------------------------
/s/ G. Paul Matthews /s/ Kenneth J. Kempf
- -------------------------------------- --------------------------------------
By: G. Paul Matthews, President By: Kenneth J. Kempf, President
Custody Administration and Agency Agreement between Matthews International Funds
and Fund/Plan Services, Inc.
================================================================================
November 26, 1996 Page 5 of 5 pages.
<PAGE>
Schedule "A"
============
CUSTODY AGENCY AND ADMINISTRATION FEE SCHEDULE
FOR
MATTHEWS INTERNATIONAL FUNDS
I. Custody of Fund Assets using Bank of New York
---------------------------------------------
A) Domestic Securities and ADRs (1/12/th/ payable monthly)
----------------------------
.00065 On the First $ 10 Million of Average Net Assets
.00035 On the Next $ 20 Million of Average Net Assets
.00025 On the Next $ 20 Million of Average Net Assets
.000175 On the Next $ 50 Million of Average Net Assets
.00015 On the Next $150 Million of Average Net Assets
.000125 Over $250 Million of Average Net Assets
B) Custody Domestic Securities Transactions Charge
-----------------------------------------------
Book Entry DTC, Federal Book Entry $14.00
NOW Accounts $ 5.00
Physical/Options/GNMA/RIC's $24.00
Mortgage Backed Securities - Principal Pay Down Per Pool $11.00
C) When Issued, Securities Lending, Index Futures:
-----------------------------------------------
Should any of these investment vehicles require a separate segregated
custody account, a fee of $250 per account per month will apply.
D) Global Assets Schedule
----------------------
See Chart on following page(s).
Custody Administration and Agency Agreement between Matthews International Funds
and Fund/Plan Services, Inc.
================================================================================
November 25, 1996 Schedule "A"; Page 1
<PAGE>
SCHEDULE "A"
============
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Countries *Safekeeping Charges Transaction Fee
(BASIS POINTS)
- ------------------------------------------------------------------------------
<S> <C> <C>
Argentina 42 95
- ------------------------------------------------------------------------------
Australia 5 75
- ------------------------------------------------------------------------------
Austria 9 90
- ------------------------------------------------------------------------------
Bangladesh 59 190
- ------------------------------------------------------------------------------
Belgium (reg bds) 3.5 90
- ------------------------------------------------------------------------------
Belgium (equities and Cpn bds) 5 90
- ------------------------------------------------------------------------------
Brazil 64 90
- ------------------------------------------------------------------------------
Canada 3 22
- ------------------------------------------------------------------------------
Chile 89 105
- ------------------------------------------------------------------------------
China 39 65
- ------------------------------------------------------------------------------
Colombia 84 130
- ------------------------------------------------------------------------------
Czech Republic 29 55
- ------------------------------------------------------------------------------
Denmark 4.5 110
- ------------------------------------------------------------------------------
Euromarket 4 20
- ------------------------------------------------------------------------------
Finland 17.50 75
- ------------------------------------------------------------------------------
France 6 90
- ------------------------------------------------------------------------------
Germany 3 40
- ------------------------------------------------------------------------------
Greece 45.5 170
- ------------------------------------------------------------------------------
Hong Kong 15 95
- ------------------------------------------------------------------------------
Hungary 59 155
- ------------------------------------------------------------------------------
India 64 **180
- ------------------------------------------------------------------------------
Indonesia 18.5 145
- ------------------------------------------------------------------------------
Ireland 4.5 55
- ------------------------------------------------------------------------------
Israel 84 60
- ------------------------------------------------------------------------------
Italy 14 65
- ------------------------------------------------------------------------------
Japan (bonds) 5 15
- ------------------------------------------------------------------------------
Japan (equities) 4 15
- ------------------------------------------------------------------------------
Luxembourg 11 85
- ------------------------------------------------------------------------------
Malaysia 20 145
- ------------------------------------------------------------------------------
Mexico (bonds) 11 75
- ------------------------------------------------------------------------------
Mexico (equities) 20 75
- ------------------------------------------------------------------------------
Netherlands 9 17
- ------------------------------------------------------------------------------
</TABLE>
Custody Administration and Agency Agreement between Matthews International Funds
and Fund/Plan Services, Inc.
================================================================================
November 25, 1996 Schedule "A"; Page 2
<PAGE>
SCHEDULE "A"
============
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Countries *Safekeeping Charges Transaction Fee
(BASIS POINTS) (U.S. Dollars)
- ------------------------------------------------------------------------------
<S> <C> <C>
New Zealand 4.5 90
- ------------------------------------------------------------------------------
Norway 3 90
- ------------------------------------------------------------------------------
Pakistan 48 170
- ------------------------------------------------------------------------------
Peru 84 195
- ------------------------------------------------------------------------------
Philippines 19.5 145
- ------------------------------------------------------------------------------
Poland 69 170
- ------------------------------------------------------------------------------
Portugal 39 245
- ------------------------------------------------------------------------------
Singapore 20 140
- ------------------------------------------------------------------------------
South Africa 2.5 40
- ------------------------------------------------------------------------------
South Korea 18 30
- ------------------------------------------------------------------------------
Spain 9 35
- ------------------------------------------------------------------------------
Sweden 4 65
- ------------------------------------------------------------------------------
Switzerland 4.5 130
- ------------------------------------------------------------------------------
Taiwan 22 140
- ------------------------------------------------------------------------------
Thailand 20 90
- ------------------------------------------------------------------------------
Turkey 37 105
- ------------------------------------------------------------------------------
United Kingdom 4 40
- ------------------------------------------------------------------------------
United Kingdom (gilts) 5 60
- ------------------------------------------------------------------------------
Uruguay 64 90
- ------------------------------------------------------------------------------
Venezuela 50.5 80
==============================================================================
</TABLE>
* Fee expressed in basis points per annum is calculated based upon month end
market value.
** Transaction charge is per 10,000 shares or part thereof.
Global Network fee per month/per portfolio is $500.
Minimum charges imposed by Agent Banks/Local Administrators
Chile - USD 5,000 per annum
Colombia - USD 600 per month
All transaction fees - includes buys, sells, maturities or any security
movement.
================================================================================
Custody Administration and Agency Agreement between Matthews International Funds
and Fund/Plan Services, Inc.
November 25,1996 Schedule "A"; Page 3
<PAGE>
SCHEDULE "A"
============
MISCELLANEOUS FEES:
- -------------------
Administrative fees incurred in certain local markets will be passed onto the
customer with a detailed description of the fees. Fees include income
collection, corporate action handling, funds transfer, special local taxes,
stamp duties, registration fees, messenger and courier services and other out-
of-pocket expenses.
================================================================================
Custody Administration and Agency Agreement between Matthews International Funds
and Fund/Plan Services, Inc.
November 25, 1996 Schedule "A"; Page 4
<PAGE>
Schedule "B"
============
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
"Matthews International Funds"
============================
1. Matthews Pacific Tiger Fund
2. Matthews Asian Convertible Securities Fund
3. Matthews Korea Fund
This Schedule "B" may be amended from time to time by agreement of the Parties.
================================================================================
Custody Administration and Agency Agreement between Matthews International Fund
and Fund/Plan Services, Inc.
November 25, 1996 Schedule "B"
<PAGE>
Exhibit 24(b)(8)(b)
AMENDMENT TO CUSTODY ADMINISTRATION AND AGENCY AGREEMENT
This Agreement, dated as of the 13th day of December,1994 made by and
between Matthews International Funds, a Delaware Business Trust (the "Trust")
operating as an open-end management investment company registered under the
Investment Company Act of 1940, as amended, duly organized and existing under
the laws of the State of Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and Fund/Plan have entered into an agreement dated
August 12, 1994 wherein Fund/Plan agreed to provide certain custody
administration services; and
WHEREAS, the Parties wish to amend the Custody Administration and Agency
Agreement to include under its terms one additional separate series of shares
identified as: Matthews Korea Fund;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree:
1. To amend Schedule "A" to the Custody Administration and Agency Agreement
in the form attached hereto as Schedule "A"; and
2. To amend Schedule "B" to the Custody Administration and Agency Agreement
in the form attached hereto as Schedule "B".
This Agreement shall take effect upon the date which the amendment to the
registration statement of the Trust registering Matthews Korea Fund becomes
effective.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of one typewritten page, together with Schedules "A" and "B", to be
signed by their duly authorized officers and their corporate seals hereunto duly
affixed and attested, as of the day and year first above written.
<TABLE>
<S> <C>
Matthews International Funds Fund/Plan Services, Inc.
/s/ G. Paul Matthews /s/ Kenneth J. Kempf
- ------------------------------- ---------------------------------
By: G. Paul Matthews, President By: Kenneth J. Kempf, President
/s/ John Dracott /s/ Janet F. Davis
- ------------------------------- ---------------------------------
Attest: John Dracott, Vice President & Secretary Attest: Janet F. Davis, Secretary
</TABLE>
================================================================================
Custody Administration and Agency Agreement between Matthews International
Funds and Fund/Plan Services, Inc.
November 26, 1996 Page 1
<PAGE>
SCHEDULE "A"
============
AS AMENDED ON NOVEMBER 28, 1994
===============================
CUSTODY AGENCY AND ADMINISTRATION FEE SCHEDULE
FOR
MATTHEWS INTERNATIONAL FUNDS
I. Annual Custody Fee Schedule Per Portfolio: Subject to a minimum annual fee
-----------------------------------------
of $5,000 for each Series, Custody Agency and Administration Fees shall be
calculated as follows: (1/12th payable monthly)
A) Domestic Securities and ADRs
----------------------------
.00065 On the First $ 10 Million of Average Net Assets
.00035 On the Next $ 20 Million of Average Net Assets
.00025 On the Next $ 20 Million of Average Net Assets
.000175 On the Next $ 50 Million of Average Net Assets
.00015 On the Next $150 Million of Average Net Assets
.000125 On Average Net Assets in Excess of $250 Million
B) Custody Domestic Securities Transactions Charge
-----------------------------------------------
Book Entry DTC, Federal Book Entry $14.00
NOW Accounts $ 5.00
Physical/Options/GNMA/RICs $24.00
Mortgage Backed Securities - Principal Pay Down Per Pool $11.00
C) When Issued, Securities Lending, Index Futures:
-----------------------------------------------
Should any of these investment vehicles require a separate
segregated custody account, a fee of $250 per account per month will
apply.
D) 1) Global Equity Securities
------------------------
.0020 On the First $50 Million of Average Net Assets
.00175 On Average Net Assets in Excess of $50 Million
2) Global Fixed Income
-------------------
.0015 On the First $50 Million of Average Net Assets
.00125 On Average Net Assets in Excess of $50 Million
3) Hong Kong
---------
.0029 On the First $50 Million of Average Net Assets
.0027 On Average Net Assets in Excess of $50 Million
================================================================================
Custody Administration and Agency Agreement between Matthews International
Funds and Fund/Plan Services, Inc.
November 25, 1996 Schedule "A"; Page 1
<PAGE>
4) Emerging Markets*
----------------
.0040 On the Average Net Assets
* Countries which quality as emerging markets are: Argentina,
Brazil, Chile, Greece, India, Indonesia, Jordan, Korea,
Malaysia, Mexico, Philippines, Portugal, Singapore, Spain,
Taiwan, Thailand, Turkey, Uruguay and Venezuela.
5) Euro CD's and TD's
------------------
.0004 of Average Net Assets
E) Foreign Security Transaction Fees
---------------------------------
Fixed Income Securities $ 24.00
Equity Securities $ 30.00
Euro Time Deposits and Euro CD's $ 25.00
Hong Kong Securities $ 80.00
Emerging Market Securities $125.00
F) Minimum fee for each Series is $5,000 per year.
II. Out-of-Pocket Expenses
----------------------
The Funds will reimburse Fund/Plan Services monthly for all out-of-pocket
expenses, including telephone, postage, telecommunications, special reports,
record retention and copying and sending materials to auditors for off-site
audits.
III. Other Services Not Covered By This Agreement
--------------------------------------------
To the extent the Funds commence using investment techniques such as Security
Lending, Short Sales, Interest Rate Swaps, Futures, Leveraging, Precious Metals
or non-U.S. denominated Futures and Options on securities and currencies,
additional fees will apply.
Activities of a non-recurring nature such as fund consolidations, mergers, or
reorganizations will be subject to negotiation. To the extent the Funds should
decide to issue multiple/separate classes of shares, additional fees will apply.
Any enhanced services or reports will be quoted upon request.
================================================================================
Custody Administration and Agency Agreement between Matthews International
Funds and Fund/Plan Services, Inc.
November 25, 1996 Schedule "A" Page 2;
<PAGE>
SCHEDULE "B"
============
AS AMENDED ON NOVEMBER 28, 1994
===============================
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
"Matthews International Funds"
============================
1. Matthews Pacific Tiger Fund
2. Matthews Asian Convertible Securities Fund
3. Matthews Korea Fund
This Schedule "B" may be amended from time to time by agreement of the Parties.
================================================================================
Custody Administration and Agency Agreement between Matthews International
Funds and Fund/Plan Services, Inc.
November 25, 1996 Schedule "B"
<PAGE>
Exhibit 24(b)(9)(a)(i)
TRANSFER AGENT SERVICES AGREEMENT
This Agreement, dated as of the12th day of August, 1994, made by and
------
between Matthews International Funds, a Delaware Business Trust (the "Trust")
----------------------------
operating as a registered investment company under the Investment Company Act of
1940, as amended (the "Act"), and duly organized and existing under the laws of
the State of Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation
------------------------
duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue separate
series of shares representing interests in separate investment portfolios (the
"Series"), which Series are identified on Schedule "C" attached hereto and which
Schedule "C" may be amended from time to time by mutual agreement of the Trust
and Fund/Plan; and
WHEREAS, the Trust desires to retain Fund/Plan to perform share transfer
agency, redemption and dividend disbursing services as set forth in this
Agreement and in Schedule "A" attached hereto, and to perform certain other
functions in connection with these duties; and
WHEREAS, Fund/Plan is registered with the Securities and Exchange
Commission as a Transfer Agent as required under Section 17(A)(c) of the
Securities Exchange Act of 1934, as amended; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
functions upon the terms and conditions set forth below; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree as follows:
Section 1. The terms as defined in this Section wherever used in this
----------
Agreement, or in any amendment or supplement hereto, shall have the meanings
herein specified unless the context otherwise requires.
Share Certificates shall mean the certificates representing shares of stock
------------------
of the Series.
Shareholders shall mean the registered owners of the Shares of the Series
------------
in accordance with the share registry records maintained by Fund/Plan for the
Trust.
Shares shall mean the issued and outstanding shares of the Series.
------
Signature Guarantee shall mean the guarantee of signatures by an "eligible
-------------------
guarantor
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Draft dated: November 26, 1996 Page 1 of 11 pages.
<PAGE>
institution" as defined in rule 17Ad-15 under the Securities Exchange Act of
1934, as amended. Eligible guarantor institutions include banks, brokers,
dealers, credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Broker-dealers
guaranteeing signatures must be members of a clearing corporation or maintain
net capital of at least $100,000. Signature guarantees will be accepted from
any eligible guarantor institution which participates in a signature guarantee
program.
Oral Instruction shall mean an authorization, instruction, approval, item
----------------
or set of data, or information of any kind transmitted to Fund/Plan in person or
by telephone, telegram, telecopy or other mechanical or documentary means
lacking original signature, by a person or persons reasonably identified to
Fund/Plan to be a person or persons so authorized by a resolution of the Board
of Trustees of the Trust.
Written Instruction shall mean an authorization, instruction, approval,
-------------------
item or set of data or information of any kind transmitted to Fund/Plan in an
original writing containing an original signature or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to Fund/Plan to be the signature of a person or persons so authorized
by a resolution of the Board of Trustees of the Trust to give Written
Instructions to Fund/Plan.
TRANSFER AGENCY SERVICES
Section 2. Fund/Plan as Transfer Agent shall make original issues of
----------
Shares in accordance with Section 9 and 10 below and with each Series'
Prospectus and Statement of Additional Information upon the written request of
the Trust, and upon being furnished with (i) a certified copy of a resolution or
resolutions of the Board of Trustees of the Trust authorizing such issue; (ii)
an opinion of counsel as to the validity of such Shares; and (iii) necessary
funds for the payment of any original issue tax applicable to such additional
Shares.
Section 3. Transfers of Shares shall be registered and new Shares issued
----------
by Fund/Plan upon redemption of outstanding Shares, (i) in the form deemed by
Fund/Plan to be properly endorsed for transfer, (ii) with all necessary
endorser's signatures guaranteed pursuant to Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, accompanied by, (iii) such assurances as
Fund/Plan shall deem necessary or appropriate to evidence the genuineness and
effectiveness of each necessary endorsement, and (iv) satisfactory evidence of
compliance with all applicable laws relating to the payment or collection of
taxes.
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Draft dated: November 26, 1996 Page 2 of 11 pages.
<PAGE>
Section 4. In registering transfers, Fund/Plan as Transfer Agent may rely
----------
upon the applicable commercial code or any other applicable law which, in the
written opinion (a copy of which shall previously have been furnished to the
Trust) of counsel, protect Fund/Plan and the Trust in not requiring complete
documentation, in registering transfer without inquiry into adverse claims, in
delaying registration for purposes of such inquiry, or in refusing registration
where in its judgment an adverse claim requires such refusal.
Section 5. With respect to confirmed trades received by Fund/Plan as
----------
Transfer Agent for the Series, Fund/Plan shall periodically notify the Trust of
the current status of outstanding confirmed trades. Fund/Plan is authorized to
cancel confirmed trades which have been outstanding for thirty (30) days. Upon
such cancellation, Fund/Plan shall instruct the accounting agent to adjust the
books of the Trust accordingly.
Section 6. Fund/Plan will maintain stock registry records in the usual
----------
form in which it will note the issuance, transfer and redemption of Shares.
Fund/Plan is responsible to provide reports of Share purchases, redemptions, and
total Shares outstanding on the next business day after each net asset
valuation. Fund/Plan is authorized to keep records, which will be part of the
stock transfer records, in which it will note the names and registered address
of Shareholders and the number of Shares and fractions thereof owned by them.
Section 7. Fund/Plan in its capacity as Transfer Agent will, in addition
----------
to the duties and functions above-mentioned, perform the usual duties and
functions of a stock transfer agent for an investment company as listed in
Schedule "A" attached hereto. Fund/Plan may rely conclusively and act without
further investigation upon any list, instruction, certification, authorization
or other instrument or paper believed by it in good faith to be genuine and
unaltered, and to have been signed, countersigned, or executed by duly
authorized person or persons, or upon the instructions of any officer of the
Trust, or upon the advice of counsel for the Trust or for Fund/Plan. Fund/Plan
may record any transfer of Shares which is reasonably believed by it to have
been duly authorized or may refuse to record any transfer of Shares if in good
faith Fund/Plan in its capacity as Transfer Agent deems such refusal necessary
in order to avoid any liability either of the Trust or Fund/Plan. The Trust
agrees to indemnify and hold harmless Fund/Plan from and against any and all
losses, costs, claims, and liability which it may suffer or incur by reason of
so relying or acting or refusing to act. Fund/Plan shall maintain and reconcile
all operating bank accounts necessary to facilitate all transfer agency
processes; including, but not limited to, distribution disbursements,
redemptions and payment
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Draft dated: November 26, 1996 Page 3 of 11 pages
<PAGE>
clearance accounts.
Section 8. In case of any request or demand for the inspection of the
----------
Share records of the Series, Fund/Plan as Transfer Agent shall endeavor to
notify the Trust and to secure instructions as to permitting or refusing such
inspection. Fund/Plan may, however, exhibit such records to any person in any
case where it is advised by its counsel that it may be held liable for failure
to do so.
ISSUANCE OF SHARES
Section 9. Prior to the daily determination of net asset value in
----------
accordance with the Series' Prospectus and Statement of Additional Information,
Fund/Plan shall process all purchase orders received since the last
determination of the Series' net asset value.
Fund/Plan shall calculate daily the amount available for investment in
Shares at the net asset value determined by the Series' pricing agent as of the
close of regular trading on the New York Stock Exchange, the number of Shares
and fractional Shares to be purchased and the net asset value to be deposited
with the Custodian. Fund/Plan as agent for the Shareholders shall place a
purchase order daily with the appropriate Series for the proper number of Shares
and fractional Shares to be purchased and confirm such number to the Trust, in
writing.
Section 10. Fund/Plan having made the calculations provided for in Section
-----------
9, shall thereupon pay over the net asset value of Shares purchased to the
Custodian. The proper number of Shares and fractional Shares shall then be
issued daily and credited by Fund/Plan to the Shareholder Registration Records.
The Shares and fractional Shares purchased for each Shareholder will be credited
by Fund/Plan to that Shareholder's separate account. Fund/Plan shall mail to
each Shareholder a confirmation of each purchase, with copies to the Trust, if
requested. Such confirmations will show the prior Share balance, the new Share
balance, the amount invested and the price paid for the newly purchased Shares.
REDEMPTIONS
Section 11. Fund/Plan shall, prior to the daily determination of net asset
-----------
value in accordance with the Series' Prospectus and Statement of Additional
Information, process all requests from Shareholders to redeem Shares and
determine the number of Shares required to be redeemed to make monthly payments,
automatic payments or the like. Thereupon, Fund/Plan shall advise the Trust of
the total number of Shares available for redemption and the number of Shares and
fractional Shares requested to be redeemed. Fund/Plan as pricing agent
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Draft dated: November 26, 1996 Page 4 of 11 pages
<PAGE>
shall then determine the applicable net asset value, whereupon Fund/Plan shall
furnish the Trust with an appropriate confirmation of the redemption and process
the redemption by filing with the Custodian an appropriate statement and make
the proper distribution and application of the redemption proceeds in accordance
with each Series' Prospectus and Statement of Additional Information then in
effect. The stock registry books recording outstanding Shares, the Shareholder
Registration Records and the individual account of the Shareholder shall be
properly debited.
Section 12. The proceeds of redemption shall be remitted by Fund/Plan in
-----------
accordance with the appropriate Series' Prospectus and Statement of Additional
Information, by check mailed to the Shareholder at the Shareholder's registered
address or wired to an authorized bank account.
For the purposes of redemption of Shares which have been purchased within
15 days of a redemption request, the Trust shall provide Fund/Plan, from time to
time, with Written Instructions concerning the time within which such requests
may be honored.
DIVIDENDS
Section 13. The Trust shall notify Fund/Plan of the date of each dividend
-----------
declaration or capital gains distribution. In addition, the Trust shall provide
to Fund/Plan five business days' prior written notice of the record date for
determining the Shareholders entitled to payment. The per-share payment amount
of any dividend or capital gain shall be determined by the Trust after receipt
of necessary information from and consultation with Fund/Plan.
Section 14. On or before each payment date, the Trust will notify
-----------
Fund/Plan in its capacity as dividend disbursing agent of the total amount of
the dividend or distribution currently payable. Fund/Plan will, on the
designated payment date, automatically reinvest all dividends in additional
Shares except in cases where Shareholders have elected to receive distribution
in cash, in which case Fund/Plan will mail distribution checks to the
Shareholders for the proper amounts payable to them from monies transferred by
the Custodian to Fund/Plan for that purpose.
FEES
Section 15. The Trust agrees to pay Fund/Plan compensation for its
-----------
services and to reimburse it for expenses, at the rates and amounts as set forth
in Schedule "B" attached hereto, and as shall be set forth in any amendments to
such Schedule "B" approved by the Trust and Fund/Plan. The Trust agrees and
understands that Fund/Plan's compensation will
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Draft dated: November 26, 1996 Page 5 of 11 pages
<PAGE>
be comprised of two components, payable on a monthly basis, as follows:
(i) An annual Shareholder account maintenance fee calculated
by multiplying the monthly average number of accounts in each Series by one
twelfth (1/12th) the per account fee as stated in Schedule "B", subject to a
minimum fee per Series, which fee the Trust hereby authorizes Fund/Plan to
collect by debiting the Trust's custody account for invoices which are rendered
for such services performed. The invoices for the services performed will be
sent to the Trust after such debiting with the indication that payment has been
made; and
(ii) reimbursement of any reasonable out-of-pocket expenses
paid by Fund/Plan on behalf of the Trust, which out-of-pocket expenses will be
billed to the Trust within the first ten calendar days of the month following
the month in which such out-of-pocket expenses were incurred. The Trust agrees
to reimburse Fund/Plan for such expenses within ten calendar days of receipt of
such bill.
For the purpose of determining fees payable to Fund/Plan, the value of each
Series' net assets shall be computed at the times and in the manner specified in
each Series' Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and the Trust.
GENERAL PROVISIONS
Section 16. Fund/Plan shall maintain records (which may be part of the
-----------
stock transfer records) in connection with the issuance and redemption of
Shares, and the disbursement of dividends and dividend reinvestments, in which
will be noted the transactions effected for each Shareholder and the number of
Shares and fractional Shares owned by each Shareholder. Fund/Plan agrees to make
available upon request and to preserve for the periods prescribed in Rule 31a-2
under the Investment Company Act of 1940, as amended, any records relating to
services provided under this Agreement which are required to be maintained by
Rule 31a-1 under the Act.
Section 17. In addition to the services as Transfer Agent and dividend
-----------
disbursing agent set forth above, Fund/Plan will perform other services for the
Trust as agreed upon from time to time, including but not limited to,
preparation of and mailing Federal Tax Information
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Draft dated: November 26, 1996 Page 6 of 11 pages
<PAGE>
Forms and mailing semi-annual reports to shareholders of the Trust.
Section 18. Nothing contained in this Agreement is intended to or shall
-----------
require Fund/Plan in any capacity hereunder, to perform any functions or duties
on any holiday, day of special observance or any other day on which the
Custodian or the New York Stock Exchange are closed. Functions or duties
normally scheduled to be performed on such days shall be performed on, and as
of, the next business day on which both the New York Stock Exchange and the
Custodian are open.
Section 19.
-----------
(a) Fund/Plan, its directors, officers, employees, shareholders
and agents shall only be liable for any error of judgment or mistake of law or
for any loss suffered by the Trust, in connection with the performance of this
Agreement that result from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer, trustee,
employee, or agent of the Trust, shall be deemed, when rendering services to
such entity or acting on any business of the Trust, (other than services or
business in connection with Fund/Plan's duties hereunder), to be rendering such
services to or acting solely for the Trust and not as a director, officer,
employee, shareholder or agent of, or one under the control or direction of
Fund/Plan even though that person is being paid salary by Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless Fund/Plan, its directors, officers,
employees, shareholders and agents from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in fact or law) of any
and every nature which Fund/Plan may sustain or incur or which may be asserted
against Fund/Plan by any person by reason of, or as a result of (i) any action
taken or omitted to be taken by Fund/Plan in good faith hereunder; (ii) any
action taken or omitted to be taken by Fund/Plan in good faith in reliance upon
any certificate, instrument, order, or stock certificate or other document
reasonably believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized person, upon the Oral Instructions or Written
Instructions of an authorized person of the Trust or upon the opinion of legal
counsel to the Trust, or its own counsel; or (iii) any action taken or omitted
to be taken by Fund/Plan in connection with its appointment under this
agreement, which action or omission
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Draft dated: November 26, 1996 Page 7 of 11 pages
<PAGE>
was taken in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended, or repealed. Indemnification under this subparagraph,
however, shall not apply to actions or omissions of Fund/Plan or its directors,
officers, employees, shareholders, or agents in cases of its or their willful
misfeasance, bad faith, gross negligence or reckless disregard of its or their
duties hereunder.
(d) Fund/Plan shall give written notice to the Trust within thirty
(30) business days of receipt by Fund/Plan of a written assertion or claim of
any threatened or pending legal proceeding which may be subject to this
indemnification. The failure to notify the Trust of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve the Trust
of any liability arising under this Section or otherwise, except to the extent
that failure to give notice prejudices the Trust.
(e) For any legal proceeding giving rise to this indemnification,
the Trust shall be entitled to defend or prosecute any claim in the name of
Fund/Plan at its own expense and through counsel of its own choosing if it gives
written notice to Fund/Plan within thirty (30) business days of receiving notice
of such claim. Notwithstanding the foregoing, Fund/Plan may participate in the
litigation at its own expense through counsel of its own choosing. In the event
the Trust chooses to defend or prosecute such claim, the parties shall cooperate
in the defense or prosecution thereof and shall furnish such records and other
information as are reasonably necessary.
(f) The Trust shall not settle any claim under Section 19(d) and
19(e) without Fund/Plan's express written consent, which consent shall not be
unreasonably withheld. Fund/Plan shall not settle any such claim without the
Trust's express written consent, which likewise shall not be unreasonably
withheld.
Section 20. Fund/Plan is authorized, upon receipt of Written Instructions
-----------
from the Trust, to make payment upon redemption of Shares without a signature
guarantee. The Trust hereby agrees to indemnify and hold Fund/Plan, its
successors and assigns, harmless of and from any and all expenses, damages,
claims, suits, liabilities, actions, demands, losses whatsoever arising out of
or in connection with a payment by Fund/Plan upon redemption of Shares pursuant
to Written Instructions and without a signature guarantee; upon the request of
Fund/Plan, the Trust shall assume the entire defense of any action, suit or
claim subject to the foregoing indemnity. Fund/Plan shall notify the Trust of
any such action, suit or claim within
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Draft dated: November 26, 1996 Page 8 of 11 pages
<PAGE>
thirty (30) days after receipt by Fund/Plan of notice thereof.
Section 21.
-----------
(a) The term of this Agreement shall be for a period of three (3)
years, commencing on the date which the Trust's registration statement is
declared effective by the U.S. Securities and Exchange Commission ("Effective
Date").
(b) The fee schedule set forth in Schedule "B" attached shall be
fixed for two (2) years commencing on the Effective Date of this Agreement.
Thereafter, the fee schedule will be subject to review and adjustment, not to
exceed 10% of those fees set forth in Schedule "B."
(c) If a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the Trust by written
notice to Fund/Plan in connection with the termination of this Agreement,
Fund/Plan shall promptly upon such termination and at the expense of the Trust,
transfer all Required Records and shall cooperate in the transfer of such duties
and responsibilities.
Section 22. The Trust shall file with Fund/Plan a certified copy of each
-----------
resolution of its Board of Trustees authorizing the execution of Written
Instructions or the transmittal of Oral Instructions, as provided in Section 1
of this Agreement.
Section 23. This Agreement may be amended from time to time by a
-----------
supplemental agreement executed by the Trust and Fund/Plan.
Section 24. Except as otherwise provided in this Agreement, any notice or
-----------
other communication required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in person or sent by first
class mail, postage prepaid, to the respective parties as follows:
If to the Trust: If to Fund/Plan:
---------------- ----------------
Matthews International Funds Fund/Plan Services, Inc.
655 Montgomery St., Suite 1438 2 West Elm Street
San Francisco, CA 94111 Conshohocken, PA 19428
Attention: G. Paul Matthews, Attention: Kenneth J. Kempf,
President President
Section 25. The Trust represents and warrants to Fund/Plan that the
-----------
execution and delivery of this Agreement by the undersigned officers of the
Trust has been duly and validly
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Draft dated: November 26, 1996 Page 9 of 11 pages
<PAGE>
authorized by resolution of the Board of Trustees of the Trust.
Section 26. This Agreement may be executed in two or more counterparts,
-----------
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 27. This Agreement shall extend to and shall be binding upon the
-----------
Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Trust without the written consent
of Fund/Plan or by Fund/Plan without the written consent of the Trust,
authorized or approved by a resolution of their respective Boards of Directors
or Trustees.
Section 28. This Agreement shall be governed by the laws of the
-----------
Commonwealth of Pennsylvania and the venue of any action arising under this
Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 29. No provision of this Agreement may be amended or modified, in
-----------
any manner except in writing, properly authorized and executed by Fund/Plan and
the Trust.
Section 30. If any part, term or provision of this Agreement is held by
-----------
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be
affected, and the rights and obligations of the parties shall be construed and
enforced as if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid, provided that the basic agreement is
not thereby substantially impaired.
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Draft dated: November 26, 1996 Page 10 of 11 pages
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting in its entirety, of eleven type written pages, together with
Schedules "A," "B" and "C," to be signed by their duly authorized officers as of
the day and year first above written.
Matthews International Funds Fund/Plan Services, Inc.
- ---------------------------- ------------------------
/s/ G. Paul Matthews /s/ Kenneth J. Kempf
- ------------------------------------ ---------------------------------
By: G. Paul Matthews, President By: Kenneth J. Kempf, President
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Draft dated: November 26, 1996 Page 11 of 11 pages
<PAGE>
Schedule "A"
============
TRANSFER AGENT/SHAREHOLDER SERVICES
FOR
MATTHEWS INTERNATIONAL FUNDS
The following is a list of Transfer Agency Services to be provided under this
agreement:
. Opening new accounts and entering demographic data into shareholder base.
. Real-time Customer Information File (CIF) to link accounts within a Series
and across all Series.
. 100% Quality Control of new accounts opened on a same-day/next day basis.
. Account Maintenance
. Processing all investments including:
- initial investments
- subsequent investments through lock box computer interface
- pre-authorized investments through ACH
- government allotments through ACH
. Processing tax ID certifications and Non-Resident Alien (NRA) and reporting
back-up withholding.
. Processing legal transfers of accounts.
. Automated exchange processing.
. Recording and retaining on tape all shareholder calls.
. Research and respond to shareholder calls and written inquiries.
. Processing reinvestment of dividends of one fund into another fund. (If
Applicable)*
. Processing sweep purchases and redemptions for brokerage, bank, or other
accounts via tape or transmission.*
. Generating account statements with copies to appropriate interested parties.
(Up to four statements.)
. Combined shareholder statements.*
. Redemption processing includes:
- complete and partial redemptions
- selected group redemptions*
- check redemption processing (if applicable)
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
November 26, 1996 Schedule "A", Page 1
<PAGE>
. Distribution options:
- federal wires*
- mailing checks
- ACH*
. Certificate issuance and cancellation.
. Replacement of certificates through surety bonds.*
. Process dividends.
. Produce daily and monthly Blue Sky reports.
. Producing daily and monthly reports of shareholder activity.
Daily Reports
-------------
Report Number Report Description
------------- ------------------
(no report number) Daily Transaction Journal
024 Tax Reporting Proof
051 Cash Receipts and Disbursement Proof
053 Daily Share Proof
091 Daily Gain/Loss Report
104 Maintenance Register
044 Transfer/Certificate Register
056 Blue Sky Warning Report
Monthly Reports
---------------
Report Description
------------------
Blue Sky
Certificate Listing
State Sales and Redemption
Monthly Statistical
Account Demographic Analysis
MTD Sales - Demographics by Account Group
Account Analysis by Type
. Producing shareholder lists, labels, ad hoc reports to management, etc. *
. Addressing, mailing, and tabulation of proxy cards, as necessary.*
. Preparation of federal tax information forms to include 1099-DIV's, 1099-B's,
1042's, etc. to shareholders with tape to IRS.
. Microfilming and indexing in PC system of all application, correspondence and
other
================================================================================
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
November 26, 1996 Schedule "A", Page 2
<PAGE>
pertinent shareholder documents to provide automated location of these
records.
. Microfilming all checks presented for investment and check redemptions.
. System access by PC dial-up or by dedicated line. (If Applicable)*
. Retirement Plan processing.* (IRA, SEP, Omnibus Qualified Plans)
- Systematic tracking of current, prior year and rollover contributions
- 5498 tax reporting
- 1099R reporting on distributions
- Processing transfer of assets between custodians
- PC based recalculation of required minimum distributions for IRA SWP's
for shareholders over 59 1/2 years of age.
. Institutional Servicing -
Institutional customers are assigned a specific representative within the
unit providing daily availability and settlement information, and
coordinating sweep activity. In addition, this representative interacts with
the Retail Operations area to endure proper handling and coding of accounts.
* Separate fees will apply for these services.
================================================================================
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
November 26, 1996 Schedule "A", Page 3
<PAGE>
SCHEDULE "B"
============
SHAREHOLDER SERVICES AND TRANSFER AGENT FEE SCHEDULE
FOR
MATTHEWS INTERNATIONAL FUNDS
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
I. A) Base Fee
--------
$12.00 per Account per Year Annual Maintenance Fee for Series declaring
semi-annual dividend distributions subject to a minimum monthly fee of
$2,000 for each Series.
B) IRA's, 403(b) Plans, Defined Contribution/Benefit Plans:
--------------------------------------------------------
$12.00 per Account per Year Annual Maintenance Fee
II. Out of Pocket Expenses:
----------------------
Matthews International Funds will reimburse Fund/Plan Services monthly for
all reasonable out-of-pocket expenses, including postage, stationery
(statements), telecommunications (telephone, fax, dedicated 800 line, on-
line access), special reports, transmissions, records retention, tapes,
couriers and any pre-approved travel expenses.
III. Other Services Not Covered By This Agreement
--------------------------------------------
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies are not included
herein, and will be quoted separately. To the extent the Fund should
decide to issue multiple/separate classes of shares, additional fees will
apply. Any enhanced services, programming requests or reports will be
quoted upon request.
================================================================================
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
November 26, 1996 Schedule "B"
<PAGE>
Schedule "C"
============
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of the Agreement:
"Matthews International Funds"
============================
1. Matthews Pacific Tiger Fund
2. Matthews Asian Convertible Securities Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
================================================================================
Transfer Agent Services Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
November 26, 1996 Schedule "C"
<PAGE>
Exhibit 24(b)(9)(a)(ii)
AMENDMENT TO TRANSFER AGENT SERVICES AGREEMENT
This Agreement, dated as of the 13th day of December, 1994 made by and
----- --------
between Matthews International Funds, a Delaware Business Trust (the "Trust")
operating as an open-end management investment company registered under the
Investment Company Act of 1940, as amended, duly organized and existing under
the laws of the State of Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and Fund/Plan have entered into an agreement dated
August 12, 1994 wherein Fund/Plan agreed to provide stock transfer agency,
shareholder services and related other services to the Trust (Transfer Agent
Services Agreement); and
WHEREAS, the Parties wish to amend the Transfer Agent Services Agreement to
include under its terms one additional separate series of shares identified as
Matthews Korea Fund;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree:
1. To amend Schedule "B" to the Transfer Agent Services Agreement in the
form attached hereto as Schedule "B"; and
2. To amend Schedule "C" to the Transfer Agent Services Agreement in the
form attached hereto as Schedule "C".
This Agreement shall take effect upon the date which the amendment to the
registration statement of the Trust registering Matthews Korea Fund becomes
effective.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of one typewritten page, together with Schedules "B" and "C", to be
signed by their duly authorized officers and their corporate seals hereunto duly
affixed and attested, as of the day and year first above written.
Matthews International Funds Fund/Plan Services, Inc.
/s/ G. Paul Matthews /s/ Kenneth J. Kempf
- -------------------------------- ---------------------------------
By: G. Paul Matthews, President By: Kenneth J. Kempf, President
/s/ John Dracott /s/Janet F. Davis
- -------------------------------- ---------------------------------
Attest: John Dracott, Vice President Attest: Janet F. Davis, Secretary
& Secretary
Amendment to Transfer Agent Services Agreement between Matthews International
Funds and Fund/Plan Services, Inc.
================================================================================
Dated: November 26, 1996 Page 1
<PAGE>
SCHEDULE "B"
============
AS AMENDED ON NOVEMBER 28, 1994
===============================
Shareholder Services and Transfer Agent Fee Schedule
for
Matthews International Funds
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
I. A) Base Fee
--------
$15.00 per Account per Year Annual Maintenance Fee for Series declaring
semi-annual dividend distributions subject to a minimum monthly fee of
$2,250 for each Series.
B) IRA's, 403(b) Plans, Defined Contribution/Benefit Plans:
--------------------------------------------------------
$12.00 per Account per Year Annual Maintenance Fee
II. Out of Pocket Expenses:
----------------------
Matthews International Funds will reimburse Fund/Plan Services monthly for
all reasonable out-of-pocket expenses, including postage, stationery
(statements), telecommunications (telephone, fax, dedicated 800 line, on-
line access), special reports, transmissions, records retention, tapes,
couriers and any pre-approved travel expenses.
III. Other Services Not Covered By This Agreement
--------------------------------------------
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies are not included
herein, and will be quoted separately. To the extent the Fund should decide
to issue multiple/separate classes of shares, additional fees will apply.
Any enhanced services, programming requests or reports will be quoted upon
request.
Amendment to Transfer Agent Services Agreement between Matthews International
Funds and Fund/Plan Services, Inc.
===============================================================================
Dated: November 25, 1996 Page 2
<PAGE>
SCHEDULE "C"
============
AS AMENDED ON NOVEMBER 28, 1994
===============================
IDENTIFICATION OF SERIES
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
MATTHEWS INTERNATIONAL FUNDS
1. Matthews Pacific Tiger Fund
2. Matthews Asian Convertible Securities Fund
3. Matthews Korea Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
Amendment to Transfer Agent Services Agreement between Matthews International
Funds and Fund/Plan Services, Inc.
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Dated: November 25, 1996 Page 3
<PAGE>
Exhibit 24(b)(9)(b)(i)
ADMINISTRATION AGREEMENT
This Agreement, dated as of the12th day of August, 1994, made by and
------
between Matthews International Funds, a Delaware Business Trust (the "Trust")
----------------------------
operating as a registered investment company under the Investment Company Act of
1940, as amended (the "Act"), duly organized and existing under the laws of the
State of Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly
------------------------
organized and existing under the laws of the State of Delaware (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue separate
series of shares representing interests in separate investment portfolios (the
"Series"), which Series are identified on Schedule "C" attached hereto, and
which Schedule "C" may be amended from time to time by mutual agreement of the
Trust and Fund/Plan; and
WHEREAS, the Parties desire to enter into an agreement whereby Fund/Plan
will provide certain administration services to each of the Series on the terms
and conditions set forth in this Agreement; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
administrative services under the terms and conditions set forth below; and
WHEREAS, the Trust on behalf of each of the Series, will provide certain
information concerning the Series to Fund/Plan as set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree as follows:
Section 1. Appointment The Trust hereby appoints Fund/Plan as
---------- -----------
administrator to each Series of the Trust and Fund/Plan hereby accepts such
appointment. Also, the Trust agrees to appoint Fund/Plan as administrator to
any additional series which, from time to time may be added to the Trust.
Section 2. Duties and Obligations of Fund/Plan
---------- -----------------------------------
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees of the Trust,
Fund/Plan shall provide to each of the Series all administrative services as set
forth in Schedule "A" attached hereto and incorporated by reference into this
Agreement. In addition to the obligations set forth in
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Administration Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Draft Dated: November 26, 1996
Page 1 of 7 pages.
<PAGE>
Schedule "A", Fund/Plan shall (i) provide its own office space, facilities and
equipment and personnel for the performance of its duties under this Agreement;
and (ii) take all actions it deems necessary to properly execute administration
on behalf of the Series.
(b) So that Fund/Plan may perform its duties under the terms of this
Agreement, the Board of Trustees of the Trust shall direct the officers,
investment advisor, distributor, legal counsel, independent accountants and
custodian of the Trust to cooperate fully with Fund/Plan and to provide such
information, documents and advice relating to the Series as is within the
possession or knowledge of such persons provided that no such person need
provide any information to Fund/Plan if to do so would result in the loss of any
privilege or confidential treatment with respect to such information. In
connection with its duties, Fund/Plan shall be entitled to rely, and shall be
held harmless by the Trust when acting in reasonable reliance upon the
instruction, advice or any documents relating to the Series as provided by the
Trust to Fund/Plan by any of the aforementioned persons. All fees charged by
any such persons shall be deemed an expense of the Trust.
(c) Any activities performed by Fund/Plan under this Agreement shall
conform to the requirements of:
(1) the provisions of the Investment Company Act of 1940, as amended
(the "Act") and the Securities Act of 1933, as amended, and of any rules or
regulations in force thereunder;
(2) any other applicable provision of state and federal law;
(3) the provisions of the Trust Instrument and By-Laws of the Trust
as amended from time to time;
(4) any policies and determinations of the Board of Trustees of the
Trust; and
(5) the fundamental policies of the Series as reflected in the
Trust's registration statement under the Act.
Fund/Plan agrees that all records that it maintains for the Trust are the
property of the Trust and will be surrendered promptly to the Trust upon written
request. Fund/Plan will preserve, for the periods prescribed under Rule 31a-2
under the Act, all such records required to be maintained under Rule 31a-1 of
the Act.
(d) Nothing in this Agreement shall prevent Fund/Plan or any officer
thereof from
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Administration Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Draft Dated: November 26, 1996
Page 2 of 7 pages.
<PAGE>
acting as administrator for or with any other person, firm or corporation.
While the administrative services supplied to the Trust may be different than
those supplied to other persons, firms or corporations, Fund/Plan shall provide
the Trust equitable treatment in supplying services. The Trust recognizes that
it will not receive preferential treatment from Fund/Plan as compared with the
treatment provided to other Fund/Plan clients. Fund/Plan agrees to maintain the
records and all other information of the Trust in a confidential manner and
shall not use such information for any purpose other than the performance of
Fund/Plan's duties under this Agreement.
Section 3. Allocation of Expenses All costs and expenses of the Trust
---------- ----------------------
shall be paid by the Trust including, but not limited to:
(a) fees paid to an investment advisor ("Advisor");
(b) interest and taxes;
(c) brokerage fees and commissions;
(d) insurance premiums;
(e) compensation and expenses of its Trustees who are not
affiliated persons of the Advisor;
(f) legal, accounting and audit expenses;
(g) custodian and transfer agent, or shareholder servicing agent,
fees and expenses;
(h) fees and expenses incident to the registration of the shares of
the Trust under Federal or state securities laws;
(i) expenses related to preparing, setting in type, printing and
mailing prospectuses, statements of additional information,
reports and notices and proxy material to shareholders of the
Trust;
(j) all expenses incidental to holding meetings of shareholders and
Trustees of the Trust;
(k) such extraordinary expenses as may arise, including litigation,
affecting the Trust and the legal obligations which the Trust
may have regarding indemnification of its officers and
trustees; and
(l) fees and out-of-pocket expenses paid on behalf of the Trust by
Fund/Plan.
Section 4. Compensation of Fund/Plan The Trust agrees to pay Fund/Plan
---------- -------------------------
compensation for its services and to reimburse it for expenses, at the rates and
amounts as set forth in Schedule "B" attached hereto, and as shall be set forth
in any amendments to such Schedule "B" approved by the Trust and Fund/Plan. The
Trust agrees and understands that Fund/Plan's compensation be comprised of two
components, payable on a monthly basis, as follows:
(i) A combined asset-based fee subject to a minimum amount that the Trust
hereby
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Administration Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Draft Dated: November 26, 1996
Page 3 of 7 pages.
<PAGE>
authorizes Fund/Plan to collect by debiting the Trust's custody account for
invoices which are rendered for the services performed. The invoices for the
services performed will be sent to the Trust after such debiting with the
indication that payment has been made; and
(ii) reimbursement of any out-of-pocket expenses paid by Fund/Plan on
behalf of the Trust, which out-of-pocket expenses will be billed to the Trust
within the first ten calendar days of the month following the month in which
such out-of-pocket expenses were incurred. The Trust agrees to reimburse
Fund/Plan for such expenses within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the value of
Series' net assets shall be computed at the times and in the manner specified in
Series' Prospectuses and Statements of Additional Information then in effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and the Trust.
Section 5. Duration
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(a) The term of this Agreement shall be for a period of three (3) years,
commencing on the date which the Trust's registration statement is declared
effective by the U.S. Securities and Exchange Commission ("Effective Date").
(b) The fee schedule set forth in Schedule "B" attached shall be fixed
for two (2) years commencing on the Effective Date of this Agreement.
Thereafter, the fee schedule will be subject to review and adjustment, not to
exceed 10% of those fees set forth in Schedule "B."
(c) If a successor to any of Fund/Plan's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Fund/Plan in
connection with the termination of this Agreement, Fund/Plan shall promptly upon
such termination and at the expense of the Trust, transfer all Required Records
and shall cooperate in the transfer of such duties and responsibilities.
Section 6. Amendment No provision of this Agreement may be amended or
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modified, in any manner except by a written agreement properly authorized and
executed by Fund/Plan and the Trust.
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Administration Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Draft Dated: November 26, 1996
Page 4 of 7 pages.
<PAGE>
Section 7. Applicable Law This Agreement shall be governed by the laws
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of the Commonwealth of Pennsylvania and the venue of any action arising under
this Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 8. Limitation of Liability
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(a) The execution and delivery of this contract has been duly authorized by
the Board of Trustees of the Trust and executed on behalf of the Trust by the
undersigned officer, in that officer's capacity as an officer of the Trust. The
obligations under this Agreement shall be binding upon the assets and property
of the Trust and shall not be binding upon any officer or shareholder of the
Series individually.
(b) Fund/Plan, its directors, officers, employees, shareholders and agents
shall only be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the performance of this Agreement that
result from willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of Fund/Plan in the performance of its obligations and
duties under this Agreement.
(c) Any person, even though a director, officer, employee, shareholder or
agent of Fund/Plan, who may be or become an officer, trustee, employee or agent
of the Trust, shall be deemed when rendering services to such entity or acting
on any business of such entity (other than services or business in connection
with Fund/Plan's duties under the Agreement), to be rendering such services to
or acting solely for the Trust and not as a director, officer, employee,
shareholder or agent of, or under the control or direction of Fund/Plan even
though such person may receive compensation from Fund/Plan.
(d) Notwithstanding any other provision of this Agreement, the Trust shall
indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith, (ii) any action taken or omitted
to be taken by Fund/Plan in good faith in reliance upon any certificate,
instrument, order or stock certificate or other document reasonably believed by
Fund/Plan to be genuine and to be signed, countersigned or executed by any duly
authorized person, upon the oral instructions or written instruction of an
authorized person of the Trust or upon the opinion of legal counsel
================================================================================
Administration Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Draft Dated: November 26, 1996
Page 5 of 7 pages.
<PAGE>
for the Trust; or (iii) any action taken in good faith or omitted to be taken by
Fund/Plan in connection with its appointment in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended or repealed. Indemnification under this
subparagraph shall not apply, however, to actions or omissions of Fund/Plan or
its directors, officers, employees, shareholders or agents in cases of its or
their willful misfeasance, bad faith, gross negligence or reckless disregard of
its or their duties hereunder.
(e) Fund/Plan shall give written notice to the Trust within thirty (30)
business days of receipt by Fund/Plan of a written assertion or claim of any
threatened or pending legal proceeding which may be subject to this
indemnification. The failure to notify the Trust of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve the Trust
of any liability arising under this Section or otherwise, unless such failure
prejudices the Trust.
(f) For any legal proceeding giving rise to this indemnification, the Trust
shall be entitled to defend or prosecute any claim in the name of Fund/Plan at
its own expense and through counsel of its own choosing if it gives written
notice to Fund/Plan within thirty (30) business days of receiving notice of such
claim. Notwithstanding the foregoing, Fund/Plan may participate in the
litigation at its own expense through counsel of its own choosing. If the Trust
does choose to defend or prosecute such claim, then the parties shall cooperate
in the defense or prosecution thereof and shall furnish such records and other
information as are reasonably necessary.
(g) The terms of this Section 8 shall survive the termination of this
Agreement.
Section 9. Notices Except as otherwise provided in this Agreement, any
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notice or other communication required by or permitted to be given in connection
with this Agreement shall be in writing, and shall be delivered in person or
sent by first class mail, postage prepaid to the respective parties as follows:
If to the Trust: If to Fund/Plan:
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Matthews International Funds Fund/Plan Services, Inc.
655 Montgomery St., Suite 1438 2 West Elm Street
San Francisco, CA 94111 Conshohocken, PA 19428
Attention: G. Paul Matthews, Attention: Kenneth J. Kempf,
President President
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Administration Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Draft Dated: November 26, 1996
Page 6 of 7 pages.
<PAGE>
Section 10. Severability If any part, term or provision of this
----------- ------------
Agreement is held by any court to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be considered
severable and not affected, and the rights and obligations of the parties shall
be construed and enforced as if the Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
Section 11. Section Headings Section and Paragraph headings are for
----------- ----------------
convenience only and shall not be construed as part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement consisting of
seven type written pages, together with Schedules "A," "B" and "C," to be signed
by their duly authorized officers as of the day and year first above written.
Matthews International Funds Fund/Plan Services, Inc.
- ---------------------------- ------------------------
/s/ G. Paul Matthews /s/ Kenneth J. Kempf
- ------------------------------------- -----------------------------------
By: G. Paul Matthews, President By: Kenneth J. Kempf, President
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Administration Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Draft Dated: November 26, 1996
Page 7 of 7 pages.
<PAGE>
Schedule "A"
============
Fund Administration Services
for
Matthews International Funds
I. Regulatory Compliance
---------------------
A. Compliance - Federal Investment Company Act of 1940
1. Review, report and renew
a. Investment advisory contracts
b. Fidelity bond
c. Underwriting contracts
d. Distribution (12b-1) plans
e. Administration contracts
f. Accounting contracts
g. Custody contracts
h. Transfer agent and shareholder services contracts
2. Filings
a. N-SAR (semi-annual report)
b. One Annual N-1A (prospectus), post-effective amendments and
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supplements ("stickers")
c. 24f-2 indefinite registration of shares
d. Filing fidelity bond under 17g-1
e. Filing shareholder reports under 30b2-1
3. Annual up-dates of biographical information and questionnaires for
Trustees and Officers.
B. Compliance - State "Blue Sky"
1. Blue Sky (state registration)
a. Registration shares
b. Registration issuer/dealer/agent (no loads)
c. Monitor sale shares over/under
d. Report shares sold
e. Filing of federal prospectus and contracts
f. Filing annual and semi-annual reports with states
C. Compliance - Prospectus
1. Analyze and review portfolio reports from investment advisor
regarding:
a. compliance with investment objectives
b. maximum investment by company/industry size
D. Compliance - Other
1. Applicable stock exchange rules
2. Applicable state tax laws
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Administration Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Dated: November 26, 1996
Schedule "A": Page 1
<PAGE>
II. Corporate Business and Shareholder/Public Information
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A. Trustees/Management
1. Preparation of Board meetings
a. agendas - all necessary items of compliance
b. arrange meetings
c. draft meeting minutes
d. keep attendance records
e. maintain corporate records/minute book
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
5. Underwriters
C. Maintain Corporate Calendars and Files
1. General
2. Blue sky
D. Release Corporate Information
1. To shareholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
b. tax information
c. changes to prospectus
d. letters from management
e. funds' performance
4. Respond to:
a. financial press, as authorized
b. miscellaneous shareholders inquiries
c. industry questionnaires
5. Prepare, maintain and update monthly information manual
E. Communications to Shareholders
1. Coordinate printing and distribution of annual and semi-annual
reports and prospectus
F. Shareholder Meetings (Additional Fee Applies)
1. Preparation of proxy
2. Conduct meeting
3. Preparation of minutes and record ballot results
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Administration Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Dated: November 26, 1996
Schedule "A": Page 2
<PAGE>
III. Financial and Management Reporting
----------------------------------
A. Income and Expenses
1. Preparation of budgets
2. Expense figures calculated and accrual levels set
3. Monitoring of expenses
4. Approve and authorize payment of expenses
5. Projection of Income
B. Distributions to Shareholders
1. Projections of distribution amounts
a. compliance with income tax provisions
b. compliance with excise tax provisions
c. compliance with Investment Company Act of 1940
2. Compilation and reclassification of distributions, where
applicable, for year end tax reporting to shareholders
C. Financial Reporting
1. Liaison between fund management and auditors
2. Preparation of unaudited and audited reports to shareholders
3. 60-day delivery to SEC and shareholders
D. Subchapter M Compliance
1. Asset diversification test
2. Short/short test
3. Income qualification test
E. Other Financial Analyses
1. Upon request from fund management, other budgeting and analyses
can be constructed to meet a fund's specific needs, some may be
at an additional fee.
F. Review and Monitoring Functions
1. Review NAV calculations
2. Coordinate and review transfer agent, accounting and custody
functions
3. Review 12b-1 accruals, expenditures and payment trail
commissions where applicable
G. 1. Preparation and distribution of periodic operational and
statistical reports to management.
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Administration Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Dated: November 26, 1996
Schedule "A": Page 3
<PAGE>
Schedule "B"
============
Administration Services Fee Schedule
for
Matthews International Funds
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
I. A) Base Fee (calculated using average monthly total net assets and payable
--------
monthly) Subject to the minimum annual fee of $60,000 for the initial two
(2) separate Series of Shares of the Trust (such minimum annual fee to
increase by $10,000 for each additional Series issued by the Trust), the
asset based administration fees shall be calculated at:
.0015 On the First $75 Million of Total Average Net Assets
.0010 On the Next $75 Million of Total Average Net Assets; and
.0005 Of Total Average Net Assets in Excess of $150 Million of Average Net
Assets
Maximum annual fee for the Trust is $500,000.
II. Out of Pocket Expenses:
----------------------
Matthews International Funds will reimburse Fund/Plan Services monthly for
all reasonable out-of-pocket expenses, including postage, telecommunications
(telephone and fax), special reports, Board Meeting Materials, record
retention, transportation costs as incurred and copying and sending
materials to auditors for off-site audits.
III. Other Services Not Covered By This Agreement
--------------------------------------------
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies, are not included
herein, and will be quoted separately. To the extent the Trust should
decide to issue multiple/separate classes of shares, additional fees will
apply. Any additional/enhanced services or reports will be quoted upon
request.
================================================================================
Administration Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Dated: November 26, 1996
Schedule "B"
<PAGE>
Schedule "C"
============
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
"Matthews International Funds"
============================
1. Matthews Pacific Tiger Fund
2. Matthews Asian Convertible Securities Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
================================================================================
Administration Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Dated: November 26, 1996
Schedule "C"
<PAGE>
Exhibit 24(b)(9)(b)(ii)
AMENDMENT TO ADMINISTRATION AGREEMENT
This Agreement, dated as of the 13th day of December, 1994 made by and
between Matthews International Funds, a Delaware Business Trust (the "Trust")
operating as an open-end management investment company registered under the
Investment Company Act of 1940, as amended, duly organized and existing under
the laws of the State of Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and Fund/Plan have entered into an agreement dated
August 12, 1994 wherein Fund/Plan agreed to provide mutual fund administration
and related services to the Trust (Administration Agreement); and
WHEREAS, the Parties wish to amend the Administration Agreement to include
under its terms one additional separate series of shares identified as:
Matthews Korea Fund;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree:
1. To amend Schedule "B" to the Administration Agreement in the form
attached hereto as Schedule "B"; and
2. To amend Schedule "C" to the Administration Agreement in the form
attached hereto as Schedule "C".
This Agreement shall take effect upon the date which the amendment to the
registration statement of the Trust registering Matthews Korea Fund becomes
effective.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of one typewritten page, together with Schedules "B" and "C", to be
signed by their duly authorized officers and their corporate seals hereunto duly
affixed and attested, as of the day and year first above written.
Matthews International Funds Fund/Plan Services, Inc.
/s/ G. Paul Matthews /s/ Kenneth J. Kempf
- -------------------------------- -------------------------------
By: G. Paul Matthews, President By: Kenneth J. Kempf, President
/s/ John Dracott /s/ Janet F. Davis
- -------------------------------- ----------------------------------
Attest: John Dracott, Vice President & Attest: Janet F. Davis, Secretary
Secretary
Amendment to Administration Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Dated: November 26, 1996 Page 1
<PAGE>
SCHEDULE "B"
============
AS AMENDED ON NOVEMBER 28, 1994
===============================
ADMINISTRATION FEE SCHEDULE
FOR
MATTHEWS INTERNATIONAL FUNDS
- --------------------------------------------------------------------------------
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
I. BASE FEE (calculated using average monthly total net assets and payable
- -- -----------------------------------------------------------------------
monthly)
--------
Subject to the minimum annual fee of $60,000 for the initial two (2)
separate Series of Shares of the Trust (such minimum annual fee to increase
by $10,000 for each additional Series issued by the Trust), the asset based
administration fees shall be calculated at:
.0015 On the First $75 Million of Total Average Net Assets
.0010 On the Next $75 Million of Total Average Net Assets; and
.0005 Of Total Average Net Assets in Excessof $150 Million of Average Net
Assets
Maximum annual fee for the Trust is $500,000.
II. Out of Pocket Expenses:
-----------------------
Matthews International Funds will reimburse Fund/Plan Services monthly for
all reasonable out-of-pocket expenses, including postage, telecommunications
(telephone and fax), special reports, Board Meeting materials, record
retention, transportation costs as incurred and copying and sending
materials to auditors for off-site audits.
II. Other Services Not Covered by this Agreement
--------------------------------------------
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies, are not included
herein, and will be quoted separately. To the extent the Trust should decide
to issue multiple/separate classes of shares, additional fees will apply.
Any additional/enhanced services or reports wil be quoted upon request.
Amendment to Administration Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
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Page 2
Dated: November 25, 1996
<PAGE>
SCHEDULE "C"
============
AS AMENDED ON NOVEMBER 28, 1994
===============================
IDENTIFICATION OF SERIES
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
MATTHEWS INTERNATIONAL FUNDS
1. Matthews Pacific Tiger Fund
2. Matthews Asian Convertible Securities Fund
3. Matthews Korea Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
Amendment to Administration Agreement between Matthews International Funds and
Fund/Plan Services, Inc.
================================================================================
Page 3
Dated: November 25, 1996
<PAGE>
Exhibit 24(b)(9)(c)(i)
ACCOUNTING SERVICES AGREEMENT
This Agreement, dated as of the 12th day of August, 1994 made by and
------
between Matthews International Funds, a Delaware Business Trust (the "Trust")
----------------------------
operating as an open end management investment company registered under the
Investment Company Act of 1940, as amended, duly organized and existing under
the laws of the State of Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a
------------------------
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue separate
series of shares representing interests in separate investment portfolios (the
"Series"), which Series are identified on Schedule "C" attached hereto and which
Schedule "C" may be amended from time to time by mutual agreement of the Trust
and Fund/Plan; and
WHEREAS, the Trust desires to appoint Fund/Plan as Accounting Services
Agent to maintain and keep current the books, accounts, records, journals or
other records of original entry relating to the business of the Trust (the
"Accounts and Records") and to perform certain other functions in connection
with such Accounts and Records; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
functions upon the terms and conditions set forth below; and
WHEREAS, the Trust will provide certain information concerning the Series
to Fund/Plan as set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree as follows:
Section 1. For purposes of this Agreement:
----------
Oral Instructions shall mean an authorization, instruction, approval, item
-----------------
or set of data, or information of any kind transmitted to Fund/Plan in person or
by telephone, telegram, telecopy, or other mechanical or documentary means
lacking a signature, by a person or persons reasonably identified to Fund/Plan
to be a person or persons authorized by a resolution of the Board of Trustees of
the Trust, to give such oral instructions on behalf of the Trust.
===============================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Page 1 of 10 pages
<PAGE>
Written Instructions shall mean an authorization, instruction, approval,
--------------------
item or set of data or information of any kind transmitted to Fund/Plan in
original writing containing original signatures or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to Fund/Plan to be the signature of a person authorized by a
resolution of the Board of Trustees of the Trust to give written instructions on
behalf of the Trust.
The Trust shall file with Fund/Plan a certified copy of each resolution of
its Board of Trustees authorizing execution of Written Instructions or the
transmittal of Oral Instructions as provided above.
Section 2. To the extent Fund/Plan receives the necessary information from
----------
the Trust or its agents by Written or Oral Instructions, Fund/Plan shall
maintain and keep current the following Accounts and Records relating to the
business of the Trust in such form as may be mutually agreed upon between the
Trust and Fund/Plan:
(a) Cash Receipts Journal
(b) Cash Disbursements Journal
(c) Dividends Paid and Payable Schedule
(d) Purchase and Sales Journals - Portfolio Securities
(e) Subscription and Redemption Journals
(f) Security Ledgers - Transaction Report and Tax Lot Holdings Report
(g) Broker Ledger - Commission Report
(h) Daily Expense Accruals
(i) Daily Interest Accruals
(j) Daily Trial Balance
(k) Portfolio Interest Receivable and Income Journal
(l) Portfolio Dividend Receivable and Income Register
(m) Listing of Portfolio Holdings - showing cost, market value and
percentage of portfolio comprised of each security.
(n) Average Daily Net assets provided on monthly basis.
The necessary information to perform the above functions and the
calculation of the net asset value of each Series as provided below, is to be
furnished by Written or Oral Instructions to Fund/Plan daily (in accordance with
the time frame identified in Section 7) prior to the close of regular trading on
the New York Stock Exchange.
Section 3. Fund/Plan shall perform the ministerial calculations necessary
----------
to calculate each of the Series' net asset value each day that the New York
Stock Exchange is open for business, in accordance with (i) each Series' current
Prospectus and Statement of Additional Information and (ii) procedures with
respect thereto approved by the Board of Trustees of the
===============================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Page 2 of 10 pages
<PAGE>
Trust and supplied in writing to Fund/Plan's Accounting Services Unit. Portfolio
items for which market quotations are available by Fund/Plan's use of an
automated financial information service (the "Service") shall be based on the
closing prices of such Service except where the Trust has given or caused to be
given specific Written or Oral Instructions to utilize a different value. All of
the portfolio securities shall be given such values as the Trust provides by
Written or Oral Instructions including all restricted securities and other
securities requiring valuation not readily ascertainable solely by such Service.
Fund/Plan shall not have any responsibility or liability for the accuracy of
prices quoted by such Service; for the accuracy of the information supplied by
the Trust; or for any loss, liability, damage, or cost arising out of any
inaccuracy of such data. Fund/Plan shall have no responsibility or duty to
include information or valuations to be provided by the Trust in any computation
unless and until it is timely supplied to Fund/Plan in usable form. Fund/Plan
shall record corporate action information as received from the Custodian, the
Service, or the Trust. Fund/Plan shall not have any duty to gather or record
corporate action information not supplied by these sources.
Fund/Plan will not assume any liability for price changes caused by: the
investment adviser(s), custodian, suppliers of security prices, corporate action
and dividend information, or any party other than Fund/Plan itself.
In the event an error is made by Fund/Plan which creates a price change,
consideration must be given to the effect of the price change as described
below. Notwithstanding the provisions of Section 11, the following provisions
govern Fund/Plan's liability for errors in calculating the net asset value
("NAV") of the Series:
If the NAV should have been higher for a date or dates in the past,
the error would have the effect of having given more shares to subscribers
and less money to redeemers to which they were entitled. Conversely, if
the NAV should have been lower, the error would have the effect of having
given less shares to subscribers and overpaying redeemers.
If the error affects the prior business day's NAV only, and the prior
day's work can be rerun before shareholder statements and checks are
mailed, the Trust hereby accepts this manner of correcting the error.
If the error spans five (5) business days or less, Fund/Plan shall
===============================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Page 3 of 10 pages
<PAGE>
reprocess shareholder purchases and redemptions where redeeming
shareholders have been underpaid. Fund/Plan shall assume liability to the
Trust for overpayments to shareholders who have redeemed.
If the error spans more than five (5) business days, Fund/Plan would
bear the liability to the Trust for, 1) buying in for excess shares given
to shareholders if the NAV should have been higher, or, 2) funding
overpayments to shareholders who have redeemed if the NAV should have been
lower. The cost of any reprocessing required for shareholders who have
been credited with fewer shares than appropriate, or for redeeming
shareholders who are due additional amounts of money will also be borne by
Fund/Plan.
Section 4. For all purposes under this Agreement, Fund/Plan is authorized
----------
to act upon receipt of the first of any Written or Oral Instruction it receives
from the Trust or its agents on behalf of the Trust. In cases where the first
instruction is an Oral Instruction that is not in the form of a document or
written record, a confirmatory Written Instruction or Oral Instruction in the
form of a document or written record shall be delivered, and in cases where
Fund/Plan receives an Instruction, whether Written or Oral, to enter a portfolio
transaction on the records, the Trust shall cause the broker/dealer to send a
written confirmation to the Custodian. Fund/Plan shall be entitled to rely on
the first Instruction received, and for any act or omission undertaken in
compliance therewith shall be free of liability and fully indemnified and held
harmless by the Trust, provided however, that in the event a Written or Oral
Instruction received by Fund/Plan is countermanded by a timely later Written or
Oral Instruction received by Fund/Plan prior to acting upon such countermanded
Instruction, Fund/Plan shall act upon such later Written or Oral Instruction.
The sole obligation of Fund/Plan with respect to any follow-up or confirmatory
Written Instruction, Oral Instruction in documentary or written form, shall be
to make reasonable efforts to detect any such discrepancy between the original
Instruction and such confirmation and to report such discrepancy to the Trust.
The Trust shall be responsible, at the Trust's expense, for taking any action,
including any reprocessing, necessary to correct any discrepancy or error, and
to the extent such action requires Fund/Plan to act, the Trust shall give
Fund/Plan specific Written Instruction as to the action required.
Section 5. The Trust shall cause its Custodian (the "Custodian") to
----------
forward to
===============================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Page 4 of 10 pages
<PAGE>
Fund/Plan a daily statement of cash and portfolio transactions and, at the end
of each month, the Trust shall cause the Custodian to forward to Fund/Plan a
monthly statement of portfolio positions, which Fund/Plan will reconcile with
its Accounts and Records maintained on behalf of the Trust. Fund/Plan will
report any discrepancies to the Custodian, and report any unreconciled items to
the Trust.
Section 6. Fund/Plan shall promptly supply daily and periodic reports to
----------
the Trust as requested by the Trust and agreed upon by Fund/Plan.
Section 7. The Trust shall provide and shall require each of its agents
----------
(including the Custodian) to provide Fund/Plan as of the close of each business
day, or on such other schedule as the Trust determines is necessary, with
Written or Oral Instructions (to be delivered to Fund/Plan by 11:00 a.m.,
Eastern time, the next following business day) containing all data and
information necessary for Fund/Plan to maintain the Trust's Accounts and
Records, and Fund/Plan may conclusively assume that the information it receives
by Written or Oral Instructions is complete and accurate. Fund/Plan, as
Transfer Agent, accepts responsibility for providing reports of share purchases,
redemptions, and total shares outstanding, on the next business day after each
net asset valuation.
Section 8. The Accounts and Records, in the agreed-upon format, maintained
----------
by Fund/Plan shall be the property of the Trust and shall be made available to
the Trust promptly upon request and shall be maintained for the periods
prescribed in Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as
amended. Fund/Plan shall assist the Trust's independent auditors, or upon
approval of the Trust, or upon demand, any regulatory body, in any requested
review of the Trust's Accounts and Records but shall be reimbursed for all
expenses and employee time invested in any such review outside of routine and
normal periodic review and audits. Upon receipt from the Trust of the necessary
information, Fund/Plan shall supply the necessary data for the Trust or an
independent auditor's completion of any necessary tax returns, questionnaires,
periodic reports to Shareholders and such other reports and information requests
as the Trust and Fund/Plan shall agree upon from time to time.
Section 9. In case of any request or demand for the inspection of the
----------
Share records of the Trust, Fund/Plan, as Accounting Services Agent, shall
endeavor to notify the Trust and to secure instructions as to permitting or
refusing such inspection. Fund/Plan may however,
===============================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Page 5 of 10 pages
<PAGE>
exhibit such records to any person in any case where it is advised by its
counsel that it may be held liable for failure to do so after notice to the
Trust.
Section 10. Fund/Plan and the Trust may from time to time adopt such
-----------
procedures as agreed upon in writing, and Fund/Plan may conclusively assume that
any procedure approved by the Trust or directed by the Trust, does not conflict
with or violate any requirements of the Trust's Registration Statements, Trust
Instrument, By-Laws, or any rule or regulation of any regulatory body or
governmental agency. The Trust shall be responsible for notifying Fund/Plan of
any changes in regulations or rules which might necessitate changes in
Fund/Plan's procedures, and for working out with Fund/Plan such changes.
Section 11.
-----------
(a) Fund/Plan, its directors, officers, employees, shareholders, and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by the Trust in connection with the performance of this
Agreement that results from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though also a director, trustee, officer,
employee, shareholder or agent of Fund/Plan, who may be or become an officer,
trustee, employee or agent of the Trust shall be deemed, when rendering services
to the Trust or acting on any business of the Trust (other than services or
business in connection with Fund/Plan's duties hereunder), to be rendering such
services to or acting solely for the Trust, and not as a director, officer,
employee, shareholder or agent of, or one under the control or direction of
Fund/Plan even though receiving a salary from Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by Fund/Plan except
matters resulting from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement; or
(ii) in reliance upon any certificate, instrument, order or
stock certificate
===============================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Page 6 of 10 pages
<PAGE>
or other document reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the Oral
Instructions or Written Instructions of an authorized person of the Trust or
upon the written opinion of legal counsel for the Trust or Fund/Plan; or
(iii) any action taken or omitted to be taken in good faith by
Fund/Plan in connection with its appointment, in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended, or repealed. Indemnification under this
subparagraph shall not apply, however, to actions or omissions of Fund/Plan or
its directors, officers, employees, shareholders, or agents in cases of its or
their willful misfeasance, bad faith, gross negligence or reckless disregard its
or their duties hereunder.
(d) Fund/Plan shall give written notice to the Trust within
thirty (30) business days of receipt by Fund/Plan of a written assertion or
claim of any threatened or pending legal proceeding which may be subject to this
indemnification. The failure to so notify the Trust of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve the Trust
of any liability arising from this Section or otherwise, except to the extent
failure to give notice prejudices the Trust.
(e) For any legal proceeding giving rise to this indemnification,
the Trust shall be entitled to defend or prosecute any claim in the name of
Fund/Plan at its own expense and through counsel of its own choosing if it gives
written notice to Fund/Plan within thirty (30) business days of receiving notice
of such claim. Notwithstanding the foregoing, Fund/Plan may participate in the
litigation at its own expense through counsel of its own choosing. If the Trust
chooses to defend or prosecute such claim, then the Parties shall cooperate in
the defense or prosecution thereof and shall furnish such records and other
information as are reasonably necessary.
Section 12. All financial data provided to, processed by, and reported by
-----------
Fund/Plan under this Agreement shall be stated in United States dollars.
Fund/Plan shall have no obligation to convert to, equate, or deal in foreign
currencies or values, and expressly assumes no liability for any currency
conversion or non-U.S. dollar denominated computations relating to the affairs
of the Trust.
Section 13. The Trust agrees to pay Fund/Plan compensation for its
-----------
services, and to
===============================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Page 7 of 10 pages
<PAGE>
reimburse it for expenses, at the rates and amounts as set forth in Schedule "B"
attached hereto, and as shall be set forth in any amendments to such Schedule
"B" agreed upon in writing by the Trust and Fund/Plan. The Trust agrees and
understands that Fund/Plan's compensation be comprised of two components,
payable on a monthly basis, as follows:
(i) A fixed fee for each Series, together with a combined
asset based fee which the Trust hereby authorizes Fund/Plan to collect by
debiting the Trust's custody account for invoices which are rendered for the
services performed for the applicable function. The invoices for the services
performed will be sent to the Trust after such debiting with the indication that
payment has been made; and
(ii) reimbursement of any reasonable out-of-pocket expenses
paid by Fund/Plan on behalf of the Trust, which out-of-pocket expenses will be
billed to the Trust within the first ten calendar days of the month following
the month in which such out-of-pocket expenses were incurred. The Trust agrees
to reimburse Fund/Plan for such expenses within ten calendar days of receipt of
such bill.
For the purpose of determining fees payable to Fund/Plan, the value of the
Series' net assets shall be computed at the times and in the manner specified in
Series' Prospectuses and Statement of Additional Information then in effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and the Trust.
Section 14. Nothing contained in this Agreement is intended to or shall
-----------
require Fund/Plan, in any capacity hereunder, to perform any functions or duties
on any holiday, day of special observance or any other day on which the New York
Stock Exchange is closed. Functions or duties normally scheduled to be performed
on such days shall be performed on, and as of, the next succeeding business day
on which the New York Stock Exchange is open. Notwithstanding the foregoing,
Fund/Plan shall compute the net asset value of each Series on each day required
pursuant to (i) Rule 22c-1 promulgated under the Investment Company Act of 1940,
as amended, and (ii) such Series' then-current Prospectus and Statement of
Additional Information.
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Page 8 of 10 pages
<PAGE>
Section 15.
-----------
(a) The term of this Agreement shall be for a period of three
(3) years, commencing on the date which the Trust's registration statement is
declared effective by the U.S. Securities and Exchange Commission ("Effective
Date").
(b) The fee schedule set forth in Schedule "B" attached shall be
fixed for (2) years commencing on the Effective Date of this Agreement.
Thereafter, the fee schedule will be subject to review and adjustment not to
exceed 10% of those fees set forth in Schedule "B."
(c) If a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the Trust by written
notice to Fund/Plan in connection with the termination of this Agreement,
Fund/Plan shall promptly upon such termination and at the expense of the Trust,
transfer all Required Records and shall cooperate in the transfer of such duties
and responsibilities.
Section 16. Except as otherwise provided in this Agreement, any notice or
-----------
other communication required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in person or sent by first
class mail, postage prepaid to the respective parties as follows:
If to Matthews International Funds: If to Fund/Plan:
----------------------------------- ---------------
Matthews International Funds Fund/Plan Services, Inc.
655 Montgomery Street, Suite 1438 2 West Elm Street
San Francisco, CA 94111 Conshohocken, PA 19428
Attention: G. Paul Matthews, Attention: Kenneth J. Kempf,
President President
Section 17. This Agreement may be amended from time to time by
-----------
supplemental agreement executed by the Trust and Fund/Plan and the compensation
stated in Schedule "B" attached hereto may be adjusted accordingly as mutually
agreed upon.
Section 18. The Trust represents and warrants to Fund/Plan that the
-----------
execution and delivery of this Agreement by the undersigned officers of the
Trust has been duly and validly authorized by resolution of the Board of
Trustees of the Trust.
Section 19. This Agreement may be executed in two or more counterparts,
-----------
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Page 9 of 10 pages
<PAGE>
Section 20. This Agreement shall extend to and shall be binding upon the
-----------
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Trust without the written
consent of Fund/Plan or by Fund/Plan without the written consent of the Trust,
authorized or approved by a resolution of its respective Boards of Directors or
Trustees.
Section 21. This Agreement shall be governed by the laws of the
-----------
Commonwealth of Pennsylvania and the venue of any action arising under this
Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 22. No provision of this Agreement may be amended or modified, in
-----------
any manner except by a written agreement properly authorized and executed by
Fund/Plan and the Trust.
Section 23. If any part, term or provision of this Agreement is held by
-----------
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid, provided that the basic agreement is not thereby
substantially impaired.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of eleven type written pages, together with Schedules "A", "B" and
"C", to be signed by their duly authorized officers as of the day and year first
above written.
Matthews International Funds Fund/Plan Services, Inc.
- ---------------------------- ------------------------
/s/ G. Paul Matthews /s/ Kenneth J. Kempf
- ------------------------------- ---------------------------------
By: G. Paul Matthews, President By: Kenneth J. Kempf, President
===============================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Page 10 of 10 pages
<PAGE>
SCHEDULE "A"
============
FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES
FOR
MATTHEWS INTERNATIONAL FUNDS
Daily Accounting Services
-------------------------
1) Calculate Net Asset Value (and Offering Price) Per Share:
--------------------------------------------------------
. Update the daily market value of securities held by the Fund using
Fund/Plan Services' standard agents for pricing domestic equity, bond
and foreign securities. The domestic equity pricing services are
Quotron Systems, Inc. and Interactive Data (IDC). Muller Data
Corporation/Extel Financial and IDC are used for bond and foreign
prices/exchange rates.
. Enter manual prices supplied by Matthews International and/or broker.
. Review variance reporting on-line and in hard copy for price changes in
individual securities using variance levels established by Matthews
International. Verify US dollar security prices exceeding variance
levels by notifying Matthews International and pricing sources of noted
variances.
. Complete daily variance analysis on foreign exchange rates and local
foreign prices. Notify Matthews International of changes exceeding
established levels for Matthews International's verification. (The
client should establish tolerance levels for each country/currency so
that local price changes and foreign exchange rate changes exceeding
this tolerance are identified and NAV problems minimized.)
. Review for ex-dividend items indicated by pricing sources; trace to
Fund general ledger for agreement.
. Prepare NAV proof sheets. Review components of change in NAV for
reasonableness.
. Communicate required pricing information (NAV) to Matthews
International, Transfer Agent and, electronically, to NASDAQ.
2) Determine and Report Cash Availability to Fund by approximately 9:30 AM
-----------------------------------------------------------------------
Eastern Time:
------------
. Receive daily cash and transaction statements from the Custodian by
8:30 AM Eastern time.
. Receive previous day shareholder activity reports from the Funds'
Transfer Agent by 8:30 AM Eastern time.
. Fax hard copy Cash Availability calculations with all details to
Matthews International.
. Supply client with 5-day cash projection report.
. Prepare and complete daily bank cash reconciliations including
documentation of any reconciling items and notify the
custodian/Matthews International.
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Schedule "A"; Page 1
<PAGE>
3) Reconcile and Record All Daily Expense Accruals:
-----------------------------------------------
. Accrue expenses based on client supplied budget either as percentage of
Fund's net assets or specific dollar amounts.
. If applicable, monitor expense limitations established by the client.
. Accrue daily amortization of Organizational Expense, if applicable.
. Complete daily accrual of 12(b)1 expenses, if applicable.
4) Verify and Record All Daily Income Accruals for Debt Issues:
-----------------------------------------------------------
. Review and verify all system generated Interest and Amortization
reports.
. Establish unique security codes for bond issues to permit segregated
Trial Balance income reporting.
5) Monitor Domestic Securities Held for Cash Dividends, corporate actions
----------------------------------------------------
and capital changes such as splits, mergers, spinoffs, etc. and process
appropriately.
. Monitor electronically received information from Muller Data Corporation
for all domestic securities.
. Review current daily security trades for dividend activity.
. Interface with custodian to monitor timely collection and postings of
corporate actions, dividends and interest.
. Process international dividend and capital change information received
from the Custodian and Advisor. Back-up information on foreign dividends
and corporate actions may also be obtained from Muller Data
Corporation/Extel Financial or IDC (as pricing agents for the Fund).
. Provide mark-to-market analysis for currency exchange rate fluctuations
on unsettled dividends and interest.
6) Enter All Security Trades on Investment Accounting System (IAS) based
---------------------------------------------------------------
on written instructions from Matthews International.
. Review system verification of trade and interest calculations.
. Verify settlement through the Custodian statements.
. Maintain security ledger transaction reporting.
. Maintain tax lot holdings.
. Provide complete broker commission reporting.
. Provide the Fund's foreign currency exchange rate realized and
unrealized gains/losses detail.
. Determine realized gains or losses on security trades.
7) Enter All Fund Share Transactions on IAS:
----------------------------------------
. Process activity identified on the Transfer Agent reports.
. Verify settlement through the Fund's Custodian statements.
. Reconcile to the Fund/Plan Services' Transfer Agent report balances.
8) Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance
---------------------------------------------------------------
(listing all asset, liability, equity, income and expense accounts)
. Post manual entries to the general ledger.
. Post custodian bank activity.
. Post security transactions.
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Schedule "A"; Page 2
<PAGE>
. Post and verify system generated activity, i.e., income and expense
accruals.
. Segregate foreign tax expense.
. Prepare daily mark-to-market analysis for all unrealized foreign
currency exchange rate gains/losses by asset/liability category.
. Prepare Fund general ledger net cash proof used in NAV calculation.
9) Review and Reconcile With Custodian Statements:
----------------------------------------------
. Verify all posted interest, dividends, expenses, and shareholder and
security payments/receipts, etc. (Discrepancies will be reported to and
resolved by the Custodian.)
. Post all cash settlement activity to the Trial Balance.
. Reconcile to ending cash balance accounts.
. Clear IAS subsidiary reports with settled amounts.
. Track status of past due items and failed trades handled by the
Custodian.
10) Submission of Daily Accounting Reports to Matthews International Capital
------------------------------------------------------------------------
Management (the "Advisor"): (Additional reports readily available.)
---------------------------
. Portfolio Valuation (listing inclusive of holdings, costs, market
values, unrealized appreciation/depreciation and percentage of portfolio
comprised of each security.)
. Cash availability.
. 5-Day Cash Projection Report
. Trial Balance
. NAV Calculation Report
Monthly Accounting Services
---------------------------
1) Full Financial Statement Preparation (automated Statements of Assets
------------------------------------
and Liabilities, of Operations and of Changes in Net Assets) and submission
to the Advisor by 10th business day.
2) Submission of Monthly Automated IAS Reports to Fund/Matthews International:
--------------------------------------------------------------------------
. Security Purchase/Sales Journal
. Interest and Maturity Report
. Brokers Ledger (Commission Report)
. Security Ledger Transaction Report with Realized Gains/Losses
. Security Ledger Tax Lot Holdings Report
. Additional reports available upon request
3) Reconcile Accounting Asset Listing to Custodian Asset Listing:
-------------------------------------------------------------
. Report any security balance discrepancies to the custodian/client.
4) Provide Monthly Analysis and Reconciliation of Additional Trial Balance
-----------------------------------------------------------------------
Accounts, such as:
---------
. Security cost and realized gains/losses
. Interest/dividend receivable and income
. Payable/receivable for securities purchased and sold
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Schedule "A"; Page 3
<PAGE>
. Payable/receivable for fund shares; issued and redeemed
. Expense payments and accruals analysis
. Unrealized and realized currency gains/losses
5) If Appropriate, Prepare and Submit:
----------------------------------
. Income by state reporting
. Standard Industry Code Valuation Report
. Alternative Minimum Tax Income segregation schedule
Annual (and Semi-Annual) Accounting Services
--------------------------------------------
1) Assist and supply auditors with schedules supporting securities and
shareholder transactions, income and expense accruals, etc. during the year
in accordance with standard audit assistance requirements.
2) Provide NSAR Reporting (Accounting Questions):
---------------------------------------------
If applicable, answer the following items:
2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62, 63,
64B, 71, 72, 73, 74, 75, 76
Note: All NSAR questions are completed by Fund/Plan Services when Fund/Plan's
Administration Group is retained.
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Schedule "A"; Page 4
<PAGE>
ACCOUNTING SERVICES BASIC ASSUMPTIONS FOR MATTHEWS INTERNATIONAL FUNDS
The Accounting Fees as set forth in Schedule "B" are based on the following
assumptions. To the extent these assumptions are inaccurate or requirements
change, fee revisions may be necessary.
Basic Assumptions:
- -----------------
1) Fund/Plan's Administration Group will complete all necessary compliance
reports (Sub-Chapter "M"), as well as monitoring of the various
prospectus limitations and restrictions. It is assumed that Fund/Plan
Services, Inc. will be appointed Transfer Agent for the Trust.
2) The Funds' security trading activity will remain comparable to the
statistics identified by Paul Matthews, i.e., approximately 20 to 30
trades per month in the Pacific Tiger Fund and 20 to 30 trades per
month in the Asian Convertible Securities Fund (inclusive of domestic
and money market transactions.)
3) The number of securities and portfolio asset composition in each Fund
will remain comparable to that identified by John Dracott, namely 50 to
75 securities in each portfolio. Investment will be in securities of
Hong Kong, Singapore, Indonesia, China, Malaysia, Korea, Taiwan and
Australia. Security types would include Asian Equity, Asian Debt,
Forward Currency Contracts, Warrants and Convertible Asian Bonds.
4) Each Fund has a tax year-end which coincides with its fiscal year-end.
No additional accounting requirements are necessary to identify or
maintain book-tax differences.
To the extent tax accounting for certain securities differs from the
book accounting, it will be done by Fund/Plan's Administration Group or
the Funds' Independent Accountant. We would recommend book/tax
differences be minimized.
The Accounting Services Unit will supply segregated Trial Balance
account details to assist the administrator in proper identification by
category of all appropriate realized and unrealized currency
gains/losses.
5) The Funds would foresee no difficulty in using Fund/Plan's standard
current pricing agents for domestic equity, bond, ADR and foreign
securities. We currently use Quotron Systems, Inc. for domestic
equities and listed ADR's. Muller Data Corporation/Extel Financial and
Interactive Data (IDC) are used for bonds, synthetic ADR's and foreign
issues.
It is expected that Muller Data Corporation would be the Funds' primary
foreign security pricing vendor and supply ASU with daily (spot)
foreign exchange rates to be used in market value calculations of non-
US dollar denominated securities and currency mark-to-market
requirements. To the extent Muller Data or IDC are unable to supply
certain foreign security prices, they will be provided by the Funds'
investment advisor or a client Management recommended pricing source.
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Schedule "A"; Page 5
<PAGE>
If appropriate, Telerate Systems, Inc. is available for daily forward
currency contract prices.
It is assumed that the Accounting Unit will work closely with Matthews
International to ensure the accuracy of the Funds' NAV and to obtain
the most satisfactory pricing sources and specific methodologies prior
to the actual start-up date. We would propose the Funds establish clear
cut security variance procedures by country/currency to minimize NAV
miscalculations.
6) To the extent the Funds require daily security prices (limited in
number) from specific brokers for domestic or foreign securities, these
manual prices will be obtained by the Funds' Investment Advisors (or
brokers) and faxed to ASU by approximately 4:00 PM Eastern time for
inclusion in the NAV calculations. Matthews International will supply
ASU with the appropriate pricing contacts for the manual quotes.
Based on our current clients' experience, we believe the Funds'
Investment Advisor will have better success in obtaining accurate and
timely broker quotes on a more consistent basis than Fund/Plan
Services.
7) To the extent the Funds should ever purchase/hold open-end registered
investment companies (RIC's), procedural discussions should take place
between ASU and Fund management clarifying the appropriate pricing and
dividend rate sources. Depending on the methodologies selected by the
Funds, additional fees may apply.
8) ASU will supply daily Portfolio Valuation Reports to the Funds'
Investment Advisor or manager identifying current security positions,
original/amortized cost, security market values and changes in
unrealized appreciation/depreciation.
It will be the responsibility of the Funds' Investment Advisor to
review these reports and to promptly notify ASU of any possible
problems, trade discrepancies, incorrect security prices, corporate
action/capital change information or exchange rate discrepancies that
could result in a misstated Fund NAV.
9) The Funds do not currently expect to invest in Futures, Swaps, Index
Futures, Foreign Currency Options and Futures, Interest Rate Futures,
Hedges or precious metals. To the extent these investment strategies
should change, additional fees will apply after the appropriate
procedural discussions have taken place between ASU and Fund
management. (Advance notice is required should the Funds commence
trading in the above investments.)
10) All foreign currency will be held within the custodian and sub-
custodian network. Time deposits and interest bearing currency accounts
will all be reflected on the Funds' custodian asset listings. The Funds
or custodian will supply ASU with appropriate (timely) information for
any trades/changes in the currency accounts, as well as interest rates
to ensure income accrual accuracy for the debt issues, time deposits
and currency accounts. Income accrual adjustments (expected to be
immaterial) will be completed when the interest is actually collected
and posted on the custodian's statements.
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Schedule "A"; Page 6
<PAGE>
11) It is assumed for all debt issues that the Advisor will supply the
Accounting Unit with critical income information such as accrual
methods, interest payment frequency details, coupon payment dates,
floating rate reset dates and complete security descriptions with issue
types and Sedol/Cusip numbers. If applicable, for proper income accrual
accounting, ASU will look to the Funds' Advisor to supply PSA, YTM and
related cash flow models for any mortgage/asset-backed securities and
IO/PO positions held in the Funds.
12) It is assumed that Citibank as Custodian will provide the Accounting
Unit with daily custodian statements reflecting all prior day cash
activity on behalf of each portfolio by 8:30 AM Eastern time. Complete
and clear descriptions of any postings, inclusive of Sedol/Cusip
numbers, interest/dividend payment dates, capital stock details,
expense authorizations, beginning/ending balances, etc. will be
provided by the custodian's reports or system.
13) It will be the responsibility of the Funds' custodian to supply the
foreign dividend, capital change information, and interest rate changes
to Accounting in a timely manner. The advisor will supplement and
support as appropriate. If selected by Matthews International and
appropriate, ASU can receive supplemental capital change and dividend
information on foreign positions from Muller Data Corporation or IDC as
the pricing vendors for the Funds' foreign securities.
14) It is assumed that the custodian will handle and report on all
settlement problems, failed trades and resolve unsettled
dividends/interest/paydowns and capital changes. Additionally, the
custodian will process all applicable capital change and foreign
reclaim paperwork based upon advice from Matthews International. ASU
will supply segregated Trial Balance reporting and supplemental reports
to assist in this process.
15) To the extent applicable for mortgage/asset-backed securities held in
the Funds such as GNMA's, FHLMC's, FNMA's, CMO's, ARM's, etc., the
custodian (or a client supplied source) will provide ASU with current
principal repayment factors on a timely basis in accordance with the
appropriate securities' schedule. Income accrual adjustments (to the
extent necessary) based upon initial estimates will be completed by ASU
when actual principal/income payments are collected by the custodian.
16) To the extent applicable, Accounting will maintain US dollar
denominated qualified covered call options and index options reporting
on the daily Trail Balance and value the respective options and
underlying positions daily. To the extent tax classifications are
required, they will be done by Fund/Plan as Administrator or the Funds'
Independent Accountant.
The Funds do not currently expect to invest in domestic options or
designated hedges. (Advance notice is requested should the Funds
commence trading in the above investments to clarify operational
procedures between ASU and the advisor.)
17) To the extent the Funds should establish a Line of Credit in segregated
accounts with the custodian for temporary administrative purposes,
and/or leveraging/hedging the
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Schedule "A"; Page 7
<PAGE>
portfolio, the investment advisor will complete the appropriate
paperwork/monitoring for segregation of assets and adequacy of
collateral. Accounting will reflect appropriate Trial Balance account
entries and interest expense accrual charges on the daily Trial Balance
adjusting as necessary at month-end.
18) The Funds do not currently expect to participate in Security Lending,
Leveraging, Precious Metals, Short Sales or Foreign Currency (non-US
dollar denominated) Futures and Options within their portfolio
securities. To the extent they do so in the future, additional fees
will apply. Forward Currency Contracts (i.e. spot contracts) executed
to cover security trades and interest/dividends receivables are
included in Accounting Services and are not to be considered an extra
expense.
19) Fund management or Fund/Plan as Administrator will supply ASU with
portfolio specific expense accrual procedures and monitor the expense
accrual balances for adequacy based on outstanding liabilities monthly.
Fund/Plan as Administrator will promptly communicate to the Accounting
Unit any adjustments needed.
20) Specific deadlines and complete Fund supplied information will be
identified for all security trades in order to minimize any settlement
problems, NAV miscalculations or income accrual adjustments.
Trade Authorization Forms, with the appropriate officer's signature,
should be supplied to the ASU on all security trades placed by the
Funds no later than settlement/value date by 12:30 PM Eastern time for
money market and currency issues (It is assumed trade date equals
settlement date for money market/currency issues.), and by 11:00 AM
Eastern time on trade date plus one for non-money market securities.
Receipt of trade information within these identified deadlines may be
via telex, fax, or on-line system access. To the extent applicable, the
investment advisor will communicate all trade information directly to
the Funds' Custody Administrator/Custodian.
Foreign exchange contracts will be completed by the Funds' custodian or
advisor and communicated to the Accounting Unit in a timely manner,
i.e., the earlier of trade date plus one or value date. For security
trade information called in after the above stated deadlines, there is
no assurance it can be included in that day's work.
Cusip numbers and/or ticker symbols for all US dollar denominated
trades and Sedol numbers for all foreign trades will be supplied by the
Investment Advisor via the Trade Authorization, telex or on-line
support. If appropriate, Accounting will supply the investment advisor
with recommended trade ticket documents to minimize receipt of
incomplete information. We would find it difficult to be responsible
for NAV changes that resulted from incomplete information about a
trade.
21) To the extent Matthews International utilizes Purchases In-Kind as a
method for shareholder subscriptions, ASU will provide Matthews
International with recommended procedures to properly handle and
process security in-kinds. Should the client prefer procedures other
than those provided by Fund/Plan Services, additional fees may apply.
(Discussions must take place in advance between Fund/Plan Services and
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Schedule "A"; Page 8
<PAGE>
Matthews International to clarify the appropriate In-Kind operational
procedures to be followed.)
22) It is assumed that Fund/Plan as Administrator will complete the
applicable performance and rate of return calculations as required by
the SEC for the Funds.
23) With respect to amortization and accretion requirements for the debt
issues in the Funds, the ASU Investment Accounting System (IAS) offers
a very comprehensive and fully automated level of support. We are
capable of reflecting market discounts and acquisition premiums either
utilizing the straight-line or yield-to-maturity (scientific) method.
It is extremely important that the Funds' requirements and proper
amortization procedures be clarified prior to start-up.
-----
It is assumed that the Funds will not hold any issues with Original
Issue Discounts (OID). It is our position that OID is a tax requirement
and, as such, not necessarily reflected on the books of the Funds.
ASU's current clients have not required any OID support. To the extent
the Funds should, in the future, own securities with OID, it is
expected that the Funds' auditors will complete the necessary OID
adjustments for financial statements and/or tax reporting.
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Schedule "A"; Page 9
<PAGE>
SCHEDULE "B"
============
FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES FEE SCHEDULE
FOR
MATTHEWS INTERNATIONAL FUNDS
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
The Accounting Fees as set forth below are based on the "Basic Assumptions" as
set forth in Schedule "A." To the extent that those assumptions are inaccurate
or requirements change, fee revisions may be necessary.
I. Annual Fee Schedule Per Global Portfolio: (1/12th payable monthly)
$45,000 On the First $ 10 Million of Average Net Assets
.0004 On the Next $ 40 Million of Average Net Assets
.0003 On the Next $ 50 Million of Average Net Assets
.0001 On Assets Over $100 Million of Average Net Assets
II. Pricing Services Quotation Fee (Based on individual CUSIP/SEDOL or
------------------------------
security identification numbers.) Respective fees will be billed monthly.
A) Muller Data Corporation (Based on current vendor costs, subject to
change)
Government/Mortgage Backed/Corporate
Short & Long Term Quotes $.50 per Quote per Issue
Tax-Exempt Short & Long Term Quotes $.55 per Quote per Issue
Foreign Security Quotes $.50 per Quote per Security
Foreign Security Supplemental Corporation
Actions, Dividends & Capital Changes $2.00 per Issue per Month
CMOs/ARMs/ABS $1.00 per Quote per Issue
Minimum Weekly File Transmission is Assumed
There are currently no charges for the domestic dividend and capital
--
change information transmitted daily to Fund/Plan services from Muller
Data Corporation.
B) Futures and Forward Currency Contracts $2.00 per Issue per Day
C) Quotron Systems, Inc. (Based on current vendor costs, subject to
change.)
There are currently no charges for the domestic security prices
--
supplied by Quotron Systems, Inc.
D) Telerate Systems, Inc. (Based on current vendor costs, subject to
change.)
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Schedule "B"; Page 1
<PAGE>
E) Interactive Data Corp. (Based on current vendor costs, subject to
change.)
Domestic Equities and Options $ .15 per Quote per Issue
Corporate/Government/Agency Bonds Including
Mortgage-Backed Securities (evaluated,
seasoned, and/or closing) $ .50 per Quote per Issue
US Municipal Bonds and Collateralized
Mortgage Obligations $ .80 per Quote per Issue
International Equities and Bonds $ .50 per Quote per Issue
Domestic Dividends and Capitalization
Changes $3.50 per Month per Holding
International Dividends and Capital
Changes $4.00 per Month per Holding
Interactive Data also charges monthly transmission costs and disk
storage charges.
Specific costs will be identified based upon options selected by Matthews
International Capital Management and will be billed monthly.
III. Out-Of-Pocket Expenses
----------------------
The Trust will reimburse Fund/Plan Services, Inc. monthly for all out-of-
pocket expenses, including telephone, postage, telecommunications, special
reports, record retention, special transportation, and copying and sending
materials to auditors for audits.
IV. Other Services Not Covered By This Agreement
--------------------------------------------
To the extent the Trust commences the use of investment techniques such as
Security Lending, Short Sales, Interest Rate Swaps, Futures, Leveraging,
Precious Metals or non-US dollar denominated Futures and Options on
securities and currency, additional fees will apply.
Activities of a non-recurring nature such as fund consolidations, mergers,
or reorganizations will be subject to negotiation. Any additional enhanced
services, programming requests or reports will be quoted upon request.
To the extent the Trust should decide to issue separate/multiple classes of
shares, additional fees shall apply.
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Schedule "B"; Page 2
<PAGE>
SCHEDULE "C"
============
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
"Matthews International Funds"
============================
1. Matthews Pacific Tiger Fund
2. Matthews Asian Convertible Securities Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
================================================================================
Accounting Services Agreement between Matthews International Funds and Fund/Plan
Services, Inc.
Date Drafted: November 26, 1996 Schedule "C"
<PAGE>
Exhibit 24(b)(9)(c)(ii)
AMENDMENT TO ACCOUNTING SERVICES AGREEMENT
This Agreement, dated as of the 13th day of December, 1994 made by and
----- --------
between Matthews International Funds, a Delaware Business Trust (the "Trust")
operating as an open-end management investment company registered under the
Investment Company Act of 1940, as amended, duly organized and existing under
the laws of the State of Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and Fund/Plan have entered into an agreement dated
August 12, 1994 wherein Fund/Plan agreed to provide mutual fund accounting and
related services to the Trust (Accounting Agreement); and
WHEREAS, the Parties wish to amend the Accounting Services Agreement to
include under its terms one additional separate series of shares identified as:
Matthews Korea Fund;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree:
1. To amend Schedule "B" to the Accounting Services Agreement in the form
attached hereto as Schedule "B"; and
2. To amend Schedule "C" to the Accounting Services Agreement in the form
attached hereto as Schedule "C".
This Agreement shall take effect upon the date which the amendment to the
registration statement of the Trust registering Matthews Korea Fund becomes
effective.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of one typewritten page, together with Schedules "B" and "C", to be
signed by their duly authorized officers and their corporate seals hereunto duly
affixed and attested, as of the day and year first above written.
Matthews International Funds Fund/Plan Services, Inc.
/s/ G. Paul Matthews /s/ Kenneth J. Kempf
- ------------------------------------- ----------------------------------
By: G. Paul Matthews, President By: Kenneth J. Kempf, President
/s/ John Dracott /s/ Janet F. Davis
- ------------------------------------- ----------------------------------
Attest: John Dracott, Vice President & Attest: Janet F. Davis, Secretary
Secretary
Amendment to Accounting Services Agreement between Matthews International Funds
and Fund/Plan Services, Inc.
================================================================================
Dated: November 26, 1996 Page 1
<PAGE>
SCHEDULE "B"
============
AS AMENDED ON NOVEMBER 28, 1994
===============================
FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES FEE SCHEDULE
FOR
MATTHEWS INTERNATIONAL FUNDS
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
The Accounting Fees as set forth below are based on the "Basic Assumptions" as
set forth in Schedule "A." To the extent that those assumptions are inaccurate
or requirements change, fee revisions may be necessary.
I. Annual Fee Schedule Per Global Portfolio: (1/12th payable monthly)
$45,000 On the First $ 10 Million of Average Net Assets
.0004 On the Next $ 40 Million of Average Net Assets
.0003 On the Next $ 50 Million of Average Net Assets
.0001 On Assets Over $100 Million of Average Net Assets
II. Pricing Services Quotation Fee (Based on individual CUSIP/SEDOL or
------------------------------
security identification numbers.) Respective fees will be billed monthly.
A) Muller Data Corporation (Based on current vendor costs, subject to
change)
Government/Mortgage Backed/Corporate
Short & Long Term Quotes $ .50 per Quote per Issue
Tax-Exempt Short & Long Term Quotes $ .55 per Quote per Issue
Foreign Security Quotes $ .50 per Quote per Security
Foreign Security Supplemental Corporation
Actions, Dividends & Capital Changes $2.00 per Issue perMonth
CMOs/ARMs/ABS $1.00 per Quote per Issue
Minimum Weekly File Transmission is Assumed
There are currently no charges for the domestic dividend and capital
--
change information transmitted daily to Fund/Plan services from
Muller Data Corporation.
B) Futures and Forward Currency Contracts $2.00 per Issue per Day
C) Quotron Systems, Inc. (Based on current vendor costs, subject to
change.)
There are currently no charges for the domestic security prices
supplied by Quotron Systems, Inc.
Amendment to Accounting Services Agreement between Matthews International Funds
and Fund/Plan Services, Inc.
================================================================================
Dated: November 25, 1996 Page 2
<PAGE>
D) Telerate Systems, Inc. (Based on current vendor costs, subject to
change.)
E) Interactive Data Corp. (Based on current vendor costs, subject to
change.)
Domestic Equities and Options $.15 per Quote per Issue
Corporate/Government/Agency Bonds Including
Mortgage-Backed Securities (evaluated,
seasoned, and/or closing) $.50 per Quote per Issue
US Municipal Bonds and Collateralized
Mortgage Obligations $.80 per Quote per Issue
International Equities and Bonds $.50 per Quote per Issue
Domestic Dividends and Capitalization
Changes $3.50 per Month per Holding
International Dividends and Capital
Changes $4.00 per Month per Holding
Interactive Data also charges monthly transmission costs and disk
storage charges.
Specific costs will be identified based upon options selected by Matthews
International Capital Management and will be billed monthly.
III. Out-Of-Pocket Expenses
----------------------
The Trust will reimburse Fund/Plan Services, Inc. monthly for all out-of-
pocket expenses, including telephone, postage, telecommunications,
special reports, record retention, special transportation, and copying
and sending materials to auditors for audits.
IV. Other Services Not Covered By This Agreement
--------------------------------------------
To the extent the Trust commences the use of investment techniques such
as Security Lending, Short Sales, Interest Rate Swaps, Futures,
Leveraging, Precious Metals or non-US dollar denominated Futures and
Options on securities and currency, additional fees will apply.
Activities of a non-recurring nature such as fund consolidations,
mergers, or reorganizations will be subject to negotiation. Any
additional enhanced services, programming requests or reports will be
quoted upon request.
To the extent the Trust should decide to issue separate/multiple classes
of shares, additional fees shall apply.
Amendment to Accounting Services Agreement between Matthews International Funds
and Fund/Plan Services, Inc.
================================================================================
Dated: November 25, 1996 Page 3
<PAGE>
SCHEDULE "C"
============
AS AMENDED ON NOVEMBER 28, 1994
===============================
IDENTIFICATION OF SERIES
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
MATTHEWS INTERNATIONAL FUNDS
1. Matthews Pacific Tiger Fund
2. Matthews Asian Convertible Securities Fund
3. Matthews Korea Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
Amendment to Accounting Services Agreement between Matthews International Funds
and Fund/Plan Services, Inc.
================================================================================
Dated: November 25, 1996 Page 4
<PAGE>
Exhibit 24(b)(11)
Ernst & Young LLP
Suite 1700
555 California Street
San Francisco, CA 94104
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Other Information" in the Post-Effective Amendment No.5 to the
Registration Statement (No. 33-78960) on Form N-1A of Matthews International
Funds and to the incorporation by reference therein of our report dated October
4, 1996, with respect to the financial statements of Matthews International
Funds included in its Annual Report to Shareholders filed on Form N-30D with the
Securities and Exchange Commission.
Ernst & Young LLP
December 6, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000923184
<NAME> MATTHEWS INTERNATIONAL FUNDS
<SERIES>
<NUMBER> 1
<NAME> MATTHEWS PACIFIC TIGER FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 16,091,451
<INVESTMENTS-AT-VALUE> 16,279,938
<RECEIVABLES> 594,568
<ASSETS-OTHER> 60,893
<OTHER-ITEMS-ASSETS> 664,772
<TOTAL-ASSETS> 17,600,171
<PAYABLE-FOR-SECURITIES> 403,297
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48,817
<TOTAL-LIABILITIES> 452,114
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,869,908
<SHARES-COMMON-STOCK> 1,586,629
<SHARES-COMMON-PRIOR> 110,736
<ACCUMULATED-NII-CURRENT> 19,664
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 69,988
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 188,497
<NET-ASSETS> 17,148,057
<DIVIDEND-INCOME> 150,524
<INTEREST-INCOME> 27,620
<OTHER-INCOME> 0
<EXPENSES-NET> 152,479
<NET-INVESTMENT-INCOME> 25,665
<REALIZED-GAINS-CURRENT> 81,306
<APPREC-INCREASE-CURRENT> 179,432
<NET-CHANGE-FROM-OPS> 286,403
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,657,416
<NUMBER-OF-SHARES-REDEEMED> 181,523
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16,065,692
<ACCUMULATED-NII-PRIOR> (197)
<ACCUMULATED-GAINS-PRIOR> (17,122)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 80,273
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 349,073
<AVERAGE-NET-ASSETS> 8,035,304
<PER-SHARE-NAV-BEGIN> 9.77
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 1.03
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.81
<EXPENSE-RATIO> 1.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000923184
<NAME> MATTHEWS INTERNATIONAL FUNDS
<SERIES>
<NUMBER> 2
<NAME> MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 3,093,145
<INVESTMENTS-AT-VALUE> 3,083,488
<RECEIVABLES> 59,478
<ASSETS-OTHER> 67,982
<OTHER-ITEMS-ASSETS> 202,677
<TOTAL-ASSETS> 3,413,625
<PAYABLE-FOR-SECURITIES> 126,918
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,347
<TOTAL-LIABILITIES> 141,265
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,200,249
<SHARES-COMMON-STOCK> 310,910
<SHARES-COMMON-PRIOR> 87,319
<ACCUMULATED-NII-CURRENT> 4,788
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 76,980
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (9,657)
<NET-ASSETS> 3,272,360
<DIVIDEND-INCOME> 38,085
<INTEREST-INCOME> 60,529
<OTHER-INCOME> 0
<EXPENSES-NET> 39,633
<NET-INVESTMENT-INCOME> 58,981
<REALIZED-GAINS-CURRENT> 81,497
<APPREC-INCREASE-CURRENT> (11,326)
<NET-CHANGE-FROM-OPS> 129,152
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 55,874
<DISTRIBUTIONS-OF-GAINS> 10,864
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 259,782
<NUMBER-OF-SHARES-REDEEMED> 41,474
<SHARES-REINVESTED> 5,283
<NET-CHANGE-IN-ASSETS> 2,409,683
<ACCUMULATED-NII-PRIOR> 1,904
<ACCUMULATED-GAINS-PRIOR> 6,124
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21,475
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 187,253
<AVERAGE-NET-ASSETS> 2,128,706
<PER-SHARE-NAV-BEGIN> 9.88
<PER-SHARE-NII> .25
<PER-SHARE-GAIN-APPREC> .75
<PER-SHARE-DIVIDEND> (0.26)
<PER-SHARE-DISTRIBUTIONS> (0.09)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.53
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000923184
<NAME> MATTHEWS INTERNATIONAL FUNDS
<SERIES>
<NUMBER> 3
<NAME> MATTHEWS KOREA FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 3,134,176
<INVESTMENTS-AT-VALUE> 2,595,330
<RECEIVABLES> 62,788
<ASSETS-OTHER> 39,492
<OTHER-ITEMS-ASSETS> 37,825
<TOTAL-ASSETS> 2,735,435
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,105
<TOTAL-LIABILITIES> 14,105
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,485,643
<SHARES-COMMON-STOCK> 376,157
<SHARES-COMMON-PRIOR> 55,186
<ACCUMULATED-NII-CURRENT> (27,353)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (198,105)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (538,855)
<NET-ASSETS> 2,721,330
<DIVIDEND-INCOME> 6,954
<INTEREST-INCOME> 7,195
<OTHER-INCOME> 0
<EXPENSES-NET> 34,299
<NET-INVESTMENT-INCOME> (20,150)
<REALIZED-GAINS-CURRENT> (206,210)
<APPREC-INCREASE-CURRENT> (512,998)
<NET-CHANGE-FROM-OPS> (739,358)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 7,128
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 452,855
<NUMBER-OF-SHARES-REDEEMED> 132,685
<SHARES-REINVESTED> 801
<NET-CHANGE-IN-ASSETS> 2,217,229
<ACCUMULATED-NII-PRIOR> 6
<ACCUMULATED-GAINS-PRIOR> 8,024
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15,406
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 174,997
<AVERAGE-NET-ASSETS> 1,474,267
<PER-SHARE-NAV-BEGIN> 9.13
<PER-SHARE-NII> (0.07)
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<PAGE>
Exhibit 24(b)(18)
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints William J. Baltrus, Gerald J. Holland, Joseph M. O'Donnell and Michelle
A. Whalen and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any and all Amendments to Registration Statement No. 33-
78960 of Matthews International Funds (the "Trust") to be filed with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended; and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and to take any appropriate action to qualify
or register all or part of the securities of the Trust for sale in various
states; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as that person might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or any substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
22nd day of January, 1996.
/s/ G. Paul Matthews
-----------------------------------
G. Paul Matthews
President
ACKNOWLEDGEMENT
---------------
State of California )
) ss:
County of San Francisco )
The foregoing instrument was acknowledged before me this 22nd day of January,
1996, by G. Paul Matthews, President of Matthews International Funds.
- --------------------------------
Notary Public
<PAGE>
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints William J. Baltrus, Gerald J. Holland, Joseph M. O'Donnell and Michelle
A. Whalen and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any and all Amendments to Registration Statement
No. 33-78960 of Matthews International Funds (the "Trust") to be filed with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended; and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and to take any appropriate action to qualify
or register all or part of the securities of the Trust for sale in various
states; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as that person might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or any substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
22nd day of January, 1996.
/s/ John H. Dracott
----------------------------------------
John H. Dracott
Trustee
ACKNOWLEDGEMENT
---------------
State of California )
) ss:
County of San Francisco )
The foregoing instrument was acknowledged before me this 22nd day of January,
1996, by John H. Dracott, Trustee of Matthews International Funds.
- ------------------------------
Notary Public
<PAGE>
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints William J. Baltrus, Gerald J. Holland, Joseph M. O'Donnell and Michelle
A. Whalen and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any and all Amendments to Registration Statement
No. 33-78960 of Matthews International Funds (the "Trust") to be filed with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended; and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and to take any appropriate action to qualify
or register all or part of the securities of the Trust for sale in various
states; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as that person might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or any substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
22nd day of January, 1996.
/s/ Robert K. Connolly
-----------------------------------
Robert K. Connolly
Trustee
ACKNOWLEDGEMENT
---------------
State of California )
) ss:
County of San Francisco )
The foregoing instrument was acknowledged before me this 22nd day of January,
1996, by Robert K. Connolly, Trustee of Matthews International Funds.
- --------------------------
Notary Public
<PAGE>
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints William J. Baltrus, Gerald J. Holland, Joseph M. O'Donnell and Michelle
A. Whalen and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any and all Amendments to Registration Statement
No. 33-78960 of Matthews International Funds (the "Trust") to be filed with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended; and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and to take any appropriate action to qualify
or register all or part of the securities of the Trust for sale in various
states; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as that person might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or any substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
22nd day of January, 1996.
/s/ Richard K. Lyons
--------------------------------
Richard K. Lyons
Trustee
ACKNOWLEDGEMENT
---------------
State of California )
) ss:
County of San Francisco )
The foregoing instrument was acknowledged before me this 22nd day of January,
1996, by Richard K. Lyons, Trustee of Matthews International Funds.
- --------------------------
Notary Public
<PAGE>
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints William J. Baltrus, Gerald J. Holland, Joseph M. O'Donnell and Michelle
A. Whalen and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any and all Amendments to Registration Statement
No. 33-78960 of Matthews International Funds (the "Trust") to be filed with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended; and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and to take any appropriate action to qualify
or register all or part of the securities of the Trust for sale in various
states; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as that person might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or any substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
22nd day of January, 1996.
/s/ Dong Wook Park
--------------------------------
Dong Wook Park
Trustee
ACKNOWLEDGEMENT
---------------
Seoul )
) ss:
Republic of Korea )
The foregoing instrument was acknowledged before me this 22nd day of January,
1996, by Dong Wook Park, Trustee of Matthews International Funds.
- -----------------------------
Notary Public
<PAGE>
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints William J. Baltrus, Gerald J. Holland, Joseph M. O'Donnell and Michelle
A. Whalen and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any and all Amendments to Registration Statement
No. 33-78960 of Matthews International Funds (the "Trust") to be filed with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended; and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and to take any appropriate action to qualify
or register all or part of the securities of the Trust for sale in various
states; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as that person might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or any substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
22nd day of January, 1996.
/s/ David Fitz William-Lay
-----------------------------------
David FitzWilliam-Lay
Trustee
ACKNOWLEDGEMENT
---------------
State of California )
) ss:
County of San Francisco )
The foregoing instrument was acknowledged before me this 22nd day of January,
1996, by David FitzWilliam-Lay, Trustee of Matthews International Funds.
- --------------------------------
Notary Public
