485APOS

As filed with the Securities and Exchange Commission on June 18, 2008

Securities Act of 1933 File No. 33-78960

Investment Company Act of 1940 File No. 811-08510

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933	x
Pre-Effective Amendment No.	o
Post-Effective Amendment No. 33	x
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940	x
Amendment No. 36

Matthews International Funds

(Exact name of registrant as specified in charter)

Four Embarcadero Center, Suite 550

San Francisco, CA 94111

(Address of Principal Executive Offices)

Registrant’s Telephone Number, including Area Code: (415) 788-6036

________________________________

William J. Guilfoyle, President

Four Embarcadero Center, Suite 550

San Francisco, CA 94111

(Name and Address of Agent for Service)

________________________________

Copies To:

Gregory Zeck, Esq.

Paul, Hastings, Janofsky & Walker LLP

55 Second Street

San Francisco, CA 94105

It is proposed that this filing will become effective

	immediately upon filing pursuant to paragraph (b)
	on April 29, 2008 pursuant to paragraph (b)
_	60 days after filing pursuant to paragraph (a)(1)
_	on ____________ pursuant to paragraph (a)(1)
X	75 days after filing pursuant to paragraph (a)(2)
	on ____________ pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

This post-effective amendment designates a new effective date

for a previously filed post-effective amendment.

Matthews Asian Funds

PROSPECTUS
September __, 2008   Matthews Asia Small Companies Fund

matthewsfunds.com

The U.S. Securities and Exchange Commission (the “SEC”) has not approved or disapproved the Fund. Also, the SEC has not passed upon the adequacy or accuracy of this prospectus. Anyone who informs you otherwise is committing a crime.

The information in this Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated June __, 2008

Matthews Asian Funds

  Investing in the future of Asia since 1994

CONTENTS

Please read this document carefully before you make any investment decision. If you have any questions, do not hesitate to contact a Matthews Asian Funds representative at 800-789-ASIA [2742] or visit matthewsfunds.com.

Please keep this prospectus with your other account documents for future reference.

Please see important information about market timing and redemption fees on page xx.

Matthews Asia Small Companies Fund
Principal Investment Strategy of the Fund	x
Investing in Asian Small Companies	x
Principal Risks of Investing in the Fund	x
Past Performance
Fees and Expenses
Management of the Fund	xx
Shareholder Information:
Pricing of Fund Shares	xx
Purchasing Shares	xx
Exchanging Shares	xx
Selling (Redeeming) Shares	xx
Market Timing Activities and Redemption Fees	xx
Other Shareholder Information	xx
General Information	xx
Privacy Statement	xx

The Matthews Asia Small Companies Fund is part of the Matthews Asian Funds family. Other funds in the Matthews Asian Funds family are offered through a separate prospectus that can be obtained from Matthews Asian Funds or its Distributor, PFPC Distributors, Inc.

Matthews Asia Small Companies Fund

Objective

Long-term capital appreciation

________________________________

PORTFOLIO MANAGERS

LEAD MANAGER:

Lydia So

CO-MANAGER:

Noor Kamruddin

________________________________

Symbol: xxxxx

There is no guarantee that the Fund’s investment objective will be achieved or that the value of the investments of the Fund will increase. 

Matthews International Capital Management, LLC (“Matthews”) is the investment advisor to the Fund. Matthews invests in Asia based on its assessment of the future development and growth prospects of companies located in that region. Matthews believes that the region’s countries are on paths toward economic development and, in general, deregulation and greater openness to market forces. Matthews believes in the potential for these economies, and that the intersection of development and deregulation will give rise to new markets and create opportunities for further growth. Matthews attempts to capitalize on its beliefs by investing in companies it considers to be well-positioned to participate in the region’s economic evolution.

Principal Investment Strategy of the Fund

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in the common and preferred stocks of small companies located in China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.

Small companies are companies that have a market capitalization (the number of its shares outstanding times the market price per share for such securities) no higher than the greater of $3 billion or the market capitalization of the largest company included in the Fund’s primary benchmark index. In assessing a company’s size, Matthews also considers the company’s revenues, number of employees, net assets, and the size, depth of its product line and other factors. Matthews intends to apply these factors flexibly, at the time of purchase, taking into account many considerations, including changes in exchange rates, differences between the number of shares of an issuer available for purchase in the public markets compared to the number of its shares outstanding, comparable companies located in other regions, and other market conditions. The Fund may continue to hold a security if its market capitalization increases above these levels after purchase.

In extreme market conditions, Matthews may sell some or all of the Fund’s securities and temporarily invest the Fund’s money in U.S. government securities or money-market instruments backed by U.S. government securities, if it believes it is in the best interest of shareholders to do so. If it were to occur, the investment goals of the Fund may not be achieved.

Investing in Asian Small Companies

During the past decade many Asian countries have adopted economic policies that have spurred the development of small companies across a large number of economic sectors. These policies include privatization (deregulation), encouraging greater competition in certain sectors, and relaxing barriers to investment. In addition, many Asian countries have encouraged entrepreneurship and enhanced the business environment for smaller companies through improved educational standards. Income levels and discretionary spending have also increased, increasing consumer demand. These trends have helped foster new markets while existing markets have expanded. Entrepreneurs have started small companies throughout the economy, including in industries not typically associated with small companies and smaller market capitalizations (such as infrastructure, banking and finance, and energy). Improved standards of corporate governance, professionalism and management expertise are helping to reduce many risks typically associated with smaller companies and emerging markets. Matthews believes that the changes in Asian markets and economies has and will continue to benefit small companies, especially efficiently run companies, resulting in sustainable long-term growth.

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Matthews also believes that smaller Asian companies are under-researched and may get overlooked by some investors, especially those that employ index-driven investment processes. Matthews emphasizes stock selection and a fundamental investment process to identify small companies than it believes may benefit from long-term economic and market trends in Asia. Matthews believes that active, fundamental investing is essential to understanding the long-term growth prospects of a company, especially a small company.

Matthews researches the fundamental characteristics of individual companies to help to understand the foundation of a company’s long-term growth, and to assess whether it is generally consistent with Matthews’ expectations for the region’s economic evolution. Matthews evaluates potential portfolio holdings on the basis of their individual merits, and invests in those companies that it believes are positioned to help the Fund achieve its investment objectives. Matthews regularly tests its beliefs and adjusts portfolio holdings in light of prevailing market conditions and other factors, including, among other things, economic, political or market events (e.g., changes in credit conditions or military action), changes in relative valuation (of a company’s growth prospects relative to other issuers), liquidity requirements and corporate governance.

Matthews has long-term investment goals, and its process aims to identify potential portfolio investments that can be held over an indefinite time horizon.

Matthews Seeks to Invest in the Long-Term Growth Potential of Asia

§ Matthews believes that the countries of Asia will continue to benefit from economic development over longer investment horizons.

§ Matthews seeks to invest in those companies that it believes will benefit from the long-term economic evolution of the region and that will help the Fund achieve its investment objective.

Matthews and the Fund Believe in Investing for the Long Term

§ The Fund is designed for investors with long-term investment horizons.

There is no guarantee that your investment in the Fund will increase in value. The value of your investment in the Fund could go down, meaning you could lose some or all of your investment. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Matthews Is an Active Investor with Strong Convictions

§ Matthews uses an active approach to investment management (rather than relying on passive or index strategies) because it believes that the current composition of the stock markets and indices may not be the best guide to the most successful industries and companies of the future.

§ Matthews invests in individual companies based on fundamental analysis that aims to develop an understanding of a company’s long-term business direction.

§ Matthews seeks to understand benchmark indices but constructs portfolios independent of indices.

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§ Matthews believes that investors benefit in the long term when the Fund is fully invested.

Matthews Is a Fundamental Investor

§ Fundamental investing is based on identifying, analyzing and understanding basic information about a company or security. These factors may include matters such as 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.

§ Matthews may also consider factors such as:

> Management: Does the management exhibit integrity? Is there a strong corporate governance culture? What is the business strategy? Does management exhibit the ability to adapt to change and handle risk appropriately?

> Evolution of Industry: Can company growth be sustained as the industry and environment evolve?

> Valuation: Is the company’s valuation reasonable in relation to its growth prospects and relative to other similar companies in the region or globally?

§ Following this fundamental analysis, Matthews seeks to invest in companies and securities that it believes are positioned to help the Fund achieve its investment objective.

Matthews Focuses on Individual Companies

§ Matthews develops views about the course of growth in the region over the long term.

§ Matthews then seeks to combine these beliefs with its analysis of individual companies and their fundamental characteristics.

§ Matthews then seeks to invest in companies and securities that it believes are positioned to help the Fund achieve its investment objective.

Principal Risks of Investing in the Fund

The Fund can add diversification to a portfolio through its focus on Asian small companies. However, an investment in the Fund includes substantial risks, and should constitute only a portion of your overall investment portfolio, not all of it. We also recommend that you invest in the Fund only for the long term (at least five years), so that you can better manage volatility in the Fund’s net asset value and other risks (as described below). Investing in a fund that invests in small companies or is regionally concentrated, such as the Fund, may not be appropriate for all investors. There is no guarantee that the Fund’s investment objective will be achieved or that the value of the investments of the Fund will increase. If the value of the Fund’s investments declines, the net asset value per share (“NAV”) of the Fund will decline and investors may lose some or all of the value of their investment.

Foreign securities held by the Fund may be traded on days and at times when the NYSE is closed and the NAV of the Fund is therefore not calculated. Accordingly, the NAV of the Fund may be significantly affected on days when shareholders are not able to buy or sell shares of the Fund. For additional information on the calculation of the Fund’s NAV, see page xx.

Your investment in the Fund is exposed to many different financial, market, regional and country-related risks, including, but not limited to, the lower degree of economic development in some countries, the less developed and more uncertain legal and financial systems, unusual or unique political structures, unpredictable foreign relations, the state of international economics and the global financial system, natural resources dependencies, and the effect of climate and environmental conditions. A description of some of these risks follows. Additional information is also included in the Fund’s Statement of Additional Information (“SAI”).

The Fund is not intended for, and the Fund attempts to discourage, time zone arbitrage and other market-timing transactions in shares of the Fund. Market timing can harm other shareholders because it can dilute the value of their shares. Market timing can also disrupt the management of the Fund’s investment portfolio and cause the Fund to incur costs, which are borne by non-redeeming shareholders. Consequently, such activity poses a risk for your investment in the Fund. See page xx for a discussion of policies and procedures intended to minimize such trading.

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Political, Social and Economic Risks

The value of the Fund’s assets may be adversely affected by political, economic, social, and religious instability; inadequate investor protection; changes in laws or regulations of countries within Asia (including countries in which the Fund invests, as well as the broader region); international relations with other nations; natural disasters; corruption and military activity. The Fund may have difficulty in obtaining or enforcing judgments against companies or their management. Furthermore, the economies of many Asian countries, where the Fund invests, differ from the economies of more-developed countries in many respects, such as rate of growth, inflation, capital reinvestment, resource self-sufficiency, financial system stability, the national balance of payments position, and sensitivity to changes in global trade. The governments of certain countries have placed restrictions on the operational freedom of private enterprise, and have or may nationalize privately owned assets including companies held by the Fund. Asian countries also have different accounting standards, corporate disclosure, governance and regulatory requirements than do the United States and other more developed countries. As a result, there may be less publicly available information about companies in Asian countries. There is generally less governmental regulation of stock exchanges, brokers and issuers than in the United States, which may result in less transparency with respect to a company’s operations. The economies of many Asian countries are dependent on exports and global trade and some have limited natural resources (such as oil), resulting in dependence on foreign sources for certain raw materials, and vulnerability to global fluctuations in price or supply. Changes in the economies of the main trading partners of Asian countries, including the United States and other developed countries, could negatively impact the growth prospects of Asian countries and markets. The securities markets of Asia may be correlated with the markets of the United States and other developed countries. A decline in the markets of the United States or other countries could result in a significant decline in Asian markets.

Small Companies

The Fund invests in securities of small companies. Smaller companies may offer substantial opportunities for capital growth; they also involve substantial risks and should be considered speculative. Such companies often have limited product lines, markets or financial resources. Smaller companies may be more dependent on one or few key persons and may lack depth of management. Larger portions of their stock may be held by a small number of investors (including founders and management) than is typical of larger companies. Credit may be more difficult to obtain (and on less advantageous terms) than for larger companies. As a result, the influence of creditors (and the impact of financial or operating restrictions associated with debt financing) may be greater than in larger or more established companies. Both of these factors may dilute the holdings, or otherwise adversely impact the rights of the Fund and smaller shareholders in corporate governance or corporate actions. Small companies also may be unable to generate funds necessary for growth or development, or be developing or marketing new products or services for which markets are not yet established and may never become established. The Fund may have more difficulty obtaining information about smaller companies, making it more difficult to evaluate the impact of market, economic, regulatory and other factors on them. Informational difficulties may also make valuing or disposing of their securities more difficult than it would for larger companies. Securities of smaller companies may trade less frequently and in lesser volume than more widely held securities and the securities of such companies generally are subject to more-abrupt or erratic price movements than more widely held or larger, more-established companies or the market indices in general. Among the reasons for the greater price volatility are the less certain growth prospects of smaller companies, the lower degree of liquidity in the markets for such securities, and the greater sensitivity of smaller companies to changing economic conditions. For these and other reasons, the value of securities of smaller companies may react differently to political, market and economic developments than the markets as a whole or than other types of stocks.

Risks Associated with Emerging Markets

Many Asian countries are considered emerging markets. Investing in emerging markets involves the political, social, economic and currency risks described in this section, as well as different and greater risks than investing in more developed markets because, among other things, emerging markets are often less stable politically and economically, and their markets are smaller and less developed than that of the United States. Their stock exchanges and brokerage industries do not have the level of government oversight as do those in the United States. Securities markets of such countries are substantially smaller, less liquid and more volatile than securities markets in the United States. Local regulation frequently imposes limits (collars) on intra-day changes in trading prices for securities, which may artificially constrain trading volume and distort market pricing mechanisms. Many markets also require the suspension of trading in securities at times or for reasons that are unusual in U.S. markets (e.g., trading may be suspended prior to shareholder meetings or in connection with the distribution of dividends, stock splits or other corporate actions). Trading suspensions may make a determination of the Fund’s net asset value more difficult and may result in the security being treated as being illiquid during the suspension. The absence of negotiated brokerage commissions in certain countries may result in higher brokerage and other fees. The procedures and rules governing foreign transactions and custody also may involve delays in payment, delivery or recovery of money or investments. In addition, standards related to corporate governance may be weaker, and transactions with or among management may be less transparent. As a result, the rights of the Fund and other independent shareholders may be adversely impacted in corporate actions. Brokerage commissions, custodian services fees, withholding taxes, and other costs relating to investment in emerging markets are generally higher than in the United States. All of these factors make the prices of securities of emerging market companies, especially smaller companies in which the Fund invests, generally more volatile than the prices of securities of companies in developed markets, and increase the risk of loss to the Fund.

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Currency Risks

When the Fund buys or sells securities in an Asian market, the transaction is usually undertaken in the local currency rather than in U.S. dollars. To execute such transactions, the Fund must purchase or sell a specified amount of the local currency, which exposes the Fund to the risk that the value of the foreign currency will increase or decrease. Similarly, when the Fund receives income from Asian securities, that Fund receives local currency rather than U.S. dollars. As a result, the value of the Fund’s portfolio holdings as well as the income derived from these holdings may be impacted. The Fund may, but currently has no intention to, engage in currency hedging transactions. For additional information see the Fund’s SAI.

Additionally, Asian countries may utilize formal or informal currency-exchange controls (or “capital controls”). Currency controls may artificially affect the value of the Fund’s holdings and may negatively impact the Fund’s ability to calculate its NAV (see, Pricing of Fund Shares, on page xx). Such controls may also restrict or prohibit the Fund’s ability to repatriate both investment capital and income; this, in turn, may undermine the value of the Fund’s holdings and potentially place the Fund’s assets at risk of total loss. In extreme circumstances, such as the imposition of capital controls that substantially limit repatriation, the Fund may suspend shareholders’ redemption privileges for an indefinite period.

Trading Markets and Depositary Receipts

Asian securities typically are listed on their respective stock exchanges, but may also be traded on other markets within or outside of Asia (including U.S. markets). Asian securities may also trade in the form of depositary receipts, including American, European and Global Depositary Receipts. Although depositary receipts have risks similar to the securities that they represent, they may also involve higher expenses, and may lack fungibility, which may result in their trading at a discount (or premium) to the underlying security. In addition, depositary receipts may not pass through voting and other shareholder rights, and may be less liquid than the underlying securities listed on an exchange.

Volatility

The smaller size and lower levels of liquidity in the markets of developing countries, as well as other factors may result in changes in the prices of Asian securities that are more dramatic, or volatile, than those of companies in more developed regions. This volatility can cause the price of the Fund’s shares (NAV) to go up or down dramatically. Volatility in the price of an investment can be disadvantageous because you may have planned or may need to sell your investment at a time when its value has decreased. Because of this volatility, it is recommended that you invest in the Fund only for the long term (at least five years).

Initial public offerings (IPOs)

IPOs of securities issued by unseasoned companies with little or no operating history are risky and their prices are highly volatile, but they can result in very large gains in their initial trading. Attractive IPOs are often oversubscribed and may not be available to the Fund, or only in very limited quantities. Thus, when the Fund’s size is smaller, any gains or losses from IPOs will have an exaggerated impact on the Fund’s performance than when the Fund is larger. Although IPO investments have had a positive impact on the performance of some funds, there can be no assurance that the Fund will have favorable IPO investment opportunities in the future, or that the Fund’s investments in IPOs will have a positive impact on the Fund’s performance.

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Preferred Stocks

Preferred stock represents an equity or ownership interest in a company. Preferred stock normally pays dividends at a specified rate and has precedence over common stock in the event the issuer is liquidated or declares bankruptcy. However, in the event a company is liquidated or declares bankruptcy, the claims of owners of bonds take precedence over the claims of those who own preferred and common stock. Preferred stock, unlike common stock, often has a stated dividend rate payable from the corporation’s earnings. Preferred stock dividends may be cumulative or non-cumulative, participating, or auction rate. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of such stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as provisions allowing the stock to be called or redeemed, which can limit the benefit of a decline in interest rates. Preferred stock is subject to many of the risks to which common stock and debt securities are subject.

Regional and Country Risks

In addition to the risks discussed above, there are specific risks associated with investing in the Asian region, including the risk of severe political or military disruption. The Asian region comprises countries in all stages of economic development. Some Asian economies may experience overextension of credit, currency devaluations and restrictions, rising unemployment, high inflation, underdeveloped financial services sectors, heavy reliance on international trade, and economic recessions. The economies of many Asian countries are dependent on the economies of the United States, Europe and other Asian countries, and events in any of these economies could negatively impact the economies of Asian Pacific countries.

Currency fluctuations, devaluations and trading restrictions in any one country can have a significant effect on the entire Asian region. Increased political and social instability in any Asian country could cause further economic and market uncertainty in the region, or result in significant downturns and volatility in the economies of Asian countries. As an example, in the late 1990s, the economies in the Asian region suffered significant downturns and increased volatility in their financial markets.

The development of Asian economies, and particularly those of China and South Korea, may also be affected by political, military, economic and other factors related to North Korea. Since 1953, the United States has maintained a military force in South Korea to help deter the ongoing military threat from North Korean forces. The situation remains a source of tension and is currently volatile, particularly as North Korea has exhibited nuclear arms capabilities. Negotiations to ease tensions and resolve the political division of the Korean peninsula have been carried on from time to time. Recently, there have also been efforts to increase economic, cultural and humanitarian contacts between North Korea and South Korea. There can be no assurance that such negotiations or efforts will continue to occur or will ease discord between North Korea and South Korea or other regional tensions.

Military action or the risk of military action or strains on the economy of North Korea could have a materially adverse effect on all countries in the region, particularly China and South Korea. Consequently, any military action or other instability could adversely impact the ability of the Fund to achieve its investment objective. Lack of available information regarding North Korea is also a significant risk factor. Similarly, the tensions between India and Pakistan described below, which involve the threat of nuclear arms, could have a negative effect on economic and securities markets in those countries.

China. The Chinese government has been reforming economic and market practices and providing a larger sphere for private ownership of property for over 25 years. While these reforms are currently contributing to growth and prosperity, they could be altered or discontinued at any time. Military conflicts, either in response to internal social unrest or conflicts with other countries, could disrupt economic development. China’s long-running conflict over Taiwan remains unresolved, while territorial border disputes persist with several neighboring countries. While economic relations with Japan have deepened, the political relationship between the two countries has become more strained in recent years, which could weaken economic ties. Development of the Chinese economy is also vulnerable to developments on the Korean peninsula. Should political tension increase or military actions be precipitated, it could adversely affect the economy and destabilize the region as a whole. There is also a greater risk involved in currency fluctuations, currency convertibility, interest rate fluctuations and higher rates of inflation. The Chinese government also sometimes takes actions intended to increase or decrease the values of Chinese stocks. The emergence of a domestic consumer class is still at an early stage, making China’s economic health dependent on exports. The emergence of a domestic consumer class is still at an early stage, making China’s economic health dependent on exports. China’s growing trade surplus with the U.S. has increased the risk of trade disputes, which could potentially have adverse effects on the country’s management of its currency, as well as on some export-dependent sectors. Social cohesion in China is being tested by growing income inequality and larger scale environmental degradation. Social instability could threaten China’s political system and economic growth, which could decrease the value of the Fund’s investments.

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Hong Kong. Since Hong Kong reverted to Chinese sovereignty in 1997, it has been governed by the Basic Law, a “quasi-constitution.” The Basic Law guarantees a high degree of autonomy in certain matters until 2047, while defense and foreign affairs are the responsibility of the central government in Beijing. If China were to exert its authority so as to alter the economic, political, or legal structures or the existing social policy of Hong Kong, investor and business confidence in Hong Kong could be negatively affected, which in turn could negatively affect markets and business performance and have an adverse effect on the Fund’s investments. There is uncertainty as to whether China will continue to respect the relative independence of Hong Kong and refrain from exerting a tighter grip on the Hong Kong’s political, economic, and social concerns. The economy of Hong Kong may be significantly affected by increasing competition from the emerging economies of Asia, including that of China itself. In addition, the Hong Kong dollar trades within a fixed trading band rate to (or is “pegged” to) the U.S. dollar. This fixed exchange rate has contributed to the growth and stability of the Hong Kong economy. However, some market participants have questioned the continued viability of the currency peg. It is uncertain what affect any discontinuance of the currency peg and the establishment of an alternative exchange rate system would have on capital markets generally and the Hong Kong economy.

Taiwan. The political reunification of China and Taiwan, over which China continues to claim sovereignty, is a highly problematic issue and is unlikely to be settled in the near future. The continuing hostility between China and Taiwan may have an adverse impact on the values of investments in either China or Taiwan, or make investments in China and Taiwan impractical or impossible. Any escalation of hostility between China and Taiwan would likely distort Taiwan’s capital accounts, as well as have a significant adverse impact on the value of investments in both countries and the region.

Taiwan’s growth has to a significant degree been export-driven. While the percentage of Taiwan’s exports purchased by the United States has been declining recently, the United States has remained a key export market. Accordingly, Taiwan is affected by changes in the economies of the United States and other main trading partners, by protectionist impulses in those countries and by the development of export sectors in lower-wage economies. In the event that growth in the export sector declines in the future, the burden of future growth will increasingly be placed on domestic demand.

The island of Taiwan has limited natural resources, resulting in dependence on foreign sources for certain raw materials and vulnerability to global fluctuations of price and supply. This dependence is especially pronounced in the energy sector. In recent years, over half of Taiwan’s crude oil has been supplied by Kuwait and Saudi Arabia. A significant increase in energy prices could have an adverse impact on Taiwan’s economy.

South Korea. Investing in South Korean securities has special risks, including political, economic and social instability, and the potential for increasing militarization in North Korea (see page xx). The market capitalization and trading volume of issuers in South Korean securities markets are concentrated in a small number of issuers, which results in potentially fewer investment opportunities for the Fund.

There are also a number of risks to the Fund associated with the South Korean government. The South Korean government has historically exercised and continues to exercise substantial influence over many aspects of the private sector. The South Korean government from time to time has informally influenced the prices of certain products, encouraged companies to invest or to concentrate in particular industries, and induced mergers between companies in industries experiencing excess capacity. The South Korean government has sought to minimize excessive price volatility on the South Korean Stock Exchange through various steps, including the imposition of limitations on daily price movements of securities, although there is no assurance that this would prevent the value of an investment from declining over time.

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Thailand. In recent years Thailand has experienced increased political and militant unrest in its predominantly Muslim southern provinces. While the unrest and associated acts of violence have been contained in the South, they could spread to other parts of the country, impacting the general sentiment as well as the tourism industry. Thailand’s political institutions remain unseasoned, increasing the risk of political uncertainty, which could negatively impact the financial markets. In September 2006, Thailand’s elected government was overthrown in a military coup and replaced by new leadership backed by a military junta. The impact of the coup and military rule on investments in Thai securities was initially negative and subsequently has been uneven. Following the coup, the new government imposed investment controls that appear to have been designed to control volatility in the Thai baht and to support certain export-oriented Thai industries. These controls have been revised and updated since their initial imposition, and more recently have largely been suspended (although there is no guarantee that such controls will not be re-imposed). However, partially in response to these controls, an offshore market for the exchange of Thai baht developed. The depth and transparency of this market have been uncertain. With the general suspension of investment controls, it is unclear whether this offshore market will continue. Accordingly, this market’s impact on the Fund is uncertain. The new leadership has begun the process of restoring Thailand’s democratic processes. However, there can be no assurance that this process will continue or improve economic conditions in the country.

India. In India, the government has exercised and continues to exercise significant influence over many aspects of the economy. Accordingly, government actions, bureaucratic obstacles and corruption within the Indian government have a significant effect on the economy and could adversely affect market conditions, deter economic growth and the profitability of private enterprises. Large portions of many Indian companies remain in the hands of their founders (including members of their families). Family-controlled companies’ corporate governance standards may be weaker and less transparent, which increases the potential for loss and unequal treatment of investors. India experiences many of the risks associated with developing economies, including relatively low levels of liquidity, which may result in extreme volatility in the prices of Indian securities.

Religious and border disputes persist in India, and India has from time to time experienced civil unrest and hostilities with neighboring countries such as Pakistan. Both India and Pakistan have tested nuclear arms, and the threat of deployment of such weapons could hinder development of the Indian economy and escalating tensions could impact the broader region.

The longstanding dispute with Pakistan over the bordering Indian state of Jammu and Kashmir remains unresolved. If the Indian government is unable to control the violence and disruption associated with these tensions (including both domestic and external sources of terrorism), the results could destabilize the economy.

Indonesia. Indonesia’s political institutions and democracy have a relatively short history, increasing the risk of political instability. Indonesia has in the past faced political and militant unrest within several of its regions, and further unrest could present a risk to the local economy and stock markets. The country has also experienced acts of terrorism, predominantly targeted at foreigners, which has had a negative impact on tourism. Corruption and the perceived lack of a rule of law in dealings with international companies in the past may have discouraged much needed foreign direct investment. Should this issue remain, it could negatively impact the long-term growth of the economy. In addition, many economic development problems remain, including high unemployment, a fragile banking sector, endemic corruption, inadequate infrastructure, a poor investment climate, and unequal resource distribution among regions.

Philippines. Philippines’ consistently large budget deficit has produced a high debt level and has forced the country to spend a large portion of its national government budget on debt service. Large, unprofitable public enterprises, especially in the energy sector, contribute to the government’s debt because of slow progress on privatization. Some credit rating agencies have expressed concerns about Philippines’ ability to sustain its debt.

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Malaysia. Malaysia has previously imposed currency controls and a 10% “exit levy” on profits repatriated by foreign entities such as the Fund and has limited foreign ownership of Malaysian companies (which may artificially support the market price of such companies). The Malaysian capital controls have been changed in significant ways since they were first adopted without prior warning on September 1, 1998. Malaysia has also abolished the exit levy. However, there can be no assurance that the Malaysian capital controls will not be changed adversely in the future or that the exit levy will not be re-established, possibly to the detriment of the Fund and its shareholders.

Singapore. As a small open economy, Singapore is particularly vulnerable to external economic influences, such as the Asian economic crisis of the late 1990s. Although Singapore has been a leading manufacturer of electronics goods, the extent to which other countries can successfully compete with Singapore in this and related industries, and adverse Asian economic influences generally, may negatively affect Singapore’s economy.

Pakistan. Changes in the value of investments in Pakistan and in companies with significant economic ties to that country largely depend on continued economic growth and reform in Pakistan, which remains uncertain and subject to a variety of risks. Adverse developments can result in substantial declines in the value of investments. Pakistan has and continues to face high levels of political instability and social unrest at both the regional and national levels. Such instability has and may erupt again into wide-scale disorder. The Pakistan government recently imposed a state of emergency following riots and the deaths of opposition leaders. Social and political instability may also result in increased levels of terrorism, prolonged economic disruption, and may discourage foreign investment.

Ongoing disputes with India over the Kashmir border region may result in armed conflict between the two nations, both of which possess nuclear capabilites. Even in the absence of armed conflict, the lingering threat of war with India may depress economic growth and investment in Pakistan. Additionally, Pakistan’s geographic location and its shared borders with Afghanistan and Iran increase the risk that it will be involved in, or otherwise affected by, international conflict. Pakistan’s recent economic growth is in part attributable to high levels of foreign aid, loans and debt forgiveness. Such international support, however, may be significantly reduced or terminated in response to changes in the political leadership of Pakistan.

Pakistan faces a wide range of other economic problems and risks. Pakistan had undertaken a privatization initiative, but recently halted that effort. There is substantial uncertainty over whether privatization will continue and whether existing efforts will be reversed. Pakistan is subject to substantial natural resource constraints, which both hamper development and make Pakistan’s economy vulnerable to price fluctuations in these resources. Pakistan maintains large budgetary and current account deficits. The resulting high levels of national debt may not be sustainable. Pakistan also maintains a trade deficit, which could be worsened if relations with the United States, the largest market for Pakistani exports, deteriorate. The rights of investors and other property owners in Pakistan are subject to protection by a developing judicial system that is widely perceived as lacking transparency. Inflation threatens long-term economic growth and may deter foreign investment in the country. Leaders of the recently installed civil government have previously adopted policies that increased legal and economic uncertainty and inhibited foreign investment.

Vietnam. In 1992, Vietnam initiated the process of privatization of state-owned enterprises, and expanded that process in 1996. The Vietnamese government has exercised and continues to exercise significant influence over many aspects of the economy. Accordingly, government and bureaucratic actions have a significant effect on the economy and could adversely affect market conditions, deter economic growth and the profitability of private enterprises. Some Vietnamese industries, including commercial banking, remain dominated by state-owned enterprises. To date, economic, political and legal reform has proceeded at a slow pace, and foreign direct investment remains at a developmental stage. Currently, employees and management boards hold a majority of the equity of most privatized enterprises. In addition, the government of Vietnam continues to hold, on average, more than one-third of the equity in such firms. Only a small percentage of the shares of privatized companies are held by investors. In addition, Vietnam continues to impose limitations on foreign ownership of Vietnamese companies. There can be no guarantee that Vietnam’s privatization process, or its efforts to reform its economic, political or legal systems will continue.

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The development of Vietnam’s economy is dependent on export markets and is vulnerable to events in these markets. There is also a greater risk involved in currency fluctuations, currency convertibility, and interest rate fluctuations. Inflation threatens long-term economic growth and may deter foreign investment in the country. Like many developing countries, Vietnamese markets have relatively low levels of liquidity, which may result in extreme volatility in the prices of Vietnamese securities.

Foreign investors in Vietnam are currently required to purchase and sell securities of Vietnamese companies through a single, pre-selected broker-dealer. This procedure decreases transparency in the market, may result in higher execution costs and limits the Fund’s ability to utilize competition amongst broker-dealers to enhance the quality of execution. This procedure may also decrease the confidentiality of the Fund’s transactions, exposing the Fund to a greater potential for front-running and similar practices.

For additional information about the Fund’s strategy and risks, see page xx and the Fund’s SAI. The SAI is available to you free of charge. To receive an SAI, please call 800-789-ASIA [2742], visit the Fund’s website atmatthewsfunds.com,or visit the SEC’s website atsec.govand access the EDGAR database.

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Past Performance and Financial Highlights

The Fund is new and does not have a full calendar year of performance or financial information to present. Once it has been in operation a full calendar year, performance (including total return) and financial information will be presented. The Fund’s benchmark index is the Morgan Stanley Capital International (“MSCI”) All Country Asia ex Japan Small Cap Index, which is a free float-adjusted market capitalization-weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand. The Fund may invest in countries that are not included in the index. It is not possible to invest directly in an index, and the performance of an index does not take into consideration fees, expenses or taxes.

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Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.

SHAREHOLDER FEES(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) imposed on purchases (as a percentage of offering price)	None
Maximum Sales Charge (Load) imposed on reinvested dividends (as a percentage of offering price)	None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price)	None
Redemption Fee on shares redeemed within 90 calendar days of purchase (as a percentage of amount redeemed)	2.00%1
OPERATING EXPENSES(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fee	x.xx%2
Distribution (12b-1) Fees	None
Other Expenses	x.xx %
Total Annual Operating Expenses	x.xx %

¹ Redemption fees are paid directly to the Fund and are intended to discourage market timing activity. Please see Market Timing Activities and Redemption Fees on page xx for more information.

² Management fees are reduced to 0.__% of the Fund’s average daily net assets between $__ billion and $__ billion, and to 0.__% of the Fund’s average daily net assets over $__ billion.

EXAMPLE OF FUND EXPENSES

This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

One Year: $xxx Three Years: $ xxx

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Management of the Fund

Matthews International Capital Management, LLC is the investment advisor to the Fund. Matthews is located at Four Embarcadero Center, Suite 550, San Francisco, California 94111 and can be reached toll-free by telephone at 800-789-ASIA [2742]. Matthews was founded in 1991 by G. Paul Matthews, who serves as Chairman and a Portfolio Manager. Since its inception, Matthews has specialized in managing portfolios of Asian securities.

Matthews invests the Fund’s assets, manages the Fund’s business affairs, supervises the Fund’s overall day-to-day operations, and provides the personnel needed by the Fund with respect to Matthews’ responsibilities pursuant to an investment advisory agreement with the Fund. Matthews also furnishes the Fund with office space and provides certain administrative, clerical and shareholder services to the Fund pursuant to an administration and shareholder servicing agreement with the Fund.

Under an investment Management Agreement with Matthews, dated as of [July 1, 2008,] the Fund pays to Matthews a management fee equal to 0.__% of its average daily net assets up to $__ billion, 0.__% of its average daily net assets between $__ billion and $__ billion, and 0.__% of its average daily net assets over $__ billion.

A discussion regarding the basis for the approval by the Board of Trustees of the Fund’s investment advisory agreement during the six-month period ended December 31, 2008, will be available in the Fund’s annual report for that period.

Under a written agreement between the Fund and Matthews, Matthews agrees to waive fees and reimburse expenses to the Fund if its expense ratio exceeds [2.00%]. This agreement will continue through at least August 31, 2009, and may be extended for additional periods.

Portfolio Managers

The Fund is managed by a Lead Portfolio Manager, Lydia So, and one Co-Portfolio Manager, Noor Kamruddin. The Lead Portfolio Manager of the Fund is responsible for its day-to-day investment management decisions and is supported by and consults with the Fund’s Co-Portfolio Manager.

Lydia So

Lydia So is a Portfolio Manager at Matthews. Prior to joining Matthews in 2004, she was a Portfolio Associate at RCM Capital Management focusing on U.S. large-cap equities. Lydia started her investment career at Kochis Fitz Wealth Management in 1999 as an Investment Operations Specialist. Lydia received a B.A. in economics from the University of California, Davis. She is fluent in Cantonese and conversational in Mandarin.

Noor Kamruddin

Noor Kamruddin is a Senior Research Analyst at Matthews. Prior to joining Matthews in May 2008, Noor spent four years at Wasatch Advisors, first as a senior analyst and then as a Portfolio Manager. From 2002-2004 Noor was an Equities Analyst with Firsthand Capital Management. Noor began her career as a software design engineer, and has also worked at Merrill Lynch and CIBC World Markets. She graduated with a B.S. in computer engineering from the University of Illinois at Urbana-Champaign and also holds an M.B.A in Finance and Accounting from the University of Chicago. Noor is fluent in Hindi.

All members of the investment team travel extensively to Asia to conduct research relating to those markets. The Fund’s SAI provides additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers, and the portfolio managers’ ownership of securities in the Fund.

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Shareholder Information

Pricing of Fund Shares

The price at which the Fund’s shares are bought or sold is called the net asset value per share, or “NAV.” The NAV is computed once daily as of the close of regular trading on the New York Stock Exchange (“NYSE”), generally 4:00 PM Eastern Time, on each day that the exchange is open for trading. In addition to Saturday and Sunday, the NYSE is closed on the days that the following holidays are observed: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day.

The NAV is computed by adding the value of all securities and other assets of the Fund, deducting any liabilities, and dividing by the total number of outstanding shares. The Fund’s expenses are generally accounted for by estimating the total expenses for the year and applying each day’s estimated expense when the NAV calculation is made.

The value of the Fund’s exchange-traded securities is based on market quotations for those securities, or on their fair value determined by or under the direction of the Fund’s Board of Trustees (as described below). Market quotations are provided by pricing services that are independent of the Fund and Matthews. Foreign exchange-traded securities are valued as of the close of trading of the primary exchange on which they trade. Securities that trade in over-the-counter markets, including most debt securities (bonds), may be valued using indicative bid and ask quotations from bond dealers or market makers, or other available market information, or on their fair value as determined by or under the direction of the Fund’s Board of Trustees (as described below). The Fund may also utilize independent pricing services to assist it in determining a current market value for each security based on sources believed to be reliable.

Foreign values of the Fund’s securities are converted to U.S. dollars using exchange rates determined as of the close of trading on the NYSE and in accordance with the Fund’s Pricing Policies. The Fund generally uses the foreign currency exchange rates deemed to be most appropriate by a foreign currency pricing service that is independent of the Fund and Matthews.

The Fund values any exchange-traded security for which market quotations are unavailable or have become unreliable, and any over-the-counter security for which indicative quotes are unavailable, at that security’s fair market value. In general, the fair value of such securities is determined, in accordance with the Fund’s Pricing Policies and subject to the Board’s oversight, by a pricing service retained by the Fund that is independent of the Fund and Matthews. There may be circumstances in which the Fund’s independent pricing service is unable to provide a reliable price of a security. In addition, when establishing a security’s fair value, the independent pricing service may not take into account events that occur after the close of Asian markets but prior to the time the Fund calculates its NAV. Similarly, there may be circumstances in which a foreign currency exchange rate is deemed inappropriate for use by the Fund or multiple appropriate rates exist. In such circumstances, the Board of Trustees has delegated the responsibility of making fair-value determinations to a Valuation Committee composed of employees of Matthews (some of whom may also be officers of the Fund) and at least one independent Trustee of the Fund. In these circumstances, the Valuation Committee will determine the fair value of a security, or a fair exchange rate, in good faith, in accordance with the Fund’s Pricing Policies and subject to the oversight of the Board. When fair value pricing is employed (whether through the Fund’s independent pricing service or the Valuation Committee), the prices of a security used by the Fund to calculate its NAV typically differ from quoted or published prices for the same security for that day. In addition, changes in the Fund’s NAV may not track changes in published indices of, or benchmarks for, Asian securities. Similarly, changes in the Fund’s NAV may not track changes in the value of closed-end investment companies, exchange-traded funds or other similar investment vehicles.

Foreign securities held by the Fund may be traded on days and at times when the NYSE is closed and the NAV is therefore not calculated. Accordingly, the NAV of the Fund may be significantly affected on days when shareholders have no access to the Fund. 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.

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Indian securities in the Fund may be subject to a short-term capital gains tax in India on gains realized upon disposition of securities lots held less than one year. The Fund accrues for this potential expense, which reduces its net asset value. For further information regarding this tax, please see page xx.

Purchasing Shares

The Fund is open for business each day the NYSE is open. You may purchase Fund shares directly from the Fund by mail, telephone, online or by wire without paying any sales charge. The price for each share you buy will be the NAV calculated after your order is received in good order by the Fund. “In good order” means that payment for your purchase and all the information needed to complete your order must be received by the Fund before your order is processed. If your order is received before the close of regular trading on the NYSE (generally 4:00 PM Eastern Time) on a day the Fund’s NAV is calculated, the price you pay will be that day’s NAV. If your order is received after the close of regular trading on the NYSE, the price you pay will be the next NAV calculated.

You may purchase shares of the Fund directly through the Fund’s underwriter, a registered broker-dealer, by calling 800-789-ASIA [2742]. Shares of the Fund may also be purchased through various securities brokers and benefit plan administrators or their sub-agents who have arrangements with the Fund. These intermediaries may charge you a fee for their services. You should contact them directly for information regarding how to invest or redeem through them. In addition, they may charge you service or transaction fees. If you purchase or redeem shares through them, you will, generally, receive the NAV calculated after receipt of the order by them on any day the NYSE is open. The Fund’s NAV is calculated as of the close of regular trading on the NYSE (generally, 4:00 PM Eastern Time) on each day that the NYSE is open. If your order is received by them after that time, it will be purchased or redeemed at the next-calculated NAV. There may also be times when, notwithstanding that your order is received by an intermediary before the close of regular trading on the NYSE, you receive the NAV for the Fund calculated on the following business day. This circumstance may arise because your intermediary has failed to transmit your order to the Fund in a timely manner.

The Fund may reject for any reason, or cancel as permitted or required by law, any purchase at any time.

Brokers and benefit plan administrators who perform transfer agency and shareholder servicing for the Fund may receive fees from the Fund for these services. Brokers and benefit plan administrators who also provide distribution services to the Fund may be paid by Matthews (out of its own resources) for providing these services. For further information, please see Additional Information about Shareholder Servicing and Other Compensation to Intermediaries on page xx.

You may purchase shares of the Fund by telephone or online. New accounts may be opened online or by mailing a completed application. Please see Purchasing Shares on page xx, and Telephone and Online Transactions on page xx. Call 800-789-ASIA [2742] or visit matthewfunds.com for details.

The Fund does not accept third-party checks, temporary (or starter) checks, bank checks, cash, credit card checks, traveler’s checks, cashier’s checks, official checks or money orders. If the Fund receives notice of insufficient funds for a purchase made by check, the purchase will be cancelled and you will be liable for any related losses or fees the Fund or its transfer agent incurs. The Fund may reject any purchase order or stop selling shares of the Fund at any time. Also, the Fund may vary or waive the initial investment minimum and minimums for additional investments.

Additionally, if any transaction is deemed to have the potential to adversely impact the Fund, the Fund reserves the right to, among other things, reject any purchase or exchange request, limit the amount of any exchange, or revoke a shareholder’s privilege to purchase Fund shares (including exchanges).

Please note that when opening your account, the Fund follows identity verification procedures outlined on page xx.

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Individual Retirement Accounts

The Fund offers Individual Retirement Accounts (IRAs). Applications for IRAs may be obtained by calling 800-789-ASIA [2742] or by visiting matthewsfunds.com.

Traditional IRA

A Traditional IRA is an IRA with contributions that may or may not be deductible depending on your circumstances. Assets grow tax-deferred; withdrawals and distributions are taxable in the year made.

Spousal IRA

A Spousal IRA is an IRA funded by a working spouse in the name of a non-working spouse.

Roth IRA

A Roth IRA is an IRA with non-deductible contributions and tax-free growth of assets and distributions to pay retirement expenses, provided certain conditions are met.

Other Accounts

Coverdell Education Savings Account

Similar to a non-deductible IRA, a Coverdell Education Savings Account (ESA) allows you to make non-deductible contributions that can grow tax-free and if used for qualified educational expenses can be withdrawn free of federal income taxes.

For more complete IRA or Coverdell ESA information or to request applications, please call 800-789-ASIA [2742] to speak with a Fund representative or visit matthewsfunds.com.

Minimum Investments in the Fund (U.S. Residents^*)

Non-retirement plan accounts

Initial investment:	$2,500
Subsequent investments:	$100

Retirement and Coverdell plan accounts**

Initial investment:	$500
Subsequent investments:	$50

*Additional limitations apply to non-U.S. residents. Please contact a Fund representative at 800-789-ASIA [2742] for information and assistance.

**Retirement plan accounts include IRAs and 401(k) plans. Speak with a Fund representative for information about the retirement plans available.

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Purchasing Shares

Opening an Account (Initial Investment)

By Mail	You can obtain an account application by calling 800-789-ASIA [2742] between 9:00 AM-7:00 PM ET or by downloading an application at matthewsfunds.com. Mail your personal check payable to Matthews Asian Funds and a completed application to: Regular Mail: Matthews Asian Funds P.O. Box 9791 Providence, RI 02940 Overnight Mail: Matthews Asian Funds 101 Sabin Street Pawtucket, RI 02860-1427
Online	You may establish a new account by visiting matthewsfunds.com, selecting “Open an Account” and following the instructions.
By Broker/Intermediary	You may contact your broker or intermediary, who may charge you a fee for their services.
By Wire	To open an account and make an initial investment by wire, a completed application is required before your wire can be accepted. After a completed account application is received at one of the addresses listed above, you will receive an account number. Please be sure to inform your bank of this account number as part of the instructions. Your bank should transmit the funds by wire to: PNC Bank ABA #031000053 Credit: Matthews Asia Small Companies Fund Account: #8606905986 FBO: [your name and account number] Note that wire fees are charged by most banks.

When opening your account, the Fund follows identity verification procedures, outlined on page xx.

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Adding to an Account (Subsequent Investments)

Existing shareholders may purchase additional shares for all authorized accounts through the methods described below.

By Mail	Please send your personal check payable to Matthews Asian Funds and a statement stub indicating your fund(s) selection via: Regular Mail: Matthews Asian Funds P.O. Box 9791 Providence, RI 02940 Overnight Mail: Matthews Asian Funds 101 Sabin Street Pawtucket, RI 02860-1427
Online	As a first time user, you will need your Fund account number and your Social Security number to establish online account access. Visit matthewsfunds.com and select Account Login, where you will be able to create a login ID and password. Note: When you open your account, you must complete the Online Account Access section of the application to be able to use this feature.
Via Automatic Investment Plan	You may establish an Automatic Investment Plan when you open your account. To do so, please complete the Automatic Investment Plan section of the application. Additionally, you may establish an Automatic Investment Plan by completing an Automatic Investment Plan form or visiting matthewsfunds.com.
By Broker/Intermediary	You may contact your broker or intermediary, who may charge you a fee for their services.
By Wire	Please call us at 800-789-ASIA [2742] between 9:00 AM-7:00 PM, ET, Monday through Friday, and inform us that you will be wiring funds. Please also be sure to inform your bank of your Matthews account number as part of the instructions. Your bank should then transmit the funds by wire to: PNC Bank ABA #031000053 Credit: Matthews Asia Small Companies Fund Account: #8606905986 FBO: [your name and account number] Note that wire fees are charged by most banks.

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Exchanging Shares

You may exchange your shares of the Matthews Asia Small Companies Fund for shares of another Matthews Asian Fund, so long as you meet the investment minimum required for that Fund. However, you may not exchange into a closed fund unless you have an existing account in that Fund. If a Fund closes completely to new investors, exchanges into that Fund will not be permitted. Lastly, if you exchange your shares into another Fund, redemption fees apply.

You should read the prospectus for any new Fund in which you invest. You can obtain a prospectus for the other Matthews Asian Funds by calling 1-800-789-ASIA or by visiting matthewsfunds.com.To receive that day’s NAV, any request must be received by the close of regular trading on the NYSE that day (generally, 4:00 PM Eastern Time). Such exchanges may be made by telephone or online if you have so authorized on your application. Please see Telephone and Online Transactions on page xx, or call 800-789-ASIA [2742] for more information. Because excessive exchanges can harm a Fund’s performance, the exchange privilege may be terminated if the Fund believes it is in the best interest of all shareholders to do so.

In extreme circumstances, such as the imposition of capital controls that substantially limit repatriation of the proceeds of sales of portfolio holdings, the Fund may suspend shareholders’ exchange privileges for an indefinite period.

The Fund may reject for any reason, or cancel as permitted or required by law, any purchase or exchange at any time. Additionally, if any transaction is deemed to have the potential to adversely impact the Fund, the Fund reserves the right to, among other things, reject any exchange request or limit the amount of any exchange.

Selling (Redeeming) Shares

You may redeem shares on any day the NYSE is open for business. To receive a specific day’s NAV, your request must be received by the Fund’s agent before the close of regular trading on the NYSE that day (generally, 4:00 PM Eastern Time). If your request is received after the close of regular trading on the NYSE, you will receive the next NAV calculated.

In extreme circumstances, such as the imposition of capital controls that substantially limit repatriation of the proceeds of sales of portfolio holdings, the Fund may suspend shareholders’ redemption privileges for an indefinite period.

If you are redeeming shares recently purchased by check, the Fund may delay sending your redemption proceeds until your check has cleared. This may take up to 15 calendar days after we receive your check.

If any transaction is deemed to have the potential to adversely impact the Fund, the Fund reserves the right to, among other things, reject any exchange request, limit the amount of any exchange, or delay payment of immediate cash redemption proceeds for up to seven calendar days.

You may redeem your shares by telephone or online. Please see “Telephone and Online Transactions” below, or call 800-789-ASIA [2742] for more information.

Telephone and Online Transactions

Investors can establish new accounts online via matthewsfunds.com by selecting Open A New Account and following the instructions. Shareholders with existing accounts may purchase additional shares, or exchange or redeem shares, directly with the Fund by calling 800-789-ASIA [2742], or through an online order at the Fund’s website at matthewsfunds.com. To gain the ability to place orders online, complete the Online Account Access section of the New Account Application or make subsequent arrangements with the Fund in writing. Only bank accounts held at domestic institutions that are Automated Clearing House (ACH) members may be used for online transactions.

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Telephone or online orders to purchase or redeem shares of the Fund, if received in good order before 4:00 PM Eastern Time (your “placement date”), will ordinarily be processed at the Fund’s NAV calculated as of 4:00 PM Eastern Time on your placement date. Shareholders of IRAs and Coverdell ESAs accounts are not eligible for online or telephone redemptions, as well as shareholders who previously declined these privileges.

In times of extreme market conditions or heavy shareholder activity, you may have difficulty getting through to the Fund. If the Fund believes that it is in the best interest of all shareholders, it may modify or discontinue telephone and/or online transactions without notice.

The convenience of using telephone and/or online transactions may result in decreased security. The Fund employs certain security measures as it processes these transactions. If such security procedures are used, the Fund or its agents will not be responsible for any losses that you incur because of a fraudulent telephone or online transaction.

21

Selling (Redeeming) shares
BY MAIL	n Send a letter to the Fund via:
Regular Mail:	Matthews Asian Funds P.O. Box 9791 Providence, RI 02940
Overnight Delivery:	Matthews Asian Funds 101 Sabin Street Pawtucket, RI 02860-1427 The letter must include your name and account number, the name of the Fund, and the amount you want to sell in dollars or shares. This letter must be signed by each owner of the account. For security purposes, a medallion signature guarantee will be required if: n Your written request is for an amount over $100,000; or n The money is to be paid to anyone other than the registered owners; or n The money is to be sent to an address that is different from the registered address or to a bank account other than the account that was preauthorized.
BY PHONE	Call 800-789-ASIA [2742]. When you open your account you will automatically have the ability to exchange and redeem shares by telephone unless you specify otherwise on your New Account Application. Note: Redemption by phone is not available for retirement or education savings accounts.
BY WIRE	If you have wiring instructions already established on your account, contact us at 800-789-ASIA [2742] to request a redemption by wire. Please note that the Fund charges $9.00 for wire redemptions, in addition to a wire fee that may be charged by your bank. Note: When you opened your account you must have provided the wiring instructions for your bank with your application.* * If your account has already been opened, you may send us a written request to add wiring instructions to your account. Please complete the Banking Instructions Form available on matthewsfunds.com or call 800-789-ASIA [2742].
ONLINE	As a first time user, you will need your Fund account number and your Social Security number to establish online account access. Visit matthewsfunds.com and select Account Login, where you will be able to create a login ID and password. Note: When you open your account, you must complete the Online Account Access section of the application to be able to use this feature.
THROUGH A BROKER OR INTERMEDIARY	Contact your broker or intermediary, who may charge you a fee for their services.

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Market Timing Activities and Redemption Fees

The Fund’s Board of Trustees has adopted policies and procedures applicable to most purchases, exchanges and redemptions of Fund shares to discourage market timing by shareholders (the “Market Timing Procedures”). Market timing can harm other shareholders because it may dilute the value of their shares. Market timing may also disrupt the management of the Fund’s investment portfolio and cause the Fund to incur costs, which are borne by non-redeeming shareholders.

Because the Fund invests in overseas securities markets, and in the securities of small companies, it is particularly vulnerable to market timers who may take advantage of time zone differences between the close of the foreign markets on which the Fund’s portfolio securities trade and the U.S. markets that generally determine the time as of which the Fund’s NAV is calculated (this is sometimes referred to as “time zone arbitrage”).

The Fund generally deems an account to be engaged in market timing activity if that account habitually redeems or exchanges Fund shares within 90 calendar days after purchasing them. The Fund may also deem other types of trading activity to involve market timing. The Fund attempts to discourage, and does not accommodate, frequent purchases and redemptions (including exchanges) of Fund shares by investors who are or appear to be engaged in market timing activity. The Fund attempts to discourage market timing activity by reducing the opportunity for time zone arbitrage through the Fund’s pricing and fair valuation procedures (see Pricing of Fund Shares on page xx). In addition, the Fund attempts to identify market timers and terminate their ability to purchase or exchange shares of the Fund, and also imposes a redemption fee on certain short-term trading activity that appears to involve market timing. There is no assurance that the Fund’s Market Timing Procedures (including the procedures described below) or fair valuation procedures will be effective, or will successfully detect or deter market timing activity.

The Fund may reject for any reason, or cancel as permitted or required by law, any purchase or exchange, including transactions deemed to represent excessive trading, at any time.

Identification of Market Timers. The Fund has adopted procedures to identify transactions that appear to involve market timing. However, the Fund does not receive information on all transactions in its shares and may not be able to identify market timers. Moreover, investors may elect to invest in the Fund through one or more financial intermediaries that use a combined or omnibus account. Such accounts obscure, and may be used to facilitate, market timing transactions. The Fund or its agents request representations or other assurances related to compliance with the Market Timing Procedures from parties involved in the distribution of Fund shares and administration of shareholder accounts. In addition, the Fund has entered into agreements with intermediaries that permit the Fund to request greater information from intermediaries regarding transactions. These arrangements may assist the Fund in identifying market timing activities. However, the Fund will not always know of, or be able to detect, frequent trading (or other market timing activity).

Omnibus accounts, in which shares are held in the name of an intermediary on behalf of multiple investors, are a common form of holding shares among retirement plans and financial intermediaries such as brokers, investment advisers and third-party administrators. Individual trades in omnibus accounts are often not disclosed to the Fund, making it difficult to determine whether a particular shareholder is engaging in excessive trading. Excessive trading in omnibus accounts may not be detected by the Fund and may increase costs to the Fund and disrupt its portfolio management.

Under policies adopted by the Board of Trustees, the Fund may rely on intermediaries to apply the Fund’s Market Timing Procedures and, if applicable, their own similar policies. In these cases, the Fund will typically not request or receive individual account data but will rely on the intermediary to monitor trading activity in good faith in accordance with its or the Fund’s policies. Reliance on intermediaries increases the risk that excessive trading may go undetected. For some intermediaries, the Fund will generally monitor trading activity at the omnibus account level to attempt to identify disruptive trades. The Fund may request transaction information, as frequently as daily, from any intermediary at any time, and may apply the Fund’s Market Timing Procedures to such transactions. The Fund may prohibit purchases of Fund shares by an intermediary or request that the intermediary prohibit the purchase of the Fund’s shares by some or all of its clients. There is no assurance that the Fund will request data with sufficient frequency, or that the Fund’s analysis of such data will enable it to detect or deter market timing activity effectively.

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The Fund (or its agents) attempts to contact shareholders whom the Fund (or its agents) believes have violated the Market Timing Procedures and notify them that they will no longer be permitted to buy (or exchange) shares of the Fund. When a shareholder has purchased shares of the Fund through an intermediary, the Fund may not be able to notify the shareholder of a violation of the Fund’s policies or that the Fund has taken steps to address the situation (for example, the Fund may be unable to notify a shareholder that his or her privileges to purchase or exchange shares of the Fund have been terminated). Nonetheless, additional purchase and exchange orders for such investors will not be accepted by the Fund.

Many intermediaries have adopted their own market timing policies. These policies may result in a shareholder’s privileges to purchase or exchange the Fund’s shares being terminated or restricted independently of the Fund. Such actions may be based on other factors or standards that are different than or in addition to the Fund’s standards. For additional information, please contact your intermediary.

Redemption Fees. Market timing can disrupt the management of the Fund's investment portfolio and cause the Fund to incur costs, which are borne by non-redeeming shareholders. As part of its efforts to discourage market timing activity, the Fund attempts to allocate these costs, to the extent permissible, to redeeming shareholders through the assessment of a redemption fee of 2.00% of the total redemption proceeds. This fee is payable directly to the Fund.

For these purposes, the Fund deems most sales and exchanges of Fund shares taking place within 90 calendar days after purchase to involve market timing. To determine whether the redemption fee applies, the Fund does not count the day that you purchased your shares, and first redeems the shares that you have held the longest. The redemption fee does not apply to shares purchased through reinvested dividends or capital gains. If you purchase shares through an intermediary, consult your intermediary to determine how the 90-calendar-day holding period will be applied.

A redemption fee will be assessed on any exchange of your shares from the Fund to any other Matthews Asian Fund within 90 days of purchase. In addition, following an exchange, the 90-calendar-day holding period begins anew. Occasionally, when accounts are transferred from one intermediary to another, shares may not be properly aged within the new account. If you believe you have been charged a redemption fee in error, please contact your financial intermediary or Matthews Asian Funds at 800-789-ASIA [2742].

The Fund may grant exemptions from the redemption fee where the Fund has previously received assurances (that it in its discretion deems to be appropriate in the circumstances) that transactions to be entered into by an account will not involve market timing activity. Types of accounts that may be considered for this exemption include asset allocation programs that offer automatic re-balancing; wrap-fee accounts, or similar types of accounts or programs; and certain types of 401(k) or other retirement accounts that provide default investment options. The Fund may also waive the imposition of redemption fees in cases of death and otherwise where the Fund, in its discretion, believes it is appropriate in the circumstances.

The Fund will attempt to monitor aggregate trading activity of transactions in accounts for which an exemption has been granted to attempt to identify activity that may involve market timing. In the event that the Fund believes it has identified such activity, it will take appropriate action, which may include revoking the exemption, heightened monitoring and termination of the privilege of purchasing or exchanging shares of the Fund.

The Fund reserves the right at any time to restrict purchases or exchanges or impose conditions that are more restrictive on excessive or disruptive trading than those stated in this prospectus. The Fund reserves the right to modify or eliminate the redemption fee at any time, without notice to shareholders. You will receive notice of any material changes to the Fund’s redemption fee policies.

24

Redemption in Kind

Under certain circumstances, you could receive your redemption proceeds as a combination of cash and securities. Receiving securities instead of cash is called “redemption in kind.” Note that if you receive securities as well, you will incur transaction charges if you sell them.

Signature Guarantees

The Fund requires a medallion signature guarantee on any written redemption over $100,000 (but may require additional documentation or a medallion signature guarantee on any redemption request to help protect against fraud); the redemption of corporate, partnership or fiduciary accounts; or for certain types of transfer requests or account registration changes. A medallion signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency, savings association or other financial institution that is participating in a medallion program recognized by the Securities Transfer Association. The three “recognized” medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP), and NYSE, Inc. Medallion Signature Program (NYSE MSP). Please call 800-789-ASIA [2742] for information on obtaining a signature guarantee.

Other Shareholder Information

Disclosure of Portfolio Holdings

A description of the Fund’s policies and procedures with respect to the disclosure of the Fund’s portfolio securities is available in the Fund’s Statement of Additional Information, which is available on the Matthews Asian Funds website at matthewsfunds.com.

Minimum Size of an Account

The Fund reserves the right to redeem small accounts (excluding IRAs) that fall below $2,500 due to redemption activity. If this happens to your account, you may receive a letter from the Fund giving you the option of investing more money into your account or closing it. Accounts that fall below $2,500 due to market volatility will not be affected.

Additional Information about Shareholder Servicing

The operating expenses of the Fund include the cost of maintaining shareholder accounts, generating shareholder statements, providing taxpayer information, and performing related servicing generally known as "sub-transfer agency" or "shareholder servicing." For shareholders who open accounts directly, PFPC Inc. ("PFPC") performs these services as part of the various services it provides to the Fund under an agreement between the Fund and PFPC. For shareholders who purchase shares through a broker or other financial intermediary, some or all of these services may be performed by that intermediary. For performing these services, the intermediary seeks compensation from the Fund or Matthews. In some cases, the services for which compensation is sought may be bundled with services not related to shareholder servicing, and may include distribution fees. The Board of Trustees has made a reasonable allocation of the portion of bundled fees, and Matthews pays from its own resources that portion of the fees that the Board of Trustees determines may represent compensation to intermediaries for distribution services.

Other Compensation to Intermediaries

Matthews, out of its own resources and without additional cost to the Fund or its shareholders, may provide additional cash payments or non-cash compensation to intermediaries who sell shares of the Fund. Such payments and compensation are in addition to service fees or sub-transfer agency fees paid by the Fund. The level of payments will vary for each particular intermediary. These additional cash payments generally represent some or all of the following: (a) payments to intermediaries to help defray the costs incurred to educate and train personnel about the Fund; (b) marketing support fees for providing assistance in promoting the sale of Fund shares; (c) access to sales meetings, sales representatives and management representatives of the intermediary; and (d) inclusion of the Fund on the sales list, including a preferred or select sales list, or other sales program of the intermediary. A number of factors will be considered in determining the level of payments, including the intermediary’s sales, assets and redemption rates, as well as the nature and quality of the intermediary’s relationship with Matthews. Aggregate payments may change from year to year and Matthews will, on an annual basis, determine the advisability of continuing these payments. Shareholders who purchase or hold shares through an intermediary may inquire about such payments from that intermediary.

25

Distributions

The Fund intends to distribute its net investment income once annually in 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. All such distributions are reinvested automatically in additional shares at the current NAV, unless you elect to receive them in cash. If you hold the shares directly with the Fund, the manner in which you receive distributions may be changed at any time by writing to the Fund.

Any check in payment of dividends or other distributions that cannot be delivered by the post office or that remains uncashed for a period of more than one year will be reinvested in your account.

Distributions are treated the same for tax purposes whether received in cash or reinvested. If you buy shares when the Fund has realized but not yet distributed ordinary income or capital gains, you will be “buying a dividend” by paying the full price of the shares and then receiving a portion of the price back in the form of a taxable dividend.

Taxes

This section only summarizes some income tax considerations that may affect your investment in the Fund. You are urged to consult your tax advisor regarding the effects of an investment on your tax situation. An investment in the Fund has certain tax consequences, depending on the type of account that you have. 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. Distributions declared in October, November or December and paid the following January are taxable as if they were paid on December 31.

The exchange of your shares of the Fund to another Matthews Asian Fund is a “taxable event,” which means that if you have a gain, you may be obligated to pay tax on it. If you have a qualified retirement account, taxes are generally deferred until distributions are made from the retirement account.

Part of a distribution may include realized capital gains, which may be taxed at different rates depending on how long the Fund has held specific securities.

Make sure you have an accurate Social Security number or taxpayer I.D. number on file with the Fund. If you do not, you may be subject to backup withholding on your distributions.

Speak with your tax advisor concerning state and local tax laws, which may produce different consequences than those under federal income tax laws.

In addition, the Fund may be subject to short-term capital gains tax in India on gains realized upon disposition of Indian securities held less than one year. The tax is computed on net realized gains; any realized losses in excess of gains may be carried forward for a period of up to eight years to offset future gains. Any net taxes payable must be remitted to the Indian government prior to repatriation of sales proceeds. The Fund accrues a deferred tax liability for net unrealized short-term gains in excess of available carryforwards on Indian securities. This accrual may reduce the Fund’s net asset value.

26

General Information

Identity Verification Procedures Notice

The USA PATRIOT Act requires financial institutions, including mutual funds, to adopt certain policies and programs to prevent money laundering activities, including procedures to verify the identity of customers opening new accounts. When completing the New Account Application, you will be required to supply the Fund with information, such as your taxpayer identification number, that will assist the Fund in verifying your identity. Until such verification is made, the Fund may temporarily limit additional share purchases. In addition, the Fund may limit additional share purchases or close an account if it is unable to verify a customer's identity. As required by law, the Fund may employ various procedures, such as comparing the information to fraud databases or requesting additional information or documentation from you, to ensure that the information supplied by you is correct. Your information will be handled by us as discussed in our Privacy Statement on page xx.

Shareholder Reports

The Fund provides an annual report (audited by independent accountants), a semi-annual report and two quarterly reports. These reports contain a discussion of the market conditions and investment strategies that significantly affected the Fund’s performance during its reporting period. To reduce the Fund’s expenses, we try to identify related shareholders in a household and send only one copy of the Fund’s prospectus and financial reports to that address. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. At any time you may view the Fund’s current prospectus and financial reports on our website. If you prefer to receive individual copies of the Fund’s prospectus or financial reports, please call us at 1-800-789-ASIA [2742].

Statement of Additional Information (SAI)

The Statement of Additional Information, which is incorporated into this prospectus by reference and dated September 1, 2008, is available to you without charge. It contains more-detailed information about the Fund.

How to Obtain Additional Information

CONTACTING MATTHEWS ASIAN FUNDS

You can obtain free copies of the publications described by visiting the Fund’s website atmatthewsfunds.com. To request additional information or to speak to a representative of the Fund, contact the Fund at:

Matthews Asian Funds

P.O. Box 9791

Providence, RI 02940

800-789-ASIA [2742]

OBTAINING INFORMATION FROM THE SEC

You can visit the SEC’s website atsec.gov to view the SAI and other information. You can also view and copy information about the Fund at the SEC’s Public Reference Room in Washington, D.C. Also, you can obtain copies of this information by sending your request and duplication fee to: SEC Public Reference Room, Washington, D.C. 20549-0102. To find out more about the Public Reference Room, call the SEC at800-SEC-0330. You may also e-mail the SEC atpublicinfo@sec.gov to obtain additional information about the Fund.

27

[Not part of the prospectus]

Privacy Statement

Matthews Asian Funds will never sell or share your personal information with other companies. While it is necessary for us to collect certain non-public personal information about you when you open an account (such as your address and Social Security number), we protect this information and use it only for communication purposes or to assist us in providing the information and services necessary to address your financial needs. We respect your privacy and are committed to ensuring that it is maintained.

As permitted by law, it is sometimes necessary for us to share your information with companies that perform administrative or marketing services on our behalf, such as transfer agents and/or mail facilities that assist us in shareholder servicing or distribution of investor materials. These companies will use this information only for the services for which we hired them and are not permitted to use or share this information for any other purpose.

We restrict access to non-public personal information about you to those employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards that comply with federal standards to protect your personal information.

When using Matthews Asian Fund’s Online Account Access, you will be required to provide personal information to gain access to your account. For your protection, the login screen resides on a secure server.

28

INVESTMENT ADVISOR

Matthews International Capital Management, LLC

800-789-ASIA [2742]

UNDERWRITER

PFPC Distributors, Inc.

760 Moore Road

King of Prussia, PA 19406

ACCOUNT SERVICES

PFPC Inc.

P.O. Box 9791

Providence, RI 02940

800-789-ASIA [2742]

Shareholder Service Representatives are available from 9:00 AM to 7:00 PM ET, Monday through Friday.

For additional information about

Matthews Asian Funds:

matthewsfunds.com

800-789-ASIA [2742]

Matthews Asian Funds

P.O. Box 9791

Providence, RI 02940

Investment Company Act File Number: 811-08510

Distributed by PFPC Distributors, Inc.

29

Matthews Asian Funds

PFPC Inc.

P.O. Box 9791

Providence, RI 02940

800-789-ASIA [2742]

matthewsfunds.com

30

MATTHEWS INTERNATIONAL FUNDS

(d/b/a MATTHEWS ASIAN FUNDS)

MATTHEWSFUNDS.COM

MATTHEWS ASIA SMALL COMPANIES FUND

STATEMENT OF ADDITIONAL INFORMATION

September __, 2008

This Statement of Additional Information (“SAI”) is not a Prospectus and should be read in conjunction with the current Prospectus of the Matthews Asia Small Companies Fund (the “Fund”) dated September 1, 2008. The Fund’s Prospectus, which is incorporated herein by reference, may be obtained without charge at MATTHEWSFUNDS.COM or by contacting a Fund representative at:

Matthews Asian Funds

P.O. Box 9791

Providence, RI 02940

(800) 789-ASIA [2742]

No person has been authorized to give any information or to make any representations not contained in this SAI 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 Fund or its Underwriter. The Prospectus does not constitute an offering by the Fund or by the Underwriter in any jurisdiction in which such offering may not lawfully be made.

The information in this Statement of Additional Information is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated June 18, 2008

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Page 1 of 52

TABLE OF CONTENTS	PAGE
Fund History	3
Investment Objective	3
Investment Process	3
Risks of Investment	5
Risks of Foreign Investment	5
Risks Associated with Emerging Markets	6
Risks Associated with Foreign Currency	7
Risks Associated with Securities Rated Below Investment Grade	8
Risks Associated with Investing in Technology Companies	9
Risks of investing in Foreign Countries	9
Additional Investment Strategies	12
Fund Policies	22
Temporary Defensive Position	23
Portfolio Turnover	24
Disclosure of Portfolio Holdings	24
Management of the Funds	25
Shareholders’ Voting Powers	30
Approval of Investment Advisory Agreement	30
Compensation	30
Code of Ethics	31
Proxy Voting Policies and Procedures	31
Control Persons and Principal Holders of Securities	32
Investment Advisory and Other Service Providers	33
Brokerage Allocation and Other Practices	39
Shares of Beneficial Interest	40
Purchase, Redemption and Pricing of Shares	40
Purchase of Shares	40
Determination of Net Asset Value	40
Redemption Fees	42
Redemption in Kind	43
Equalization	43
Equalization	43
Dividends and Distributions	43
Taxation of the Trust	44
In General	44
Taxes Regarding Options, Futures and Foreign Currency Transactions	45
Other Foreign Tax Issues	46
Other Information	47
Reports to Shareholders	47
Appendix: Bond Ratings	48

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Page 2 of 52

Fund History

Matthews International Funds (d/b/a Matthews Asian Funds) (the “Trust”), Four Embarcadero Center, Suite 550, San Francisco, California 94111, is a family of mutual funds currently offering the Fund as well as nine other separate series of shares (collectively, the “Funds”).

Description of the Fund

Please read the following information together with the information contained in the Prospectus (dated September __, 2008) concerning the investment strategies, risks and policies of the Fund. The information in this SAI supplements the information in the Prospectus.

The Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust was organized as a Delaware statutory (business) trust on April 13, 1994 and commenced operations on September 12, 1994. It has never been engaged in any other business. The Fund is “diversified”, which means that at least 75% of the value of the Fund’s total assets must be comprised of (i) cash and cash items, (ii) securities issued or guaranteed by the U.S. government, its agencies or instrumentalities, (iii) securities of other investment companies, or (iv) other securities, provided that no more than 5% of the value of the Fund’s total assets are invested in the securities of a single issuer and the Fund does not own more than 10% of the outstanding voting securities of a single issuer. The remaining 25% of the value of the Fund’s total assets may be invested in a single issuer, or in multiple issuers not subject to the above limitations.

The Fund has elected and intends to continue to qualify to be treated as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Such qualification relieves the Fund of liability for federal income taxes to the extent the Fund’s earnings are distributed in accordance with the Code. To so qualify, among other requirements, the Fund 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 Fund’s 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.

Investment Objective

The investment objective of the Fund is to seek long-term capital appreciation.

Investment Process

Matthews International Capital Management, LLC (“Matthews”) is the investment advisor to the Fund. Matthews invests in Asia based on its assessment of the future development and growth prospects of companies located in that region. Matthews believes that the region’s countries are on paths toward economic development and, in general, deregulation and greater openness to market forces. Matthews believes in the potential for these economies, and believes that the intersection of development and deregulation will create opportunities for further growth. Matthews attempts to capitalize on its beliefs by investing in companies it considers to be well-positioned to participate in the region’s economic evolution. Matthews uses a range of approaches to participate in the growth of Asia to suit clients’ differing needs and investment objectives.

Matthews researches the fundamental characteristics of individual companies to help to understand the foundation of a company’s long-term growth, and to assess whether it is generally consistent with Matthews’ expectations for the region’s economic evolution. Matthews evaluates potential portfolio holdings on the basis of their individual merits, and invests in those companies that it believes are positioned to help the Fund achieve its investment objective.

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Matthews has long-term investment goals and its process aims to identify potential portfolio investments that can be held over an indefinite time horizon. Matthews regularly tests its beliefs and adjusts portfolio holdings in light of prevailing market conditions and other factors, including, among other things, economic, political or market events (e.g., changes in credit conditions or military action), changes in relative valuations (to both a company’s growth prospects and to other issuers), liquidity requirements and management malfeasance or other unethical conduct.

The Fund invests where Matthews believes the potential for capital growth exists and in companies that it believes have demonstrated the ability to anticipate and adapt to changing markets.

Equity securities, in which the Fund may invest, include common stocks, preferred stocks, warrants, and securities convertible into common or preferred stocks, such as convertible bonds and debentures.

The Fund may invest up to 20% of its total assets in non-convertible bonds and other debt securities, including securities issued by government entities and their political subdivisions.

The Fund may invest in securities of issuers of various sizes. 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 and may lack depth of management. Smaller companies may have less certain growth prospects, and be more sensitive to changing economic conditions than larger, more established companies. The Fund may have more difficulty obtaining information about smaller portfolio companies, or valuing or disposing of their securities, than it would if it focused on larger, more well-known companies. Transaction costs in stocks of smaller capitalization companies may be higher than those of larger capitalization companies.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 markets in general, and can react differently to political, market and economic developments than these companies or markets.

The Fund may invest in debt securities, including convertible debt securities, debt securities rated below investment grade, as well as unrated securities that have been deemed by Matthews to be of similar credit quality. Securities rated below investment grade (and unrated securities of comparable quality as determined by Matthews) are sometimes referred to as “high yield securities” or “junk bonds.” High yield securities involve a greater risk of loss of principal and interest (see “Risks Associated with Securities Rated Below Investment Grade”). There is no objective standard against which Matthews may evaluate the credit and other risks of unrated securities. Matthews seeks to minimize the risks of investing in unrated and 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 Fund, Matthews may assess the following factors, among others:

· Potential for capital appreciation;

· Price of security relative to price of underlying stock, if a convertible security;

· Yield of security relative to yield of other fixed-income securities;

· Interest or dividend income;

· Call and/or put features;

· Creditworthiness;

· Price of security relative to price of other comparable securities

· Size of issue;

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Page 4 of 52

· Currency of issue; and

· Impact of security on diversification of the portfolios.

The Fund may also invest in securities of foreign issuers in the form of American Depositary Receipts (“ADRs”), European Depositary Receipts (“EDRs”) and International Depositary Receipts (“IDRs”), also known as Global Depositary Receipts (“GDRs”). Generally, ADRs in registered form are U.S. dollar-denominated securities designed for use in the U.S. securities markets, which may be converted into an underlying foreign security. ADRs represent the right to receive securities of foreign issuers deposited in the domestic bank or correspondent bank. ADRs do not eliminate all the risks inherent in investing in the securities of foreign issuers. The Fund may also invest in 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.

IDRs and GDRs 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 some represent bonds, commercial paper and certificates of deposit. Some IDRs may be convertible to ADRs, making them particularly useful for arbitrage between the markets.

The Fund may purchase securities on a “when-issued” basis and may purchase or sell securities on a “forward commitment” basis. Such transactions may act as a hedge against anticipated changes in interest rates and prices.

Risks of Investment

All investments involve risk and there can be no guarantee against loss resulting from an investment in the Fund, nor can there be any assurance that the Fund’s investment objective will be attained. Below is supplemental information about risks of investing in the Fund. Further information about the principal risks of investing in the Fund can be found in the Fund’s Prospectus.

Political, Social and Economic Risks

The value of the Fund’s assets may be adversely affected by political, economic, social and religious factors, inadequate investor protection, changes in the laws or regulations of the countries in which it invests and the status of these country’s relations with other countries. In addition, the economies of these countries may differ favorably or unfavorably from the U.S. economy in respects such as the rate of growth of gross domestic product, the rate of inflation, capital reinvestment, resource self-sufficiency, balance of payments position and sensitivity to changes in global trade. Agriculture frequently occupies a more prominent position in the economy of these countries than in the United States, and therefore they may be more susceptible to adverse changes in climate, weather or natural disasters. Some countries have limited natural resources (such as oil), resulting in dependence on foreign sources for certain raw materials and vulnerability to global fluctuations of price and supply.

In many other countries, the government has exercised and continues to exercise significant influence over many aspects of the economy, and the number of public sector enterprises in these countries is substantial. Accordingly, government actions in these countries in the future could have a significant effect on the economy of these countries, which could affect private sector companies and the Fund, market conditions, and prices and yields of securities in the Fund’s portfolio.

Risks Associated with Emerging Markets

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Many Asian countries are considered to be developing or emerging economies and markets. The risks of investment in such markets include (i) less social, political, and economic stability; (ii) the smaller size of the securities markets and the lower volume of trading, which may result in a lack of liquidity and in greater price volatility; (iii) certain national policies that may restrict the Fund’s 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 Fund’s loss of its entire investment in that market; (iv) less developed legal and regulatory structures governing private or foreign investment or allowing for judicial redress for injury to private property; (v) inaccurate, incomplete or misleading financial information on companies in which the Fund invests; (vi) securities of companies may trade at prices not consistent with traditional valuation measures; and (vii) limitations on foreign ownership, which may impact the price of a security purchased or held by the Fund.

Many developing countries in which the Fund invests lack the social, political and economic stability characteristic of the United States. Political instability among emerging markets countries can be common and may be caused by an uneven distribution of wealth, social unrest, labor strikes, civil wars and religious oppression. Economic instability in emerging markets countries may take the form of (i) high interest rates, (ii) high levels of inflation, including hyperinflation, (iii) high levels of unemployment or underemployment, (iv) changes in government economic and tax policies, including confiscatory taxation, and (v) imposition of trade barriers.

Stock exchanges in emerging markets have in the past experienced substantial fluctuations in the prices of their listed securities. They have also experienced problems such as temporary exchange closures, broker defaults, settlement delays and broker strikes that, if they occur again in the future, could affect the market price and liquidity of the securities in which the Fund invests. In addition, the governing bodies of certain stock exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Disputes have also occurred from time to time among listed companies, the stock exchanges and other regulatory bodies, and in some cases those disputes have had a negative effect on overall market sentiment. There have been delays and errors in share allotments relating to initial public offerings, which in turn affect overall market sentiment and lead to fluctuations in the market prices of the securities of those companies and others in which the Fund may invest.

In the past, governments within the emerging markets have become overly reliant on the international capital markets and other forms of foreign credit to finance public spending programs that cause large deficits. Often, interest payments have become too burdensome for the government to meet, representing a large percentage of total GDP. These foreign obligations then become the subject of political debate with the opposition parties pressuring the government to use its funds for social programs rather than making payments to foreign creditors. Either due to an inability to pay or submission to political pressure, foreign governments have been forced to seek a restructuring of their loan and/or bond obligations or have declared a temporary suspension of interest payments or have defaulted. These events have adversely affected the values of securities issued by foreign governments and companies in emerging markets countries and have negatively impacted not only their cost of borrowing, but their ability to borrow in the future as well.

In addition, brokerage commissions, custodian services, withholding taxes, and other costs relating to investment in foreign markets may be more expensive than in the United States. The operating expense ratio of the Fund may be expected to be higher than that of a fund investing primarily in the securities of U.S. issuers.

Many emerging markets countries suffer from uncertainty and corruption in their legal frameworks. Legislation may be difficult to interpret and laws may be too new to provide any precedential value. Laws regarding foreign investment and private property may be weak or non-existent. Sudden changes in governments may result in policies that are less favorable to investors, such as policies designed to expropriate or nationalize “sovereign” assets. Certain emerging markets countries in the past have expropriated large amounts of private property, in many cases with little or no compensation, and there can be no assurance that such expropriation will not occur in the future.

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Legal principles relating to corporate affairs and the validity of corporate procedures, directors’ fiduciary duties and liabilities and shareholders’ rights may differ from those that may apply in the United States and other more developed countries. Shareholders’ rights may not be as extensive as those that exist under the laws of the United States and other more developed countries. The Fund may therefore have more difficulty asserting shareholder rights than it would as a shareholder of a comparable U.S. company.

Disclosure and regulatory standards of emerging market countries are in many respects less stringent than U.S. standards. Issuers are subject to accounting, auditing and financial standards and requirements that differ, in some cases significantly, from those applicable to issuers in the United States or other more developed countries. In particular, the assets and profits appearing on the financial statements of an issuer may not reflect its financial position or results of operations in the way they would be reflected had such financial statements been prepared in accordance with U.S. or European generally accepted accounting principles. There is substantially less publicly available information about emerging market issuers than there is about U.S. issuers.

Risks Associated with Foreign Currency

Currencies of emerging markets countries are subject to significantly greater risks than currencies of developed countries. Many emerging markets countries have experienced steady declines or sudden devaluations of their currencies relative to the U.S. dollar. Some emerging markets currencies may not be internationally traded or may be subject to strict controls by local governments, resulting in undervalued or overvalued currencies. Some emerging markets countries have experienced deficits and shortages in foreign exchange reserves. Governments have responded by restricting currency conversions, foreign investments or the repatriation of foreign investments. Future restrictive exchange controls could prevent or restrict the ability of an issuer in such market to make dividend or interest payments in the original currency of the obligation. In addition, even though the currencies of some emerging markets countries may be convertible into U.S. dollars, the conversion rates may not reflect their market values.

The U.S. dollar value of the Fund’s investments and of dividends and interest earned by the Fund may be significantly affected by changes in currency exchange rates. The value of the Fund’s 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 Fund may engage in currency transactions, Matthews does not currently intend to actively manage currency exchange rate risks. Should Matthews do so, there is no assurance that it will do so at an appropriate time or that it will be able to predict exchange rates accurately. For example, if the Fund increases its exposure to a currency and that currency’s price subsequently falls, such currency management may result in increased losses to the Fund. Similarly, if the Fund decreases its exposure to a currency and the currency’s price rises, the Fund will lose the opportunity to participate in the currency’s appreciation. Some currency prices may be volatile, and there is the possibility of government controls on currency exchange or government intervention in currency markets, which could adversely affect the Fund. Foreign investments, which are not U.S. dollar-denominated, may require the Fund 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.

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Dividends and interest received by the Fund with respect to foreign securities may give rise to withholding and other taxes imposed by foreign countries. Tax treaties between certain countries and the U.S. may reduce or eliminate such taxes. In addition, many foreign countries do not impose taxes on capital gains with respect to investments by non-resident investors.

The Fund may invest in convertible debt securities, which may be denominated in U.S. dollars, local or other currencies. The value of convertible securities varies with a number of factors including the value and volatility of the underlying stock, the level and volatility of interest rates, the passage of time, dividend policy and other variables. Investing in a convertible security denominated in a currency different from that of the security into which it is convertible may expose the Fund to currency risk as well as risks associated with the level and volatility of the foreign exchange rate between the security’s currency and the underlying stock’s currency.

Risks Associated with Securities Rated Below Investment Grade

In this SAI, references are made to credit ratings of debt securities, which measure an issuer’s expected ability to pay principal and interest over time. Credit ratings are determined by rating organizations, such as Moody’s, S&P or Fitch. The following terms are generally used to describe the credit quality of debt securities depending on the security’s credit rating or, if unrated, credit quality as determined by Matthews:

· High quality

· Investment grade

· Below investment grade (“high yield securities” or “junk bonds”)

For a further description of credit ratings, see “Appendix: Bond Ratings.” As noted in the Appendix, Moody’s, S&P and Fitch may modify their ratings of securities to show relative standing within a rating category, with the addition of numerical modifiers (1, 2 or 3) in the case of Moody’s, and with the addition of a plus (+) or minus (-) sign in the case of S&P or Fitch. The Fund may purchase a security, regardless of any rating modification, provided the security is rated at or above the Fund’s minimum rating category. For example, the Fund may purchase a security rated B3 by Moody’s, B- by S&P, or B- by Fitch, provided the Fund may purchase securities rated B.

The Fund may invest up to 15% of its total assets in securities rated below investment grade (securities rated BBB or below by S&P or Fitch, Baa or below by Moody’s or, if unrated, are of comparable quality in the judgment of Matthews). Securities rated BBB by S&P or Fitch, or Baa by Moody’s are considered to have speculative characteristics. Debt securities rated below investment grade, commonly referred to as “junk bonds,” are considered to be of poor standing and have speculative characteristics that result in a greater risk of loss of principal and interest. There can be no assurance that the Fund 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 the Fund, especially in a thinly-traded foreign market.

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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, the 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 Fund, especially in a thinly-traded market.

The credit ratings of S&P, Fitch and Moody’s are evaluations of the safety of principal and interest payments, not market value risk, of lower-rated securities. 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, Matthews may perform its own analysis of issuers in selecting investments for the Fund. Matthews’ analysis of issuers may include, among other things, historic and current financial condition and current and anticipated cash flows.

Risks Associated with Investing in Technology Companies

The Fund may invest in securities of technology companies. Such companies may be affected by rapid product changes and associated developments. Technology companies also face the risks that new services, equipment or technologies will not be accepted by consumers or businesses or will become rapidly obsolete. Technology companies are subject to greater competitive pressures, such as new market entrants, aggressive pricing and competition for market share, and potential for falling profit margins. As a result, the price movements of technology company stocks can be abrupt or erratic (especially over the short term), and historically have been more volatile than stocks of other types of companies. These factors may also affect the profitability of technology companies and, as a result, the value of their securities. As a result, the net asset value of the Fund may be more volatile, especially over the short term.

Risks of investing in Foreign Countries

The Fund may invest in companies from different countries. In addition, the Fund may invest up to 20% of its total assets in securities located outside of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam. Such investments by the Fund may be in the securities of companies from any country, including the United States. Each country’s size, level of economic development, and economic and political stability will have an impact on the value of those companies.

Risks Associated with China

The Fund may hold securities listed on the Shanghai and/or Shenzhen stock exchanges. Securities listed on these exchanges are divided into two classes: A shares, which are mostly limited to domestic investors, and B shares, which are allocated for both international and domestic investors. The Fund’s exposure to securities listed on either the Shanghai or Shenzhen exchanges is currently through B shares. The government of China has announced plans to exchange B shares for A shares and to merge the two markets. Such an event may produce greater liquidity and stability for the combined markets. However, it is uncertain whether or the extent to which these plans will be implemented. In addition to B shares, the Fund may also invest in Hong Kong listed H shares, Hong Kong listed Red Chips (which are companies owned by mainland China enterprises, but are listed in Hong Kong), and companies with a significant amount of their revenues derived from business conducted in China (regardless of the exchange on which the security is listed or the country in which the company is based).

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Risks Associated with Taiwan

The political reunification of China and Taiwan, over which China continues to claim sovereignty, is a highly problematic issue and is unlikely to be settled in the near future. Continuing hostility between China and Taiwan may have an adverse impact on the values of the Fund’s investments in either China or Taiwan, or make investment in China and Taiwan impracticable or impossible. Any escalation of hostility between China and Taiwan would likely distort Taiwan’s capital accounts, as well as have a significant adverse impact on the value of the Fund’s investments in both countries, and in other countries in the region.

Taiwan has in the past shown an ability to prosper in a competitive environment on the strength of product quality, efficiency and responsiveness to market demand. This ability will continue to be tested in the future as, in addition to protectionist threats, Taiwan’s export economy faces competition from producers in other countries with lower wage levels than those generally prevailing in Taiwan. Skilled workers and technical personnel are still relatively inexpensive, but unskilled labor is in increasingly short supply. Recognizing the imperatives of the more competitive Asian economy, the Taiwanese government is seeking to develop Taiwan into a regional hub for high-end manufacturing, sea and air transportation, finance, telecommunications and media. Taiwan is seeking to develop further as a service-oriented economy rather than a labor-intensive, manufacturing-oriented one. One result of the movement of industrial capacity offshore has been the reduction of the labor shortage in manufacturing.

Risks Associated with India

Foreign investment in the securities of issuers in India is usually restricted or controlled to some degree. In India, “Foreign Institutional Investors” (“FIIs”) may predominately invest in exchange-traded securities (and securities to be listed, or those approved on the over-the-counter market of India) subject to the conditions specified in the guidelines for Direct Foreign Investment by FIIs in India (the “Guidelines”) published in a Press Note dated September 14, 1992, issued by the Government of India, Ministry of Finance, Investment Division. FIIs have to apply for registration to the Securities and Exchange Board of India (“SEBI”) and to the Reserve Bank of India for permission to trade in Indian securities. The Guidelines require SEBI to take into account the track record of the FII, its professional competence, financial soundness, experience and other relevant criteria. SEBI must also be satisfied that suitable custodial arrangements are in place for the Indian securities. Although the Trust is a registered FII, it must still seek renewal of this status every five years, for which there can be no guarantee that regulatory approval will be forthcoming. FIIs are required to observe certain investment restrictions, including an ownership ceiling on the total issued share capital of any one company of: (1) 10% for an FII in aggregate; and (2) 10% for each sub-account or 5% for sub-accounts registered under the Foreign Companies/Individual category. In addition, the shareholdings of all registered FIIs, together with the shareholdings of non-resident Indian individuals and foreign corporate bodies substantially owned by non-resident Indians, may not exceed 40% of the issued share capital of most companies. It is possible that this restriction could be raised or potentially lifted, subject to that company’s approval. Only registered FIIs and non-Indian mutual funds that comply with certain statutory conditions may make direct portfolio investments in exchange-traded Indian securities. Under normal circumstances, income, gains and initial capital with respect to such investments are freely repatriable, subject to payment or withholding of applicable Indian taxes. Please see “Exchange Controls and the Ability to Repatriate Investments” below and also “Other Foreign Tax Issues” on page xx. There can be no assurance that these investment control regimes will not change in a way that makes it more difficult or impossible for the Fund to reach its investment objectives or repatriate its income, gains and initial capital from India.

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A high proportion of the shares of many Indian issuers are held by a limited number of persons or entities, which may limit the number of shares available for investment by the Fund. In addition, further issuances, or the perception that such issuances may occur, of securities by Indian issuers in which the Fund has invested could dilute the earnings per share of the Fund’s investment and could adversely affect the market price of such securities. Sales of securities by such issuer’s major shareholders, or the perception that such sales may occur, may also significantly and adversely affect the market price of such securities and, in turn, the Fund’s investment. A limited number of issuers represent a disproportionately large percentage of market capitalization and trading value. The limited liquidity of the Indian securities markets may also affect the Fund’s ability to acquire or dispose of securities at the price and time that it desires.

The ability of the Fund to invest in Indian securities, exchange Indian rupees into U.S. dollars and repatriate investment income, capital and proceeds of sales realized from its investments in Indian securities is subject to the Indian Foreign Exchange Management Act, 1999, and the rules, regulations and notifications issued thereunder. There can be no assurance that the Indian government in the future, whether for purposes of managing its balance of payments or for other reasons, will not impose restrictions on foreign capital remittances abroad or otherwise modify the exchange control regime applicable to foreign institutional investors in such a way that may adversely affect the ability of the Fund to repatriate its income and capital.Such a condition may prompt the Board of Trustees to suspend redemptions for an indefinite period. If for any reason the Fund is unable, through borrowing or otherwise, to distribute an amount equal to substantially all of its investment company taxable income (as defined for U.S. tax purposes, without regard to the deduction for dividends paid) within the applicable time periods, the Fund would cease to qualify for the favorable tax treatment afforded to regulated investment companies under the U.S. Internal Revenue Code.

Religious and border disputes persist in India. Moreover, India has from time to time experienced civil unrest and hostilities with neighboring countries such as Pakistan. Both India and Pakistan have tested nuclear arms, and the threat of deployment of such weapons could hinder development of the Indian economy and escalating tensions could impact the broader region. The Indian government has confronted separatist movements in several Indian states. The longstanding dispute with Pakistan over the bordering Indian state of Jammu and Kashmir, a majority of whose population is Muslim, remains unresolved. If the Indian government is unable to control the violence and disruption associated with these tensions, the results could destabilize the economy and, consequently, adversely affect the Fund’s investments.

Risks Associated with South Korea

The South Korean government has historically imposed significant restrictions and controls for foreign investors. As a result, the Fund may be limited in its investments or precluded from investing in certain South 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 South Korean Stock Exchange (“KSE”). From time to time, many of the securities trade among non-South 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 South 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 premiums 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 Fund’s Valuation Committee under the supervision of the Board of Trustees.

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Investments by the Fund in the securities of South Korean issuers may involve investment risks different from those of U.S. issuers, including possible political, economic or social instability in South Korea, and by changes in South 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 South 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 South Korean company than about a domestic company. Brokers in South Korea may not be as well capitalized as those in the U.S., so that they may be more susceptible to financial failure in times of market, political, or economic stress. Additionally, South 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 South 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 South Korea.

The Fund does not intend to engage in activities that it believes would create a permanent establishment in South Korea within the meaning of the South Korea-U.S. Tax Treaty. Therefore, the Fund generally will not be subject to any South Korean income taxes other than South Korean withholding taxes. Exemption or reductions in these taxes apply if the South Korea-U.S. Tax Treaty applies to the Fund. If the treaty provisions are not, or cease to be, applicable to the Fund, significant additional withholding or other taxes could apply, reducing the net asset value (“NAV”) of the Fund.

Risks Associated with Japan

The decline in the Japanese securities markets, which began in 1989, has contributed to a weakness in the Japanese economy, and the impact of a further decline cannot be ascertained. The common stocks of many Japanese companies continue to trade at high price-earnings ratios in comparison with those in the United States, even after the recent market decline. Differences in accounting methods make it difficult to compare the earnings of Japanese companies with those of companies in other countries, especially the United States.

Additional Investment Strategies

Except as otherwise stated, the following strategies and specific type of investments are not the principal investment strategies of the Fund, but are reserved by Matthews for its use in the event that Matthews deems it appropriate to do so to achieve the Fund’s fundamental objective.

1.Loans of Portfolio Securities

The Fund may lend portfolio securities to broker-dealers and financial institutions. In return, the broker-dealers and financial institutions pay the Fund money to borrow these securities. The Fund may lend portfolio securities, provided that: (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 Fund may call the loan at any time and receive the securities loaned; (3) the Fund will receive any interest or dividends paid on the loaned securities; and (4) the aggregate market value of securities loaned by the Fund will not at any time exceed 33% of the total assets of the Fund.

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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 Fund will only enter into portfolio loans after a review by Matthews, 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.

For the duration of the loan, the Fund will continue to receive the equivalent of the interest or dividends paid by the issuer on the securities loaned and will receive proceeds from the investment of the collateral. As with other extensions of credit, there are risks of delay in recovery or even losses of rights in the securities loaned should the borrower of the securities fail financially. However, the loans will be made only to borrowers deemed by Matthews to be creditworthy, and when, in the judgment of Matthews, the income which can be earned currently from such loans justifies the attendant risk. Additionally, for the duration of the loan, the Fund will not have the right to vote on securities while they are being lent, but will generally call a loan in anticipation of any important vote, as determined by Matthews.

Such loans of securities are collateralized with collateral assets in an amount at least equal to the current value of the loaned securities, plus accrued interest. There is a risk of delay in receiving collateral or recovering the securities loaned or even a loss of rights in the collateral should the borrower fail financially.

2.Repurchase Agreements

The Fund may enter into repurchase agreements to earn income. The Fund may also enter into repurchase agreements with financial institutions that are deemed to be creditworthy by Matthews, pursuant to guidelines established by the Board of Trustees. The repurchase price under the reverse repurchase agreements equals the price paid by the 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 collateralized loans by the Fund under the 1940 Act.

Any 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 Fund 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. The Fund will not invest more than 15% of its net assets in repurchase agreements maturing in more than seven days. The Fund must treat each repurchase agreement as a security for tax diversification purposes and not as cash, a cash equivalent or receivable.

The financial institutions with which the Fund 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 Matthews. Matthews 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 Fund 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 Fund 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, may offer less protection to investors such as the Fund, and foreign repurchase agreements generally involve greater risks than a repurchase agreement in the United States.

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3.Reverse Repurchase Agreements

The Fund may enter into reverse repurchase agreements to raise cash on a short-term basis. Reverse repurchase agreements involve the sale of securities held by the Fund pursuant to its agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the 1940 Act, and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, the Fund will maintain in a segregated account of 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 Fund may decline below the price of the securities the Fund is obligated to repurchase.

4.Securities of Other Investment Companies

The Fund may invest in the securities of other investment companies and currently intends to limit its 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 Fund’s total assets will be invested in the securities of any one investment company; (ii) not more than 10% of the Fund’s 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 Fund.

As a shareholder of another investment company, the Fund would bear along with other shareholders, its pro rata portion of the investment company’s expenses, including advisory fees. These expenses would be in addition to the advisory and other expenses that the Fund bears directly in connection with its own operations.

5.Illiquid Securities

Illiquid securities are securities that cannot be disposed of at their market price within seven days of wanting to do so. The Board of Trustees has delegated the function of making day-to-day determinations of whether a security is liquid or not to Matthews, pursuant to guidelines established by the Board of Trustees and subject to its quarterly review. Matthews will monitor the liquidity of securities held by the Fund and report periodically on such decisions to the Board of Trustees.

The Fund may invest up to 15% of its net assets in illiquid securities. 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 that 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 which are not readily marketable are more likely to be issued by start-up, small or family businesses and therefore subject to greater economic, business and market risks than the listed securities of more well established companies.

6.Rule 144A Securities (Restricted Securities)

Securities which are not registered with the U.S. Securities and Exchange Commission (“SEC”) pursuant to Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”), are only traded among institutional investors. These securities are sometimes called “Restricted Securities” because they are restricted from being sold to the general public because they are not registered with the SEC.

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Some of these securities are also illiquid because they cannot be sold at market price within seven days of wanting to do so. The Fund will limit its investments in securities of issuers which are restricted from selling to the public without registration under the 1933 Act to 15% of the total assets. This 15% does not include any restricted securities that have been determined to be liquid by the Fund’s Board of Trustees.

7.Convertible Securities

The Fund may purchase convertible securities. 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. In addition, the owner of convertible securities often receives interest or dividends until the security is converted. 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.

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.

8.Forward Commitments, When-Issued Securities and Delayed-Delivery Transactions

The Fund 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 Fund will normally realize a capital gain or loss in connection with these transactions. For purposes of determining the Fund’s average dollar-weighted maturity, the maturity of when-issued or forward commitment securities will be calculated from the commitment date.

When the Fund purchases securities on a when-issued, delayed-delivery or forward commitment basis, the Fund’s 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 Fund’s 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 Fund will maintain sufficient assets at all times to cover its obligations under when-issued purchases, 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 Fund would generally purchase securities on a when-issued, delayed-delivery or a forward commitment basis with the intention of acquiring the securities, the Fund may dispose of such securities prior to settlement if Matthews deems it appropriate to do so.

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9.Fixed-Income Securities

All fixed-income securities are subject to two primary types of risks: credit risk and 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.

10.Short-Selling

In markets where it is permitted to do so, the Fund may make short sales. A short sale occurs when the Fund borrows stock (usually from a broker) and promises to give it back at some date in the future. If the market price of that stock goes down, the Fund buys the stock at a lower price so that it can pay back the broker for the stock borrowed. The difference between the prices of the stock when borrowed, and when later purchased, is a profit. The profit is reduced by a fee paid to the broker for borrowing the stock.

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 amount of any loss will be 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.

11. Interest Rate Futures Contracts

The 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 its 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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12.Futures Transactions

The Fund may engage in futures transactions for the purchase or sale for future delivery of securities. While futures contracts provide for the delivery of securities, deliveries usually do not occur. Contracts are generally terminated by entering into offsetting transactions. The Fund may invest in futures transactions for hedging purposes or to maintain liquidity. The 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 Fund to take or make delivery of certain securities or the cash value of a securities index. The 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. The 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 Fund may purchase a futures contract in anticipation of purchases of securities. In addition, the Fund may utilize futures contracts in anticipation of changes in the composition of its portfolio holdings.

The Fund 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 Fund may enter into such futures transactions 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 multiplied by 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 Fund is temporarily not fully invested, it 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 Fund 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 Fund may seek to close out an option position by writing or buying an offsetting position covering the same securities or contracts and that 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.

The Fund may purchase and sell call and put options on futures contracts traded on an exchange or board of trade. When the 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 the 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 Fund 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 Fund intends to purchase. Similarly, if the market is expected to decline, the Fund might purchase put options or sell call options on futures contracts rather than sell futures contracts. In connection with the Fund’s position in a futures contract or option thereon, the Fund 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.

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a.Restrictions on the Use of Futures Contracts

The Fund may enter into futures contracts provided that such obligations represent no more than 20% of the Fund’s net assets. Under the Commodity Exchange Act, the Fund may invest in futures contracts or options on future contracts (a) for bona fide hedging purposes within the meaning of regulations of such Act, or (b) for other than bona fide hedging purposes if (1) the aggregate initial margin and premiums required to establish such positions will not exceed 5% of the Fund’s net assets (after taking into account unrealized profits and unrealized losses on any such positions) and that in the case of an option that is in-the-money at the time of purchase, the in-the-money amount may be excluded from such 5%; or (2) the aggregate notional value of all non-hedge futures contracts including such contract (taken at market value at the time of entering that contract) does not exceed the liquidation value of the Fund’s portfolio. To the extent required by law, the Fund will set aside cash and appropriate liquid assets in a segregated account to cover its obligations related to futures contracts.

b.Risk Factors of Futures Transactions

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 Fund 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) Matthews’ ability to predict correctly the direction of security prices, interest rates and other economic factors.

13.Foreign Currency Transactions

The Fund may engage in foreign currency transactions in connection with its investment in foreign securities. The Fund will conduct its 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 specific 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 principally traded in the inter-bank market conducted directly between currency traders (usually large, commercial banks) and their customers. The cost to the 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. A forward contract generally has no deposit requirement, and because forward currency contracts are usually entered into on a principal basis, no fees or commissions are charged at any stage for trades. However, dealers do realize a profit based on the difference between the prices at which they are buying and selling various currencies.

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When the Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, it may want to establish the U.S. dollar cost or proceeds, as the case may be. By entering into a forward contract in U.S. dollars for the purchase or sale of the amount of foreign currency involved in an underlying security transaction, the 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 U.S. dollar and such foreign currency. However, this tends to limit potential gains that might result from a positive change in such currency relationships. The Fund may also hedge its foreign currency exchange rate risk by engaging in currency financial futures and options transactions.

The Fund may enter into a forward contract to sell a different foreign currency for a fixed U.S. dollar amount where Matthews believes that the U.S. dollar value of the currency to be sold pursuant to the forward contract will fall whenever there is a decline in the U.S. dollar value of the currency in which portfolio securities of the Fund are denominated (“cross-hedge”). 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 Fund might need to purchase or sell foreign currencies in the spot (cash) market to the extent such foreign currencies are not covered by forward contracts. 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 Fund may also enter into forward contracts to sell foreign currency with respect to portfolio positions denominated or quoted in that currency.

When the Fund enters into a forward currency contract, it relies on the counter party to make or take delivery of the underlying currency at the maturity of the contract. Failure by the counter party to do so would result in the loss of any expected benefit of the transaction. 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 counter party. Thus, there can be no assurance that the Fund 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 counter party, the Fund might be unable to close out a forward currency contract at any time prior to maturity. In either event, the Fund 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 Fund will segregate liquid assets that will be marked-to-market daily to meet its forward contract commitments to the extent required by the SEC.

The Fund may enter into forward currency contracts or maintain a net exposure to such contracts only if (i) the consummation of the contracts would not obligate the Fund to deliver an amount of foreign currency in excess of the value of its portfolio securities or other assets denominated in that currency, or (ii) the Fund maintains 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 (i) above, as marked-to-market daily.

The Fund may also use options and futures on foreign currencies, in addition to forward currency contracts, to hedge against movements in the values of the foreign currencies in which the Fund’s securities are denominated. Such currency hedges can protect against price movements in a security the Fund owns or intends to acquire that are attributable to changes in the value of the currency in which it is denominated. While hedging may limit the potential loss to the Fund from adverse currency movements, Matthews’ ability to anticipate changes in the price of foreign currencies is not always accurate, so the hedge may limit the potential gain from positive currency movements. Such hedges do not 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 inter-bank 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 Fund 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 Fund may hedge against price movements in that currency by entering into transactions using hedging instruments on other currencies, the values of which Matthews 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 Fund might be required to accept or make delivery of the underlying foreign currency in accordance with U.S. or foreign regulations regarding the maintenance of foreign banking arrangements by U.S. residents and might be required to pay fees, taxes and charges associated with such delivery assessed in the issuing country.

14.Options

The Fund may buy put and call options and write covered call and secured put options. 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.

a. Writing Call Options

The Fund may write covered call options from time to time on portions of its portfolio, without limit, as Matthews determines is appropriate in pursuing the Fund’s investment goals. The advantage to the Fund of writing covered calls is that the Fund receives a premium which is additional income. However, if the security rises in value, the Fund may not fully participate in the market appreciation.

The Fund will write call options only if they are “covered.” In the case of a call option on a security, the option is “covered” if the 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 the Fund maintains with its custodian a diversified stock portfolio, or liquid assets equal to the contract value. A call option is also covered if the Fund holds a call on the same security or index as the call written. Here 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.

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The Fund’s 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, the 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 Fund 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.

b.Writing Put Options

The Fund may write put options. The Fund will write put options only if they are “secured” at all times by liquid assets of cash or U.S. Government securities maintained in a segregated account by the Fund’s custodian in an amount not less than the exercise price of the option at all times during the option period. Secured put options will generally be written in circumstances where Matthews wishes to purchase the underlying security for the Fund’s portfolio at a price lower than the current market price of the security. With regard to the writing of put options, the Fund will limit the aggregate value of the obligations underlying such put options to 50% of its total net assets.

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.

c.Purchasing Call Options

The Fund may purchase call options to the extent that premiums paid by the Fund do not aggregate more than 10% of its total assets. When the Fund purchases 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 such transactions.

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The Fund may, following the purchase of a call option, liquidate its position by effecting a closing sale transaction. This is accomplished by selling an option of the same series as the option previously purchased. The Fund 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 Fund 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 Fund 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 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 Fund would have to exercise its 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 Fund may expire without any value to the Fund, in which event the Fund would realize a capital loss which will be short-term unless the option was held for more than one year.

d.Purchasing Put Options

The Fund may invest up to 10% of its total assets in the purchase of put options. The Fund will, at all times during which it holds a put option, own the security covered by such option. The purchase of the put option on substantially identical securities held will constitute a short sale for tax purposes, the effect of which is to create a 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 the Fund gives it the right to sell one of its securities for an agreed price up to an agreed date. The Fund intends to purchase put options in order to protect against a decline in the market value of the underlying security below the exercise price less the premium paid for the option (“protective puts”). The Fund may sell a put option that it had 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 Fund may sell a put option purchased on individual portfolio securities. Additionally, the Fund may enter into closing sale transactions. A closing sale transaction is one in which the Fund, when it is the holder of an outstanding option, liquidates its position by selling an option of the same series as the option previously purchased.

Fund’s Policies

The policies set forth below are fundamental and may not be changed without the approval of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund. A majority of the outstanding voting securities of the Fund means the lesser of (a) 67% or more of the voting securities present at a meeting of shareholders, if the holders of more than 50% of the outstanding voting securities of the Fund are present or represented by proxy, or (b) more than 50% of the outstanding voting securities of the Fund. Unless otherwise indicated, all percentage limitations listed below apply to the Fund and apply only at the time of the transaction. Accordingly, if a percentage restriction is adhered to at the time an investment is made, a later increase or decrease in the percentage which results from a relative change in values or from a change in the Fund’s total assets will not be considered a violation.

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Except as otherwise set forth herein and in the Prospectus, the Fund may not:

1. Issue senior securities;

2. Borrow money, except that the 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 borrowing will be done from a bank and asset coverage of at least 300% is required. The Fund will not purchase securities when borrowings exceed 5% of the Fund’s total net assets;

3. Act as an underwriter of securities, except that, in connection with the disposition of a security, the Fund may be deemed to be an “underwriter” as that term is defined in the 1933 Act;

4. 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 the Fund’s investments in such industry would exceed 25% of the value of the total assets of the Fund.

5. Purchase or sell real estate, real estate limited partnership interests, interests in oil, gas and/or mineral exploration or development programs or leases. This restriction shall not prevent the Fund 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;

6. Make loans, except that this restriction shall not prohibit (a) the purchase and holding of debt instruments in accordance with the Fund’s investment objectives and policies, (b) the lending of portfolio securities, or (c) entry into repurchase agreements with banks or broker-dealers;

7. Change its diversification status under the 1940 Act;

8. Purchase or sell commodities or commodity contracts, except that the 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; or

9. Make investments in securities for the purpose of exercising control.

Temporary Defensive Position

To the extent practicable and in light of economic and market conditions and the Fund’s cash needs, Matthews intends to be fully invested in the markets appropriate to the Fund’s investment objective. When, in the opinion of Matthews, a temporary defensive position is warranted, the Fund is permitted to hold cash or invest temporarily and without limitation in U.S. government securities or money market instruments backed by U.S. government securities. The Fund’s investment objectives may not be achieved at such times when a temporary defensive position is taken.

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Portfolio Turnover

Matthews buys and sells securities for the Fund whenever it believes it is appropriate to do so. The rate of portfolio turnover will not be a limiting factor in making portfolio decisions. It is currently estimated that under normal market conditions the annual portfolio turnover rate for the Fund 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 will generally result in higher transaction costs to the Fund and also may result in a higher level of taxable gain for a shareholder.

Disclosure of Portfolio Holdings

In accordance with the Fund’s policies and procedures (“Policies”), the Fund’s transfer agent, PFPC Inc. (“PFPC”), is responsible for dissemination of information about the Fund’s portfolio holdings. The Fund, together with PFPC and Matthews (the “Service Providers”), may only disclose information concerning securities held in the Fund’s portfolio under the following circumstances:

(i) Following the end of each fiscal quarter (generally within 60 days), the Fund’s full portfolio holdings will be made publicly available by the following means:

a. The Fund shall send shareholders portfolio holdings in the Fund’s annual, semi-annual and quarterly reports, which are mailed to shareholders and posted on the Matthews Asian Funds’ website.

b. PFPC shall send portfolio holdings to nationally recognized rating agencies via electronic transmission.

(ii) The Fund will also release top ten holdings on a monthly basis via the Matthews Asian Funds’ website and written communication within approximately 21 days of each month end;

(iii) The Fund or a Service Provider do not disclose the Fund’s portfolio security holdings in advance of general release and without delay except to the Fund’s custodian bank, independent public accountant, independent legal counsel, proxy voting agent, financial printers, technical writers who assist with the preparation of disclosure materials, technology service providers, and pricing service providers. The Fund will also disclose its portfolio security holdings to third parties in connection with its on-going efforts to analyze its trading activity, and in connection with its periodic reviews of the performance of existing fund agents and advisers or the retention of new agents and advisers. In addition, the Fund may make such disclosure on a confidential basis to selected third parties when the Fund has a legitimate business purpose for doing so. Examples of legitimate business purposes in which selective disclosure of the Fund’s portfolio securities may be appropriate include disclosure for due diligence purposes to an investment advisor that is in merger or acquisition talks with Matthews; disclosure to a newly hired investment advisor or sub-advisor prior to its commencing its duties; and disclosure to a rating or ranking organization. Currently the Fund has no such disclosure arrangements in place.

As required by the federal securities laws, including the 1940 Act, the Fund will disclose its portfolio holdings in its applicable regulatory filings, including shareholder reports, reports on Form N-Q, Form N-CSR or such other filings, reports or disclosure documents as the applicable regulatory authorities may require.

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In accordance with the Fund’s Policies, third parties are required to keep confidential any information disclosed to them in accordance with the foregoing and no compensation may be received by the Fund, a Service Provider or any affiliate in connection with disclosure of such information. The Fund’s Board of Trustees will oversee disclosure under the foregoing Policies by approval in advance of disclosures for legitimate business purposes and by regular review of reports on disclosures of the Fund’s portfolio holdings.

The Policies may not be waived, or exception made, without the consent of the Chief Compliance Officer (“CCO”) of the Fund. The CCO may not waive or make exception to the Policies unless such waiver or exception is consistent with the intent of the Policies, which is to ensure that disclosure of portfolio information is in the best interest of Fund shareholders. In determining whether to permit a waiver of or exception to the Policies, the CCO will consider whether the proposed disclosure serves a legitimate purpose of the Fund, whether it could provide the recipient with an advantage over Fund shareholders or whether the proposed disclosure gives rise to a conflict of interest between the Fund’s shareholders and Matthews or the Fund’s principal underwriter or other affiliated person. The CCO will report all waivers of or exceptions to the Policies to the Trustees at their next meeting. The Trustees may impose additional restrictions on the disclosure of portfolio holdings information at any time.

The Policies are designed to provide useful information concerning the Fund to existing and prospective Fund shareholders while at the same time inhibiting the improper use of portfolio holdings information in trading Fund shares and/or portfolio securities held by the Fund. However, there can be no assurance that the provisions of any portfolio holdings information is not susceptible to inappropriate uses (such as the development of “market timing” models), particularly in the hands of highly sophisticated investors, or that it will not in fact be used in such ways beyond the control of the Fund.

Management of the Fund

Trustees and Officers

The operations of the Fund are under the direction of the Board of Trustees. The Board establishes the Fund’s policies and oversees and reviews the management of the Fund. The Board meets regularly to review the activities of the officers, who are responsible for the day-to-day operations of the Fund. The Trustees and executive officers of the Fund, their years of birth, business addresses, principal occupations during the past five years and other directorships held are set forth below. The “Fund Complex” refers to the ten Funds.

Name, Year of Birth, and Address	Position(s) Held with the Trust	Term of Office and Length of Time Served1	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Trusteeships/ Directorships (number of portfolios) Held by Trustee
INDEPENDENT TRUSTEES
Geoffrey H. Bobroff Born 1944 Four Embarcadero Center Suite 550 San Francisco, CA 94111	Chairman of the Board of Trustees and Trustee	Since 2006	President, Bobroff Consulting, Inc. (since 1993).	10	None

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Name, Year of Birth, and Address Position(s) Held with the Trust Term of Office and Length of Time Served¹ Principal Occupation(s) During Past 5 Years Number of Portfolios in Fund Complex Overseen by Trustee Other Trusteeships/ Directorships (number of portfolios) Held by Trustee

Rhoda Rossman Born 1958 Four Embarcadero Center Suite 550 San Francisco, CA 94111	Trustee	Since 2006	Vice President, Corporate Investment Officer (2007-present); and Senior Vice President and Treasurer (2003 - 2007), The PMI Group, Inc.	10	Director and officer of PMI Insurance Services, Limited; and officer of each of PMI Group Inc., PMI Mortgage Insurance Co., PMI Mortgage Guaranty Co., PMI Mortgage Services Co., Residential Insurance Co., PMI Insurance Co., PMI Securities Co., Commercial Loan Insurance Corporation, WMAC Credit Insurance Corporation, and PMI Reinsurance Co.
Toshi Shibano Born 1950 Four Embarcadero Center Suite 550 San Francisco, CA 94111	Trustee	Since 2003	President, Toshi Shibano Consulting, Inc. (since 1995); Adjunct Associate Professor, Columbia Graduate School of Business (since 2001); Adjunct Professor, Thunderbird American Graduate School of International Management (2000-2005); Faculty, General Electric Corporate Leadership Development Center (since 2000); Executive Education Lecturer, Haas School of Business, University of California at Berkeley since 1995.	10	None
Jonathan F. Zeschin Born 1953 Four Embarcadero Center Suite 550 San Francisco, CA 94111	Trustee	Since 2007	President and Founder, Essential Advisers, Inc (since 2000); Managing Partner, JZ Partners LLC (since 1998).	10	Independent Chairman of the Board of Trustees, Dividend Capital Realty Income Allocation Fund (since 2005) and Dividend Capital Strategic Global Realty Fund (since 2007); Independent Trustee, ICON Funds (2002-2007); Independent Director, Wasatch Funds (2002-2004).
INTERESTED TRUSTEES2

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Name, Year of Birth, and Address Position(s) Held with the Trust Term of Office and Length of Time Served¹ Principal Occupation(s) During Past 5 Years Number of Portfolios in Fund Complex Overseen by Trustee Other Trusteeships/ Directorships (number of portfolios) Held by Trustee

G. Paul Matthews Born 1956 Four Embarcadero Center Suite 550 San Francisco, CA 94111	Trustee	Since 2006	Chairman and Portfolio Manager, Matthews International Capital Management, LLC (“Matthews”) (since 1991); Chief Investment Officer, Matthews (1991 - 2007); President of the Funds (1994 - 2007).	10	Director, Matthews Asian Selection Funds Plc (1 Portfolio)
OFFICER(S) WHO ARE NOT TRUSTEES2
William Guilfoyle Born 1958 Four Embarcadero Center Suite 550 San Francisco, CA 94111	President	Since 2008	Co-Chief Executive Officer (since 2007), Matthews; Principal, Guilfoyle Associates (2002-2007).	N/A	N/A
John P. McGowan Born 1964 Four Embarcadero Center Suite 550 San Francisco, CA 94111	Vice President and Secretary	Since 2005	Chief Administrative Officer (since 2007) and Chief Operating Officer (since 2004), Matthews; Chief Operating Officer, Treasurer, and Chief Compliance Officer, Forward Management LLC (1998-2004).	N/A	N/A
Shai Malka Born 1973 Four Embarcadero Center Suite 550 San Francisco, CA 94111	Treasurer	Since 2005	Senior Manager of Fund Accounting and Operations (since 2004); Manager of Fund Accounting (2003-2004), Fund Accountant (2000-2003), Matthews.	N/A	N/A
Andrew T. Foster Born 1974 Four Embarcadero Center Suite 550 San Francisco, CA 94111	Vice President	Since 2005	Acting Chief Investment Officer (since 2008), Director of Research (2003 - 2008) and Portfolio Manager (since 2005), Matthews.	N/A	N/A
William J. Hackett Born 1967 Four Embarcadero Center Suite 550 San Francisco, CA 94111	Vice President	Since 2008	President (since 2007), Matthews; Partner (2002-2007), Deloitte & Touche, LLP.	N/A	N/A

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Name, Year of Birth, and Address Position(s) Held with the Trust Term of Office and Length of Time Served¹ Principal Occupation(s) During Past 5 Years Number of Portfolios in Fund Complex Overseen by Trustee Other Trusteeships/ Directorships (number of portfolios) Held by Trustee

Timothy B. Parker Born 1958 Four Embarcadero Center Suite 550 San Francisco, CA 94111	Vice President	Since 2008	General Counsel (since 2005), Matthews; Partner, Kirkpatrick & Lockhart Nicholson Graham LLP (2003-2005).	N/A	N/A
Manoj K. Pombra Born 1964 Four Embarcadero Center Suite 550 San Francisco, CA 94111	Chief Compliance Officer	Since 2005	Chief Compliance Officer, Matthews (since 2005); Senior Manager, Mutual Fund Compliance/Manager Portfolio Compliance, Franklin Templeton Investments (2001- 2005).	N/A	N/A

1 Each Trustee serves for an indefinite term, until retirement age or until his/her successor is elected. Officers serve at the pleasure of the Board of Trustees.

2 These Trustees and officers are considered “interested persons” of the Trust as defined under the 1940 Act either because of an ownership interest in Matthews or an office held with the Trust.

Board of Trustees. The primary responsibility of the Board is to represent the interests of the shareholders of the Fund and to provide oversight management of the Trust. At least 65% of the Board members are independent of the Fund and Matthews (the “Independent Trustees”). Currently the Board is comprised of five individuals, one of whom is considered an Interested Trustee as defined by the 1940 Act. The remaining Trustees are referred to as “Disinterested” or “Independent” Trustees. The Board meets multiple times during the year (i.e. at least quarterly) to review the investment performance of the Fund and other financial operational matters, including policies and procedures with respect to compliance with regulatory and other requirements. The Board met eight times during the fiscal year ended December 31, 2007. Currently, the Board has an Audit Committee, a Nominating Committee and a Compensation Committee. Each such committee is composed solely of the Independent Trustees (currently, Messrs. Bobroff, Shibano and Zeschin and Ms. Rossman). The Chairman and functions of each committee is set forth below.

Audit Committee. Mr. Shibano, Chairman

The Audit Committee has the responsibility, among other things, to (1) recommend the selection of the Fund’s independent registered public accounting firm; (2) review and approve the scope of the independent registered public accounting firm’s audit activity; (3) review the financial statements which are the subject of the independent registered public accounting firm’s certifications; and (4) review with such independent registered public accounting firm the adequacy of the Fund’s basic accounting system and the effectiveness of the Fund’s internal accounting controls. The Audit Committee met three times during the fiscal year ended December 31, 2007.

Nominating Committee. Mr. Bobroff, Chairman

The Nominating Committee has the responsibility, among other things, to consider and nominate new Trustees to serve on the Fund’s Board. If required by law, the Nominating Committee will consider nominations from shareholders. The Nominating Committee did not meet during the fiscal year ended December 31, 2007.

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Compensation Committee. Mr. Shibano, Chairman The Compensation Committee has the responsibility, among other things, toannually review and consider the compensation of the Board as well as the compensation of the Chief Compliance Officer. The Compensation Committee met once during the fiscal year ended December 31, 2007.

Security and Other Interests. The following table sets forth the dollar range of equity securities beneficially owned by each Trustee in each of the Funds and in all registered investment companies overseen by the Trustee within the same family of investment companies, as of December 31, 2007.

Name of Trustee	Dollar Range of Equity Securities in each of the Funds*	Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Trustee within the Family of Investment Companies
INDEPENDENT TRUSTEES
Geoffrey H. Bobroff	▪Matthews Asian Growth and Income Fund $10,001-$50,000 ▪Matthews Pacific Tiger Fund $10,001-$50,000 ▪Matthews Asian Technology Fund $1 - $10,000 ▪Matthews Japan Fund $1 - $10,000	$50,001 - $100,000
Rhoda Rossman	§Matthews Asian Growth and Income Fund $10,001-$50,000 §Matthews Pacific Tiger Fund $10,001 - $50,000 §Matthews India Fund $10,001-$50,000 §Matthews Japan Fund $10,001 - $50,000	$50,001-$100,000
Toshi Shibano	▪Matthews China Fund Above $100,000 ▪Matthews India Fund$50,001-$100,000	Above $100,000
Jonathan F. Zeschin	▪Matthews Asia Pacific Equity Income Fund $10,001 - $50,000	$10,001 - $50,000

INTERESTED TRUSTEES
G. Paul Matthews	§Matthews Asia Pacific Equity Income Fund Above $100,000 §Matthews Asian Growth and Income Fund Above $100,000 §Matthews Asia Pacific Fund Above $100,000 §Matthews Pacific Tiger Fund Above $100,000 §Matthews Asian Technology Fund $10,001-$50,000 §Matthews China Fund $50,001-$100,000 §Matthews India Fund $10,001-$50,000 §Matthews Japan Fund $50,001-$100,000 §Matthews Korea Fund $10,001-$50,000	Above $100,000

* The Matthews Asia Small Companies Fund did not exist as of December 31, 2007.

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As of December 31, 2007, none of the Independent Trustees or their respective immediate family members (spouse or dependent children) owned beneficially or of record an interest in Matthews or the Fund’s underwriter, or in any person directly or indirectly controlling, controlled by, or under common control with Matthews or the Fund’s underwriter.

Shareholders’ Voting Powers

On any matter submitted to a vote of shareholders, all shares shall be voted separately by the Fund and individually by each other fund series in the Matthews Asian Funds, except that the shares shall be voted in the aggregate and not by individual Fund when (i) required by the 1940 Act; or (ii) the Board of Trustees has determined that the matters affect the interests of more than one Fund (e.g., the election of a new member to the Board of Trustees of the Trust). Each whole share is entitled to one vote as to any matter on which it is entitled to vote, and each fractional share is entitled to a proportionate fractional vote.

Approval of Investment Advisory Agreement

The Trust has retained Matthews to manage the assets of the Fund pursuant to an investment advisory agreement (the “Advisory Agreement”) that has been approved by the Board of Trustees of the Trust, including the Independent Trustees. Additional information regarding the Advisory Agreement may be found in the section entitled “Investment Advisory and Other Service Providers.” The Advisory Agreement has an initial term of two years and continues in effect from year to year provided such continuance is specifically approved at least annually by the vote of the holders of at least a majority of the outstanding shares of the Fund, or by the Board of Trustees, and in either event, by a majority of the Independent Trustees of the Trust casting votes in person at a meeting called for such purpose. A discussion regarding the basis for the Board of Trustees’ approval of the Advisory Agreement will be available in the Fund’s Annual Report to Shareholders for the fiscal year ended December 31, 2008.

Compensation

The fees and expenses of the Independent Trustees are allocated among the ten series of the Trust and paid by the Trust. The following table shows the fees paid during the fiscal year ended December 31, 2007 to the Independent Trustees for their service to the Matthews Asian Funds and the total compensation paid to the Trustees by the Fund Complex.

	Fiscal Year End of 12-31-07†
Independent Trustee	Aggregate Compensation from the Trust	Pension or Retirement Benefits Accrued as Part of Fund Expenses	Estimated Annual Benefits Upon Retirement	Total Compensation From Fund Complex Paid to Trustees*
Geoffrey H. Bobroff	$82,000	None	None	$82,000
Robert K. Connolly*	$71,000	None	None	$71,000
Rhoda Rossman	$71,000	None	None	$71,000
Toshi Shibano	$76,500	None	None	$76,500
Jonathan F. Zeschin**	$53,250	None	None	$53,250

† The Matthews Asia Small Companies Fund did not exist on December 31, 2007

^* Robert K. Connolly resigned from the Board on November 8, 2007.

** Jonathan F. Zeschin was not appointed to the Board until May 18, 2007.

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No officer or employee of Matthews receives any compensation from the Fund for acting as an officer or employee of the Trust. The officers of the Trust receive no compensation directly from the Fund for performing the duties of their offices. Neither the Trustees nor the officers of the Trust receive any pension or retirement benefits from the Fund.

Code of Ethics

The Trust and Matthews have adopted a written Code of Ethics (the “Code”) pursuant to Section 17(j) of the 1940 Act and Rule 17j-1 thereunder and Rule 204A-1 under the Advisers Act. The Code requires certain persons with access to investment information (“Access Persons”) to obtain prior clearance before engaging in personal securities transactions. Transactions must be executed generally within 2 business days of clearance. In addition, all Access Persons must report their personal securities transactions within 10 days after the end of each calendar quarter or becoming an Access Person, and file an annual statement within 45 calendar days with respect to their personal securities holdings. Access Persons and members of their immediate family are prohibited from directly and indirectly acquiring beneficial ownership in any security from a region in which the Funds may invest (excluding ownership of shares of an investment company registered under the 1940 Act). Any material violation of the Code is reported to the Board of Trustees. The Board of Trustees also oversees the administration of the Code. The Code of Ethics is on file with the SEC.

The Fund’s principal underwriter has also adopted a Code of Ethics pursuant to Rule 17j-1.

Proxy Voting Policies and Procedures

The Board of Trustees of the Fund has delegated to Matthews the authority to vote proxies of companies held in the Fund’s portfolio. Matthews has adopted written Proxy Voting Policies and Procedures (“Proxy Policies”) to assist it in evaluating shareholder proposals. Matthews has retained the services of an independent proxy consultant, Institutional Shareholder Services, Inc. (“ISS”), to receive and evaluate shareholder proposals, apply its Proxy Policies, effect proxy votes and maintain appropriate records.

For significant corporate matters, such as establishing pension or profit sharing plans, proposed mergers and acquisitions, and sales of assets, Matthews’ Proxy Policies establish guidelines for evaluating the facts and circumstances of the particular proposal. In such circumstances, Matthews evaluates the proposal in light of the best interests of the Fund and its shareholders and votes accordingly. With respect to other, more routine, matters, Matthews Proxy Policies may establish certain standards that, if satisfied, will result in a vote for or against a proposal. Routine matters include (i) election of directors; (ii) approval of auditors; (iii) approval of dividends and distributions; (iv) confidential voting; and (v) limitation on charitable contributions or fees paid to professional advisors. However, even in these circumstances, Matthews reserves the right to evaluate each proposal individually, and to vote on the matter in a manner that Matthews believes is in the best interest of the Fund or its shareholders (even if that vote is inconsistent with Matthews’ Proxy Policies). For example, while Matthews generally votes in favor of management’s nominees for a board of directors, it may vote against management nominees if it believes that the board was entrenched or otherwise not acting in the best interests of shareholders. Matthews generally votes in the same manner for each of its clients that hold a security, subject to the individual objectives of each client. As a result, Matthews may vote in favor of a proposal for certain clients while voting against the same proposal for other clients. Matthews also reserves the right to revise, alter or supplement the Proxy Policies from time-to-time, which may result in different votes on similar issues over time.

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There may be circumstances when Matthews believes that refraining from voting on a matter submitted to shareholders is in the best interests of the Fund or its shareholders, such as when the cost of voting the proxy exceeds the expected benefit to the client. Similarly, voting on shareholder matters in foreign countries, particularly in emerging markets, may be subject to restrictions (including registration procedures that may result in a holding becoming illiquid for a period of time) and limitations that impede or make impractical the exercise of shareholder rights. Such limitations may include (i) untimely or inadequate notice of shareholder meetings; (ii) restrictions on the ability of holders outside the issuer’s jurisdiction of organization to exercise votes; (iii) in person voting requirements; (iv) restrictions on the sale of securities for periods surrounding the shareholder meeting (“share blocking”); (v) granting local agents powers of attorney to facilitate voting instructions; (vi) proxy materials or ballots not being readily available; and (vii) proxy materials or ballots not being available in English.

There may be circumstances in which Matthews has or may be perceived to have a conflict or potential conflict of interest in voting on particular matters. Matthews’ Proxy Policies attempt to minimize this potential by utilizing an independent consultant to monitor and apply its Proxy Policies. Matthews’ Proxy Policies also provide for monitoring of conflicts and potential conflicts of interest circumstances. When a material conflict of interest is identified, Matthews votes proxies (i) in accordance with a pre-determined policy, (ii) based upon the recommendations of an independent third party; (iii) advises the Fund’s Board of Trustees of the circumstances, seeks their direction, and votes accordingly; or (iv) takes other action as may be appropriate in the particular circumstances.

In addition to providing research and other proxy voting services, ISS, through its Corporate Services Division, offers products and services to issuers of proxy solicitations consisting of advisory and analytical services, self-assessment tools and publications. ISS has represented that employees of its Corporate Services Division are not involved in ISS’ analysis of filed proxy proposals or preparation of vote recommendations. Nonetheless, ISS has adopted policies and procedures to guard against and to resolve any conflicts of interest that may arise in connection with its provision of research analyses, vote recommendations and voting services to Matthews.

Information regarding how the Fund votes proxies relating to portfolio securities during the period ending June 30 will be available (1) without charge, by visiting matthewsfunds.com or (2), by calling the Fund at (800) 789-ASIA [2742] and (3) on the SEC’s website at sec.gov.

Control Persons and Principal Holders of Securities

As of the date of this SAI, the Trustees and officers as a group owned less than 1% of the outstanding shares of the Fund because the Fund had not yet commenced operations.

As of the date of this SAI, no person owned of record or beneficially 5% or more of the outstanding shares of the Fund because the Fund had not yet commenced operations. Any person owning more than 25% of the voting securities of the Fund may be deemed to have effective voting control over the operation of that Fund, which would diminish the voting rights of other shareholders.

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Investment Advisory and Other Service Providers

The Investment Advisor

Currently the Trust employs only one investment advisor, Matthews International Capital Management, LLC. City National Corporation has an ownership interest of 10%-25% in Matthews. The Hambrecht 1980 Revocable Trust (“Hambrecht”), a family trust, has an ownership interest of more than 25% in Matthews.

Matthews performs its duties and is paid pursuant to its [Advisory Agreement] with the Fund. Some of the terms of the [Advisory Agreement] are set by the 1940 Act, such as that after an initial two-year term, it is reviewed each year by the Board of Trustees and the Board may terminate it without penalty on 60 days’ notice.

The advisory services provided by Matthews and the fees received by it for such services are described in the Prospectus. As stated in the Prospectus, Matthews may, from time-to-time, voluntarily waive its advisory fees with respect to the Fund, but is not obligated to do so.

Under the [Advisory Agreement], Matthews is not liable for any error of judgment or mistake of law or for any loss suffered by the 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.

The terms of the [Advisory Agreement] provide that it will continue from year to year provided that it is approved at least annually by the vote of the holders of at least a majority of the outstanding shares of the Fund, or by the Board of Trustees, including a majority of the Independent Trustees. The [Advisory Agreement] may be terminated 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 Matthews. Matthews may also terminate its advisory relationship with the Fund on 60 days’ written notice to the Fund. The [Advisory Agreement] can only be assigned with prior shareholder approval. In the event that the [Advisory Agreement] is assigned without shareholder approval, the [Advisory Agreement] automatically terminates.

Under the [Investment Advisory Agreement], the Fund is responsible for payment of all of its expenses except those specifically assumed by Matthews or another third party, including payment of the following expenses:

1. The fees and expenses of the Fund’s Independent Trustees;

2. The salaries and expenses of any of the Fund’s officers or employees who are not affiliated with Matthews;

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;

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9. Fees and expenses of the Fund’s custodian, administrator and transfer agent and any related services;

10. Expenses of obtaining quotations of the Fund’s portfolio securities and of pricing the Fund’s shares;

11. Expenses of maintaining the Fund’s legal existence and of shareholder’s meetings;

12. Expenses of preparation and distribution to existing shareholders of reports, proxies and prospectuses;

13. Fees and expenses of membership in industry organizations; and

14. Expenses related to the development and maintenance of the Fund’s Compliance Program as required by the 1940 Act.

The ratio of the Fund’s expenses to its relative net assets can be expected to be higher than the expense ratio of a fund investing solely in domestic securities, since the cost of maintaining the custody of foreign securities is generally higher than comparable expenses for such other funds and the rate of investment management fees paid by the Fund may also be higher than the comparable expenses of such other funds.

General expenses of the Trust such as costs of maintaining corporate existence, legal fees, insurance, etc., and expenses shared by the Matthews Asian Funds will be allocated among the Funds on a basis deemed fair and equitable by the Board of Trustees, 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 the Fund, such as certain registration fees, brokerage commissions and other portfolio expenses, will be borne directly by the Fund.

The Fund pays Matthews an annual fee as a percentage of average daily net assets for management and advisory services. See page xx for a description of such services. Under the [Advisory Agreement], dated as of August __, 2008, the Fund pays Matthews 0.__% of average daily net assets of the Fund from $0 to $__ billion, 0.___% on average daily net assets of the Fund between $__ billion and $___ billion, and 0.__% on average daily net assets of the Fund over $__ billion.

Under a written agreement between the Fund and Matthews, Matthews agrees to reimburse money to the Fund if its expense ratio exceeds ______%. In turn, if the Fund’s expenses fall below the level noted within three years after Matthews has made such a reimbursement, the Fund may reimburse Matthews up to an amount not to exceed its expense limitation. This agreement will continue through at least __________, __ 2009. This agreement may be extended for additional periods. Because the Fund is new, it has not paid Matthews any fees under the [Advisory Agreement].

Portfolio Managers

The following table shows information regarding other accounts managed by the Fund’s Portfolio Managers as of August 15, 2008, except as otherwise indicated in the footnotes to the table.

Name of Portfolio Manager	Account Category	Number of Accounts	Total Assets in Accounts	Number of Accounts Where Advisory Fee is Based on Account Performance	Total Assets in Accounts Where Advisory Fee is Based on Account Performance
Lydia So Lead Portfolio Manager of the Matthews Asia Small Companies Fund	Registered Investment Companies	0	0	0	0

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Name of Portfolio Manager Account Category Number of Accounts   Total Assets in Accounts Number of Accounts Where Advisory Fee is Based on Account Performance Total Assets in Accounts Where Advisory Fee is Based on Account Performance

Co-Portfolio Manager of the Matthews Asian Technology Fund.
	Other Pooled Investment Vehicles	0	0	0	0
	Other Accounts	0	0	0	0
Noor Kamruddin Co-Portfolio Manager of the Matthews Asia Small Companies Fund	Registered Investment Companies	0	0	0	0
	Other Pooled Investment Vehicles	0	0	0	0
	Other Accounts	0	0	0	0

Portfolio Managers’ compensation consists of a combination of base salary, fixed and discretionary bonuses, and participation in benefit plans, which are generally available to all salaried employees. Compensation is structured to emphasize the success of both Matthews and the individual employee. Compensation is not linked to the distribution of the shares of the Fund. Most portfolio managers also participate in equity ownership of Matthews. The two most senior portfolio managers providing services to the Matthews Asian Funds and officers of Matthews also receive compensation based on Matthews’ total assets under management.

Key elements of compensation are detailed below:

Base Salary	Each portfolio manager receives a fixed base salary that takes into account his or her experience and responsibilities and is intended to be competitive with salaries offered by other similar firms.
Bonus	Matthews emphasizes teamwork and a focus on client needs. Bonuses are structured to emphasize those principles and are based on a number of factors including the profitability of Matthewsand the employee’s contributions to the firm, such as the performance of accounts managed by the employee, leadership position in the firm and participation in firm marketing efforts and other activities.
Benefit Programs	Portfolio managers participate in benefit plans and programs available generally to all employees.

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Equity Ownership Most portfolio managers are members of Matthews, which is a private limited liability company that provides pass-through treatment of Matthews’ profits and losses to its members. Subject to certain required amounts, member distributions are generally determined based on considerations of Matthews’ working capital requirements and on estimated tax liabilities associated with the pass-through of income.

A Portfolio Manager’s compensation arrangement may give rise to potential conflicts of interest. A Portfolio Manager’s base pay tends to increase with additional and more complex responsibilities that include increased assets under management; each receives equity-based compensation; and the bonuses of the Portfolio Managers relate to increases in asset levels under Matthews’ management. The management of or participation in the management of multiple Matthews Asian Funds and accounts may give rise to potential conflicts of interest among the Funds and accounts, as Portfolio Managers must allocate their time and investment ideas across Matthews Asian Funds or other accounts which may pay different fees to Matthews and have different objectives, benchmarks, and time horizons. A Portfolio Manager may execute transactions for a Matthews Asian Fund or other account that may adversely impact the value of securities held by the Fund. Any securities selected for a Matthews Asian Fund or other account may perform differently than the securities selected for another Matthews Asian Fund or other account. The Matthews Asian Funds and Matthews have adopted a trade management policy which they believe is reasonably designed to address potential conflicts of interest that may arise in managing multiple accounts, including the fair and equitable allocation of investment opportunities. In addition, the management of personal accounts may give rise to potential conflicts of interest; there is no assurance that the Trusts’ Code of Ethics will adequately address such conflicts.

The following table sets forth the dollar range of equity securities beneficially owned by each Portfolio Manager in each Fund and in all registered investment companies overseen by the Portfolio Manager within the family of investment companies, as of August 15, 2008.

Name of Portfolio Manager	Dollar Range of Equity Securities in each Fund*
Lydia So	§None.
Noor Kamruddin	§None.

* The Matthews Asia Small Companies Fund did not exist on December 31, 2007

Principal Underwriter

The Trust entered into an Underwriting Agreement dated December 31, 2000, as amended (the “Underwriting Agreement”) with PFPC Distributors, Inc., which is currently located at 760 Moore Road, King of Prussia, PA 19406 (“PFPC Distributors” or the “Underwriter”). PFPC Distributors acts as the statutory principal underwriter of the Fund’s shares for the purpose of facilitating the registration of shares of the Fund under state securities laws and assists in the continuous offering of shares, on an agency basis. The Underwriting Agreement has been approved by the Board of Trustees. Matthews compensates PFPC Distributors for its services to the Fund.

Pursuant to the Underwriting Agreement, PFPC Distributors has agreed to qualify as a broker-dealer under all applicable federal or state laws in those states that the Trust shall from time to time identify to PFPC Distributors as states in which it wishes to offer its shares for sale, in order that state registrations may be maintained for the Fund. PFPC Distributors is a broker-dealer registered with the SEC and a member in good standing of the Financial Industry Regulatory Authority (formerly, the National Association of Securities Dealers, Inc.).

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The Trust has agreed to indemnify PFPC Distributors from losses relating to PFPC Distributors’ assumption of the principal underwriter function and from prospectus and sales material disclosure liability.

Rule 12b-1 Plan (Distribution Plan)

The Trust’s 12b-1 Plan (the “Plan”) is inactive. The Plan authorizes the use of the Fund’s assets to compensate parties which provide distribution assistance or shareholder services, including, but not limited to, printing and distributing prospectuses to persons other than shareholders, printing and distributing advertising and sales literature and reports to shareholders used in connection with selling shares of the Fund, and furnishing personnel and communications equipment to service shareholder accounts and prospective shareholder inquiries. Although the Plan currently is not active, it is reviewed by the Board annually in the event that the Board determines it is necessary to re-activate the Plan. The Plan would not be re-activated without prior notice to shareholders and any amounts payable under the Plan would be subject to applicable operating expense limitations agreed to by Matthews.

Information about Shareholder Servicing and Administration

PFPC (or the “Administrator”) provides certain administrative services to the Trust pursuant to a Second Amended and Restated Investment Company Services Agreement dated as of April 1, 2008, with effect from April 1, 2007 (the “Investment Company Services Agreement”). Under the Investment Company Services Agreement, PFPC: (i) coordinates with the custodian and transfer agent and monitors the services they provide to the Fund; (ii) coordinates with and monitors any other third parties furnishing services to the Fund; (iii) provides the Fund with necessary office space, telephones and other communications facilities and personnel competent to perform administrative and clerical functions; (iv) supervises the maintenance by third parties of such books and records of the Fund as may be required by applicable federal or state law; (v) prepares or supervises the preparation by third parties of all federal, state and local tax returns and reports of the Fund required by applicable law; (vi) prepares and files and arranges for the distribution of proxy materials and periodic reports to shareholders of the Fund as required by applicable law; (vii) prepares and 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; (viii) reviews and submits to the officers of the Trust for their approval invoices or other requests for payment of the Fund’s expenses and instructs the custodian to issue checks in payment thereof; and (ix) takes such other action with respect to the Trust or the Fund as may be necessary in the opinion of the Administrator to perform its duties under the Investment Company Services Agreement.

In addition, pursuant to the Investment Company Services Agreement, PFPC provides certain transfer agency and other shareholder services for shareholders who open accounts directly with PFPC. Such services include maintaining shareholder accounts, generating shareholder statements, providing taxpayer information, and performing related servicing generally (collectively, "transfer agency and shareholder services”).

Because the Fund is new, it has not paid the Administrator any fees under the Investment Company Services Agreement.

For shareholders who purchase shares through a broker or other financial intermediary (sometimes called fund “supermarkets”), some or all transfer agency and shareholder services may be performed by that intermediary. The services provided by supermarkets (although they vary from supermarket to supermarket) generally include the following: acceptance, processing and settlement of specific shareholder transactions (purchases, redemptions and exchanges); establishing and maintaining transaction clearing relationships; establishing and maintaining individual shareholder records; providing and maintaining periodic and transaction-specific reporting; maintaining shareholder records regarding share splits, reorganizations and other corporate actions; performing anti-money laundering and related regulatory compliance functions that relate to individual shareholders; responding to inquiries regarding the Fund as well as the status of accounts and transactions made by shareholders who own shares through that supermarket; processing redemption fees; providing net asset value, dividend and distribution information to shareholders; and assisting with shareholder communications. Some fund supermarkets also provide the following services: next-day transaction processing services; 24-hour transaction services; performance estimates; research; fund ratings (e.g., Lipper and Morningstar ratings); risk analysis; fund facts and fees; tax information and analysis; independent due diligence of funds; tax lot accounting; internet services; and access to other financial products (e.g., banking and credit). You should contact your supermarket to determine the specific services available to you.

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For performing transfer agency and shareholder services, the supermarket may seek compensation from the Fund or Matthews. In some cases, the services for which compensation is sought may be bundled with services not related to shareholder servicing, and may include distribution fees. The Board of Trustees has made a reasonable allocation (and periodically reviews the allocation) of the portion of bundled fees, and Matthews pays from its own resources that portion of the fees that the Board of Trustees determines may represent compensation to supermarkets for distribution services.

[Under the [Advisory] Agreement, Matthews also provides a range of administrative services that focus on the servicing needed by the Fund and oversight and coordination of its various service providers, as distinct from the services provided by PFPC and supermarkets to shareholder accounts. Matthews’ services may include, on a continuous basis: responding to shareholder communications that come to Matthews directly, indirectly via PFPC or a supermarket, or via the Fund’s website; providing regular communications and investor education materials to shareholders; communicating with investment advisers whose clients own or hold shares of the Fund and providing such other information as may reasonably be requested by shareholders or certain services not provided by the Fund’s transfer agent or by fund supermarkets. Matthews also provides, on a continuous basis, the following administration services: oversight of the activities of PFPC as the Fund’s transfer agent (including the transfer agent’s call center operations); oversight of the Fund’s accounting agent, custodian and PFPC’s administrative functions; assisting with the daily calculation of Fund net asset values; overseeing the Fund’s compliance with its legal, regulatory and ethical policies and procedures; assisting with the preparation of agendas and other materials drafted by other parties, such as PFPC, for Board meetings; providing such other information and assistance to shareholders as they may reasonably request; coordinating and executing Fund soft closures and new Fund launches (as applicable); and general oversight of the vendor community at large as well as industry trends to ensure that shareholders are receiving quality service and technical support.

Transfer Agent

PFPC Inc. (“PFPC”) is currently located at 760 Moore Road, King of Prussia, PA 19406 and provides transfer agency and dividend disbursing agent services for the Fund. As part of these services, PFPC maintains records pertaining to the sale, redemption, and transfer of the Fund’s shares and distributes the Fund’s cash distributions to shareholders.

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Custodian

Brown Brothers Harriman & Co., 40 Water Street, Boston, MA 02109 is the custodian of the Trust’s assets pursuant to a custodian agreement. Under the custodian agreement, Brown Brothers Harriman & Co. (i) maintains a separate account or accounts in the name of the Fund, (ii) holds and transfers portfolio securities on account of the Fund, (iii) accepts receipts and makes disbursements of money on behalf of the Fund, (iv) collects and receives all income and other payments and distributions on account of the Fund’s securities, and (v) makes periodic reports to the Board of Trustees concerning the Fund’s operations.

Counsel to the Trust

Paul, Hastings, Janofsky & Walker LLP, 55 Second Street, 24^th Floor, San Francisco, CA 94105 serves as counsel to the Trust.

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP, 3 Embarcadero Center, San Francisco, CA 94111, serves as the independent registered public accounting firm of the Trust. The firm provides audit services and assistance and consultation with respect to regulatory filings with the SEC. The books of the Fund will be audited at least once each year by PricewaterhouseCoopers LLP.

Brokerage Allocation and Other Practices

Matthews is responsible for effecting portfolio transactions and will do so in a manner deemed fair and reasonable to the Fund. The primary consideration in all portfolio transactions will be seeking the best execution of the transaction taking into account the net proceeds of the transaction as well as qualitative factors.

In selecting and monitoring broker-dealers and negotiating commissions, Matthews 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, and other matters involved in the receipt of brokerage services generally.

Matthews 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, on-line pricing and news services. The Fund does not engage in “directed brokerage,” or the compensation of a broker-dealer for promoting or selling the Fund’s shares by directing portfolio securities transactions to that broker or dealer.

Matthews 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, Matthews 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 Matthews’ overall responsibilities to the portfolios over which Matthews exercises investment authority. Research services furnished by brokers through whom Matthews intends to effect securities transactions may be used in servicing all of Matthews’ accounts; not all of such services may be used by Matthews in connection with accounts that paid commissions to the broker providing such services. In conducting all of its soft dollar relationships, Matthews will seek to take advantage of the safe harbor provided by Section 28(e) of the Securities Exchange Act of 1934, as amended.

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Matthews will attempt to allocate portfolio transactions among the Fund and other accounts on a fair basis whenever concurrent decisions are made to purchase or sell securities by the Fund and other accounts. In making such allocations between the Fund 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 Fund and the other accounts. In some cases, this procedure could have an adverse effect on the Fund. In the opinion of Matthews, however, the results of such procedures will, on the whole, be in the best interests of each of the clients.

The Fund may at times invest in securities of its regular broker-dealers or the parent of its regular broker-dealers.

Because the Fund is new, it has not incurred any brokerage commissions.

Shares of Beneficial Interest

The Fund is authorized to issue an unlimited number of shares of beneficial interest, each with a $0.001 par value. Shares of the Fund represent equal proportionate interests in the assets of the 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 and no conversion rights.

Each whole share is entitled to one vote as to each matter on which it is entitled to vote, and each fractional share is entitled to a proportionate fractional vote. The voting rights of shareholders can be changed only by a shareholder vote.

The Fund may be terminated upon the sale and conveyance of its assets to another fund, partnership, association or corporation, or to a separate series thereof, or upon the sale and conversion into money of its assets. The Trustees may terminate or sell all or a portion of the assets of the Fund without prior shareholder approval. In the event of the dissolution or liquidation of the Fund, shareholders of the Fund are entitled to receive the underlying assets of the Fund available for distribution.

The validity of shares of beneficial interest offered by this registration statement has been passed on by Paul, Hastings, Janofsky & Walker LLP, 55 Second Street, 24^th Floor, San Francisco, CA 94105.

All accounts will be maintained in book entry form and no share certificates will be issued.

Purchase, Redemption and Pricing of Shares

Purchase of Shares

The shares are offered to the public through the Underwriter or through investment professionals who may charge a fee for their services.

Determination of Net Asset Value

Generally, the NAV per share of the Fund will be determined as of the close of trading on each day the New York Stock Exchange (“NYSE”) is open for trading. The Fund does not determine NAV on days that the NYSE is closed and at other times described in the Prospectus. However, the Fund may, under extraordinary circumstances, calculate the NAV of its shares on days on which the NYSE is closed for trading. The NYSE is closed on the days on which the following holidays are observed: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ 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 NYSE will not be open for trading on the preceding Friday and when such holiday falls on a Sunday, the NYSE 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.

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The value of an exchange-traded security held by the Fund is based on market quotations for those securities, or on its fair value determined by or under the direction of the Fund’s Board of Trustees (as described below). Market quotations are provided by pricing services that are independent of the Fund and Matthews. Foreign exchange-traded securities are valued as of the close of trading on the primary exchange on which they trade. Securities that trade in over-the-counter markets, including most debt securities (bonds), may be valued using indicative bid and ask quotations from bond dealers or market makers, or other available market information, or on their fair value as determined by or under the direction of the Fund’s Board of Trustees (as described below). The Fund may also utilize independent pricing services to assist it in determining a current market value for each security based on sources believed to be reliable.

In addition, the Fund may be subject to short-term capital gains tax in India on gains realized upon disposition of Indian securities held less than one year. The tax is computed on net realized gains; any realized losses in excess of gains may be carried forward for a period of up to eight years to offset future gains. Any net taxes payable must be remitted to the Indian government prior to repatriation of sales proceeds. The Fund accrues a deferred tax liability for net unrealized short-term gains in excess of available carryforwards on Indian securities. This accrual may reduce the Fund’s net asset value.

Short-term fixed-income securities 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 first valued at its purchase price. After it is purchased, it is valued by assuming a constant amortization to maturity of any discount or premium (because the Fund is highly likely to hold the security until it matures and then receive its face value), regardless of the way of changing interest rates could change the market value of the instrument.

Generally portfolio securities subject to a “foreign share” premium are valued at the local share prices (i.e., without including any foreign share premium). In addition, in certain countries shares may be purchased in a local class or, subject to certain limitations, in a class reserved for foreign purchasers. Foreign classes of securities frequently trade at a premium when any purchase limitations have been met. In such cases shares held in a foreign class will be valued at the foreign class price. However, foreign class shares will be valued at the local class price if either the foreign class is not full or the foreign class is not trading.

Foreign values of the Fund’s securities are converted to U.S. dollars using exchange rates determined as of the close of trading on the NYSE and in accordance with the Fund’s Pricing Policies. The Fund generally uses the foreign currency exchange rates deemed to be most appropriate by a foreign currency pricing service that is independent of the Fund and Matthews.

Trading in securities on Asian exchanges and over-the-counter markets is normally completed well before the close of the business day in New York. In addition, trading in Asian securities may not take place on all business days in New York. Furthermore, trading takes place in Asian markets and in various foreign markets on days that are not business days on which the NYSE is open and therefore the Fund’s NAV is not calculated.

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The Fund has a Valuation Committee, comprised of at least one Trustee of the Trust, as well as certain employees of Matthews (some of whom may also be officers of the Fund), which reviews and monitors the pricing policies adopted by the Board. The Valuation Committee is responsible for determining the fair value of the Fund’s securities as needed in accordance with the pricing policies and performs such other tasks as the Board deems necessary. The Valuation Committee meets on an ad hoc basis to discuss issues relating to the valuation of securities held by the Fund. Committee members are required to report actions taken at their meetings at the next scheduled Board meeting following the Valuation Committee’s meeting.

Pursuant to its policies and procedures, the Fund values any exchange-traded security for which market quotations are unavailable or have become unreliable, and any over-the-counter security for which indicative quotes are unavailable, at that security’s fair market value. In general, the fair value of such securities is determined, in accordance with the Fund’s Pricing Policies and subject to the Board’s oversight, by a pricing service retained by the Fund that is independent of the Fund and Matthews. There may be circumstances in which the Fund’s independent pricing service is unable to provide a reliable price of a security. In addition, when establishing a security’s fair value, the independent pricing service may not take into account events that occur after the close of Asian markets but prior to the time the Fund calculates its NAV. Similarly, there may be circumstances in which a foreign currency exchange rate is deemed inappropriate for use by the Fund or multiple appropriate rates exist. In such circumstances, the Board of Trustees has delegated the responsibility of making fair-value determinations to a Valuation Committee. In these circumstances, the Valuation Committee will determine the fair value of a security, or a fair exchange rate, in good faith, in accordance with the Fund’s Pricing Policies and subject to the oversight of the Board. When fair value pricing is employed (whether through the Fund’s independent pricing service or the Valuation Committee), the prices of a security used by the Fund to calculate its NAV typically differ from quoted or published prices for the same security for that day. In addition, changes in the Fund’s NAV may not track changes in published indices of, or benchmarks for, Asian Pacific securities. Similarly, changes in the Fund’s NAV may not track changes in the value of closed-end investment companies, exchange-traded funds or other similar investment vehicles.

Assets or liabilities initially expressed in terms of foreign currencies are translated prior to the next determination of the NAV of the Fund’s shares into U.S. dollars at the prevailing market rates, as determined in accordance with the Fund’s Pricing Policies.

Redemption Fees

The Fund will assess a redemption fee of 2.00% of the total redemption proceeds if you sell or exchange your shares within 90 calendar days after purchasing them. The redemption fee is paid directly to the Fund and is designed to discourage market timing activity. Market timing can disrupt the management of the Fund's investment portfolio and cause the Fund to incur costs to accommodate frequent buying and selling of shares by the market timer.  These costs are borne by the Fund’s non-redeeming shareholders.  As part of its efforts to discourage market timing activity, the Fund attempts to allocate these costs, to the extent permissible, to redeeming shareholders through the assessment of a redemption fee of 2.00% of the total redemption proceeds of shareholders who sell or exchange shares within 90 calendar days after purchasing them.  This fee is payable directly to the Fund.  For purposes of determining whether the redemption fee applies, shares that have been held longest will be redeemed first. The redemption fee does not apply to shares purchased through reinvested dividends or capital gains.

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The Fund may grant exemptions from the redemption fee where the Fund believes the transaction or account will not involve market timing activity.  The Fund reserves the right at any time to restrict purchases or exchanges or impose conditions that are more restrictive on excessive or disruptive trading, and to modify or eliminate the redemption fee at any time, without notice to shareholders, as described in the Prospectus.

If you purchase shares through an intermediary, consult your intermediary to determine how the 90 calendar day holding period will be applied. In addition, some intermediaries may impose an additional or different redemption fee, or may take different measures to discourage market timing, or short-term and frequent trading. If you purchase shares of the Fund through an intermediary, please consult that intermediary.

Please note that the redemption fee also applies to exchanges of shares between the Fund and another Matthews Asian Fund.  That is, for purposes of calculating the redemption fee, if you exchange your shares from the Fund to another Matthews Asian Fund within 90 days of purchase, the 2.00% redemption fee will be assessed. In addition, the 90-calendar-day holding period begins anew. Occasionally, when accounts are transferred from one intermediary to another, shares may not be properly aged within the new account. If you believe you have been charged a redemption fee in error, please contact your financial intermediary.

Redemption in Kind

At the organizational meeting of the Trust, the Trustees directed that the Trust elect to pay redemptions in cash as consistent with Rule 18f-1 of the 1940 Act. The Trustees further directed that Form N-18F-1 be filed with the SEC on the Trust’s behalf committing the Trust to pay in cash all requests for redemption by any shareholder of record, limited in amount with respect to each shareholder during any 90 calendar day holding period to the lesser of $250,000 or 1% of the NAV of the Fund at the beginning of such period. This means that the Trust could, if the redemption is larger than $250,000 or 1% of the net asset value of the Fund, pay a redemption with the securities held in the Fund’s portfolio. If this occurred, the shareholder receiving these portfolio securities would incur transaction charges if such shareholder were to convert the securities into cash. Due to market restrictions in certain markets, the option of the Fund to redeem in kind may be limited.

Equalization

For any of its fiscal years, the Fund may use an accounting method (known as “equalization”) that is designed to allocate equitably the tax burden of the Fund to all of its shareholders regardless of when during a tax year an individual shareholder redeemed (if ever) his or her shares of the Fund. Equalization allocates a pro rata share of taxable income to departing shareholders when they redeem shares of the Fund, reducing the amount of the distribution to be made to remaining shareholders of the Fund.

Dividends and Distributions

Dividends from net investment income, if any, are normally declared and paid by the Fund in December. Capital gains distributions, if any, are normally made after October 31. The Fund may make additional payments of dividends or distributions if it deems it to be desirable and in the best interests of shareholders at other times during the year. Any dividend or distributions paid by the Fund has the effect of reducing the net asset value per share on the record date by the amount of the dividend of distribution. To the extent the Fund makes a mid-year distribution of realized capital gains, the Fund runs the risk of over-distributing because subsequent capital losses realized prior to October 31 may more than offset the amount of the distribution. An over-distribution of capital gains is in effect a return of capital. Therefore, the Fund will only make a special mid-year distribution of capital gains in circumstances where the Board of Trustees has determined that it is more likely than not to be in the best interests of shareholders generally and that the amount of the distribution is not likely to result in an unintended return of capital.

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Taxation of the Trust

In General

The Fund has elected and intends to continue to qualify each year as a regulated investment company under Subchapter M of 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) distribute at least 90% of its dividend, interest and certain other taxable income each year; and (iii) 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 U.S. 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 Fund qualifies for treatment as a regulated investment company, it 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 will be imposed on the excess, if any, of the Fund’s “required distributions” over actual distributions in any calendar year. Generally, the “required distribution” is 98% of the Fund’s ordinary income for the calendar year plus 98% of its net capital gains recognized during the one-year period ending on October 31 plus undistributed amounts from prior years. The Fund intends 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 Fund during October, November or December to shareholders of record during such months 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 Fund whether received in cash or additional shares of the Fund. Distributions of net investment income and net capital gains, if any, will be taxable to shareholders without regard to how long a shareholder has held shares of the Fund. Dividends paid by the Fund may qualify in part for the dividends received deduction for corporations.

The Fund will notify shareholders each year of the amount of dividends and distributions, and the portion of its dividends which qualify for the corporate dividends-received deduction or any reduced rate of taxation applicable to “qualified dividends.”

At the time of an investor’s purchase of Fund shares, a portion of the purchase price may be attributable to realized or unrealized appreciation in the Fund’s portfolio or undistributed taxable income of the Fund. Consequently, subsequent distributions by the Fund with respect to these shares from such appreciation or income may be taxable to such investor even if the trading value of the investor’s shares is, as a result of the distributions, reduced below the investor’s cost for such shares and the distributions economically represent a return of a portion of the investment.

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Taxes Regarding Options, Futures and Foreign Currency Transactions

When the Fund writes a call, or purchases a put option, an amount equal to the premium received or paid by it is included in the Fund’s 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 that the 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 that 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 that 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 that 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 the 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. 60% 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.

Foreign exchange gains and losses realized by the Fund in connection with certain transactions involving foreign currency-denominated debt securities, certain options and futures contracts relating to foreign currency, foreign currency forward contracts, foreign currencies, or payables or receivables denominated in a foreign currency are subject to Section 988 of the Code, which generally causes such gains and losses to be treated as ordinary income and losses and may affect the amount, timing and character of distributions to stockholders.

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Other Foreign Tax Issues

In India, a tax of 15% plus surcharges is currently imposed on gains from sales of equities held not more than one year and sold on a recognized stock exchange in India. Gains from sales of equity securities in other cases are taxed at a rate of 30% plus surcharges (for securities held not more than one year) and 10% (for securities held for more than one year). There is no tax on gains from sales of equities held for more than one year and sold on a recognized stock exchange in India.

Also in India, the tax rate on gains from sales of listed debt securities is currently 10% plus surcharges if the securities have been held more than one year and 30% plus surcharges if the securities have been held not more than one year. Securities transaction tax applies for specified transactions at specified rates. India imposes a tax on interest on securities at a rate of 20% plus surcharges. This tax is imposed on the investor and payable prior to repatriation of sales proceeds. The tax is computed on net realized gains; any realized losses in excess of gains may be carried forward for a period of up to 8 years to offset future gains. India imposes a tax on dividends paid by an Indian company at a rate of 12.5% plus surcharges. This tax is imposed on the company that pays the dividends. Please refer to the Purchase, Redemption and Pricing of Shares section for information on how treatment of these taxes may affect the Fund’s daily NAV.

Taxes incurred on the Fund’s short-term realized gains may lower the potential short-term capital gains distribution of the Fund. Any taxes paid in India by the Fund on short-term realized gains will be available to be included in the calculation of the Fund’s foreign tax credit that is passed through to shareholders via Form 1099-DIV. Although taxes incurred on short-term gains may lower the potential short-term capital gains distribution of the Fund, they also potentially lower, to a larger extent, the total return of the Fund as proceeds from sales are reduced by the amount of the tax.

Under the U.S.-South Korea income tax treaty, as presently in effect, the government of South Korea imposes a non-recoverable withholding tax and resident tax aggregating 16.5% on dividends and 13.2% on interest paid by South Korean issuers. Under U.S.-South Korea income tax treaty, there is no South Korean withholding tax on realized capital gains.

The above discussion and the related discussion in the Prospectus are not intended to be complete discussions of all applicable Federal or foreign tax consequences of an investment in the Fund. 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, as well as any foreign tax implications.

Federal law requires that the Fund withhold (as “backup withholding”) 28% of reportable payments, including dividends, capital gain distributions and the proceeds of redemptions and exchanges or repurchases of Fund shares, paid to stockholders who have not complied with IRS regulations. In order to avoid this withholding requirement, stockholders must certify on their Account Applications, or on separate IRS Forms W-9, that the Social Security Number or other Taxpayer Identification Number they provide is their correct number and that they are not currently subject to backup withholding, or that they are exempt from backup withholding.

The foregoing discussion relates solely to U.S. investors. Non-U.S. investors should consult their tax advisors concerning the tax consequences of ownership of shares of the Fund, including the possibility that distributions may be subject to a 30% U.S. withholding tax (or a reduced rate of withholding provided by treaty).

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Other Information

Statements contained in the Prospectus or in this SAI 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 Prospectus and this SAI form a part. Each such statement is qualified in all respects by such reference.

Reports to Shareholders

Shareholders will receive un-audited semi-annual reports describing the Fund’s investment operations and annual financial statements audited by independent certified public accountants. Inquiries regarding the Fund may be directed to Matthews at (800) 789-ASIA [2742].

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Appendix: Bond Ratings

The Fund’s investments may range in quality from securities rated in the lowest category in which the Fund is permitted to invest to securities rated in the highest category (as rated by Moody’s Investors Service, Inc. (“Moody’s”), Standard & Poor’s Corporation (“S&P”) or Fitch Inc., (“Fitch”), or, if unrated, determined by Matthews to be of comparable quality). The percentage of the Fund’s assets invested in securities in a particular rating category will vary. The following terms are generally used to describe the credit quality of fixed income securities:

· High Quality Debt Securities are those rated in one of the two highest rating categories (the highest category for commercial paper) or, if unrated, deemed comparable by Matthews.

· Investment Grade Debt Securities are those rated in one of the four highest rating categories or, if unrated, deemed comparable by Matthews.

· Below Investment Grade, High Yield Securities (“Junk Bonds”) are those rated lower than Baa by Moody’s, BBB by S&P or Fitch and comparable securities. They are considered predominantly speculative with respect to the issuer’s ability to repay principal and interest.

The following is a description of the ratings categories used by Moody’s, S&P and Fitch applicable to fixed income securities.

Moody’s classifies corporate bonds as follows:

“Aaa” - Bonds are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edged.” 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 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 risk appear somewhat larger than the “Aaa” securities.

“A” - Bonds 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 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.

“Ba” - Bonds 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 thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.

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“B” - Bonds generally lack characteristics of the desirable investment. 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 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 represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.

“C” - Bonds 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.

Note: Moody’s applies numerical modifiers 1, 2, and 3 in each generic rating classification from “Aa” through “Caa.” The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.

Moody’s classifies corporate short-term debt as follows:

Moody’s short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations which have an original maturity not exceeding one year. Obligations relying upon support mechanisms such as letters of credit and bonds of indemnity are excluded unless explicitly rated. Moody’s employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers:

PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structure with moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial charges and high internal cash generation; and well-established access to a range of financial markets and assured sources of alternate liquidity.

PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.

PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.

S&P describes classification of corporate and municipal debt as follows:

“AAA” - An obligation rated “AAA” has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.

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“AA” - An obligation rated “AA” differs from the highest rated obligations only in small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.

“A” - An obligation rated “A” is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.

“BBB” - An obligation rated “BBB” exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

Obligations rated “BB,” “B,” “CCC,” “CC” are regarded as having significant speculative characteristics. “BB” indicates the least degree of speculation and “CC” the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

“BB” - An obligation rated “BB” is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

“B” - An obligation rated “B” is more vulnerable to nonpayment than obligations rated “BB,” but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.

“CCC” - An obligation rated “CCC” is currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

“CC” - An obligation rated “CC” is currently highly vulnerable to nonpayment.

“C” - The “C” rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued.

“D” - An obligation rated “D” is in payment default. The “D” rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payment will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-) - The ratings from “AA” through “CCC” may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

Debt obligations of issuers outside the United States and its territories are rated on the same basis as domestic corporate and municipal issues. The ratings measure the creditworthiness of the obligor but do not take into account currency exchange and related uncertainties.

Provisional ratings:

“p” The letter “p” indicates that the rating is provisional. A provisional rating assumes the successful completion of the project being financed by the debt being rated and indicates that payment of debt service requirements is largely or entirely dependent upon the successful and timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of, or the risk of default upon failure of, such completion. The investor should exercise his own judgment with respect to such likelihood and risk.

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“r” The “r” is attached to highlight derivative, hybrid, and certain other obligations that S&P believes may experience high volatility or high variability in expected returns due to non-credit risks. Examples of such obligations are: securities whose principal or interest return is indexed to equities, commodities, or currencies; certain swaps and options; and interest only and principal only mortgage securities. The absence of an “r” symbol should not be taken as an indication that an obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.

Fitch describes classification of long term credit ratings of debt securities as follows:

“AAA”: Highest credit quality. “AAA” ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

“AA”: Very high credit quality. “AA” ratings denote a very low expectation of credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

“A”: High credit quality. “A” ratings denote a low expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.

“BBB”: Good credit quality. “BBB” ratings indicate that there is currently a low expectation of credit risk. The capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investment-grade category. Speculative Grade

“BB”: Speculative. “BB” ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade.

“B”: Highly speculative. “B” ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment.

“CCC,” “CC,” “C”: High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. A “CC” rating indicates that default of some kind appears probable. “C” ratings signal imminent default.

“DDD,” “DD,” “D”: Default. The ratings of obligations in this category are based on their prospects for achieving partial or full recovery in a reorganization or liquidation of the obligor. While expected recovery values are highly speculative and cannot be estimated with any precision, the following serve as general guidelines. “DDD” obligations have the highest potential for recovery, around 90%-100% of outstanding amounts and accrued interest. “DD” indicates potential recoveries in the range of 50%-90%, and “D” the lowest recovery potential, i.e., below 50%. Entities rated in this category have defaulted on some or all of their obligations. Entities rated “DDD” have the highest prospect for resumption of performance or continued operation with or without a formal reorganization process. Entities rated “DD” and “D” are generally undergoing a formal reorganization or liquidation process; those rated “DD” are likely to satisfy a higher portion of their outstanding obligations, while entities rated “D” have a poor prospect for repaying all obligations.

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“NR” indicates that Fitch does not rate the issuer or issue in question.

Withdrawn: A rating is withdrawn when Fitch deems the amount of information available to be inadequate for rating purposes, or when an obligation matures, is called, or refinanced.

Rating Watch: Ratings are placed on Rating Watch to notify investors that there is a reasonable probability of a rating change and the likely direction of such change. These are designated as “Positive”, indicating a potential upgrade, “Negative,” for a potential downgrade, or “Evolving,” if ratings may be raised, lowered or maintained. Rating Watch is typically resolved over a relatively short period.

A Rating Outlook indicates the direction a rating is likely to move over a one to two year period. Outlooks may be positive, stable, or negative. A positive or negative Rating Outlook does not imply a rating change is inevitable. Similarly, companies whose outlooks are “stable” could be downgraded before an outlook moves to positive or negative if circumstances warrant such an action. Occasionally, Fitch may be unable to identify the fundamental trend. In these cases, the Rating Outlook may be described as evolving.

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MATTHEWS INTERNATIONAL FUNDS

Form N-1A

Part C - Other Information

Item 23. Exhibits

(a) Trust Instrument and Certificate of Trust is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 5 on December 26, 1996.

(b) By-Laws are incorporated herein by reference to and were filed electronically with Post-Effective Amendment No. 5 on December 26, 1996.

(c) Not Applicable.

(d)(1) Form of Investment Advisory Agreement between Matthews International Funds and Matthews International Capital Management, LLC, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 16 on December 21, 2001.

(d)(2) Investment Advisory Agreement between Matthews International Capital Management, LLC and Matthews International Funds on behalf of the Matthews Asia Pacific Fund, dated October 31, 2003, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 20 on December 23, 2003.

(d)(3) Investment Advisory Agreement between Matthews International Capital Management, LLC and Matthews International Funds on behalf of each series of the Trust, dated August 31, 2004, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 22 on October 28, 2004.

(d)(4) Amended Appendix A to the Investment Advisory Agreement between Matthews International Capital Management, LLC and Matthews International Funds, dated August 12, 2005 to reflect the addition of the Matthews India Fund, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 27 on October 31, 2005.

(d)(5) Amended Appendix A to the Investment Advisory Agreement between Matthews International Capital Management, LLC and Matthews International Funds, dated August 11, 2006 to reflect the addition of the Matthews Asia Pacific Equity Income Fund, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 29 on August 15, 2006.

(d)(6) Amendment to the Investment Advisory Agreement between Matthews International Capital Management, LLC and Matthews International Funds, dated August 31, 2007 is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 32 on April 29, 2008.

(e)(1) Underwriting Agreement for Matthews International Funds with PFPC Distributors, Inc., dated December 31, 2000, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 16 on July 16, 2001.

(e)(2) Amended Schedule A to Underwriting Agreement for Matthews International Funds with PFPC Distributors, Inc., dated August 15, 2003 to reflect the addition of the Matthews Asia Pacific Fund, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 20 on December 23, 2003.

(e)(3) Amended Schedule A to Underwriting Agreement for Matthews International Funds with PFPC Distributors, Inc., dated August 12, 2005 to reflect the addition of the Matthews India Fund, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 27 on October 31, 2005.

(e)(4) Amended Schedule A to Underwriting Agreement for Matthews International Funds with PFPC Distributors, Inc., dated August 11, 2006 to reflect the addition of the Matthews Asia Pacific Equity Income Fund, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 29 on August 15, 2006.

(f) Not Applicable.

(g) Custody Agreement with Brown Brothers Harriman & Co. dated July 20, 2007 is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 32 on April 29, 2008.

(h)(1) Investment Company Services Agreement for Matthews International Fundswith FPS Services, Inc., dated October 1, 1997, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 8 on December 31, 1997.

(h)(1)(i) Amendment to Investment Company Services Agreement dated November 11, 1997, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 8 on December 31, 1997.

(h)(1)(ii) Amendment to Investment Company Services Agreement, dated July 31, 1998, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 16 on December 21, 2001.

(h)(1)(iii) Amendment to Investment Company Services Agreement, dated December 30, 1998, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 16 on December 21, 2001.

(h)(1)(iv) Amendment No. 3 to Investment Company Services Agreement, dated October 15, 1999, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 13 on December 20, 1999.

(h)(1)(v) Amendment to Investment Company Services Agreement, dated December 1, 1999, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 13 on December 20, 1999.

(h)(1)(vi) Amendment to Investment Company Services Agreement, dated May 1, 2001, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 16 on December 21, 2001.

(h)(1)(vii) Anti-Money Laundering and Privacy Amendment dated, July 24, 2002 to Investment Company Services Agreement, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 18 on July 18, 2003.

(h)(1)(viii) Amendment to Investment Company Services Agreement, dated August 1, 2002, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 18 on July 18, 2003.

(h)(1)(ix) Amendment to Investment Company Services Agreement, dated August 15, 2003 to reflect the addition of the Matthews Asia Pacific Fund, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 20 on December 23, 2003.

(h)(1)(x) Customer Identification Services Amendment to Investment Company Services Agreement, dated October 1, 2003, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 20 on December 23, 2003.

(h)(1)(xi) Amended and Restated Investment Company Services Agreement dated June 1, 2004 is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 27 on October 31, 2005.

(h)(1)(xii) Amended Schedule A to Investment Company Services Agreement, dated August 12, 2005 to reflect the addition of the Matthews India Fund, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 27 on October 31, 2005.

(h)(1)(xiii) Amended Schedule A to Investment Company Services Agreement, dated August 11, 2006 to reflect the addition of the Matthews Asia Pacific Equity Income Fund, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 29 on August 15, 2006.

(h)(1)(xiv) Amendment to Investment Company Services Agreement, dated May 8, 2007, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 32 on April 29, 2008.

(h)(1)(xv) Second Amended and Restated Investment Company Services Agreement, dated April 2, 2008, with effect from April 1, 2007 is filed herewith.

(h)(1)(xvi) Services Standards related to the Second Amended and Restated Investment Company Services Agreement, dated April 2, 2008, with effect from April 1, 2007 is filed herewith.

(h)(2)(i) Shareholder Services Agreement between Matthews International Funds and Matthews International Capital Management, LLC, dated April 17, 1998 and as amended April 3, 2002, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 18 on July 18, 2003.

(h)(2)(ii) Amendment to Shareholder Services Agreement between Matthews International Funds and Matthews International Capital Management, LLC, dated August 15, 2003 is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 20 on December 23, 2003.

(h)(2)(iii) Administration and Shareholder Services Agreement between Matthews International Funds and Matthews International Capital Management, LLC, dated August 31, 2004 is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 22 on October 28, 2004.

(h)(2)(iv) Amended Schedule A to Administration and Shareholder Services Agreement between Matthews International Funds and Matthews International Capital Management, LLC, dated August 12, 2005 to reflect the addition of the Matthews India Fund, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 27 on October 31, 2005.

(h)(2)(v) Amended Schedule A to Administration and Shareholder Services Agreement between Matthews International Funds and Matthews International Capital Management, LLC, dated, dated August 11, 2006 to reflect the addition of the Matthews Asia Pacific Equity Income Fund, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 29 on August 15, 2006.

(h)(2)(vi) Amended Schedule B to Administration and Shareholder Services Agreement between Matthews International Funds and Matthews International Capital Management, LLC dated August 11, 2006 is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 30 on October 31, 2006.

(h)(2)(vii) Amendment to Administration and Shareholder Services Agreement between Matthews International Funds and Matthews International Capital Management, LLC dated August 31, 2007 is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 32 on April 29, 2008.

(h)(3) Operating Expenses Agreement between Matthews International Funds and Matthews International Capital Management, LLC, dated November 14, 2003 is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 28 on April 28, 2006.

(h)(3)(i) Amendment to Operating Expenses Agreement Operating Expenses Agreement between Matthews International Funds and Matthews International Capital Management, LLC, dated August 12, 2005 to reflect the addition of the Matthews India Fund is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 28 on April 28, 2006.

(h)(3)(ii) Amendment to Operating Expenses Agreement Operating Expenses Agreement between Matthews International Funds and Matthews International Capital Management, LLC, dated August 11, 2006 to reflect the addition of the Matthews Asia Pacific Equity Income Fund, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 29 on August 15, 2006.

(h)(3)(iii) Amendment to Operating Expenses Agreement between Matthews International Funds and Matthews International Capital Management, LLC, dated as of April 23, 2007 is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 31 on April 30, 2007.

(i) Legal Opinion and Consent of Counsel to be filed by amendment.

(j) Consent of Independent Registered Public Accounting Firm to be filed by amendment.

(k) Not Applicable.

(l) Not Applicable.

(m)(1) 12b-1 Plan is incorporated herein by reference to and filed electronically with Post-Effective Amendment No. 13 on December 20, 1999.

(m)(2) Distribution Plan - Class A dated August 13, 2004 is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 27 on October 31, 2005.

(n) Not Applicable.

(o) Second amended and restated 18f-3 Plan is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 16 on December 21, 2001.

(p)(1) Code of Ethics of Matthews International Funds is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 16 on December 21, 2001.

(p)(2) Code of Ethics of Matthews International Capital Management, LLC is incorporated herein by reference to and filed electronically with Post-Effective Amendment No. 14 on October 12, 2000.

(p)(3) Code of Ethics of Matthews Asian Funds and Matthews International Capital Management, LLC, dated December 15, 2003, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 20 on December 23, 2003.

(p)(4) Code of Ethics of Matthews Asian Funds and Matthews International Capital Management, LLC, dated October 11, 2004, is incorporated herein by reference and was filed electronically with Post-Effective Amendment No. 23 on December 29, 2004.

(p)(5) Code of Ethics of Matthews Asian Funds and Matthews International Capital Management, LLC, dated May 2005, is incorporated herein by reference and was filed electronically with Post-Effective Amendment No. 26 on August 10, 2005.

(p)(6) Code of Ethics of Matthews Asian Funds and Matthews International Capital Management, LLC, dated June 2007, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 32 on April 29, 2008.

(q)(1) Power of Attorney dated, November 14, 2003, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 20 on December 23, 2003.

(q)(2) Power of Attorney dated, January 27, 2004, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 21 on January 28, 2004.

(q)(3) Power of Attorney dated, August 12, 2005, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 27 on October 31, 2005.

(q)(4) Power of Attorney dated, May 25, 2006, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 29 on August 15, 2006.

(q)(5) Power of Attorney, dated February 28, 2008, is incorporated herein by reference to and was filed electronically with Post-Effective Amendment No. 32 on April 29, 2008.

Item 24. Persons Controlled by or under Common Control with the Registrant

Not Applicable.

Item 25. 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 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, incorporated herein by reference as Exhibit 1 to Post-Effective Amendment No. 5, 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. In addition, the Registrant has entered into an Indemnification Agreement with each Trustee providing for indemnification and advancement of expenses consistent with the Registrant’s Trust Instrument and applicable state and federal statutes.

Item26. Business and Other Connections of Advisor:

The sole business activity of Matthews International Capital Management, LLC, Four Embarcadero Center, Suite 550, San Francisco, CA 94111 ( “Matthews”), is to offer continuous investment management supervision to client portfolios. Matthews is registered under the Investment Advisers Act of 1940, as amended. Information as to the directors and officers of Matthews is as follows:

Name and Position with Matthews	Other Company	Position With Other Company
G. Paul Matthews Director, Chairman and Portfolio Manager	Matthews International Funds (d/b/a Matthews Asian Funds) Four Embarcadero Center San Francisco, CA 94111 Mathews Asian Selections Funds Plc Floor 3 Brooklawn House Crampton Ave. Ballsbridge Dublin 4, Ireland	Director Director
Mark W. Headley Director, Chief Investment Officer, Co-Chief Executive Officer and Portfolio Manager	Mathews Asian Selections Funds Plc Floor 3 Brooklawn House Crampton Ave. Ballsbridge Dublin 4, Ireland	Director

William J. Guilfoyle Co-Chief Executive Officer	Matthews International Funds (d/b/a Matthews Asian Funds) Four Embarcadero Center San Francisco, CA 94111 Guilfoyle and Associates 3603 Campanil Dr. Santa Barbara, CA 93109	President Principal 2002-2007
William J. Hackett President	Matthews International Funds (d/b/a Matthews Asian Funds) Four Embarcadero Center San Francisco, CA 94111 Deloitte & Touche LLP 695 Town Center Drive Suite 1200 Costa Mesa, CA 92626	Vice President Partner, 2005 -2007
Manoj Pombra Chief Compliance Officer	Matthews International Funds (d/b/a Matthews Asian Funds) Four Embarcadero Center San Francisco, CA 94111	Chief Compliance Officer
John P. McGowan Chief Administrative Officer	Matthews International Funds (d/b/a Matthews Asian Funds) Four Embarcadero Center San Francisco, CA 94111 Mathews Asian Selections Funds Plc Floor 3 Brooklawn House Crampton Ave. Ballsbridge Dublin 4, Ireland	Vice President and Secretary Director

Andrew T. Foster Acting Chief Investment Officer and Portfolio Manager	Matthews International Funds (d/b/a Matthews Asian Funds) Four Embarcadero Center San Francisco, CA 94111	Vice President
Timothy B. Parker General Counsel	Matthews International Funds (d/b/a Matthews Asian Funds) Four Embarcadero Center San Francisco, CA 94111	Vice President
Paul F. Pelosi Director	Fairfield Associates 235 Montgomery Street San Francisco, CA 94104 Financial Leasing Service, Inc. 235 Montgomery Street San Francisco, CA 94104 45 Belden Corp. 235 Montgomery Street San Francisco, CA 94104 City Car Services 235 Montgomery Street San Francisco, CA 94104	President President President Director
Chris Carey Director	City National Bank 555 South Flower Street Los Angeles, CA 90071	Chief Financial Officer

Item27. Principal Underwriter

(a) PFPC Distributors, Inc. (the “Underwriter”) is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the National Association of Securities Dealers. As of April 7, 2008, the Underwriter acted as principal underwriter for the following investment companies:

AFBA 5 Star Funds, Inc.

Aston Funds

Atlantic Whitehall Funds Trust

BHR Institutional Funds

CRM Mutual Fund Trust

E.I.I. Realty Securities Trust

FundVantage Trust

GuideStone Funds

Highland Floating Rate Fund

Highland Floating Rate Advantage Fund

Highland Funds I

Highmark Funds

Kalmar Pooled Investment Trust

Matthews Asian Funds

Metropolitan West Funds

New Alternatives Fund

Old Westbury Funds

PAX World Funds Series Trust I

The RBB Fund, Inc.

Stratton Multi-Cap Fund

Stratton Monthly Dividend REIT Shares, Inc.

The Stratton Funds, Inc.

Sterling Capital Small Cap Value Fund

The Torray Fund

Van Wagoner Funds

Wilshire Mutual Funds, Inc.

Wilshire Variable Insurance Trust

(b) The Underwriter is a Massachusetts corporation located at 760 Moore Road, King of Prussia, PA 19406. The Underwriter is a wholly-owned subsidiary of PFPC, Inc. and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., a publicly traded company.

The following is a list of the directors and executive officers of the Underwriter:

Board of Directors

Name	Position	Effective Date
Nicholas M. Marsini, Jr.	Director	April 26, 2007
Michael DeNofrio	Director	April 26, 2007
Steven Turowski	Director	August 30, 2007
T. Thomas Deck	Director	January 3, 2008

Officers

Name	Position	Effective Date
T. Thomas Deck	President and Chief Executive Officer	January 3, 2008
Bruno DiStefano	Vice President	April 11, 2007
Susan K. Moscaritolo	Vice President, Secretary and Clerk	VP - April 11, 2007 Secretary and Clerk - May 29, 2007
Charlene Wilson	Treasurer and Financial Operations Principal, Chief Financial Officer	April 11, 2007
Rita G. Adler	Chief Compliance Officer	April 11, 2007
Jodi L. Jamison	Chief Legal Officer	April 11, 2007
Maria C. Schaffer	Controller and Assistant Treasurer	April 11, 2007
John Munera	Anti-Money Laundering Officer	April 11, 2007
Ronald Berge	Assistant Vice President	April 11, 2007
Julie Bartos	Assistant Secretary and Assistant Clerk	April 11, 2007
Dianna A. Stone	Assistant Secretary and Assistant Clerk	November 27, 2007

(c) Not applicable.

Item 28. Location of Accounts and Records

Books or other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, and the rules promulgated thereunder, are maintained as follows:

(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6); (8); (12); and 31a-1(d), the required books and records will be maintained at the offices of Registrant’s Custodian:

Brown Brothers Harriman & Co., 40 Water Street, Boston, MA 02109-3661.

(b)/(c) With respect to Rules 31a-1(a); 31a-1(b),(4); (2)(C) and (D); (4); and 31a-1(f), the required books and records are maintained at the offices of Registrant’s Administrator, Transfer Agent and Fund Accounting Services Agent:

PFPC Inc., 760 Moore Road, King of Prussia, PA 19406-0903.

(c) With respect to Rules 31a-1(b)(5), (6), (9), (10) and (11) and 31a-1(f), the required books and records are maintained at the principal offices of the Registrant’s Advisor:

Matthews International Capital Management, LLC, Four Embarcadero Center, Suite 550, San Francisco, CA 94111

Item 29. Management Services

Not Applicable.

Item 30. Undertakings

Not Applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the Investment Company Act of 1940, as amended, the Registrant has duly caused this Post-Effective Amendment No. 33 to be signed on its behalf by the undersigned, thereto duly authorized, in the City of San Francisco and State of California on the 18^th day of June, 2008.

Matthews International Funds

By /s/ William J. Guilfoyle

William J. Guilfoyle, President

Pursuant to the requirements of the Securities Act, this Post-Effective Amendment No. 33 to the Registration Statement of Matthews International Funds has been signed below by the following persons on the 18^th day of June, 2008, in the capacities indicated.

Signature	Capacity	Date
/s/ William J. Guilfoyle	President and Principal Executive Officer	June 18, 2008
William J. Guilfoyle
/s/ Shai Malka	Treasurer	June 18, 2008
Shai Malka
/s/ Geoffrey H. Bobroff*	Trustee	June 18, 2008
Geoffrey H. Bobroff
/s/ Jonathan Zeschin*	Trustee	June 18, 2008
Jonathan Zeschin
/s/ G. Paul Matthews*	Trustee	June 18, 2008
G. Paul Matthews
/s/ Rhoda Rossman*	Trustee	June 18, 2008
Rhoda Rossman
/s/ Toshi Shibano*	Trustee	June 18, 2008
Toshi Shibano

* By: /s/ John P. McGowan

as Attorney-in-Fact and Agent

pursuant to Power of Attorney

MATTHEWS INTERNATIONAL FUNDS

N-1A

EXHIBIT INDEX

EXHIBIT NO.	DESCRIPTION
(h)(1)(xv)	Second Amended and Restated Investment Company Services Agreement, dated April 2, 2008, with effect from April 1, 2007.
(h)(1)(xvi)	Services Standards related to the Second Amended and Restated Investment Company Services Agreement, dated April 2, 2008, with effect from April 1, 2007.

EX-99.(H)(1)(XV)

SECOND AMENDED AND RESTATED

INVESTMENT COMPANY SERVICES AGREEMENT

This Second Amended and Restated Investment Company Services Agreement (the “Agreement”) is this 2nd day of April 2008, with effect retroactively from April 1, 2007 by and between PFPC Inc., a Massachusetts corporation (“PFPC”), and Matthews International Funds, d/b/a Matthews Asian Funds, a Delaware statutory trust (the “Trust”).

RECITALS

A. The Trust is registered as an open-end management investment company under the 1940 Act.

B. The Trust and PFPC were parties to an Investment Company Services Agreement dated October 1, 1997 (the “1997 Agreement”) as amended by the certain Amended and Restated Investment Company Services Agreement, as amended (the “Superseded Agreement”), which is terminated as of the date of this Agreement.

C. The Trust wishes to continue to retain PFPC to provide fund accounting and administration, pricing agent, regulatory administration and transfer agent services to its investment portfolios listed on Schedule A attached hereto and made a part hereof (each a “Fund” and collectively, the “Funds”), as such Schedule A may be amended from time to time, and PFPC wishes to continue to furnish such services, on the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and intending to be legally bound hereby the parties hereto agree as follows:

1. Definitions. Capitalized terms not otherwise defined herein have the respective meanings as set forth on Schedule B hereto.

2. Appointment.

2.1. Services. The Trust reappoints PFPC as of the Effective Date as its administrator, fund accountant, pricing agent and transfer agent with respect to each of the Funds, in accordance with the terms set forth in this Agreement. PFPC acknowledges such appointment and agrees to continue to furnish such services described herein and on Schedules C and D hereto (the “Services”).

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2.2. Valuation Services.

(i) Pricing Vendors. The Trust has entered into an agreement with a primary pricing vendor and may enter into agreements with one or more Secondary Pricing Vendors for the provision of standard pricing information, and a Fair Value Pricing Vendor for certain Fair Value Prices to PFPC, each in accordance with the Trust’s Pricing Policies. Prior to entering into an agreement with any other person to act as Pricing Vendor (whether Primary, Secondary, or Fair Value), the Trust will notify PFPC, and the parties will work together to determine, as between the Trust and PFPC, the terms and fees under which such Pricing Vendor would be acceptable to both parties. The parties further agree that the Trust shall at no time be required to obtain PFPC’s consent to the selection of a different Pricing Vendor; provided that at no time will be PFPC required perform valuation services using such Pricing Vendor if the Trust selects a Pricing Vendor for which PFPC does not then-currently have in effect all necessary (i) contractual arrangements and (ii) interconnectivity.

(ii) Fair Value Pricing. The Trust understands and agrees that PFPC will not be able to employ its standard review process to Fair Value Prices and that PFPC shall have no obligation to inquire into, verify, or otherwise analyze the accuracy or reasonableness of any Fair Value Prices except as set forth in Schedule D. Except as set forth in Schedule D, PFPC shall have no responsibility for verifying the accuracy and reasonableness of Fair Value Prices or the appropriateness of the Funds’ use of Fair Value Prices, regardless of any efforts of PFPC in this respect. The Trust acknowledges that any determination to use any Fair Value Price is the responsibility of the Trust and not PFPC.

(iii) Standard Pricing. Excluding securities for which Fair Value Prices are obtained, PFPC represents and warrants that it has adopted and implemented policies and procedures to review prices received from the Primary Pricing Vendor and, if applicable, a Secondary Pricing Vendor for accuracy and reasonableness, including policies and procedures that are reasonably designed to ensure that (i) prices provided are for the proper security (as identified by CUSIP, ISIN or another similar code broadly used in the financial markets); (ii) prices provided by any Pricing Vendor are from the correct pricing source; (iii) the Trust is notified when a Pricing Vendor has not provided a price for any security; (iv) the Trust is notified when any security provided by a Pricing Vendor has not changed for 3 or more business days; and (v) that the Trust is notified when any security held by a Fund has or is expected to the subject of a dividend, stock split or other corporate action.

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3. Compliance with Rules and Regulations. PFPC undertakes to comply with all applicable requirements of the Securities Laws, and any laws, rules and regulations of governmental authorities having jurisdiction with respect to the duties to be performed by PFPC hereunder. Except as specifically set forth herein, PFPC assumes no responsibility for such compliance by the Trust, the Funds or other entity.

4. Instructions.

4.1. Unless otherwise provided in this Agreement, PFPC shall act only upon Oral Instructions or Written Instructions.

4.2. PFPC shall be entitled to rely upon any Oral Instruction or Written Instruction it receives from an Authorized Person (or from a person reasonably believed by PFPC to be an Authorized Person identified on the then-current Schedule G) pursuant to this Agreement. PFPC may assume that any Oral Instruction or Written Instruction received hereunder is not in any way inconsistent with the provisions of organizational documents or this Agreement or of any vote, resolution or proceeding of the Trust’s Board of Trustees or of the Trust’s shareholders, unless and until PFPC receives Written Instructions to the contrary.

4.3. The Trust agrees to forward to PFPC Written Instructions confirming Oral Instructions (except where such Oral Instructions are given by PFPC or its affiliates) promptly following such Oral Instructions are received. The fact that such confirming Written Instructions are not received by PFPC or differ from the Oral Instructions shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions or PFPC’s reliance upon such Oral Instructions prior to its receipt of Written Instructions or subsequent Oral Instructions and a reasonable opportunity to act thereon.

5. Right to Receive Advice.

5.1. Advice of the Trust. If PFPC is in doubt as to any action it should or should not take, PFPC may request directions or advice, including Oral Instructions or Written Instructions, from the Trust.

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5.2. Advice of Counsel. If PFPC shall be in doubt as to any question of law pertaining to any action it should or should not take, PFPC may request advice from counsel of its own choosing (who may be counsel for the Trust, Matthews or PFPC, at the option of PFPC). PFPC shall solely be responsible for the associated counsel fees unless PFPC consults with the Trust prior to requesting advice of counsel concerning a material question of law, in which case, the parties shall use good faith efforts to properly allocate the expense of any such counsel fees between the parties; provided however, it is the parties mutual understanding that PFPC shall not be responsible for legal fees or costs occasioned by PFPC’s provision of regulatory administration services in the normal course of business.

5.3. Conflicting Advice. In the event of a conflict between (i) directions or advice or Oral Instructions or Written Instructions PFPC receives from the Trust; and (ii) the advice PFPC receives from counsel, PFPC may rely upon and follow the advice of counsel in not acting upon such directions, advice, Oral Instructions or Written Instructions; provided, however, that PFPC shall promptly notify the Trust in writing of such conflict and PFPC’s determination not act upon the direction, advice, Oral Instruction or Written Instruction of the Trust.

5.4. Protection of PFPC. Subject to Section 12 of this Agreement, PFPC shall be indemnified by the Trust and without liability for any action PFPC takes or does not take in reliance upon directions or advice or Oral Instructions or Written Instructions PFPC receives from or on behalf of the Trust or from counsel and which PFPC believes, in good faith, to be consistent with those directions or advice and Oral Instructions or Written Instructions. Nothing in this section shall be construed so as to impose an obligation upon PFPC (i) to seek such directions or advice or Oral Instructions or Written Instructions, or (ii) to act in accordance with such directions or advice or Oral Instructions or Written Instructions.

6. Records; Visits.

6.1. The books and records pertaining to the Trust and the Funds that are in the possession or under the control of PFPC shall be the property of the Trust. Such books and records shall be prepared and maintained as required by the 1940 Act and other applicable laws, rules and regulations. The Trust and Authorized Persons shall have access to such books and records at all times during PFPC’s normal business hours. Upon the reasonable request of the Trust, copies of any such books and records shall be provided by PFPC to the Trust or to an Authorized Person, at the Trust’s expense.

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6.2. PFPC shall keep the current the accounts, books, and other documents relating to the business of the Trust which constitute certain of the records forming the basis for financial statements required to be filed pursuant to section 31 of the 1940 Act and any rules adopted thereunder, including the following records, which shall be prepared and maintained at the times and in a manner consistent with the requirements of Rule 31a-1 of the 1940 Act, as such Rule is amended from time to time:

(i) Purchases and Sales of Portfolio Securities. Journals (or other records of original entry) containing an itemized daily record in detail of all purchases and sales of securities (including sales and redemptions of its own securities), all receipts and deliveries of securities (including certificate numbers if such detail is not recorded by custodian or transfer agent), all receipts and disbursements of cash and all other debits and credits;

(ii) General Ledger. General and auxiliary ledgers (or other records) reflecting all assets, liability, reserve, capital, income and expense accounts, including:

a. Separate ledger accounts (or other records) reflecting the following:

i. Dividends and interest received; and

ii. Dividends receivable and interest accrued.

b. Separate ledger accounts (or other records) for each portfolio security, showing (as of trade dates) (a) the quantity and unit and aggregate price for each purchase, sale, receipt, and delivery of securities and commodities for such accounts, and (b) all other debits and credits for such accounts. A memorandum record shall be available setting forth, with respect to each portfolio security account, the amount and declaration ex-dividend, and payment dates of each dividend declared thereon;

c. Separate ledger accounts (or other records) for each broker-dealer bank or other person with or through which transactions in portfolio securities are effected, showing each purchase or sale of securities with or through such persons, including details as to the date of the purchase or sale, the quantity and unit and aggregate price of such securities, and the commissions or other compensation paid to such persons; and

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d. Separate ledger accounts (or other records) showing for each shareholder of record of the investment company the number of shares of capital stock of the company held. In respect of share accumulation accounts (arising from periodic investment plans, dividend reinvestment plans, deposit of issued shares by the owner thereof, etc.), details shall be available as to the dates and number of shares of each accumulation, and except with respect to already issued shares deposited by the owner thereof, prices of each such accumulation.

(iii) Portfolio Positions. A securities record or ledger reflecting separately for each portfolio security as of trade date all "long" and "short" positions carried by the investment company for its own account and showing the location of all securities long and the off-setting position to all securities short. The record called for by this paragraph shall not be required in circumstances under which all portfolio securities are maintained by a bank or banks or a member or members of a national securities exchange as custodian under a custody agreement or as agent for such custodian.

(iv) Corporate Records. Corporate charters, certificates of incorporation or trust agreements, and by-laws, and minute books of stockholders' and directors' or trustees' meetings; and minute books of directors' or trustees' committee and advisory board or advisory committee meeting.

(v) Trial Balances. A record of the proof of money balances in all ledger accounts (except shareholder accounts), in the form of trial balances.

7. Confidentiality. Each party shall keep confidential any information relating to the other party’s business (“Confidential Information”). Confidential Information shall include (a) any data or information that is competitively sensitive material, and not generally known to the public, including, but not limited to, information about product plans, marketing strategies, finances, operations, customer relationships, customer profiles, customer lists, sales estimates, business plans, and internal performance results relating to the past, present or future business activities of the Trust or PFPC, their respective subsidiaries and affiliated companies and the customers, clients and suppliers of any of them; (b) any scientific or technical information, design, process, procedure, formula, or improvement that is commercially valuable and secret in the sense that its confidentiality affords the Trust or PFPC a competitive advantage over its competitors; (c) all confidential or proprietary concepts, documentation, reports, data, specifications, computer software, source code, object code, flow charts, databases, inventions, know-how, and trade secrets, whether or not patentable or copyrightable; (d) any information concerning the investment research, transactions or holdings of the Trust, its Directors, officers, employees or clients; (e) any information, material or data concerning the Trust provided by third party vendors of the Trust; (f) any analyses, compilations, studies, summaries, extracts or other documentation prepared by a party in any manner or in any medium to the extent they include Confidential Information of the other party, (g) any information relating directly to any shareholder of the Trust, including any such person’s name, address tax payer identification number, social security number, brokerage account number, bank account number, custody account number or other personally identifying information; and (i) anything reasonably designated as confidential by either party.

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Notwithstanding the foregoing, information shall not be subject to such confidentiality obligations if it: (a) is already known to the receiving party at the time it is obtained; (b) is or becomes publicly known or available through no wrongful act of the receiving party; (c) is rightfully received from a third party who, to the best of the receiving party’s knowledge, is not under a duty of confidentiality; (d) is released by the protected party to a third party without restriction; (e) is requested or required to be disclosed by the receiving party pursuant to a court order, subpoena, governmental or regulatory agency request or law (provided the receiving party will provide the other party written notice of the same, to the extent such notice is permitted); (f) is relevant to the defense of any claim or cause of action asserted against the receiving party; (g) has been or is independently developed or obtained by the receiving party; (h) is necessary or appropriate for PFPC or its affiliates to release such information in connection with the provision of services under this Agreement or another agreement between an affiliate of PFPC and Matthews or the Trust; or (i) is released in connection with an independent third party compliance or other review.

8. Liaison with Accountants. PFPC shall act as liaison with the Trust’s independent public accountants and shall provide account analyses, fiscal year summaries, and other audit-related schedules with respect to each Fund. PFPC shall take all reasonable action in the performance of its duties under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion, as required by the Trust.

9. PFPC System. PFPC shall retain title to and ownership of any and all data bases (but not any information of the Trust contained therein), computer programs, screen formats, report formats, interactive design techniques, derivative works, inventions, discoveries, patentable or copyrightable matters, concepts, expertise, patents, copyrights, trade secrets, and other related legal rights utilized by PFPC in connection with the services provided by PFPC to the Trust.

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10. Disaster Recovery. PFPC represents, warrants and covenants that, as of the date it has executed this Agreement, it has designed and implemented, and shall maintain a business continuity plan that is reasonably designed to respond to and reasonably recover from a business interruption of any cause (including any inability to access its offices and equipment and power interruptions) or duration that may impede or interfere with its ability to perform its duties under this Agreement.

10.1. PFPC’s disaster recovery planning a capability shall comply with all laws and regulations applicable to PFPC.

10.2. As part of its disaster recovery plans, PFPC shall:

(i) Conduct periodic tests of critical systems to determine such system's ability to process transactions in an accurate, timely, and efficient manner;

(ii) Review the vulnerability of its systems and data center computer operations to internal and external threats, physical hazards, and natural disasters;

(iii) Establish adequate contingency plans for the use of, or support by, alternative sites and power sources;

(iv) On a periodic basis, test the efficacy of its disaster recovery plans; and

(v) On an annual basis, perform an independent review, in accordance with established audit procedures and standards, of its disaster recovery plans.

10.3. PFPC shall enter into and shall maintain in effect with appropriate parties one or more agreements making provision for emergency use of electronic data processing equipment. In the event of equipment failures, PFPC shall, at no additional expense to the Trust, take reasonable steps to minimize service interruptions. PFPC shall have no liability with respect to the loss of data or service interruptions caused by equipment failure, provided such loss or interruption is not caused by PFPC’s own willful misfeasance, bad faith, negligence or reckless disregard of its duties or obligations under this Agreement.

11. Anti-Money Laundering. To the extent the other provisions of this Agreement require PFPC to establish, maintain and monitor accounts of investors in the Trust consistent with securities laws, PFPC shall perform reasonable actions necessary to help the Trust be in compliance with Section 352 of the USA PATRIOT Act, as follows: PFPC : (a) has established and implement written internal policies, procedures and controls reasonably designed to help prevent the Trust from being used to launder money or finance terrorist activities; (b) has provided for independent testing, by an employee who is not responsible for the operation of PFPC's anti-money laundering (“AML”) program or by an outside party, for compliance with PFPC's established AML policies and procedures; (c) has designated a person or persons responsible for implementing and monitoring the operation and internal controls of PFPC's AML program; and (d) shall provide ongoing training of PFPC personnel relating to the prevention of money-laundering activities. Upon the reasonable request of the Trust, PFPC shall provide to the Trust: (x) a copy of PFPC's written AML policies and procedures (it being understood such information is to be considered confidential and treated as such and afforded all protections provided to confidential information under this Agreement); (y) at the option of PFPC, a copy of a written assessment or report prepared by the party performing the independent testing for compliance, or a summary thereof, or a certification that the findings of the independent party are satisfactory; and (z) a summary of the AML training provided for appropriate PFPC personnel. PFPC agrees to permit inspections relating to its AML program by U.S. Federal departments or regulatory agencies with appropriate jurisdiction and to make available to examiners from such departments or regulatory agencies such information and records relating to its AML program as such examiners shall reasonably request. Without limiting or expanding the foregoing, the parties agree the provisions herein do not apply to Section 326 of the USA PATRIOT Act (or other sections other than Section 352) or regulations promulgated thereunder.

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11.1. To help the Trust comply with its requirements to establish and implement a due diligence program for “foreign financial institution” accounts (which the Trust is required to have under regulations issued under Section 312 of the USA PATRIOT Act), PFPC will do the following:

(i) Implement and operate a due diligence program that includes appropriate, specific, risk-based policies, procedures and controls that are reasonably designed to enable the Trust to detect and report, on an ongoing basis, any known or suspected money laundering activity conducted through or involving any correspondent account established, maintained, administered or managed by the Trust for a “foreign financial institution” (as defined in 31 CFR 103.175(h))(“Foreign Financial Institution”);

(ii) Conduct due diligence to identify and detect any Foreign Financial Institution accounts in connection with new accounts and account maintenance;

(iii) Assess the money laundering risk presented by each such Foreign Financial Institution account, based on a consideration of all appropriate relevant factors (as generally outlined in 31 CFR 103.176), and assign a risk category to each such Foreign Financial Institution account;

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(iv) Apply risk-based procedures and controls to each such Foreign Financial Institution account reasonably designed to detect and report known or suspected money laundering activity, including a periodic review of the Foreign Financial Institution account activity sufficient to determine consistency with information obtained about the type, purpose and anticipated activity of the account;

(v) Include procedures to be followed in circumstances in which the appropriate due diligence cannot be performed with respect to a Foreign Financial Institution account;

(vi) Adopt and operate enhanced due diligence policies, where necessary, as may be required by future regulations pending for Foreign Financial Institution accounts;

(vii) Record due diligence program and maintain due diligence records relating to Foreign Financial Institution accounts; and

(viii) Report to the Trust about measures taken under (i)-(vii) above.

Notwithstanding anything to the contrary, and without expanding the scope of the express language in this subsection 11.1, PFPC need not complete any due diligence beyond the requirements of the relevant Foreign Financial Institution due diligence program regulations and PFPC need not perform any task that need not be performed for the Trust to be in compliance with relevant Foreign Financial Institution due diligence program regulations.

Without limiting or expanding the foregoing, the parties agree the provisions herein do not apply to Section 326 of the USA PATRIOT Act (or other sections other than Section 312) or regulations promulgated thereunder. This Section 11 specifically excludes private bank account provisions of Section 312 of the USA PATRIOT Act.

12. Customer Identification Program (“CIP”) Services.

12.1. To help the Trust comply with its Customer Identification Program (which the Trust is required to have under regulations issued under Section 326 of the USA PATRIOT Act) PFPC will do the following:

(i) Implement procedures under which new accounts in the Trust are not established unless PFPC has obtained the name, date of birth (for natural persons only), address and government-issued identification number (collectively, the “Data Elements”) for each corresponding “Customer” (as defined in 31 CFR 103.131).

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(ii) Use collected Data Elements to attempt to reasonably verify the identity of each new Customer promptly before or after each corresponding new account is opened. Methods of verification may consist of non-documentary methods (for which PFPC may use unaffiliated information vendors to assist with such verifications) and documentary methods (as permitted by 31 CFR 103.131), and may include procedures under which PFPC personnel perform enhanced due diligence to verify the identities of Customers the identities of whom were not successfully verified through the first-level (which will typically be reliance on results obtained from an information vendor) verification process(es).

(iii) Record the Data Elements and maintain records relating to verification of new Customers consistent with 31 CFR 103.131(b)(3).

(iv) Regularly report to the Trust about measures taken under (i)-(iii) above.

(v) If PFPC provides services by which prospective Customers may subscribe for shares in the Trust via the Internet or telephone, work with the Trust to notify prospective Customers, consistent with 31 CFR 103.131(b)(5), about the Trust’s CIP.

12.2. Notwithstanding anything to the contrary, and without expanding the scope of the express language in this Section 12, PFPC need not collect the Data Elements for (or verify) prospective customers (or accounts) beyond the requirements of relevant customer identification program regulations (for example, PFPC will not verify customers opening accounts through NSCC) and PFPC need not perform any task that need not be performed for the Trust to be in compliance with relevant customer identification program regulations.

12.3. PFPC agrees to permit inspections relating to the CIP Services provided hereunder by U.S. Federal departments or regulatory agencies with appropriate jurisdiction and to make available to examiners from such departments or regulatory agencies such information and records relating to the CIP Services provided hereunder as such examiners shall reasonably request.

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12.4. Notwithstanding anything to the contrary, PFPC need not perform any of the steps described in this Section 12 with respect to persons purchasing Shares via exchange privileges.

13. Privacy of Client Information. PFPC represents that it has adopted and implemented procedures to safeguard Client Information and records that are reasonably designed to: (i) insure the security and confidentiality of records containing Client Information; (ii) protect against any anticipated threats or hazards to the security or integrity of records containing Client Information; (iii) protect against unauthorized access to or use of client records or information that could result in substantial harm or inconvenience to any client; (iv) protect against unauthorized disclosure or non-public personal information to unaffiliated third parties; and (v) otherwise ensure its compliance Regulation S-P of the Securities and Exchange Commission.

14. Compensation. As compensation for services rendered by PFPC during the term of this Agreement, the Trust, on behalf of each Fund, will pay to PFPC a fee or fees as may be agreed to in writing by the Trust and PFPC (the “Fee Letter”). For the avoidance of doubt, notwithstanding Sections 15 and 16 of this Agreement, but subject to the Section 17, the Trust shall remain responsible for paying to PFPC the fees set forth in the then-current Fee Letter. Further, the terms of the Fee Letter dated as of the date of this Agreement shall be effective retroactively as of the Effective Date.

15. Indemnification. The Trust, on behalf of each Fund, shall indemnify, defend and hold harmless PFPC and its affiliates, including their respective officers, directors, agents and employees, from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, reasonable attorneys’ fees and disbursements and liabilities arising under the Securities Laws and any state and foreign securities and blue sky laws) arising from, or directly or indirectly in connection with, any action or omission to act which PFPC takes in connection with its performance of this Agreement, including its reliance on Oral Instructions or Written Instructions. Neither PFPC, nor any of its affiliates, shall be indemnified against any liability (or any expenses incident to such liability) caused by PFPC’s or its affiliates’ own willful misfeasance, bad faith, negligence or reckless disregard in the performance of PFPC’s activities under this Agreement. Any amounts payable by the Trust hereunder shall be satisfied only against the relevant Fund’s assets and not against the assets of any other investment portfolio of the Trust.

PFPC The Trust, on behalf of each Fund, shall indemnify, defend and hold harmless The Trust (including each of the Funds), Matthews and each of their affiliates, including their respective officers, directors, agents and employees, from and against all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, reasonable attorneys’ fees and disbursements and liabilities arising under the Securities Laws and any state and foreign securities and blue sky laws) (i) arising directly from any action or omission to act, which, subject to Sections 4 and 5 of this Agreement, PFPC improperly takes that is inconsistent with any Oral Instructions or Written Instructions; or (ii) is caused by PFPC’s or its affiliates’ own willful misfeasance, bad faith, negligence or reckless disregard in the performance of PFPC’s activities under this Agreement.

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The provisions of this Section 15 shall survive termination of this Agreement.

16. Responsibility of PFPC.

16.1. PFPC shall be under no duty to take any action hereunder on behalf of the Trust or any Fund except as specifically set forth herein or as may be specifically agreed to by PFPC and the Trust in a written amendment hereto. PFPC shall be obligated to exercise care and diligence in the performance of its duties hereunder and to act in good faith in performing services provided for under this Agreement. PFPC shall be liable only for any damages arising out of PFPC’s failure to perform its duties under this Agreement to the extent such damages arise out of PFPC’s willful misfeasance, bad faith, negligence or reckless disregard of such duties.

16.2. Notwithstanding anything in this Agreement to the contrary, (i) neither party shall be liable to the other party for any losses, delays, failure, errors, interruption or loss of data occurring directly or indirectly by reason of circumstances beyond its reasonable control, including without limitation acts of God; action or inaction of civil or military authority; public enemy; war; terrorism; riot; fire; flood; sabotage; epidemics; labor disputes; civil commotion; interruption, loss or malfunction of utilities, transportation, computer or communications capabilities; insurrection; elements of nature; or non-performance by a third party; and (ii) PFPC shall not be under any duty or obligation to inquire into and shall not be liable for the validity or invalidity, authority or lack thereof, or truthfulness or accuracy or lack thereof, of any instruction, direction, notice, instrument or other information which PFPC reasonably believes to be genuine.

16.3. Notwithstanding anything in this Agreement to the contrary, (i) neither party, including such party’s affiliates, shall be liable to the other party for any consequential, special or indirect losses or damages, whether or not the likelihood of such losses or damages was known by that party or its affiliates and (ii) PFPC’s cumulative liability to the Trust for all losses, claims, suits, controversies, breaches or damages for any cause whatsoever (including but not limited to those arising out of or related to this Agreement) and regardless of the form of action or legal theory shall not exceed the lesser of $4,000,000 or the fees received by PFPC for services provided hereunder during the 24 months immediately prior to the date of such loss or damage.

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16.4. No party may assert a cause of action against PFPC or any of its affiliates that allegedly occurred more than 12 months immediately prior to the filing of the suit (or, if applicable, commencement of arbitration proceedings) alleging such cause of action.

16.5. Each party shall have a duty to mitigate damages for which the other party may become responsible.

16.6. The provisions of this Section 16 shall survive termination of this Agreement.

17. Duration and Termination.

17.1. This Agreement shall be effective as of the Effective Date and unless terminated pursuant to its terms shall continue until April 1, 2010 (the “Initial Term”).

17.2. Upon the expiration of the Initial Term, this Agreement shall automatically renew for successive terms of one (1) year each (each such period a “Renewal Term”), unless the Trust or PFPC provides written notice to the other party of its intent not to renew the Agreement. Such notice must be received not less than ninety (90) days prior to the expiration of the Initial Term or the then current Renewal Term.

17.3. In the event of any termination, all reasonable expenses associated with movement (or duplication) of records and materials and conversion thereof to a successor accounting and administration services agent(s) (and any other service provider(s)), and all reasonable trailing expenses incurred by PFPC, will be borne by the Trust.

17.4. In the event a party fails to perform a material obligation hereunder (a “Defaulting Party”) the other party (the “Non-Defaulting Party”) may give written notice thereof to the Defaulting Party, and if such material breach shall not have been remedied within thirty (30) days after such written notice is given, then the Non-Defaulting Party may terminate this Agreement by giving thirty (30) days written notice of such termination to the Defaulting Party. In all cases, termination by the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting Party of any other rights it might have under this Agreement or otherwise against the Defaulting Party.

17.5. Notwithstanding anything contained in this Agreement to the contrary, if in connection with a Change in Control the Trust gives notice to PFPC terminating it as the provider of any of the services hereunder or if the Trust otherwise terminates this Agreement before the expiration of the then-current Initial or Renewal Term (“Early Termination”). In connection with an Early Termination:

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i. PFPC shall, if requested by the Trust, make a good faith effort to facilitate a conversion to the Trust’s successor service provider; provided that PFPC does not guarantee that it will be able to effect a conversion on the date(s) requested by the Trust;

ii. The Trust shall pay to PFPC a fee (the “Early Termination Fee”). The Early Termination Fee shall be an amount equal to the lesser of (1) the fee that the Trust would have paid PFPC from the date of such Early Termination until the termination of the Initial Term or then-current Renewal Term; or (2) the fee that the Trust would have paid PFPC under the Agreement for the next succeeding twelve (12) months. For purposes of this provision, the Early Termination Fee shall be calculated using the average of the monthly fees (excluding any out of pocket expenses and other similar amounts) due to PFPC under this Agreement during the three calendar months before the date of the notice of Early Termination (or if not given the date it should have been given); and

iii. The Trust expressly acknowledges and agrees that the Early Termination Fee is not a penalty but reasonable compensation to PFPC for the termination of services before the expiration of the then-current Initial or Renewal Term.

iv. For purposes of Section 17.5, “Change in Control” means a merger, consolidation, adoption, acquisition, change in control, re-structuring, or re-organization of or any other similar occurrence involving the Trust or any affiliate of the Trust.

v. If the Trust gives notice of Early Termination after expiration of the specified notice period to terminate this Agreement in the ordinary course at the end of the then-current Initial or Renewal Term, the references above to “expiration of the then-current Initial or Renewal Term” shall be deemed to mean “expiration of the Renewal Term immediately following the then-current Initial or Renewal Term.”

17.6. If any of the Trust’s assets serviced by PFPC under this Agreement are removed from the coverage of this Agreement other than pursuant to Section 17.5 of this Agreement (“Removed Assets”) and are subsequently serviced by another service provider (including the Trust or an affiliate of the Trust): (i) the Trust will be deemed to have caused an Early Termination with respect to such Removed Assets as of the day immediately preceding the first such removal of assets; and, (ii) at, PFPC’s option, either (a) the Trust will also be deemed to have caused an Early Termination with respect to all non-Removed Assets as of a date selected by PFPC, or (b) this Agreement will remain in full force and effect with respect to all non-Removed Assets.

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17.7. In addition, a party may terminate the Fair Value Services on sixty (60) days’ written notice to the other party. Termination of the Fair Value Services shall not terminate the Agreement, and the subsequent provision of Fair Value Services by the Trust, an affiliate of the Trust, or another service provider shall not be deemed to constitute Removed Assets.

18. Notices. Notices shall be addressed:

If to PFPC:	PFPC, Inc.
	301 Bellevue Parkway
	Wilmington, Delaware 19809
	Attention: President
If to the Trust:	Matthews International Funds
	c/o Matthews International Capital Management, LLC
	Four Embarcadero Center, Suite 550
	San Francisco, California 94111
	Attention: General Counsel

or to such other address as shall have been given by like notice to the sender of any such notice or other communication by the other party. If notice is sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately. If notice is sent by first-class mail, it shall be deemed to have been given three days after it has been deposited in the United States mails. If notice is sent by messenger, it shall be deemed to have been given at the time that it is delivered.

18. Amendments. This Agreement, or any term thereof, may be changed or waived only by written amendment, signed by the party against whom enforcement of such change or waiver is sought.

19. Assignment. PFPC may assign its rights hereunder to any majority-owned direct or indirect subsidiary of PFPC or of The PNC Financial Services Group, Inc., provided that (i) PFPC gives the Trust 30 days’ prior written notice of such assignment, and (ii) PFPC and such assignee promptly provides such information as the Trust may reasonably request and respond to such questions as the Trust may reasonably ask, relative to the assignment (including, without limitation, the capabilities of the assignee). In addition, PFPC may delegate certain of its duties under this Agreement to its affiliates as PFPC deems it necessary to provide the services set forth in this Agreement.

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20. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

21. Further Actions. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.

22. Miscellaneous.

22.1. Notwithstanding anything in this Agreement to the contrary, the Trust agrees not to make any modifications to its registration statement or adopt or modify any policies if such modifications or policies would affect materially the obligations or responsibilities of PFPC hereunder without the prior written approval of PFPC, which approval shall not be unreasonably withheld or delayed.

22.2. Except as expressly provided in this Agreement, PFPC hereby disclaims all representations and warranties, express or implied, made to the Trust or any other person, including, without limitation, any warranties regarding quality, suitability, merchantability, fitness for a particular purpose or otherwise (irrespective of any course of dealing, custom or usage of trade), of any services or any goods provided incidental to services provided under this Agreement. PFPC disclaims any warranty of title or non-infringement except as otherwise set forth in this Agreement.

22.3. This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements (including the Superseded Agreement) and understandings relating to the subject matter hereof, provided that the parties may embody in one or more separate documents their agreement, if any, with respect to delegated duties. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. Notwithstanding any provision hereof, the services of PFPC are not, nor shall they be, construed as constituting legal advice or the provision of legal services for or on behalf of the Trust or any other person. The scope of services to be provided by PFPC under this Agreement shall not be increased as a result of new or revised regulatory or other requirements that may become applicable with respect to the Trust, unless the parties hereto expressly agree in writing to any such increase.

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22.4. The Trust will provide such information and documentation as PFPC may reasonably request in connection with the services provided by PFPC to the Trust.

22.5. This Agreement shall be deemed to be a contract made in Delaware and governed by Delaware law, without regard to principles of conflicts of law.

22.6. If any provision 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. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

22.7. The facsimile signature of any party to this Agreement shall constitute the valid and binding execution hereof by such party.

22.8. To help the U.S. government fight the funding of terrorism and money laundering activities, U.S. Federal law requires each financial institution to obtain, verify, and record certain information that identifies each person who initially opens an account with that financial institution on or after October 1, 2003. Certain of PFPC’s affiliates are financial institutions, and PFPC may, as a matter of policy, request (or may have already requested) the Trust’s name, address and taxpayer identification number or other government-issued identification number, and, if such party is a natural person, that party’s date of birth. PFPC may also ask (and may have already asked) for additional identifying information, and PFPC may take steps (and may have already taken steps) to verify the authenticity and accuracy of these data elements.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.

PFPC INC.		MATTHEWS INTERNATIONAL FUNDS
By:	/s/ Jay F. Nusblatt	By:	/s/ William J. Guilfoyle
Name:	Jay F. Nusblatt	Name:	William J. Guilfoyle
Title:	Sr. Vice President	Title:	President

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SCHEDULE A

IDENTIFICATION OF FUNDS

Below are Funds to which services under this Agreement are to be performed:

Matthews International Funds

Matthews Asia Pacific Fund

Matthews Asia Pacific Equity Income Fund

Matthews Pacific Tiger Fund

Matthews Asian Growth and Income Fund

Matthews Asian Technology Fund

Matthews China Fund

Matthews India Fund

Matthews Japan Fund

Matthews Korea Fund

No-load, no 12b-1, no CDSC, redemption fee of 2% on all redemptions made within 90 days of purchase).

This Schedule A may be amended from time to time by agreement of the parties.

A-1

SCHEDULE B

DEFINITIONS

“1933 Act” means the Securities Act of 1933, as amended.

“1934 Act” means the Securities Exchange Act of 1934, as amended.

“1940 Act” means the Investment Company Act of 1940, as amended.

“Authorized Person” means any officer of the Trust and any other person listed on Schedule G to the Agreement, as amended by the Trust from time to time, or any other person that the Trust designates in writing to PFPC to be authorized by the Trust to give Oral Instructions or Written Instructions on behalf of the Trust to PFPC. An Authorized Person’s scope of authority may be limited by setting forth such limitation in a written document signed by both parties hereto.

“CEA” means the Commodities Exchange Act, as amended.

“Change of Control” means, with respect to PFPC or the Trust, any merger, adoption, acquisition, re-structuring or re-organization (excluding any transaction between or among wholly owned direct or indirect subsidiaries of a common parent) and any change in ownership or control (not including transactions between wholly owned direct or indirect subsidiaries of a common parent) of 25% or more of the beneficial ownership of the shares of common stock or shares of beneficial interest of PFPC or the Trust. In addition, with respect to the Trust, a “Change of Control” also means any merger, adoption, acquisition, re-structuring or re-organization (excluding any transaction between or among wholly owned direct or indirect subsidiaries of a common parent) and any change in ownership or control (not including transactions between wholly owned direct or indirect subsidiaries of a common parent) of 25% or more of the beneficial ownership of the shares of common stock or shares of beneficial interest of Matthews and any event that results in Matthews ceasing to act as the investment manager of the Trust.

“Custodian” means the custodian primarily responsible for maintaining a Fund’s assets.

“Effective Date” means April 1, 2007.

”Fair Value Price” means the fair value of a security or other asset held by a Fund determined under the Trust’s Pricing Policies when the market price of that asset is deemed to be not readily available. Pursuant to the Pricing Policies, a Fair Value Price may be supplied by the Fair Value Pricing Vendor, calculated by PFPC using a factor and applying a methodology supplied by the Fair Value Pricing Vendor, or may be determined in good faith by or under the directions of the Board of Directors of the Trust.

B-1

“Fair Value Pricing Vendor” means Interactive Data Corporation (“IDC”), International Technology Group, Inc. (“ITG”) or such other pricing vendor mutually agreed by the parties.

“Matthews” means Matthews International Capital Management, LLC, the investment adviser or each of the Funds.

“Oral Instructions” mean oral instructions received by PFPC from an Authorized Person. PFPC may, in its sole discretion in each separate instance, consider and rely upon instructions it receives from an Authorized Person via electronic mail as Oral Instructions.

”Pricing Policies” mean the Pricing and Valuation Policy of the Trust as they may be amended or modified from time to time.

“Pricing Vendor” means the Primary Pricing Vendor or the Secondary Pricing Vendor, as appropriate.

“Primary Pricing Vendor” means IDC. or such other pricing vendor mutually agreed by the parties.

“Secondary Pricing Vendor” means Reuters, Bloomberg, ITG or such other pricing vendor mutually agreed by the parties.

“SEC” means the Securities and Exchange Commission.

“Securities Laws” means the 1933 Act, the 1934 Act, the 1940 Act, the CEA, the Sarbanes-Oxley Act of 2002 (as amended), the Investment Advisers Act of 1940 (as amended), Title V of the Gramm-Leach-Bliley Act (as amended), any rules adopted by the SEC under any of these statutes, the Bank Secrecy Act (as amended), as it applies to investment companies, and any rules adopted thereunder by the SEC or the Department of the Treasury

“Shares” means the shares of beneficial interest of any series or class of the Trust.

“Written Instructions” mean (i) written instructions signed by an Authorized Person and received by PFPC or (ii) trade instructions transmitted (and received and opened by PFPC) by means of an electronic transaction reporting system access to which requires use of a password or other authorized identifier. The instructions may be delivered by hand, mail, tested telegram, cable, telex or facsimile sending device.

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SCHEDULE C

THIS SCHEDULE C, dated April 2, 2008 with effect retroactively from April 1, 2007, is Schedule C to that certain Second Amended and Restated Investment Company Services Agreement dated April 2, 2008 with effect retroactively from April 1, 2007 between PFPC Inc. and Matthews International Funds d/b/a Matthews Asian Funds.

1. Description of Accounting Services on a Continuous Basis

Each business day (except as otherwise set forth below), PFPC will perform the following accounting services with respect to each Fund, all in accordance with U.S. Generally Accepted Accounting Principles and applicable rules and regulations of the Securities and Exchange Commission:

1.1 Journalize investment, capital share and income and expense activities;

1.2 Confirm with Matthews (i) the aggregate number of purchase and sale transactions for each Fund for the prior business day; (ii) the total number and value of purchase transactions for each Fund for the prior business day; and (iii) the total number and value of sale transactions for each Fund for the prior business day. Review the transaction dates, share of sales, amounts and prices, commissions and taxes for reasonableness;

1.3 Maintain individual ledgers for assets, including currency and any off-balance sheet positions;

1.4 Maintain historical tax lots for each asset. Unless otherwise instructed in writing, sales of securities will be accounted for on a First In First Out (“FIFO”) basis;

1.5 Post all transactions and expenses to, and prepare trial balances as appropriate;

1.6 Calculate the expenses (including out-of-pocket expenses) of each Fund (e.g., advisory and custody fees). Where an expense was incurred for a specific Fund, it shall be allocated to such Fund. Where an expense was incurred for more than one Fund it shall be allocated among such Funds in proportion to their net assets or, in a fair and equitable manner as instructed in writing by the Trust;

1.7 Monitor the expense accruals for each Fund. Notify Trust management monthly of any proposed adjustments, or more frequently if a proposed adjustment is materially significant;

1.8 After receiving Written Instructions, coordinate with the Custodian for the applicable Fund to make disbursements and keep appropriate records of such Written Instruction and disbursements for the time period required by applicable law;

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1.9 Calculate book basis capital gains and losses for each Fund;

1.10 Transmit to or make available a copy of the daily portfolio valuation and trial balance or any other report that is not available on PFPC’s data repository and analytics suite, as reasonably requested and mutually agreed to for each Fund to Matthews;

1.11 Calculate net asset value of each Fund;

1.12 Calculate summary financial information for each Fund, including yield (in the manner required by the SEC and in any manner reasonably requested by the Trust on a monthly basis) total return, total return gross of expenses (monthly), and after tax performance (on a pre- and post-liquidation basis);

1.13 Calculate and provide to the Trust on a daily basis for each of the Funds, the hypothetical return of an investment of $10,000 in the manner required by item 3 of Form N-1A except that the actual return and expenses of each Fund shall be used in such calculation;

1.15 Monitor and calculate tax liabilities that pertain to realized gains upon disposition of securities in foreign markets upon procedures agreed to with Matthews; and

1.16 Deliver to the Trust electronically (in a form mutually agreed upon) a file containing (i) cash availability (including, among other things, dividends paying, short-term interest expenses, overdraft charges, other expenses paid, redemption fees); (ii) custody transactions; and (iii) shares outstanding not later than 7:15 am PT.

2. Description of Financial Administration Services on a Continuous Basis

PFPC will perform the following financial administration services with respect to each Fund:

2.1 Supply on a timely basis, normal and customary Fund information and statistical data (e.g. corporate, governance, and other survey information, return and expense information, and portfolio holdings to mutually agreed marketplace and service companies (e.g., Morningstar and Lipper), and supply daily NAV transmission to NASDAQ (and other reporting services) as requested by the Trust on an ongoing basis. Notwithstanding any other provision of this Schedule C or the Agreement, PFPC shall not be responsible for any failure to timely supply such information to the extent that such failure was caused by NASDAQ, a pricing vendor, the Trust or an agent of the Trust (which for the avoidance of doubt shall include Matthews) other than PFPC;

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2.2 Prepare and file (or coordinate the filing) with the SEC on a timely basis and in accordance with the rules and regulations of the SEC each Fund’s quarterly, semi-annual and annual shareholder reports, and forms N-SAR, and 24f-2. Notwithstanding any other provision of this Schedule C or the Agreement, PFPC shall not be responsible for any failure to make a timely filing of any quarterly, semi-annual and annual shareholder reports, or forms N-SAR, and 24f-2 on behalf of the Trust where such failure was caused by the Trust or an agent of the Trust other than PFPC;

2.3 Assist in gathering information for the Trust’s selection of its contractual service providers (other than for successors to PFPC);

2.4 Provide employees or officers to serve as Assistant Treasurer and Assistant Secretary of the Trust;

2.5 Prepare expense budgets in accordance with mutually agreed specifications and monitor accruals for consistency with each Fund’s assets, and other metrics as mutually agreed;

2.6 Prepare and supply to the Trust on a timely basis for execution and filing Federal and state tax returns for each Fund and in connection therewith, maintain a log of any uncertain tax positions taken by each Fund as identified to PFPC by the Trust or Matthews and monitor the impact of such positions on each Fund’s net asset value. Notwithstanding any other provision of this Schedule C or the Agreement, PFPC shall not be responsible for any failure to make a timely filing of any Federal and state tax returns on behalf of the Trust to the extent that such failure was caused by the Trust or an agent of the Trust other than PFPC;

2.7 Complete and file the Trust’s excise returns (Form 8613) and corporate tax return (1120-RIC) after review and approval by the Trust’s independent auditors. Sign Form 8613 and 1120-RIC as paid preparer;

2.8 Respond to requests of state and local tax authorities, as appropriate;

2.9 On a monthly basis as of the last business day of each month, report to the Trust for each of the Funds: the current net investment income for each Fund, specifically identifying qualified dividend income as such term is currently used in the Internal Revenue Code of 1986, as amended and the Rules and Regulations of the Internal Revenue Service applicable to Regulated Investment Companies (the “IRC”), other dividend income, and an estimate of future dividend income (identifying qualified dividend income) based on each Fund’s portfolio as of the date of the report;

2.10 On a monthly basis as of the last business day of each month, report to the Trust for each of the Funds, each asset identified in writing by the Trust as a passive foreign investment company (a “PFIC”), (i) the market value of each PFIC, (ii) the original cost of the PFIC, (iii) the realized capital gain (loss) attributable to such PFIC, (iv) an estimate of any mark-to-market on a PFIC, and (v) any necessary tax character reclassifications due to PFICs sold, and the impact thereof on distributions of each Fund under the IRC;

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2.11 Prepare and provide to the Trust semi-monthly distribution reports between and including August through November of each year showing estimates of distribution requirements and all information required to calculate distributions in connection with IRC §855 and IRC §4982. Mid-month distribution estimates will incorporate the then latest PFIC analysis completed as described in Section 2.10 and any significant book-to-tax adjustments (e.g. wash sales and foreign currency gain/loss reclassifications) as mutually agreed;

2.12 Upon the request of the Trust, estimate net investment income of each Fund from the date of the distribution made to satisfy each Fund’s excise requirements (typically in early December of each year, but not prior to November 1 of each year) through December 31 of that fiscal year;

2.13 On a monthly basis as of the last business day of each month, report to the Trust for each of the Funds: the status of each Fund as a regulated investment company under Sub-chapter M of the IRC (including diversification, qualified income, and income distribution);

2.14 Upon the request of the Trust, provide, with respect to each Fund, PFPC’s Lot Selection Methodology Program, identifying tax lots of individual securities, reporting on the potential tax impact of the sale of an asset, and taking into account, to the extent possible, tax attributes unique to each such Fund (e.g., a Fund’s capital loss carryforwards); and

2.15 At the request of the Trust, arrange for officers and employees of the Trust and Matthews to meet in person with officers and employees of PFPC who are responsible for supervising and performing fund accounting, administration and transfer agent services on behalf of the Trust, and such other officers and employees of PFPC semi-annually and as the Trust may reasonably request to review PFPC’s performance of its duties under the Agreement and this Schedule C; and

2.16 On a monthly basis provide statistical reports concerning the accuracy of PFPC’s calculation of each Fund’s net asset value and timing of NASDAQ reporting and such other matters as the parties mutually agree in writing.

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3. Description of Regulatory Administration & Compliance Support Services on a Continuous Basis

3.1 PFPC shall perform the following corporate secretarial services, regulatory administration and compliance support services:

3.1.1 Develop and maintain calendar of annual and quarterly board approvals and SEC filings;

3.1.2 Prepare and coordinate with the Trust and the Trust’s counsel, meeting notices, agendas, and resolutions for quarterly board meetings; attend quarterly meetings and act as recording secretary; make in-person presentations at quarterly meetings where appropriate and requested; and prepare minutes of quarterly meetings;

3.1.3 Maintain corporate records (including notices of meetings, board materials, minutes of meetings and other corporate actions);

3.1.4 Assist with the preparation of (including consulting and coordinating with Trust counsel), and coordinate the filing of the following documents with the SEC on a timely basis in accordance with the rules and regulations of the SEC, the annual update to the Trust’s Registration Statement on Form N-1A, Forms N-CSR, N-Q and N-PX (with the Trust providing the voting records in the format required by PFPC). With respect to each such filing PFPC shall (i) use commercially reasonable efforts to obtain any necessary certifications from the appropriate Trust officers, and (ii) coordinate the relevant Form’s Edgarization and filing with the Trust’s financial printer. Notwithstanding any other provision of this Schedule C or the Agreement, PFPC shall not be responsible for any failure to make a timely filing of any amendment to the Trust’s Registration Statement or any other filing where such failure was caused by the Trust, the financial printer, or another agent of the Trust other than PFPC;

3.1.6 Provide periodic updates on recent relevant regulatory events;

3.1.7 Maintain effective communication with outside counsel and Matthews;

3.1.8 Administratively assist in arranging D&O/E&O insurance and fidelity bond coverage for the Trust;

3.1.9 Promptly provide Trust records requested in connection with any audit, inspection or other action by the SEC or any other governmental or self-regulatory organization to which the Trust is subject, or any other audit, examination or similar event to which the Trust is subject;

3.1.10 Cooperate with the Trust in, and promptly provide Trust records requested in connection with any internal audit or self-examination conducted by the Trust;

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3.1.11 Design, implement and maintain compliance policies and procedures (“Compliance Policies”) for fund accounting and administration and transfer agency services that are reasonably designed to detect and prevent violations of the Securities Laws and carry out the provisions of this Agreement by PFPC. The Compliance Policies shall also include policies and procedures related to the maintenance (through both physical and technological means) of the confidentiality of Confidential Information and the use of Confidential Information in securities transactions by PFPC, or its officers, directors, employees or agents. As of the execution of the Agreement, PFPC shall have provided the Trust with summaries of the Compliance Policies. In addition, PFPC shall:

· At the request of the Trust, present the Compliance Policies (including any material amendments or changes thereto) to the Board of Trustee of the Trust and respond to any questions of the Board of Trustees;

· Notify the Chief Compliance Officer of the Trust in writing promptly following the adoption of any material change to any Compliance Policy;

· Promptly notify the Chief Compliance Officer of the Trust, in writing, of any Material Compliance Matter (as defined below);

· Promptly notify the Chief Compliance Officer of the Trust of any shareholder complaint related to or concerning the Trust, any Fund, or the services performed by PFPC hereunder;

· Provide the Trust a copy of PFPC’s quarterly certification of PFPC’s adherence to the Compliance Policies;

· As of the end of each calendar quarter, provide a written report to the Trust signed by an officer in PFPC’s Compliance Support Services group and dated not later than 30 days following the end of the calendar quarter to which it relates;

· As of the end of each calendar quarter, provide a written certification to the Trust signed by an officer in PFPC’s Compliance Support Services group and dated not later than 30 days following the end of the calendar quarter to which it relates, that the Compliance Policies are in effect and are reasonably designed to detect and prevent violations of the Securities Laws; and either indicating (i) there have been no Material Compliance Matters; or (ii) any Material Compliance Matters have been previously disclosed to the Chief Compliance Officer of the Trust;

· Promptly provide to the Trust a copy of the results of any external Rule 38(a)-1 examination review engaged by PFPC concerning, among other things, the Compliance Policies.

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For purposes of this clause 3.1.11, a Material Compliance Matter shall mean any matter concerning or related to any Compliance Policy, if directly affecting or relating to the Trust or involving or directly related to any service provided by or process utilized by PFPC for the Trust, about which, in PFPC’s good faith view, the Trust would reasonably need to know to oversee the performance of this Agreement by PFPC, including, without limitation, any material (x) violation of the Securities Laws by PFPC, or its officers, directors, or employees; (y) violation of the Compliance Policies or any of the policies and procedures of the Trust; and (z) weakness in the design or implementation of the Compliance Policies.

3.1.12 Arrange for the Trust’s Chief Compliance Officer, legal counsel or other officers and agents to meet with the head of PFPC’s Compliance Support Services group, the appropriate individuals in the line of business with responsibility for compliance with respect to PFPC’s duties in each of fund accounting, administration transfer agent and anti-money laundering, and such other officers, employees and agents of PFPC as the Trust may reasonably request quarterly and otherwise as the Trust may reasonably request to review the Compliance Policies, and their implementation and maintenance;

3.1.13 Provide additional compliance support services on such terms and for such fees as the parties may mutually agree in writing, which may include one or more of the following services:

· Load the Trust’s and the Trust’s service providers’ policies and procedures onto PFPC’s Compliance Fund Library;

· Assist in preparing chief compliance officer’s annual written report; and

· Assist in regulatory/compliance training of portfolio managers and advisory personnel.

3.2 The parties hereto may agree that PFPC shall perform the following special regulatory services on such terms and for such fees as the parties may mutually agree in writing, which may include without limitation:

3.2.1 Assist in new fund and class start-up (to the extent reasonably requested);

3.2.2 Respond to SEC comments, with review by the Trust and Fund counsel, and assist in coordinating SEC audits with the Trust;

3.2.3 Assist in developing compliance guidelines and procedures to improve overall compliance by the Trust and service providers;

3.2.4 Assist in the preparation of proxy material for special meetings for shareholders (including fund merger documents);

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3.2.5 Prepare Post-Effective Amendments for special purposes (e.g. new funds or classes, changes in advisory relationships, mergers, restructurings);

3.2.7 Prepare special prospectus supplements where needed; and

3.2.8 Assist in extraordinary non-recurring projects; and such other services as mutually agreed upon by the Trust and PFPC.

All regulatory services are subject to the review and approval of Trust counsel.

4. Blue Sky Administration

4.1 Sales Data: PFPC will perform the following:

4.1.1 Receive daily sales figures from appropriate entities with PFPC BlueWin System;

4.1.2 Produce daily warning report for sales in excess of pre-determined percentage; and

4.1.3 Analyze sales data to determine trends within certain states.

4.2 Filings: PFPC will produce and mail the following blue sky filings as required:

4.2.1 Initial Filings: Produce all required forms and follow-up on any comments, including notification of SEC effectiveness;

4.2.2 Renewals: Produce renewal documents and mail to states, includes follow-up to determine whether blue sky requirements are in order to continue selling in states;

4.2.3 Sales Report: Produce relevant sales reports for the states and complete necessary documents to properly file sales reports with states;

4.2.4 Annual Report Filings: File copies of all annual reports with states, as required;

4.2.5 Prospectus Filings: File copies of the Trust’s definitive Statement of Additional Information and prospectuses with the states, as required; and

4.2.6 Post-Effective Amendment Filing: File Post-Effective Amendments with the states as required, as well as, any other required documents.

4.3 On demand additional states: PFPC will complete required fillings for any states the Trust adds - this task includes all of the items set forth in Section 4.2.1 above.

4.4 Amendments to current permits: PFPC will file in a timely manner any required amendment to registered share amounts.

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4.5 PFPC will update and file hard copy of all required data pertaining to individual state permits.

4.6 Consulting and Analysis: PFPC will supply the most current fee structure for each state and aid in the Trust in its efforts to minimize the amount of money spent on Blue Sky registration.

4.7 Notwithstanding anything to the foregoing in this Section 4, PFPC’s responsibility to make a particular filing is contingent on PFPC’s timely receipt in advance of such filing, as applicable, notification, filing fees, required data, and the requisite number of copies of each document (i.e. definitive prospectuses) requested by PFPC (to the extent such documents are required to effect the relevant filing).

5. Description of Transfer Agency Services

5.1 Services Provided on an Ongoing Basis. PFPC shall perform the following services on and ongoing basis, if applicable:

5.1.1 Calculate 12b-1 payments;

5.1.2 Maintain shareholder registrations;

5.1.3 Review new applications and correspond with shareholders to complete or correct information;

5.1.4 Direct payment processing of checks or wires;

5.1.5 Prepare and certify stockholder lists in conjunction with proxy solicitations;

5.1.6 Prepare and mail to shareholders confirmation of activity;

5.1.7 Provide toll-free lines for direct shareholder use, plus customer liaison staff for on-line inquiry response;

5.1.8 Mail duplicate confirmations to broker-dealers of their clients’ activity, whether executed through the broker-dealer or directly with PFPC;

5.1.9 Provide periodic shareholder lists and statistics to the Trust;

5.1.10 Provide detailed data for underwriter/broker confirmations;

5.1.11 Prepare periodic mailing of year-end tax and statement information;

5.1.12 Notify on a timely basis Matthews, the Trust’s fund accountant, and the Custodian of purchase, redemption and exchange transactions for each Fund;

5.1.13 Perform other participating broker-dealer shareholder services as may be agreed upon from time to time;

5.1.14 Accept and post daily Share purchases and redemptions; and

5.1.15 Accept, post and perform shareholder transfers and exchanges.

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5.2 Purchase of Shares. PFPC shall issue and credit an account of an investor, in the manner described in the Trust’s prospectus, once PFPC receives: (i) a purchase order in completed proper form; (ii) proper information to establish a shareholder account; and (iii) confirmation of receipt or crediting of funds for such order to the Custodian.

5.3 Redemption of Shares. PFPC shall process requests to redeem Shares as follows:

5.3.1 All requests to transfer or redeem Shares and payment therefor shall be made in accordance with the Trust’s prospectus, when the shareholder tenders Shares in proper form, accompanied by such documents as PFPC reasonably may deem necessary;

5.3.2 PFPC reserves the right to refuse to transfer or redeem Shares until it is satisfied that the endorsement on the instructions is valid and genuine and that the requested transfer or redemption is legally authorized, and it shall incur no liability for the refusal, in good faith, to process transfers or redemptions which PFPC, in its good judgment, deems improper or unauthorized, or until it is reasonably satisfied that there is no basis to any claims adverse to such transfer or redemption;

5.3.3 When Shares are redeemed, PFPC shall deliver to the Custodian and the Trust or its designee a notification setting forth the number of Shares redeemed. Such redeemed Shares shall be reflected on appropriate accounts maintained by PFPC reflecting outstanding Shares of the Trust and Shares attributed to individual accounts;

5.3.4 PFPC shall, upon receipt of the monies provided to it by the Custodian for the redemption of Shares, pay such monies as are received from the Custodian, all in accordance with the procedures established from time to time between PFPC and the Trust;

5.3.5 When a broker-dealer notifies PFPC of a redemption desired by a customer, and the Custodian provides PFPC with funds, PFPC shall prepare and send the redemption check to the broker-dealer and made payable to the broker-dealer on behalf of its customer, unless otherwise instructed in writing by the broker-dealer; and

5.3.6 PFPC shall not process or effect any redemption requests with respect to Shares of a Fund after receipt by PFPC of notification of the suspension of the determination of the net asset value of the Fund; provided that PFPC shall be afforded a reasonable time to act after receipt of any such notification.

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5.4 Dividends and Distributions. Upon receipt of a resolution of the Trust’s Board of Trustees authorizing the declaration and payment of dividends and distributions or written instructions from the Trust or Matthews, PFPC shall issue dividends and distributions declared by the Trust in Shares, or, upon shareholder election, pay such dividends and distributions in cash, if provided for in the Trust’s prospectus. Such issuance or payment, as well as payments upon redemption as described above, shall be made after deduction and payment of the required amount of funds to be withheld in accordance with any applicable tax laws or other laws, rules or regulations. PFPC shall mail to the Trust’s shareholders such tax forms and other information, or permissible substitute notice, relating to dividends and distributions paid by the Trust as are required to be filed and mailed by applicable law, rule or regulation. PFPC shall prepare, maintain and file with the IRS and other appropriate taxing authorities reports relating to all dividends above a stipulated amount paid by the Trust to its shareholders as required by tax or other law, rule or regulation.

5.5 Shareholder Account Services.

5.5.1 PFPC may arrange, in accordance with the prospectus, for issuance of Shares obtained through:

· Any pre-authorized check plan; and

· Direct purchases through broker wire orders, checks and applications.

5.5.2. PFPC may arrange, in accordance with the prospectus, for shareholder’s:

· Exchange of Shares for shares of a Fund with which a Fund has exchange privileges;

· Automatic redemption from an account where that shareholder participates in a automatic redemption plan; and/or

· Redemption of Shares from an account with a check writing privilege.

5.6 Communications to Shareholders. Upon timely Written Instructions, PFPC shall mail all communications by the Trust to its shareholders, including:

· Reports to shareholders;

· Confirmations of purchases and sales of Shares;

· Monthly or quarterly statements;

· Dividend and distribution notices; and

· Tax form information.

5.7 Records. PFPC shall maintain records of the accounts for each shareholder showing the following information:

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· Name, address and United States Tax Identification or Social Security number;

· Number and class of Shares held and number and class of Shares for which certificates, if any, have been issued, including certificate numbers and denominations;

· Historical information regarding the account of each shareholder, including dividends and distributions paid and the date and price for all transactions on a shareholder’s account;

· Any stop or restraining order placed against a shareholder’s account;

· Any correspondence relating to the current maintenance of a shareholder’s account;

· Information with respect to withholdings; and

· Any information required in order for PFPC to perform any calculations required by this Agreement.

5.8 Lost or Stolen Certificates. PFPC shall place a stop notice against any certificate reported to be lost or stolen and comply with all applicable federal regulatory requirements for reporting such loss or alleged misappropriation. A certificate shall be cancelled and book shares issued only upon:

· The shareholder’s pledge of a lost instrument bond or such other appropriate indemnity bond issued by a surety company approved by PFPC; and

· Completion of a release and indemnification agreement signed by the shareholder to protect PFPC and its affiliates.

5.9 Shareholder Inspection of Share Records. Upon a request from any Trust shareholder to inspect share records, PFPC will notify the Trust and the Trust will issue instructions granting or denying each such request. Unless PFPC has acted contrary to the Trust’s instructions, the Trust agrees to and does hereby release PFPC from any liability for refusal of permission for a particular shareholder to inspect the Trust’s share records.

5.10 Withdrawal of Shares and Cancellation of Certificates. Upon receipt of Written Instructions, PFPC shall cancel outstanding certificates surrendered by the Trust to reduce the total amount of outstanding shares by the number of shares surrendered by the Trust.

5.11 Lost Shareholders. PFPC shall perform such services as are required in order to comply with rule 17Ad-17 of the 1934 Act (the “Lost Shareholder Rule”), including, but not limited to, those set forth below. PFPC may, in its sole discretion, use the services of a third party to perform some of or all such services.

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5.11.1 Documentation of search policies and procedures;

5.11.2 Execution of required searches;

5.11.3 Tracking results and maintaining data sufficient to comply with the Lost Shareholder Rules; and

5.11.4 Preparation and submission of data required under the Lost Shareholder Rules.

Except as set forth above, PFPC shall have no responsibility for any escheatment services.

5.12 Retirement Plans.

5.12.1 In connection with the individual retirement accounts, simplified employee pension plans, rollover individual retirement plans, educational IRA’s and ROTH individual retirement accounts (“IRA Plans”), 403 (b) Plans and money purchase and profit sharing plans (“Qualified Plans”) (collectively, the “Retirement Plans”) within the meaning of Section 408 of the Internal Revenue Code of 1986, as amended (the “Code”) sponsored by the Trust for which contributions of the Trust’s shareholders (the “Participants”) are invested solely in Shares of the Trust, PFPC shall provide the following administrative services:

(A) Establish a record of types and reasons for distributions (i.e., attainment of age 59-1/2, disability, death, return of excess contributions, etc.);

(B) Record method of distribution requested and/or made;

(C) Receive and process designation of beneficiary forms requests;

(D) Examine and process requests for direct transfers between custodians/trustees, transfer and pay over to the successor assets in the account and records pertaining thereto as requested;

(E) Prepare any annual reports or returns required to be prepared and/or filed by a custodian of a Retirement Plan, including, but not limited to, an annual fair market value report, Forms 1099R and 5498; and file same with the IRS and provide same to Participating/Beneficiary, as applicable; and

(F) Perform applicable federal withholding and send Participants/Beneficiaries an annual TEFRA notice regarding required federal tax withholding.

5.12.2 PFPC shall arrange for PFPC Trust Company to serve as custodian for the Retirement Plans sponsored by the Trust.

5.12.3 With respect to the Retirement Plans, PFPC shall provide the Trust with the associated Retirement Plan documents for use by the Trust and PFPC shall be responsible for the maintenance of such documents in compliance with all applicable provisions of the Code and the regulations promulgated thereunder.

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5.13 Print mail. The Trust hereby engages PFPC as its print/mail service provider with respect to those items and for such fees as set forth on the then-current fee letter, and with respect to such other items, if any, and for such fees as the parties may mutually agree in writing.

6. Anti-Money Laundering

To the extent the other provisions of this Agreement require PFPC to establish, maintain and monitor accounts of shareholders in the Trust consistent with securities laws, PFPC shall perform reasonable actions necessary to help the Trust be in compliance with Section 352 of the USA PATRIOT Act, as follows: In this regard, PFPC shall: (a) establish and implement written internal policies, procedures and controls reasonably designed to help prevent the Trust from being used to launder money or finance terrorist activities (“AML Procedures”); (b) provide for independent testing, by an employee who is not responsible for the operation of PFPC’s AML program or by an outside party, for compliance with PFPC’s established policies and procedures; (c) designate a person or persons responsible for implementing and monitoring the operation and internal controls of PFPC’s AML program; and (d) provide ongoing training of PFPC personnel relating to the prevention of money-laundering and terrorist financing activities. Upon the reasonable request of the Trust, PFPC shall provide to the Trust: (x) a copy of PFPC’s written AML policies and procedures (it being understood such information is to be considered confidential and treated as such and afforded all protections provided to confidential information under this agreement); (y) at the option of PFPC, a copy of a written assessment or report prepared by the party performing the independent testing for compliance, or a summary thereof, or a certification that the findings of the independent party are satisfactory; and (z) a summary of the AML training provided for appropriate personnel. PFPC agrees to permit inspections relating to its AML program by U.S. Federal departments or regulatory agencies with appropriate jurisdiction and to make available to examiners from such departments or regulatory agencies such information and records relating to its AML program as such examiners shall reasonably request. Without limiting or expanding the foregoing, the parties agree the provisions herein do not apply to Section 326 of the USA PATRIOT Act (or other sections other than Section 352) or regulations promulgated thereunder.

The following is a general description of the anti-money laundering services that the Trust has delegated to PFPC and PFPC agrees to implement and operate on behalf of the Trust in accordance with the AML Procedures pertaining to the delegated services below:

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A. Purchase Transactions. PFPC shall reject and return to sender any and all checks, deposits, and other deliveries of cash or property that do not comply with the Trust’s cash and cash equivalent requirements as agreed from time to time by PFPC and the Trust.

B. Monitoring Transactions to Detect Potentially Suspicious Activity. Monitoring shareholder transactions to detect potentially suspicious activity with notification to Trust of activity requiring further review by the Trust to cause compliance with suspicious activity or Form 8300 reporting obligations. The Trust shall be responsible for all filing and reporting obligations related to any activity notified to the Trust.

C. Government List Match Screening. In connection with the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) list of Specially Designated Nationals (“OFAC List”) and list of countries which OFAC imposes sanctions (“Sanctioned Countries”, together with the OFAC List, “Government Restrictions List”), PFPC shall maintain a database of SDNs and Sanctioned Countries (the “PFPC OFAC Database”), update the PFPC OFAC Database as OFAC issues updates to the Government Restrictions List, and conduct a matching routine between PFPC OFAC Database and any new shareholder account, existing shareholder account that has had a change to the name or address fields, or funds transfers.

D. FinCEN 314(a) Requests. Upon receipt of a FinCEN 314(a) request (a “314(a) Request”) from the Trust, PFPC shall use its Government Restrictions List matching technology to compare the entries on the 314(a) Request to shareholder records maintained for the Trust. Based on this comparison, PFPC shall provide the Trust with a list of shareholder records which appear to match the 314(a) Request entries. Trust is responsible for evaluating potential matches and making notification to FinCEN.

E. USA PATRIOT Act Section 311 “Special Measures” and Section 312 “Due Diligence”. PFPC shall implement measures to screen entities that have been designated by the U.S. Secretary of Treasury for “special measure” orders under Section 311; and shall implement and operate a due diligence program under Section 312 that includes appropriate, specific, risk-based policies, procedures and controls to detect and report instances of money laundering conducted through or involving any correspondent account established, maintained, administered or managed by the Trust for a “foreign financial institution”.  

7. CIP Services

7.1 To help the Trust comply with its Customer Identification Program (which the Trust is required to have under regulations issued under Section 326 of the USA PATRIOT Act) PFPC will do the following:

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7.1.1 Implement procedures under which new accounts in the Trust are not established unless PFPC has obtained the name, date of birth (for natural persons only), address and government-issued identification number (collectively, the “Data Elements”) for each corresponding Customer (as defined in 31 CFR 103.131).

7.1.2 Use collected Data Elements to attempt to reasonably verify the identity of each new Customer before or promptly after each corresponding new account is opened. Methods may consist of non-documentary methods (for which PFPC may use unaffiliated information vendors to assist with such verifications) and documentary methods (as permitted by 31 CFR 103.131), and may include procedures under which PFPC personnel perform additional due diligence to verify the identities of Customers the identities of whom were not successfully verified through the first-level (which will typically be reliance on results obtained from an information vendor) verification process(es).

7.1.3 Record the Data Elements and maintain records relating to verification of new Customers consistent with 31 CFR 103.131 (b)(3).

7.1.4 Regularly report to the Trust about measures taken under Sections 7.1.1 and 7.1.3 above.

7.1.5 If PFPC provides services by which prospective Customers may subscribe for shares in the Trust via the Internet or telephone, work with the Trust to notify prospective Customers, consistent with 31 CFR 103.(b)(5), about the Trust’s CIP.

7.1.6 Set forth on a separate fee schedule compensation amounts due for these CIP Services.

7.2 Notwithstanding anything to the contrary, and without expanding the scope of the express language above, PFPC need not collect the Data Elements for (or verify) prospective customer (or accounts) beyond the requirements of relevant regulation (for example, PFPC will not verify customers opening accounts through NSCC) and PFPC need not perform any task that need not be performed for the Trust to be in compliance with relevant regulation.

8. General Acknowledgement

The Trust acknowledges and agrees that, notwithstanding the delegation of the anti-money laundering and Customer Identification Program services herein, the Trust maintains full responsibility for ensuring its compliance with the applicable anti-money laundering and customer identification program laws, and, therefore, must monitor the operation and effectiveness of the anti-money laundering services and the Customer Identification Program conducted on behalf of the Trust. Changes to AML Procedures and the procedures to implement the Customer Identification Program shall be implemented at PFPC's sole discretion. Special procedures on behalf of the Trust may be implemented for an additional fee to be agreed upon. PFPC has provided the Trust with a copy of the AML Procedures and Customer Identification Program procedures documents, and will provide the Trust with all amendments thereto.

C-16

SCHEDULE D

SECURITY VALUATION PROCDEDURES

For purposes of calculating the NAV of any Fund, calculating the performance of any Fund, calculating any asset-based fee payable by any Fund, or making any asset-based related calculation hereunder or providing any information related to the value of any security or other asset of any Fund, PFPC agrees to value such security or other asset in accordance with the provisions of (i) this Schedule D and (ii) the Pricing Policies of the Trust as such have been mutually agreed in writing by PFPC (as they may be amended or supplemented from time to time).

Unless the Trust directs PFPC otherwise by Written Instructions, the Trust hereby authorizes and instructs PFPC to: (a) receive from the Fair Value Pricing Vendor, and Matthews Fair Value Prices (in a format reasonably required by PFPC) for each of the Funds and (b) use such Fair Value Prices that PFPC receives by the Cut-Off Time (as defined in Schedule D) in all calculations based on or relating to the value of the assets of a Fund (including, for example, calculation of net asset values, performance and fees) for the Funds.

PFPC shall provide or make available to the Trust and Matthews reports, worksheets and other information relating to the valuation of assets held by the Funds and the calculation of each Fund’s net asset value at such times as the Trust or Matthews may reasonably request.

1. Valuation of Portfolio Securities. The Pricing Policies require that the securities of the Funds be valued at their last sale price on the principal exchange or over-the-counter market for each respective security. To facilitate PFPC’s valuation of the securities of the Funds at such prices, the Trust has entered into an agreement with the Primary Pricing Vendor and may enter into agreements with one or more Secondary Pricing Vendors for the provision of pricing information and Fair Value Prices to PFPC in accordance with the Trust’s Pricing Policies.

The Trust hereby authorizes and directs PFPC to: (a) receive from the Primary Pricing Vendor security valuation information, including Fair Value Prices (in a format reasonably required by PFPC) for each of the Funds and (b) except as set forth in this Schedule D, or as otherwise be directed by the Trust in an Oral Instruction or a Written Instruction, to value each security held by a Fund at the last sale price on the principal exchange or over-the-counter market for each such respective security as provided to it by the Primary Pricing Vendor. Except as provided in the Agreement or this Schedule D, PFPC shall have no obligation to verify the accuracy or fairness of any price provided by any Pricing Vendor or any Fair Market Price.

D-1

1. Notwithstanding the foregoing, PFPC shall value a security at:

1.1. With respect to non-equity securities, in accordance with the Pricing Policies.

1.2. With respect to any equity security for which the Primary Pricing Vendor does not supply a last sale price, as directed by the Trust in an Oral Instruction or a Written Instruction.

1.3. The mean between the last available bid and asked price if not last sale price is available.

1.4. With respect to non-U.S. equity securities, at the Fair Value Price (subject to the conditions set forth in the Pricing Policies) provided by the Fair Value Pricing Vendor (or calculated by PFPC using a factor supplied by the Fair Value Pricing Vendor) for applicable securities (except as otherwise instructed by the Trust in an Oral Instruction or a Written Instruction) when a Pricing Trigger (as defined in the Pricing Policies, communicated to PFPC from time to time and calculated in the manner described in the Pricing Policies) has increased or decreased by an amount equal to or greater than an applicable Threshold (as defined in the Pricing Policies), in absolute value without rounding, and a Fair Value Price for that security for that date are received by PFPC in accordance with the Pricing Policies. For purposes of this paragraph, a security issued by a non-U.S. entity but held by a Fund in the form of an American Depositary Receipt is deemed to be a U.S. equity security.

1.5. At the Fair Market Price provided by a Primary Pricing Vendor, a Secondary Pricing Vendor, or the Trust, upon an Oral Instruction or a Written Instruction from the Trust.

2. Calculation of Triggers.

On each day that the Net Asset Value for a Fund is calculated, PFPC will calculate each Pricing Trigger and determine whether any Pricing Trigger has increased or decreased by an amount equal to or greater than the Threshold in absolute value without rounding, all in the manner and at the times set forth in the Pricing Policies. PFPC shall confirm each such calculation promptly with the Trust.

The Trust has instructed or will instruct the Primary Pricing Vendor to provide Fair Value Prices to PFPC each business day prior to 5:15 p.m. Eastern Time.

The Trust may change the level of any Threshold by providing PFPC with at least five (5) business day’s written notice.

D-2

3. Changing Pricing Vendors.

Prior to entering into an agreement with any other person to act as Primary or Secondary Pricing Vendor, the Trust will notify PFPC, and the parties will work together to determine, as between the Trust and PFPC, the terms and fees under which a different Pricing Vendor would be acceptable to both parties; provided, however, that the Trust at no time will be required to obtain the consent of PFPC if it wishes to select a different Pricing Vendor.

4. Review Process.

PFPC shall provide or make available to the Trust and Matthews reports, worksheets and other information relating to the valuation of assets held by the Funds and the calculation of each Fund’s net asset value at the times and in the forms set forth below:

· daily foreign exchanges rates

· daily market value of each security position

· daily trial balance

PFPC represents and warrants that, as of the date it has executed this Agreement, it has adopted and implemented policies and procedures to review prices received from the Primary Pricing Vendor and any Secondary Pricing Vendor for reasonableness, including policies and procedures that are reasonably designed to (i) check that prices provided are for the proper security (as identified by CUSIP, ISIN or another similar code broadly used in the financial markets); (ii) check that prices provided by any Pricing Vendor are from the correct pricing source; (iii) cause PFPC personnel to promptly notify the Trust when a Pricing Vendor has not provided a price for any security held by a Fund; (iv) cause PFPC personnel to promptly notify the Trust when any security held by a Fund provided by a Pricing Vendor has not changed for 3 or more business days; and (v) cause PFPC personnel to promptly notify the Trust when any security held by a Fund has been the subject of a dividend, stock split or other corporate action.

The Trust understands and agrees that PFPC will not be able to employ its standard review process to Fair Value Prices and that PFPC shall have no obligation to inquire into, verify, or otherwise analyze the accuracy or reasonableness of any Fair Value Prices except as set forth in Schedule D. Except as set forth in Schedule D, PFPC shall have no responsibility for verifying the accuracy and reasonableness of Fair Value Prices or the appropriateness of the Funds’ use of Fair Value Prices, regardless of any efforts of PFPC in this respect. The Trust acknowledges that any determination to use any Fair Value Price is the responsibility of the Trust and not PFPC

D-3

5. Periodic Reporting.

PFPC shall provide the Trust with (i) a report identifying the number of days that Fair Value Prices were utilized during the last quarter; and (ii) such other reports as the Trust may reasonably request.

D-4

SCHEDULE E

Data Repository and Analytics Suite

1. PFPC Services. PFPC will:

(a) Provide Internet access to PFPC’s data repository and analytics suite at www.pfpcdatapath.com or other site operated by PFPC (the “Site”) for Fund portfolio data otherwise supplied by PFPC to Fund service providers via other electronic and manual methods. Types of information to be provided on the Site include: (i) data relating to portfolio securities, (ii) general ledger balances and (iii) net asset value-related data, including NAV and net asset, distribution and yield detail (collectively, the “Accounting Services”).

(b) Supply each of the Authorized Users, as specified on Schedule G, with a logon ID and Password;

(c) Provide to Authorized Users access to the information listed in subsection (a) above using standard inquiry tools and reports. With respect to the Accounting Services, Authorized Users will be able to modify standard inquiries to develop user-defined inquiry tools; however, PFPC will review computer costs for running user-defined inquiries and may assess surcharges for those requiring excessive hardware resources. In addition, costs for developing custom reports or enhancements are not included in the fees set forth below and will be billed separately.

(d) Utilize a form of encryption that is generally available to the public in the U.S. for standard Internet browsers and establish, monitor and verify firewalls and other security features (commercially reasonable for this type of information and these types of users) and exercise commercially reasonable efforts to attempt to maintain the security and integrity of the Site; and

(e) Monitor the telephone lines involved in providing the Accounting Services and inform the Trust promptly of any malfunctions or service interruptions.

2. Duties of the Fund and the Users. The Trust and the Users (to the extent applicable) will:

(a) Provide and maintain a web browser supporting Secure Sockets Layer 128-bit encryption; and

E-1

(b) Keep logon IDs and passwords confidential and notify PFPC immediately in the event that a logon ID or password is lost, stolen or if you have reason to believe that the logon ID and password are being used by an unauthorized person.

3. Internet Disclaimer.

The Trust acknowledges that the Internet is an “open,” publicly accessible network and not under the control of any party. PFPC’s provision of Accounting Services is dependent upon the proper functioning of the Internet and services provided by telecommunications carriers, firewall providers, encryption system developers and others. The Trust agrees that PFPC shall not be liable in any respect for the actions or omissions of any third party wrongdoers (i.e., hackers not employed by such party or its affiliates) or of any third parties involved in the Accounting Services and shall not be liable in any respect for the selection of any such third party, unless that selection constitutes a breach of PFPC’s Standard of Care.

E-2

SCHEDULE F

COMPLIANCE SUPPORT SERVICES

I. Base Compliance Support Services

Description	Frequency
Provide compliance policies and procedures for fund accounting and administration and transfer agency services, summary procedures thereof, and a related certification letter.	Annually, with interim updates on an as-needed basis.

II. Elective Compliance Support Services*

Compliance Policies and Procedures Support

Description	Frequency
Load Trust’s and Trust’s service providers’ policies and procedures, summaries of those policies and procedures and related documents onto PFPC’s Compliance Fund Library, a secure web-based program featuring search capabilities and 24/7 access by the Trust’s management and Board members.	Initial set up and first year maintenance per registrant Annual service thereafter
Assist in preparing the Trust’s CCO’s annual written report to the Board regarding operation of the Trust’s policies and procedures and those of its service providers.	Annual service
Present various aspects of the compliance policies and procedures of PFPC’s lines of business to the Trust’s Board and respond to related questions.	Per meeting

*Note: Elective services are subject to additional fees.

F-1

Chief Compliance Officer Support

Description	Frequency
Meet quarterly with the Trust’s CCO on regulatory issues and industry best practices, and provide written quarterly updates. (Includes quarterly written regulatory updates described below.)	Group meetings with other CCOs per quarter One-on-one meetings at PFPC or your location per quarter
Provide written updates on regulatory matters to the Trust’s CCO both on an ad hoc basis (as regulatory events occur) and on a quarterly basis.	Per quarter
Provide quarterly review with the Trust’s CCO, both upon appointment and thereafter, of PFPC’s operations for the period related to the Trust.	Per quarterly meeting

Additional Rule 38a-1 Support Services

Description	Frequency
Assist in training portfolio managers and other advisory personnel on Rule 38a-1 and other regulatory/compliance issues.	Annually; includes two full-day sessions.
Prepare PFPC’s quarterly “report card,” offering a self-assessment of PFPC’s adherence to PFPC’s compliance policies and procedures as the Trust’s service provider. Other forms of customized reporting (e.g., statistical reporting on such matters as NAV accuracy) are also available.	Per customized report

F-2

Suite of Services

Compliance support services package (Includes all services listed above)

PFPC’s compliance support services are intended to assist in meeting the Trust’s regulatory needs and are not legal advice. All services or documents that could be construed as legal advice are subject to fund counsel review. Finally, all services performed by PFPC will be at the request and direction of the Trust and its CCO.

F-3

SCHEDULE G

AUTHORIZED PERSONS

Officers of the Trust:

Name	Title
Mark W. Headley	President
John P. McGowan	Secretary, Vice President
Shai Malka	Treasurer
Andrew T. Foster	Vice President
Manoj K Pombra	Chief Compliance Officer

Other Authorized Persons:

Name Scope of Authority

G-1

EX-99.(H)(1)(XVI)

SERVICE STANDARDS

RELATED TO THE

SECOND AMENDED AND RESTATED INVESTMENT COMPANY SERVICES AGREEMENT

BETWEEN MATTHEWS ASIAN FUNDS

AND PFPC

In connection with the Second Amended and Restated Investment Company Services Agreement dated as of April 2, 2008 and effective retroactively from April 1, 2007 (the “Agreement”) between PFPC Inc. (“PFPC”) and Matthews International Funds d/b/a Matthews Asian Funds (the “Trust”), PFPC has agreed to perform the services described in the Agreement in accordance with the service standards set forth in this agreement (the “Service Level Agreement”). The parties agree that the service standards set forth herein may be revised, from time to time, by mutual written agreement.

PFPC will use commercially reasonable efforts to perform the services set forth in the Agreement in accordance with the service standards set forth below (each, a “Standard”). In the event PFPC fails to meet a particular Standard in any particular month, PFPC agrees to take appropriate, commercially reasonable corrective measures within the following month to seek to be in compliance with the appropriate Standard at the end of such month; provided, however, that the foregoing requirement shall not apply in those instances in which PFPC’s failure to meet a Standard was due to circumstances beyond its control.

With respect to each PFPC line of business (that is, (a) Transfer Agency & Shareholder Services, and (b) Fund Accounting & Regulatory Administration), in the event PFPC fails to meet the Standards for three or more different items (“Items”), each as identified below (except for any failure due to circumstances beyond its control), in each of three consecutive months, the fee payable to PFPC under the Agreementattributable to the corresponding line of businessshall be reduced by one and one-quarter percent (1.25%) or such lower amount as the parties shall agree upon for the third of those three months. With respect to each PFPC line of business, if PFPC fails to meet the Standards for any three or more different Items (except for any failure to do circumstances beyond its control), in each of four or more consecutive months, the fee payable to PFPC under the Agreement attributable to the corresponding line of businessshall be reduced by two and one-half percent (2.50%) or such lower amount as the parties shall agree upon for the fourth of those months and each successive month until PFPC no longer fails to meet the Standards for such three or more Items in a particular month. For the avoidance of doubt, the foregoing calculations will be calculated separately for each PFPC line of business.

Transfer Agency & Shareholder Services

ITEM	STANDARD
New Account External Quality	98% accuracy rate
Financial Transaction Quality	99% accuracy rate
Incoming Calls	85% answered in twenty (20) seconds
Abandon Rate	Under 2%
Non-Financial Transaction Quality	98% accuracy rate
Financial Correspondence Non-Financial Correspondence	98% responded to within three (3) business days 98% responded to within five (5) business days
Confirmations	99% mailed in three business (3) days
Statements	99% mailed in five business (5) days
Form 1099-DIV Additional Year-End Tax Information	Prepared and mailed notices to shareholders within 45 days of calendar year-end.
Email Inquiries	98% resolved within 3 business days of receipt.

Fund Accounting & Regulatory Administration Services

ITEM	STANDARD
NAV Operations
NAV Calculation Accuracy	99.4% or better
Cash Availability	90% delivered by 10:15 am (ET).
Daily Bulletin	99% or better delivered by 6:30 pm (ET).
Position Reconciliation	Weekly, for the prior week.
Compliance
Monthly Sub-M	Results provided by 5th business day

Board Meetings
Mailing of Board Meeting Materials	7 business days prior to meeting date, provided the Administrator has received timely notice of such meeting and has timely received information from third parties.
Fund Administration
N-SARs	Completed and filed with the SEC by the 60th day following the Fund’s fiscal year end, or mid-year end (with respect to semi-annual dates), if these dates are business day, otherwise, the next business day.
Excise Tax Distributions	Calculated and declared income and capital gain distributions prior to December 31.
Monthly Performance Calculations	Complete and distribute within 3 business days following calendar month-end.
Expense Budgeting and Analysis	Analyze and adjust expense accruals, as needed, on a monthly basis.
Annual and Semi-Annual Reports and N-CSR Filings	Complete annual and semi-annual reports by the 60th day following the Fund’s fiscal year end, or mid-fiscal year end (with respect to semi-annual dates). File N-CSR with SEC 10 days after initial mail date to shareholders, if is a business day, otherwise, the next business day
24f-2 Share Registration Date	Prepare financial data for inclusion in the Form 24f-2 filing within 90 days of fiscal year-end.
Form 1099-MIS Additional Year-End Tax Information	Prepare and mail notices to Trustees and vendors within 45 days of calendar year-end.
Forms 1120-RIC and 8613	Prepare and file on a Fund-by-Fund basis with the U.S. Internal Revenue Service by the relevant due date, inclusive of extensions where allowable.
Payment of Invoices	Pay on behalf of the Trust all invoices accurately within 2 weeks of initial receipt of invoice by PFPC. For avoidance of doubt, the Trust will promptly reimburse PFPC for all such payments.
Payment of Asset-Based Fees	Recalculate and prepare payment authorizations for advisory fees monthly. To be completed within 1 business day of the end of the calculation period.

NAV Standard.

With respect to the NAV Standard, NAV calculations are measured by total number of NAVs calculated monthly. On each day where PFPC receives less than 50% of the nightly security information prior to 5:00pm ET, that entire day’s NAV calculation will be excluded from the Standard performance calculation.

An inaccurate NAV (an error greater than 1 cent per share of the asset value) calculation may persist beyond one day. If an error lasts more than one business day, it shall be treated as one error and excluded from both the numerator and denominator after the first day for that month’s calculation unless the source of the inaccuracy changes during the relevant period.

It is anticipated that the Funds would not wish to deliver an NAV to NASDAQ if the accuracy of the NAV is in question at the time it is necessary to transmit the NAV to NASDAQ. If PFPC has reason to believe that an NAV is or may be incorrect, PFPC may either “withhold” the NAV from NASDAQ or “withdraw” an NAV previously submitted, in consultation with an appropriate representative of the Funds. In such event, PFPC shall not be deemed to have failed to report to NASDAQ by the applicable cut-off time.

General.

Standards measured in percentages associated with an Item will be measured by dividing the total number of times that Item was correctly performed during the month by the total number of times that Item occurred during the month.

For purposes of the foregoing, a failure to meet a particular Standard includes only those failures for which PFPC, in its capacity under the Agreement, would not be excused and for which PFPC would be responsible under the Agreement (including, without limitation, under Section 13, Responsibility of PFPC).

Miscellaneous.

(a) Capitalized terms not defined in this Service Level Agreement have their respective meanings as defined in the Agreement.

(b) As hereby supplemented, the Agreement shall remain in full force and effect. In the event of a conflict between the terms hereof and the Agreement, this Service Level Agreement shall control.

(c)The Agreement, as supplemented hereby, together with its Exhibits and Schedules, constitutes the complete understanding and agreement of the parties with respect to the subject matter hereof and supersedes all prior communications with respect thereto.

(d) This Service Level Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The facsimile signature of any party to this Service Level Agreement shall constitute the valid and binding execution hereof by such party.

(e) This Service Level Agreement shall be governed by the laws of the State of Delaware, without regard to its principles of conflicts of laws.

IN WITNESS WHEREOF, the parties hereto have caused this Service Level Agreement to be executed by their duly authorized officers designated below on the date and year first above written.

MATTHEWS INTERNATIONAL FUNDS

By:	/s/ William J. Guilfoyle
Name:	William J. Guilfoyle
Title:	President

PFPC INC.

By:	/s/ Stephen M. Wynne
Name:	Stephen M. Wynne
Title:	Chief Executive Officer