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Matthews China Small Companies Fund
MCSMX

Snapshot
  • Seeks alpha in China’s lesser known small entrepreneurial companies
  • Invests in industries that are leveraged to China’s increasingly innovative and dynamic economy driven by fast growing domestic consumer demand
  • Tilt towards higher value-added growth sectors benefiting from innovation and capital efficiency

05/31/2011

Inception Date

26.54%

YTD Return

(as of 10/17/2025)

$11.49

NAV

(as of 10/17/2025)

-0.32

1 Day NAV Change

(as of 10/17/2025)

Objective

Long-term capital appreciation.

Strategy

Under normal circumstances, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of Small Companies located in China. China includes its administrative and other districts, such as Hong Kong. The Fund seeks to invest in smaller companies capable of sustainable growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size and stability of cash flow; management’s depth, adaptability and integrity; product lines; marketing strategies; corporate governance; and financial health. The Fund defines Small Companies as companies with market capitalization no higher than the greater of US $5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI China Small Cap Index.

Risks

Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.

These and other risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 05/31/2011
Fund Assets $72.74 million (09/30/2025)
Currency USD
Ticker MCSMX
Cusip 577-125-404
Benchmark MSCI China Small Cap Index
Geographic Focus China - China includes its administrative and other districts, such as Hong Kong
Fees & Expenses
Gross Expense Ratio 1.61%
Net Expense Ratio 1.40%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 09/30/2025
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Small Companies Fund - MCSMX
05/31/2011
MCSMX
3.49% 21.60% 33.92% 27.32% 8.22% -3.07% 9.84% 6.06%
MSCI China Small Cap Index
4.58% 25.16% 55.11% 48.07% 14.78% 0.53% 2.17% 0.66%
As of 09/30/2025
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Small Companies Fund - MCSMX
05/31/2011
MCSMX
3.49% 21.60% 33.92% 27.32% 8.22% -3.07% 9.84% 6.06%
MSCI China Small Cap Index
4.58% 25.16% 55.11% 48.07% 14.78% 0.53% 2.17% 0.66%
For the years ended December 31st
Name 2024 2023 2022 2021 2020 2019 2018 2017 2016 2015
Matthews China Small Companies Fund - MCSMX
MCSMX
2.82% -17.51% -31.26% -3.59% 82.52% 35.41% -17.68% 53.88% -2.35% 4.07%
MSCI China Small Cap Index (USD)
6.82% -24.82% -24.77% -6.26% 27.21% 6.63% -19.53% 24.62% -5.95% 3.48%
 

Unusually high returns may not be sustainable. 

The Fund's primary benchmark index is the MSCI China Index.

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

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

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

Growth of a Hypothetical $10,000 Investment Since Inception

(as of 09/30/2025)

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

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

Ratings

  • OVERALL
  • out of 74 funds
  • 3 YEAR
  • out of 74 funds
  • 5 YEAR
  • out of 58 funds
  • 10 YEAR
  • out of 39 funds

Ratings agency calculation methodology

Portfolio Managers

Sherwood  Zhang, CFA photo
Winnie  Chwang photo
Andrew  Mattock, CFA photo

Portfolio Characteristics

(as of 09/30/2025)
Fund Benchmark
Number of Positions 64 239
Weighted Average Market Cap $5.1 billion $3.1 billion
Active Share 84.9 n.a.
P/E using FY1 estimates 15.9x 12.9x
P/E using FY2 estimates 14.7x 12.2x
Price/Cash Flow 11.9 7.2
Price/Book 2.2 1.1
Return On Equity 14.5 1.8
EPS Growth (3 Yr) 17.3% -9.6%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 06/30/2025)
-4.97%
Alpha
0.82
Beta
71.62%
Upside Capture
92.33%
Downside Capture
-0.40
Sharpe Ratio
-0.26
Information Ratio
12.32%
Tracking Error
85.96

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 09/30/2025)
Name Sector % Net Assets
Hongfa Technology Co Ltd. Industrials 4.1
NetEase Cloud Music, Inc. Communication Services 3.9
Yantai Jereh Oilfield Services Group Co., Ltd. Energy 3.9
ACM Research, Inc. Information Technology 3.8
Atour Lifestyle Holdings, Ltd. Consumer Discretionary 3.7
Zhejiang Shuanghuan Driveline Co., Ltd. Consumer Discretionary 3.6
Minth Group, Ltd. Consumer Discretionary 3.2
Tongcheng Travel Holdings, Ltd. Consumer Discretionary 3.1
SITC International Holdings Co., Ltd. Industrials 2.4
FIT Hon Teng, Ltd. Information Technology 2.3
TOTAL 34.0

Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.

Source: BNY Mellon Investment Servicing (US) Inc.

Portfolio Breakdown (%)

(as of 09/30/2025)
  • Sector Allocation
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 25.3 11.4 13.9
Information Technology 19.4 12.4 7.0
Industrials 17.5 12.4 5.1
Health Care 8.1 24.6 -16.5
Communication Services 6.7 6.0 0.7
Materials 6.5 11.1 -4.6
Consumer Staples 4.7 5.1 -0.4
Real Estate 3.9 8.3 -4.4
Energy 3.9 1.2 2.7
Financials 1.0 5.6 -4.6
Utilities 0.9 1.9 -1.0
Cash and Other Assets, Less Liabilities 2.1 0.0 2.1

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 0.0 0.0 0.0
Large Cap ($10B-$25B) 8.4 0.0 8.4
Mid Cap ($3B-$10B) 62.1 41.2 20.9
Small Cap (under $3B) 27.5 58.8 -31.3
Cash and Other Assets, Less Liabilities 2.1 0.0 2.1

The Portfolio’s market cap exposure breakdown presented is used for comparison purposes and the definition of the capitalization breakdown is from MSCI.

The Fund defines Small Companies as companies with market capitalization no higher than the greater of US$5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI China Small Cap Index.

China Exposure Portfolio Weight
Hong Kong Listed Companies 57.0
Mainland China Listed Companies 26.5
ADR/GDR 9.0
Other 5.5
Cash and Other Assets, Less Liabilities 2.1

Mainland China listed companies includes A Share and B Shares. A Shares are Mainland Chinese companies incorporated in China and listed on the Shanghai or Shenzhen exchanges, available mostly to local Chinese investors and qualified institutional investors. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors. ADRs are American Depositary Receipts and GDRs are Global Depositary Receipts. Hong Kong Listed Companies include SAR (Hong Kong) companies, China-affiliated corporations, and H Shares. SAR companies are companies that conduct business in Hong Kong and/or mainland China. China-affiliated corporations [CAC], also known as "Red Chips," are mainland China companies with partial state ownership listed in Hong Kong, and incorporated in Hong Kong. H Shares are mainland Chinese companies listed on the Hong Kong exchange but incorporated in mainland China. Other represents Chinese companies listed in other countries or non-China companies with a majority of revenue coming from China such as Japan, Singapore, Taiwan and the United States or other non-China companies.

Source: FactSet Research Systems.

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

Distributions

Record Date Ex, Pay and
Reinvest Date
Ordinary
Income
Short Term
Capital Gains
Long Term
Capital Gains
Total Distributions
Per Share
% of NAV Nondividend Distribution (Return of Capital)
12/17/2024 12/18/2024 $0.12228 $0.00000 $0.00000 $0.12228 1.3% N.A.
12/13/2023 12/14/2023 $0.21127 $0.00000 $0.00000 $0.21127 2.4% N.A.
12/13/2022 12/14/2022 $0.19767 $0.00000 $0.00000 $0.19767 1.7% N.A.
12/14/2021 12/15/2021 $0.11673 $1.77913 $0.81209 $2.70795 14.0% N.A.
12/15/2020 12/16/2020 $0.13338 $1.96280 $1.27532 $3.37150 18.0% N.A.

 

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

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

Commentary

Period ended September 30, 2025

Market Environment

  • China was the top-performing major emerging market during the quarter, posting a gain of approximately 21%1. While economic growth remains uneven and the property market continues to struggle, investor sentiment improved as U.S.–China political tensions appeared to ease in the quarter and trade tariff threats moderated.
  • Authorities have also continued to implement targeted stimulus measures, including providing liquidity backup in markets and initiatives to aid consumer spending and stabilize the housing market. The government’s explicit support of private enterprise has also provided a tailwind.
  • In recent weeks, global investor enthusiasm toward artificial intelligence (AI) opportunities has accelerated and China’s markets have benefited as domestic hardware and internet platforms have made progress in developing AI-related solutions and committed to large CapEx expenditures. Beyond technology, select insurance companies, industrials and financials also contributed to gains in the quarter.

Contributors and Detractors

  • For the quarter ended September 30, 2025, the Matthews China Small Companies Fund returned 21.60% (Investor Class) and 21.60% (Institutional Class) while its benchmark, the MSCI China Small Cap Index, returned 25.16% over the same period.
  • On a sector basis, the top three contributors to relative performance were information technology (IT), energy and industrials due to stock selection. The top three detractors were materials due to an underweight allocation, and communication services and consumer staples due to stock selection.
  • The largest contributors to absolute performance included Yantai Jereh Oilfield Services Group, an oilfield services company, FIT Hon Teng Ltd., a Taiwanese IT company, and ACM Research, a semiconductor equipment company servicing Chinese chip foundries. The top three detractors included DPC Dash, operator of Domino's Pizza’s China franchise, Dream International Ltd., a toy manufacturer, and Chagee Holdings Ltd., a teahouse operator.

Outlook

  • Amid the global surge in sentiment toward AI themes, our investment focus remains on the fundamentals of companies and avoiding momentum and market froth. We are also attuned to identifying companies with solid growth prospects in other areas of China’s economy.
  • We do see more market upside through the rest of 2025, however, careful positioning will be critical. Some markets, including China, have generated returns driven more by multiple expansion, for example, from depressed valuations or from rising AI sentiment, rather than from improving fundamentals.
  • While we are not seeing a meaningful pickup in the property market and general consumption, we are mindful that there may be progress in these areas later in the year. We are also keeping a close watch for positive and negative developments in geopolitics with the U.S. A deal on trade or an easing in trade restrictions could lift sentiment toward Chinese equities significantly, in our view.

1Source: MSCI China Index, as of Sept. 30, 2025.

View the Fund's Top 10 holdings as of September 30, 2025. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MCSMX as of 09/30/2025
1YR 3YR 5YR 10YR Since Inception Inception Date
27.32% 8.22% -3.07% 9.84% 6.06% 05/31/2011

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

Fees & Expenses
Gross Expense Ratio 1.61%
Net Expense Ratio 1.40%

Matthews has contractually agreed to waive fees and reimburse expenses to limit the Total Annual Fund Operating Expenses until April 30, 2026. Please see the Fund’s prospectus for additional details.

Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.

 

Visit our Glossary of Terms page for definitions and additional information.

Index Definitions

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

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