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MAPIX dividend update.

JohnChisum
in Fund Discussions

This morning I recieved another email from Matthews Asia regarding the lack of a dividend with MAPIX. I had asked a second question as to how further distributions would be handled with this investment decision. The answer is in the second paragraph.


"The lack of an income distribution for the Matthews Asia Dividend Fund is primarily due to the tax treatment of PFICs under the U.S. tax code. Even if a holding in a PFIC has not been sold, that PFIC position is typically marked to market and any gain or loss is treated as either an addition or a reduction to distribution income for that quarter. In the case of the Matthews Asia Dividend Fund, it is expected that certain PFIC holdings will reduce the distribution income to zero for the fourth quarter of 2014."

"Barring any changes in the U.S. tax code, it is expected that PFIC holdings in the Matthews Asia Dividend Fund will receive similar treatment with respect to any future distributions. Please note that due to the complexity of the U.S. tax code, different tax treatment than that described above may be possible for certain PFIC holdings."

So, it seems imply that future distributions may not happen with this PFIC investment they have taken on. The tax treatment is so severe with PFICs as they explained in the first paragraph.

I hope those of you holding MAPIX will find this information useful.

Comments

  • Old_JoeOld_Joe
    Wow- that's certainly something to chew on. With no dividends, nothing left but to hope for NAV appreciation, which doesn't look all that likely either. Time to go?
  • ron
    If the EM are strong, this fund will do well but perhaps for traders, the short term may not. Investors should continue to hold a small position.
  • MikeMMikeM
    I don't own the fund, but isn't the important thing here real or total return? How is it doing in at that, especially risk adjusted returns?
  • JohnChisum
    Per the Matthews website; " Investment Objective is total return with an emphasis on providing current income."

    When I purchased this fund, I thought I was being a bit more conservative than in choosing one of their growth funds. As some others have mentioned, having the word "Dividend" in the fund's name implies that there will be such and in this case, on a quarterly basis. So far so good until Q4 this year when the fund announced no dividend would be paid. It took some investigating to find out why because Matthews was not very forthcoming until pushed.

    I do plan to stick with this fund for now, but it is on my watch list for selling if things do not go well. In other words, they are on a short leash.

  • MaxBialystockMaxBialystock
    http://funds.us.reuters.com/US/funds/overview.asp?symbol=MAPIX
    http://www.bloomberg.com/quote/MAPIX:US/chart
  • JohnChisum
    Matthews has MAPIX up 3.14% YTD versus Reuters and Bloomie up 1.38%

    ???
  • Old_JoeOld_Joe
    edited December 2014
    Our good friends at M* have it up by 1.05% YTD. Any way you look at this, it ain't too hot. (Then again, M* didn't really say which year, either.)
  • JunksterJunkster
    edited December 2014
    The 3.14% was through 9/30/14. The 1.38% was through yesterday and assume OJ's reflects today's decline and hence 1.05%
  • Old_JoeOld_Joe
    Thanks, Junkster... that sounds right.
  • JohnChisum
    I forgot to look at the time frame on Matthews site. Still, as Old_Joe stated, it is not all that good.
  • AndyJ
    I suppose it'll take a 2008 to get MAPTX open again.
  • expatsp
    So M* has it 4% above its benchmark and 0.16% below its category YTD, and 1.66% below its category for the last 12 months: even the best funds have a stretch of underperformance now and then, this strikes me as not bad for a fund with an excellent long-term record and superior downside protection (beat its category by 16 points in 2008.)
  • JohnChisum
    @expatsp, I have had no problems with MAPIX and the returns. In recent months it has pared back quite a bit from its high. Most Asia funds have had their struggles as talks of slowdown in China are on the increase. I have been in it for some time now and still have good gains.

    But it is still on a short leash for me.
  • mrdarceymrdarcey
    So essentially they are saying the distributions from ordinary equities are being used to pay the taxes on REITs and other pass-through income holdings, and that this will continue for the foreseeable future?

    Any reason not to move to SIGIX or MACSX if this is the case?
  • JohnChisum
    @mrdarcey, A lot of questions unanswered as Matthews has not been very transparent in this whole issue. There is supposed to be a report out this month I think and whether there is a better explanation of what happened remains to be seen. If anything has bothered some of us, it is this.
  • MaxBialystockMaxBialystock
    Ding.
  • AndyJ
    edited December 2014
    expatsp said:

    So M* has it 4% above its benchmark and 0.16% below its category YTD, and 1.66% below its category for the last 12 months: even the best funds have a stretch of underperformance now and then, this strikes me as not bad for a fund with an excellent long-term record and superior downside protection (beat its category by 16 points in 2008.)

    Another factor to consider is that the management change coincides with this stretch of underperformance. Foster and Madsen, both gone now, made that "excellent long-term record" (including 2008), not current management.
  • mrdarceymrdarcey
    JohnChisum said:

    @mrdarcey, A lot of questions unanswered as Matthews has not been very transparent in this whole issue. There is supposed to be a report out this month I think and whether there is a better explanation of what happened remains to be seen. If anything has bothered some of us, it is this.

    Agreed. The earlier explanation seemed to be that the sale of PFICs generated capital losses/gains that were taxed at some bizarre rate. That seemed pretty straightforward to me.

    This explanation seems to be that PFICs are taxed at a higher rate specifically because they are passthrough income, and that the sales have nothing to do with it.

    Again, devil in the details, but those are two different explanations as I read it, which is pretty maddening.

    Beyond that, though, if a substantial portion of your income is being used just to pay taxes on certain holdings, what is the total return potential?
  • JohnChisum
    There is a terse discussion over at the M* forums on this same topic. Some additional thoughts can be read over there.

    http://socialize.morningstar.com/NewSocialize/forums/p/343430/3593192.aspx#PageIndex=1
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