MATTHEWS INTERNATIONAL FUNDS, 497, 1998-01-08

MATTHEWS INTERNATIONAL FUNDS
497, 1998-01-08

Previous: CNL AMERICAN PROPERTIES FUND INC, 424B3, 1998-01-08

Next: CHAPDELAINE GEORGE R, SC 13D, 1998-01-08

<PAGE> 1

MATTHEWS INTERNATIONAL FUNDS
655 MONTGOMERY STREET, SUITE 1438
SAN FRANCISCO, CA 94111

MATTHEWS PACIFIC TIGER FUND
MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND
MATTHEWS KOREA FUND
MATTHEWS DRAGON CENTURY CHINA FUND

CLASS I SHARES
PROSPECTUS DECEMBER 31, 1997
- --------------------------------------------------------------------------------

Matthews International Funds (the "Company") is an open-end investment
management company which currently consists of four separate investment series
(each a "Fund" and collectively, the "Funds") designed to offer investors a
variety of investment opportunities. Each series has distinct investment
objectives and policies. This Prospectus pertains only to Class I shares of
MATTHEWS PACIFIC TIGER FUND, MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND,
MATTHEWS KOREA FUND and MATTHEWS DRAGON CENTURY CHINA FUND and is intended to
aid investors in understanding the similarities and differences among the Funds.

The Company is organized as a Delaware business trust. Matthews International
Capital Management, LLC (the "Advisor") serves as the investment advisor to the
Funds and manages the investments of the Funds according to the investment
objectives of each Fund. Daewoo Capital Management Co., Ltd. (the "Korean
Advisor"), an investment advisory subsidiary of Daewoo Securities Co., Ltd.,
acts as the Korean advisor to MATTHEWS KOREA FUND.

MATTHEWS PACIFIC TIGER FUND seeks maximum capital appreciation by investing,
under normal circumstances, at least 65% of its total assets in equity
securities of Pacific Tiger economies. The Pacific Tiger economies include: Hong
Kong, Singapore, South Korea, Taiwan, Indonesia, Malaysia, the Philippines,
Thailand and China. Equity securities in which the Fund may invest include:
common stocks, preferred stocks, warrants, and securities convertible into
common stocks such as convertible bonds and debentures.

MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND seeks to provide capital appreciation
and current income by investing, under normal circumstances, at least 65% of its
total assets in convertible securities of the Asian markets. The countries
included in this market are: Hong Kong, Japan, Singapore, South Korea, Taiwan,
Indonesia, Malaysia, the Philippines, Thailand, China and India. Convertible
securities include corporate bonds and preferred stocks which are convertible
into common stocks, as well as debt instruments with warrants or common stock
attached.

MATTHEWS KOREA FUND seeks long-term capital appreciation through investment
primarily in equity securities of South Korean companies. Under normal
circumstances, the Fund will invest at least 65% of its total assets in equity
securities of South Korean companies. Equity securities include common stocks,
preferred stocks, warrants and securities convertible into common or preferred
stock.

MATTHEWS DRAGON CENTURY CHINA FUND seeks long-term capital appreciation through
investment primarily in equity securities of Chinese companies. Under normal
circumstances, the Fund will invest at least 65% of its total assets in equity
securities of Chinese companies. Equity securities in which the Fund may invest
include: common stocks, preferred stocks, warrants, and securities convertible
into common stocks such as convertible bonds and debentures.

Class I shares of each Fund may be purchased directly from the Funds without any
sales charge although the Advisor and other institutions may charge their
customers a fee for services provided in connection with their investments.

A REDEMPTION FEE OF 1% WILL BE IMPOSED ON REDEMPTIONS MADE WITHIN NINETY DAYS OF
PURCHASE, THE PROCEEDS OF WHICH WILL BE RETAINED BY THE FUNDS.

The minimum initial investment for each Fund is $1,000. Subsequent investments
will be accepted in minimum amounts of $250. The minimum initial investment for
IRAs, 401(k), 403(b)(7) plans and other retirement plans is $250. Subsequent
investment for any retirement plan is $50.

The Funds' principal Underwriter is FPS Broker Services, Inc., 3200 Horizon
Drive, P.O. Box 61503, King of Prussia, PA 19406-0903.

This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the above Funds. Investors should read
and retain this Prospectus for future reference. Additional Information about
the Funds is contained in the Statement of Additional Information dated December
31, 1997, which has been filed with the Securities and Exchange Commission and
is available upon request without charge by contacting FPS Broker Services,
Inc., at the address above or by calling (800) 892-0382. The Statement of
Additional Information is incorporated by reference into this Prospectus.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY........................................................................... 3
EXPENSE INFORMATION.......................................................................... 4
FINANCIAL HIGHLIGHTS......................................................................... 7
INVESTMENT OBJECTIVES
Matthews Pacific Tiger Fund............................................................. 8
Matthews Asian Convertible Securities Fund.............................................. 8
Matthews Korea Fund..................................................................... 8
Matthews Dragon Century China Fund...................................................... 9
INVESTMENT POLICIES AND RISKS
Common to all Funds..................................................................... 10
Specific to Matthews Pacific Tiger Fund................................................. 11
Specific to Matthews Asian Convertible Securities Fund.................................. 12
Specific to Matthews Korea Fund......................................................... 12
Specific to Matthews Dragon Century China Fund.......................................... 14
INVESTMENT STRATEGIES AND RISKS
Common to all Funds..................................................................... 15
Specific to Matthews Asian Convertible Securities Fund.................................. 19
Specific to Matthews Korea Fund......................................................... 19
RISK FACTORS
Common to all Funds..................................................................... 19
Specific to Matthews Asian Convertible Securities Fund.................................. 21
Specific to Matthews Korea Fund......................................................... 21
Specific to Matthews Dragon Century China Fund.......................................... 24
MANAGEMENT OF THE FUNDS...................................................................... 24
ADMINISTRATION OF THE FUNDS.................................................................. 27
PURCHASE OF SHARES........................................................................... 28
EXCHANGE OF SHARES........................................................................... 30
REDEMPTION OF SHARES and REDEMPTION FEE...................................................... 30
SHAREHOLDER SERVICES......................................................................... 32
NET ASSET VALUE.............................................................................. 33
DIVIDENDS AND TAXES.......................................................................... 33
PERFORMANCE INFORMATION...................................................................... 35
GENERAL INFORMATION.......................................................................... 35
APPENDIX
DEBT RATINGS................................................................................. 38
</TABLE>

THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUNDS TO MAKE SUCH
AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE, DEALER, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS.

2
<PAGE> 3

MATTHEWS INTERNATIONAL FUNDS

MATTHEWS DRAGON CENTURY CHINA FUND

CLASS I SHARES

SUPPLEMENT TO DECEMBER 31, 1997 PROSPECTUS

The distributor of MATTHEWS DRAGON CENTURY CHINA FUND, FPS Broker Services, Inc.
("FPS"), is soliciting subscriptions for the Fund's Class I (no load) shares
during an initial offering period currently scheduled from January 15, 1998 to
close of business on February 19, 1998 (the "Subscription Period"). The
subscription price will be the initial net asset value per share of the Class I
shares of $10.00 per share. Orders to purchase shares of the Fund received
during the Subscription Period will be accepted on February 19, 1998. Checks
accompanying orders received during the Subscription Period will be held
uninvested until the close of business on February 19, 1998.

Charles Schwab & Co., Inc. ("Schwab") is also soliciting subscriptions of Fund
shares during the Subscription Period pursuant to a Selected Dealer Agreement
with FPS. The purchase price for Fund shares will be paid from a Schwab
customer's brokerage account at the close of business on February 19, 1998. For
its services, Schwab will receive from Matthews International Capital
Management, LLC ("Matthews"), the Investment Advisor to the Fund, a fixed fee of
up to $60,000, plus up to fifty basis points of the aggregate net asset value of
Fund shares sold by Schwab during the Subscription Period. The fee will be paid
solely by Matthews out of its own resources or those of its affiliates and will
have no effect on the Fund's fees or expenses.

Shares of the Fund will not be available to the public prior to February 19,
1998 except by way of these special subscription offers.

THIS SUPPLEMENT IS DATED DECEMBER 31, 1997.
<PAGE> 4

PROSPECTUS SUMMARY

THE COMPANY
Matthews International Funds (the "Company") is an open-end investment
management company organized as a business trust under the laws of the state of
Delaware. The Company is organized to offer separate series of shares and is
currently comprised of four separate series of shares, although this Prospectus
only pertains to Class I shares of MATTHEWS PACIFIC TIGER FUND, MATTHEWS ASIAN
CONVERTIBLE SECURITIES FUND, MATTHEWS KOREA FUND and MATTHEWS DRAGON CENTURY
CHINA FUND. Additional series of the Company may be established from time to
time at the discretion of the Board of Trustees of the Company.

INVESTMENT OBJECTIVES
MATTHEWS PACIFIC TIGER FUND seeks to maximize capital appreciation by investing,
under normal circumstances, at least 65% of its total assets in equity
securities of Pacific Tiger economies. The Pacific Tiger economies include Hong
Kong, Singapore, South Korea, Taiwan, Indonesia, Malaysia, the Philippines,
Thailand and China. See "INVESTMENT OBJECTIVES," "INVESTMENT POLICIES AND RISKS"
and "RISK FACTORS."

MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND seeks capital appreciation and
current income by investing, under normal circumstances, at least 65% of its
total assets in convertible securities of the Asian markets. The countries
included in this market are: Hong Kong, Japan, Singapore, South Korea, Taiwan,
Indonesia, Malaysia, the Philippines, Thailand, China and India. See "INVESTMENT
OBJECTIVES," "INVESTMENT POLICIES AND RISKS" and "RISK FACTORS."

MATTHEWS KOREA FUND seeks long-term capital appreciation through investment
primarily in equity securities of South Korean companies. The Fund will, under
normal circumstances, invest at least 65% of its total assets in equity
securities of South Korean companies. The Fund is designed primarily for
long-term investment, and investors should not consider it a short-term trading
vehicle. See "INVESTMENT OBJECTIVES," "INVESTMENT POLICIES AND RISKS" and "RISK
FACTORS."

RISK FACTORS
There is no assurance that the Funds will achieve their investment objectives.
Investing outside of the United States involves special risks, in addition to
the risks which are inherent to all investments. See "RISK FACTORS."

INVESTMENT MANAGEMENT, UNDERWRITER AND SERVICING AGENTS
Matthews International Capital Management, LLC (the "Advisor"), 655 Montgomery
Street, Suite 1438, San Francisco, California 94111, a limited liability company
and registered investment advisor, is the investment advisor for the Funds. The
Advisor manages the investments of each Fund according to its investment
objectives. As of October 1, 1997, the Advisor had approximately $70 million
under management or committed to management in various fiduciary or advisory
capacities, primarily from private and institutional accounts. Daewoo Capital
Management Co., Ltd., (the "Korean Advisor"), 34-3, Yoido-dong, Yungdungpo-gu,
Seoul 150-010, Korea, is registered under the U.S. Investment Advisers Act of
1940 and acts as Korean Advisor to Matthews Korea Fund. The Korean Advisor is a
subsidiary of Daewoo Securities Co., Ltd., the largest Korean securities firm
and an affiliate of Daewoo Research Institute. The Advisor is responsible for
the fees of the Korean Advisor under the terms of a separate agreement. See
"MANAGEMENT OF THE FUNDS." FPS Broker Services, Inc., 3200 Horizon Drive, P.O.
Box 61503, King of Prussia, PA 19406-0903 serves as the Funds' underwriter. The
Bank of New York, 90 Washington Street,

3
<PAGE> 5

New York, New York 10286 serves as the custodian of the Funds' assets. FPS
Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-
0903 serves as the Funds' administrator, transfer agent and fund accounting
agent.

As of December 17, 1997, Goodness, Ltd., a shareholder account of Class I shares
of the KOREA FUND, may be considered to be a "controlling person" by reason of
ownership of 38.69% of the capital stock of such Fund, thus enabling such
account to strongly influence the outcome of shareholder votes.

PURCHASE OF SHARES
The minimum initial investment for each Fund is $1,000 for all accounts.
Subsequent investments will be accepted in minimum amounts of $250 for all
accounts. Purchase of Class I shares do not impose any sales load nor bear any
fees pursuant to a Rule 12b-1 Plan. The public offering price for shares of each
Fund is the net asset value per share next determined after receipt of a
purchase order at the transfer agent in proper form with accompanying check or
bank wire arrangements. See "PURCHASE OF SHARES."

REDEMPTION OF SHARES
Shares of the Funds may be redeemed at the net asset value per share next
determined after receipt by the transfer agent of a redemption request in proper
form. IF ANY SHARES OF A FUND ARE REDEEMED WITHIN NINETY DAYS OF THE PURCHASE OF
THOSE SHARES, THE PROCEEDS OF THAT REDEMPTION WILL BE SUBJECT TO A REDEMPTION
FEE OF 1.00%, THE PROCEEDS OF WHICH WILL BE RETAINED BY THE FUND FROM WHICH THE
SHARES ARE REDEEMED. Signature guarantees may be required for certain redemption
requests. See "Redemption Fee" under "REDEMPTION OF SHARES."

DIVIDENDS
Each Fund intends to distribute substantially all of its net investment income
and net realized capital gains, if any, to shareholders. Distributions of net
capital gains, if any, will be made annually. All distributions are reinvested
at net asset value in additional full and fractional shares of each Fund unless
the shareholder notifies the transfer agent in writing requesting payments in
cash. MATTHEWS PACIFIC TIGER FUND, MATTHEWS KOREA FUND and MATTHEWS DRAGON
CENTURY CHINA FUND intend to declare and pay dividends annually. MATTHEWS ASIAN
CONVERTIBLE SECURITIES FUND intends to declare and pay dividends semi-annually.
See "DIVIDENDS AND TAXES."

EXPENSE INFORMATION

SHAREHOLDER TRANSACTION EXPENSES FOR EACH FUND:

<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)............................... 0.00%
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage
of offering price)................... 0.00%
Contingent Deferred Sales Charge (as a
percentage of original purchase
price)............................... 0.00%
Redemption Fee (as a percentage of
amount redeemed)..................... 1.00%*
</TABLE>

* The Redemption Fee of 1.00% applies only to those shares redeemed within
ninety days of purchase. See "Redemption Fee" under the heading "REDEMPTION OF
SHARES."

If you want to redeem shares by wire transfer, the Funds' transfer agent charges
a fee (currently $9.00) for each wire redemption. Purchases and redemptions may
also be made through broker-dealers and others who may charge a commission or
other transaction fee for their services.

4
<PAGE> 6

- --------------------------------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES
as a Percentage of Average Net Assets:

<TABLE>
<CAPTION>
ESTIMATED NET EXPENSE
OTHER EXPENSES RATIO
MANAGEMENT 12B-1 AFTER EXPENSE AFTER EXPENSE
FUND(1)(2) FEES EXPENSES REIMBURSEMENT REIMBURSEMENT(3)
- ---------------------------------- --------------- ----------- ---------------- ------------------
<S> <C> <C> <C> <C>
MATTHEWS PACIFIC TIGER FUND-CLASS
I............................... 1.00% None 0.90% 1.90%
MATTHEWS ASIAN CONVERTIBLE
SECURITIES FUND-CLASS I......... 1.00% None 0.90% 1.90%
MATTHEWS KOREA FUND-CLASS I....... 1.00% None 1.50% 2.50%
MATTHEWS DRAGON CENTURY
CHINA FUND-CLASS I.............. 1.00% None 1.00% 2.00%
</TABLE>

- --------------------------------------------------------------------------------

(1) For each Fund other than MATTHEWS DRAGON CENTURY CHINA FUND, the ratios set
forth above reflect a continuation of the Advisor's voluntary advisory fee
waivers and/or expense reimbursements, which were in effect at the close of
the Funds' most recent fiscal year. For the MATTHEWS DRAGON CENTURY CHINA
FUND, the ratios set forth above reflect the anticipated voluntary advisory
fee waivers and/or expense reimbursements by the Advisor.

(2) MATTHEWS PACIFIC TIGER FUND, MATTHEWS KOREA FUND and MATTHEWS DRAGON CENTURY
CHINA FUND offer two classes of shares that invest in the same portfolio of
securities. Shareholders of Class A are subject to a sales charge and a
12b-1 Distribution Plan and shareholders of Class I are not; therefore,
expenses and performance figures will vary between the Classes. The
information set forth in the table above and the example below relates only
to Class I shares. See "General Information."

(3) As of the date hereof, the net expense limitations for Class I shares of
MATTHEWS PACIFIC TIGER FUND, MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND and
MATTHEWS KOREA FUND remain at 1.90%, 1.90%, and 2.50%, respectively. The net
expense limitation for Class I shares of MATTHEWS DRAGON CENTURY CHINA FUND
will be 2.00% for its first twelve months of operations.

Absent fee waivers and/or expense reimbursements during the fiscal year
ended August 31, 1997, MATTHEWS PACIFIC TIGER FUND'S advisory fee,
estimated other expenses, and net expense ratio would have been 1.00%,
0.97%, and 1.97%, respectively. MATTHEWS ASIAN CONVERTIBLE SECURITIES
FUND'S advisory fee, estimated other expenses, and net expense ratio would
have been 1.00%, 3.45%, and 4.45%, respectively. MATTHEWS KOREA FUND'S
advisory fee, estimated other expenses, and net expense ratio would have
been 1.00%, 1.90%, and 2.90%, respectively. MATTHEWS DRAGON CENTURY CHINA
FUND'S advisory fee, estimated other expenses, and approximate net expense
ratio would be 1.00%, 3.35%, and 4.35% respectively, absent the expense
limitation to be in effect for its first twelve months of operations.

In subsequent years, overall operating expenses for each Fund may not fall
below the applicable percentage limitation until the Advisor has been fully
reimbursed for fees foregone or expenses it paid under the Advisory
Agreement. Each will reimburse the Advisor in the three following years if
operating expenses (before reimbursement) are less than the applicable
percentage limitation charged to the Fund.

5
<PAGE> 7

- --------------------------------------------------------------------------------

EXAMPLE

Based on the level of expenses listed above, the total expenses relating to an
investment of $1,000 would be as follows, assuming a 5% annual return,
reinvestment of all dividends and distributions and redemption at the end of
each time period.

<TABLE>
<CAPTION>
NAME OF FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
MATTHEWS PACIFIC TIGER FUND-CLASS I................... $19 $60 $102 $221
MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND-CLASS I.... $19 $60 $102 $221
MATTHEWS KOREA FUND-CLASS I........................... $25 $78 $133 $282
MATTHEWS DRAGON CENTURY CHINA FUND-CLASS I............ $20 $63 $108 $233
</TABLE>

- --------------------------------------------------------------------------------

The purpose of this table is to assist the investor in understanding the various
costs and expenses that a shareholder will bear directly or indirectly. While
the example assumes a 5% annual return, each Fund's actual performance will vary
and may result in actual returns greater or less than 5%. The above example
should not be considered a representation of past or future expenses or
performance. Actual expenses of the Funds may be greater or less than those
shown.

6
<PAGE> 8

FINANCIAL HIGHLIGHTS

MATTHEWS PACIFIC TIGER FUND
MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND
MATTHEWS KOREA FUND

The following financial highlights are a part of the Funds' Class I shares
financial statements which have been audited by Ernst & Young LLP, independent
auditors, for the most recent fiscal year. The following tables should be read
in conjunction with these financial statements and related notes which appear in
the 1997 Annual Report to Shareholders.

<TABLE>
<CAPTION>
MATTHEWS PACIFIC MATTHEWS ASIAN CONVERTIBLE
TIGER FUND SECURITIES FUND
-------------------------------------- --------------------------------------
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1997 1996 1995* 1997 1996 1995*
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period........................ $ 10.81 $ 9.77 $ 10.00 $ 10.53 $ 9.88 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) 0.02 0.01 0.02 0.10 0.25 0.23
Net realized and unrealized
gain (loss) on investments
and foreign currency......... 0.50 1.03 (0.23) 1.42 0.75 (0.14)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations.................. 0.52 1.04 (0.21) 1.52 1.00 0.09
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS FROM:
Net investment income......... (0.01) 0.00 (0.02) (0.10) (0.26) (0.21)
Net realized gains on
investments.................. (0.02) 0.00 0.00 (0.24) (0.09) 0.00
---------- ---------- ---------- ---------- ---------- ----------
Total distributions........... (0.03) 0.00 (0.02) (0.34) (0.35) (0.21)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, end of period $ 11.30 $ 10.81 $ 9.77 $ 11.71 $ 10.53 $ 9.88
========== ========== ========== ========== ========== ==========
TOTAL RETURN................... 4.75% 10.64% (2.07%)++ 14.67% 10.24% 0.89%++
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's)................... $ 43,647 $ 17,148 $ 1,082 $ 6,166 $ 3,272 $ 863
Ratio of expenses to average
net assets before
reimbursement and waiver of
expenses by Advisor and
Administrator................ 1.97% 4.35% 25.95%+ 4.45% 8.73% 23.11%+
Ratio of expenses to average
net assets after reimbursement
and waiver of expenses by
Advisor and Administrator.... 1.90% 1.90% 2.17%+ 1.90% 1.85% 2.26%+
Ratio of net investment income
(loss) to average net assets
before reimbursement and
waiver of expenses by Advisor
and Administrator............ 0.20% (2.13%) (23.41%)+ (1.55%) (4.13%) (18.68%)+
Ratio of net investment income
(loss) to average net assets
after reimbursement and
waiver of expenses by Advisor
and Administrator............ 0.27% 0.32% 0.36%+ 1.00% 2.75% 2.17%+
Portfolio turnover............ 70.73% 124.69% 92.53% 50.20% 88.16% 121.63%
Average commission rate paid.. $ 0.0065 $ 0.0064 N/A $ 0.0077 $ 0.0020 N/A

MATTHEWS KOREA
FUND
--------------------------------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
AUGUST 31, AUGUST 31, AUGUST 31,
1997 1996 1995**
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, beginning of
period........................ $ 7.23 $ 9.13 $ 10.00
---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) (0.04)*** (0.07) 0.08***
Net realized and unrealized
gain (loss) on investments
and foreign currency......... (1.00)*** (1.75) (0.95)***
---------- ---------- ----------
Total from investment
operations.................. (1.04) (1.82) (0.87)
---------- ---------- ----------
LESS DISTRIBUTIONS FROM:
Net investment income......... 0.00 0.00 0.00
Net realized gains on
investments.................. 0.00 (0.08) 0.00
---------- ---------- ----------
Total distributions........... 0.00 (0.08) 0.00
---------- ---------- ----------
Net Asset Value, end of period $ 6.19 $ 7.23 $ 9.13
========== ========== ==========
TOTAL RETURN................... (14.38%) (20.11%) (8.70%)++
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's)................... $ 19,356 $ 2,721 $ 504
Ratio of expenses to average
net assets before
reimbursement and waiver of
expenses by Advisor and
Administrator................ 2.90% 11.36% 42.87%+
Ratio of expenses to average
net assets after reimbursement
and waiver of expenses by
Advisor and Administrator.... 2.50% 2.23% 0.24%+
Ratio of net investment income
(loss) to average net assets
before reimbursement and
waiver of expenses by Advisor
and Administrator............ (1.81%) (10.44%) (41.79%)+
Ratio of net investment income
(loss) to average net assets
after reimbursement and
waiver of expenses by Advisor
and Administrator............ (1.41%) (1.31%) 0.84%+
Portfolio turnover............ 112.68% 139.71% 42.16%
Average commission rate paid.. $ 0.0911 $ 0.1397 N/A
+ Annualized.
++ Not Annualized.
* The Funds commenced operations on September 13, 1994.
** The Fund commenced operations on January 3, 1995.
*** Calculated using the average shares method.
</TABLE>

7
<PAGE> 9

INVESTMENT OBJECTIVES

The investment objective of each Fund is fundamental and may not be changed
without a vote of the holders of the majority of the voting securities of each
respective Fund. Unless otherwise stated in this Prospectus, the Funds'
investment policies are not fundamental and may be changed without shareholder
approval. While an investment policy or restriction may be changed by the
Trustees of the Company without shareholder approval, the Funds intend to notify
shareholders before making any material change to an investment policy or
restriction. Fundamental objectives may not be changed without shareholder
approval. Additional investment policies and restrictions are described in the
Statement of Additional Information.

MATTHEWS PACIFIC TIGER FUND
MATTHEWS PACIFIC TIGER FUND seeks maximum capital appreciation by investing,
under normal circumstances, at least 65% of its total assets in equity
securities of Pacific Tiger economies. The Pacific Tiger economies include the
following countries: Hong Kong, Singapore, South Korea, Taiwan, Indonesia,
Malaysia, the Philippines, Thailand and China. The Fund will invest, under
normal market conditions, in issuers located in at least three different
countries. The assets of the Fund will be invested with geographic flexibility;
however, there is no limitation on the percentage of assets which may be
invested in the securities of issuers domiciled in any one country.

To be eligible for inclusion in the Fund's portfolio, a company is considered to
be within a Tiger "country" if (i) it is organized under the laws of Hong Kong,
Singapore, South Korea, Taiwan, Indonesia, Malaysia, the Philippines, Thailand
or China, (ii) it derives at least 50% of its revenues or profits from goods
produced or sold, investments made, services performed, or has at least 50% of
its assets located in one of these countries, (iii) it has the primary trading
markets for its securities in one of these countries or (iv) it is a
governmental entity or an agency or instrumentality or political subdivision of
such country.

MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND
MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND seeks capital appreciation and
current income by investing, under normal circumstances, at least 65% of its
total assets in convertible securities of the Asian markets. The countries
included in this market are: Hong Kong, Japan, Singapore, South Korea, Taiwan,
Indonesia, Malaysia, the Philippines, Thailand, China and India. The Fund may
invest without limit in securities that are not considered investment grade
("junk bonds") and that accordingly have greater risk of loss of principal and
interest. The Fund will primarily invest in Euroconvertible securities that are
denominated in U.S. dollars, Swiss Francs or other currencies. The remaining 35%
of the Fund's assets may be invested in non-convertible corporate or
fixed-income securities, common stocks and selected money market instruments of
issuers located outside the Asian markets, including, without limitation, the
United States.

To be eligible for inclusion in the Fund's portfolio, a company is considered to
be within an Asian "country" if (i) it is organized under the laws of Hong Kong,
Japan, Singapore, South Korea, Taiwan, Indonesia, Malaysia, the Philippines,
Thailand China or India, (ii) it derives at least 50% of its revenues or profits
from goods produced or sold, investments made, services performed, or has at
least 50% of its assets located in one of these countries, (iii) it has the
primary trading markets for its securities in one of these countries or (iv) it
is a governmental entity or an agency or instrumentality or political
subdivision of such country.

MATTHEWS KOREA FUND
MATTHEWS KOREA FUND seeks long-term capital appreciation through investment
primarily in equity securities of South Korean companies. Under normal
circumstances, the Fund will invest at least 65% of its total assets in equity
securities of South Korean companies. These include securities of companies
which (i) are organized under the laws of South Korea, (ii) regardless of where
organized, derive at least 50% of their revenues or profits from goods produced
or sold, investments made, or services performed or have at least 50% of their
assets located in South Korea,

8
<PAGE> 10

(iii) have the primary trading market for their securities in South Korea or
(iv) are governmental entities or agencies or instrumentalities or other
political subdivisions, of South Korea.

The remaining 35% of the Fund's total assets may be invested in equity and other
securities of issuers located outside of South Korea, including, without
limitation, the United States, and in non-convertible bonds and other debt
securities issued by foreign issuers and foreign government entities.

MATTHEWS KOREA FUND'S investment objective and policies reflect the opinion of
the Advisor that attractive investment opportunities may result from the
potential growth of the South Korean economy and the evolving process of the
liberalization and reform of the securities markets in South Korea. The
emergence of Korea's reputation as a producer of quality goods coupled with its
position as a leading exporter in the Asia Pacific region may contribute
significantly to the potential for accelerated growth in the Korean economy.
Continued liberalization of the securities markets along with an increase in the
number of Korean companies that are available for investment to foreign
investors would enable the Fund to participate in and benefit from such
potential economic growth.

In terms of Gross National Product, industrial standards and level of education,
South Korea is second in Asia only to Japan. It enjoys the benefits of a
diversified economy with well-developed sectors in electronics, automobiles,
textiles and shoe manufacture, steel and shipbuilding among others. The driving
force behind the economy's dynamic growth has been the planned development of an
export-oriented economy in a vigorously entrepreneurial society.

There can be no assurance that such liberalization or economic growth will
continue to occur or that the Fund will be able to participate in and benefit
from any future liberalization or economic growth.

MATTHEWS DRAGON CENTURY CHINA FUND
MATTHEWS DRAGON CENTURY CHINA FUND seeks long-term capital appreciation through
investment primarily in equity securities of Chinese companies. Under normal
circumstances, the Fund will invest at least 65% of its total assets in equity
securities of Chinese companies. These include securities of companies which (i)
are organized under the laws of China or Hong Kong, (ii) regardless of where
organized, derive at least 50% of their revenues or profits from goods produced
or sold, investments made, or services performed or have at least 50% of their
assets located in China, (iii) have the primary trading market for their
securities in China or (iv) are the government, or its agencies or
instrumentalities or other political subdivisions, of China.

MATTHEWS DRAGON CENTURY CHINA FUND'S investment objective and policies reflect
the opinion of the Advisor that attractive investment opportunities may result
from the on-going transformation of the Chinese economy from state controlled
central planning to free-market mechanisms. This transformation of the world's
most populous nation has resulted in above average real GDP growth. Significant
reforms to the structure of the economy were begun in 1978 by the recently
deceased Deng Xiaoping, and have expanded significantly in recent years. It must
be emphasized that China remains a totalitarian state and there is no guarantee
that the introduction of further market reforms will occur, or that current
free-market activity will not be rescinded.

China currently has two stock markets, one in Shanghai and one in Shenzhen (a
Special Economic Zone neighboring Hong Kong). There is currently a dual share
class structure, A shares available only to local investors and B shares
available only for foreign investors. Only some companies offer B shares. A
significant number of Chinese companies have listed in Hong Kong (H shares) and
New York (N shares). Chinese entities have taken stakes in a large number of
Hong Kong listed companies creating what is widely referred to as "Red Chips."

ASIAN-PACIFIC REGION OPPORTUNITY
The Advisor believes that in contrast to more developed economies, the newly
industrialized countries of the Asian markets are in an earlier, more dynamic
growth stage of their development. This growth has been characterized by, among
other factors, low labor costs, strong demand from export markets for consumer
products, high productivity, long work weeks, pro-business governments and a
strong work ethic. Historically, South Korea, Hong Kong, Singapore and

9
<PAGE> 11

Taiwan have been examples of these traits. Today, however, the economies of
Malaysia, Indonesia, Thailand and southern China are starting to exhibit many of
these same characteristics and appear to be accelerating.

Many of the stock markets of the Asia-Pacific region are either fully open for
foreign investors or are in the process of opening. The Advisor believes that
the opening of these markets offers particular opportunities for investment in
convertible securities.

INVESTMENT POLICIES AND RISKS COMMON TO ALL FUNDS

The Advisor uses a multi-factor research approach when selecting investments for
the Funds. These factors include evaluation of each country's political
stability, prospects for economic growth (inflation, interest direction, trade
balance and currency strength), identification of long-term trends that might
create investment opportunities, the status of the purchasing power of the
people and population and composition of the work force. In reviewing potential
companies in which to invest, the Advisor considers the company's quality of
management, plans for long-term growth, competitive position in the industry,
future expansion plans and growth prospects, valuations compared with industry
average, earnings track record and a debt/equity ratio less than the market
average. In addition, the Advisor will visit countries and companies in person
to derive firsthand information for further evaluation. After evaluation of all
factors, the Advisor attempts to identify those companies in such countries and
industries that are best positioned and managed to take advantage of the varying
economic and political factors.

Many of the debt and convertible securities in which the Funds will invest are
unrated by any rating agency and, therefore, there is no objective standard
against which the Advisor may evaluate such securities. The Advisor seeks to
minimize the risks of investing in lower-rated securities through investment
analysis and attention to current developments in interest rates and economic
conditions. In selecting debt and convertible securities for the Funds, the
Advisor will assess the following factors: 1) potential for capital
appreciation; 2) price of security relative to price of underlying stock, if a
convertible security; 3) yield of security relative to yield of other fixed-
income securities; 4) interest or dividend income; 5) call and/or put features;
6) creditworthiness; 7) price of security relative to price of other comparable
securities; 8) size of issue; 9) currency of issue; and 10) impact of security
on diversification of the portfolios.

The Funds may also invest in securities of foreign issuers in the form of
American Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs").
Generally, ADRs in registered form are dollar denominated securities designed
for use in the U.S. securities markets, which represent and may be converted
into an underlying foreign security. EDRs, in bearer form, are designed for use
in the European securities markets. See "INVESTMENT STRATEGIES AND RISKS."

The Funds may purchase securities on a "when-issued" basis and may purchase or
sell securities on a "forward commitment" basis in order to hedge against
anticipated changes in interest rates and prices. See "INVESTMENT STRATEGIES AND
RISKS."

The investment in securities of other investment companies by the Funds will be
subject to limitations under the Investment Company Act of 1940 (the "1940
Act"). The Funds may invest up to 10% of its assets in other investment
companies. See "INVESTMENT STRATEGIES AND RISKS."

10
<PAGE> 12

demand deposits. The Funds' investment objective may not be achieved at such
times when a temporary defensive position is taken. Foreign investments which
are not U.S. dollar denominated may require the Funds to convert assets into
foreign currencies or to convert assets and income from foreign currencies to
U.S. dollars. Normally, exchange transactions will be conducted on a spot or
cash basis at the prevailing rate in the foreign exchange market.

The Funds may write covered call options and purchase put and call options on
securities to reduce overall risk. The Funds may also purchase put and call
options on foreign currencies to hedge against movements in currency exchange
rates. For the same purpose, the Funds may also purchase and sell foreign
currency futures contracts and write covered call options on such contracts.
Collectively, these securities may be referred to as "derivatives." Foreign
investments which are not U.S. dollar denominated may require the Funds to
convert assets into foreign currencies or to convert assets and income from
foreign currencies to U.S. dollars. Normally, exchange transactions will be
conducted on a spot or cash basis at the prevailing rate in the foreign exchange
market. See "INVESTMENT STRATEGIES AND RISKS."

INVESTMENT POLICIES
AND RISKS SPECIFIC TO
MATTHEWS PACIFIC TIGER FUND

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

The Fund may invest up to 35% of its total assets in equity and other securities
of issuers located outside of the Pacific Tiger economies, including, without
limitation, the United States, and in non-convertible bonds and other debt
securities issued by foreign issuers and foreign government entities.

The Fund may invest up to 10% of its total assets in securities rated below
investment grade (securities rated Baa or higher by Moody's Investors Service,
Inc. or BBB or higher by Standard & Poor's Corporation or, if unrated, are
comparable in quality). Debt securities rated below investment grade, commonly
referred to as junk bonds, have speculative characteristics that result in a
greater risk of loss of principal and interest. See "Risks Associated with Lower
Rated Securities" under the heading "RISK FACTORS."

The Fund may invest up to 25% of its total assets in the convertible securities
of companies of the Pacific Tiger economies. Convertible securities are
fixed-income securities such as corporate bonds, notes and preferred stocks that
can be exchanged for stock and other securities (such as warrants) that also
offer equity participation. Convertible securities are hybrid securities,
combining the investment characteristics of both bonds and common stocks. Like a
bond, a convertible security pays a pre-determined interest rate, but may be
converted into common stock at a specific price or conversion rate. The investor
has the right to initiate conversion into a specified quantity of the underlying
stock at a stated price, within a stipulated period of time. Convertible
securities are generally senior to common stock and junior to non-convertible
debt. In addition to the convertible securities denominated in the currency of
the issuer, the Fund may also invest in convertible securities which are
denominated in another currency (e.g., U.S. dollars).

The Advisor may invest where the Advisor believes the potential for capital
growth exists and in companies which have demonstrated the ability to anticipate
and adapt to changing markets. The Fund may invest in the securities of all
types of issuers, large or small, whose earnings are believed by the Advisor to
be in a relatively strong growth trend or whose assets are substantially
undervalued. Smaller companies often have limited product lines, markets or
financial resources, and they may be dependent upon one or a few key people for
management. The securities of such companies generally are subject to more
abrupt or erratic market movements and may be less liquid than securities of
larger, more established companies or the market averages in general.

Under normal circumstances, the Advisor expects that the portfolio of the Fund
will be comprised of forty to eighty individual stocks in various countries in
the Pacific Tiger economies. When purchasing portfolio securities for the Fund,
the Advisor's philosophy is a

11
<PAGE> 13

buy and hold strategy versus buying for short-term trading.

INVESTMENT POLICIES AND RISKS
SPECIFIC TO MATTHEWS ASIAN
CONVERTIBLE SECURITIES FUND

Convertible securities are fixed-income securities such as corporate bonds,
notes and preferred stocks that can be exchanged for stock and other securities
(such as warrants) that also offer equity participation. Before conversion from
a debt security to an equity security, convertible securities have
characteristics similar to non-convertible debt securities in that they
ordinarily provide a stream of income with generally higher yields than those of
common stock of the same or similar issuers. Convertible securities are hybrid
securities, combining the investment characteristics of both bonds and common
stocks. Like a bond, a convertible security pays a predetermined interest rate,
but may be converted into common stock at a specific price or conversion rate.
An investor has the right to initiate conversion into a specified quantity of
the underlying stock, at a stated price, within a stipulated period of time,
into a specified quantity of the underlying stock. Convertible securities are
generally senior to common stock and junior to non-convertible debt. Under
normal circumstances, the Advisor expects that the portfolio of the Fund will be
comprised of twenty to sixty convertible bonds in various countries in the Asian
markets.

MANY ASIAN CONVERTIBLE SECURITIES ARE UNRATED OR ARE RATED BELOW INVESTMENT
GRADE AND THE FUND MAY INVEST WITHOUT LIMIT IN SUCH SECURITIES. Investment grade
securities are securities rated Baa or higher by Moody's Investors Service, Inc.
("Moody's") or BBB or higher by Standard & Poor's Corporation ("S&P") or if
unrated are of comparable quality. IT IS EXPECTED THAT NOT MORE THAN 50% OF THE
FUND'S PORTFOLIO WILL CONSIST OF SECURITIES RATED CCC OR LOWER BY S&P OR CAA OR
LOWER BY MOODY'S OR, IF UNRATED, ARE OF COMPARABLE QUALITY, AND ARE COMMONLY
REFERRED TO AS "JUNK BONDS." These securities are considered by the rating
agencies to be predominantly speculative and involve risk exposures such as
increased sensitivity to interest rate and economic changes and limited
liquidity. The Fund does not intend to invest in issuers which are in default at
the time of investment. See "RISK FACTORS."

Euroconvertible securities are denominated in a Eurocurrency, simultaneously
issued in more than one foreign country and issued by an international
syndicate. Frequently, with Euroconvertible notes and bonds, the currency of the
bond is different from the currency of the stock into which the bond is
convertible. This feature may provide some protection against disadvantageous
local currency movement. An issuer of debt securities purchased by the Fund may
be domiciled in a country other than the country in whose currency the
instrument is denominated. See "Risks Associated with Euroconvertible
Securities" under the heading "RISK FACTORS."

The average maturity of the Fund's portfolio will vary based upon the Advisor's
assessment of economic and market conditions, although it is not currently
expected that the average maturity of the Fund's portfolio will exceed ten
years.

INVESTMENT POLICIES AND RISKS
SPECIFIC TO MATTHEWS KOREA FUND

Equity securities in which the Fund may invest include South Korean common
stocks, preferred stocks (including convertible preferred stock), bonds, notes
and debentures convertible into common or preferred stocks, warrants and rights,
equity interests in trusts, partnerships, joint ventures or similar enterprises
and depositary receipts. At present, not all of these types of securities are
available for investment in South Korea.

12
<PAGE> 14

Korean government or South Korean companies and obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities. Korean law does not
currently permit foreign investors such as the Fund to acquire debt securities
denominated in Won or equity securities of companies organized under the laws of
Korea that are not listed on the Korea Stock Exchange ("KSE"). At the present
time, however, foreign investors are permitted to invest in debt securities
issued by Korean companies outside of Korea and denominated in currencies other
than Won.

The Fund may invest up to 35% of its total assets in convertible securities.
Convertible securities are fixed-income securities such as corporate bonds,
notes and preferred stocks that can be exchanged for stock and other securities
(such as warrants) that also offer equity participation. Convertible securities
are hybrid securities, combining the investment characteristics of both bonds
and common stocks. Convertible securities are generally senior to common stock
and junior to non-convertible debt.

THE FUND MAY INVEST UP TO 35% OF ITS TOTAL ASSETS IN SECURITIES RATED BELOW
INVESTMENT GRADE (securities rated below Baa by Moody's or below BBB by S&P or,
if unrated, are comparable in quality) commonly referred to as "junk bonds".
Debt securities rated below investment grade may have speculative
characteristics that result in a greater risk of loss of principal or interest.
See "Risks Associated with Lower Rated Securities."

The Fund may invest its assets in a broad spectrum of securities of Korean
industries which are believed to have attractive long-term growth potential. The
Fund has the flexibility to invest in both large and small companies, as deemed
appropriate by the Advisor. Smaller companies often have limited product lines,
markets or financial resources, and they may be dependent upon one or a few key
people for management. The securities of such companies generally are subject to
more abrupt or erratic market movements and may be less liquid than securities
of larger, more established companies or the market averages in general. In
selecting industries and companies for investment, the Advisor considers overall
growth prospects, competitive position in export markets, technology, research
and development, productivity, labor costs, raw material costs and sources,
profit margins, capital resources, government regulation, quality of management
and other factors. After evaluation of all factors, the Advisor attempts to
identify those companies and industries that are best positioned and managed to
take advantage of the varying economic and political factors.

The Fund may invest up to 10% of its total assets in equity or debt securities
for which there is are no ready markets. The Fund may therefore not be able to
readily sell such securities. Such securities are unlike securities that are
traded in the open market and which can be expected to be sold immediately. The
sale price of securities that are not readily marketable may be lower or higher
than the Fund's most recent estimate of their fair value. Generally, less public
information is available with respect to the issuers of these securities than
with respect to companies whose securities are traded on an exchange. Securities
not readily marketable are more likely to be issued by start-up, small or family
business and therefore subject to greater economic, business and market risks
than the listed securities of more well-established companies.

The Advisor intends to be as fully invested in the South Korean economy as is
practicable in light of economic and market conditions and the Fund's cash
needs. During periods in which, in the opinion of the Advisor, changes in Korean
market conditions or other economic conditions in Korean political conditions
warrant, the Fund may reduce its position in equity securities and, subject to
any applicable restrictions under Korean law (which currently limit the amount
of Government and corporate bonds that the Fund may acquire to 10% of the Fund's
net asset value), invest temporarily and without limitation in money market
instruments of U.S. or foreign issuers or maintain a cash position. Such
instruments include but are not limited to the following: obligations issued or
guaranteed by the U.S. or foreign governments, their agencies or
instrumentalities; obligations of international organizations designed or
supported by multiple foreign governmental entities to promote economic
reconstruction or development; bank obligations, including bankers' acceptances,
certificates of deposit, time deposits, and demand deposits. The Fund's
investment objective

13
<PAGE> 15

may not be achieved at such times when a temporary defensive position is taken.

Certain investment practices in which the Fund is authorized to engage, such as
certain currency hedging techniques, the lending of portfolio securities,
forward commitments, standby commitment agreements and the purchase or sale of
put and call options are not currently permitted under Korean laws or
regulations. The Fund may engage in these investment practices to the extent the
practices become permissible under Korean law in the future or with respect to
investments outside of Korea.

The Fund is a "non-diversified" investment company. This means that, with
respect to 50% of its total assets, it may not invest more than 5% of its total
assets in the securities of any one issuer (other than the U.S. government). The
balance of its assets may be invested in as few as two issuers. Thus, up to 25%
of the Fund's total assets may be invested in the securities of any one issuer.
The Fund is also subject to the Korean Securities and Exchange Commission rule
limiting total foreign investment in each class of a company's outstanding
shares. See "RISK FACTORS."

INVESTMENT POLICIES AND RISKS
SPECIFIC TO MATTHEWS DRAGON CENTURY CHINA FUND

Equity securities in which the Fund may invest include common stocks, preferred
stocks, warrants, and securities convertible into common stocks, such as
convertible bonds and debentures. The Fund may hold a significant weighting in
securities listed on either the Shanghai and/or Shenzhen stock exchanges.
Securities listed on these exchanges are divided into two classes, A shares,
which are limited to domestic investors, and B shares, which are allocated for
international investors. The Fund's exposure to securities listed on either the
Shanghai and Shenzhen exchanges will initially be through B shares, until the
regulatory environment eliminates the share class distinction. 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 the majority of their revenues derived
from business conducted in China (regardless of the exchange the security is
listed on or the country the company is based).

The Fund may invest up to 35% of its total assets in equity and other securities
of issuers located outside of the China region, including, without limitation,
the United States, and in non-convertible bonds and other debt securities issued
by foreign issuers and foreign government entities.

Under normal circumstances, the Advisor expects that the portfolio of the Fund
will be comprised of twenty to sixty individual stocks in various countries in
the China region. When purchasing portfolio securities for the Fund, the
Advisor's philosophy is a buy and hold strategy versus buying for short-term
trading.

14
<PAGE> 16

INVESTMENT STRATEGIES AND RISKS
COMMON TO ALL FUNDS

Below are explanations and the associated risks of certain unique securities and
investment techniques. Shareholders should understand that all investments
involve risk and there can be no guarantee against loss resulting from an
investment in the Funds, nor can there be any assurance that the Funds'
investment objectives will be attained.

ADRS AND EDRS
For many foreign securities, there are United States dollar denominated American
Depositary Receipts ("ADRs"), which are bought and sold in the United States and
are issued by domestic banks. ADRs represent the right to receive securities of
foreign issuers deposited in the domestic bank or a correspondent bank. ADRs do
not eliminate all the risk inherent in investing in the securities of foreign
issuers. By investing in ADRs rather than directly in foreign issuer's stock
however, the Funds will avoid currency risks during the settlement period for
either purchases or sales. In general, there is a large, liquid market in the
United States for most ADRs. The Funds may also invest in European Depositary
Receipts ("EDRs") which are receipts evidencing an arrangement with a European
bank similar to that for ADRs and are designed for use in the European
securities markets.

EDRs are not necessarily denominated in the currency of the underlying security.
The Funds have no current intention to invest in unsponsored ADRs and EDRs.

IDRS
IDRs (International Depositary Receipts, also known as GDRs or Global Depositary
Receipts) are similar to ADRs except that they are bearer securities for
investors or traders outside the U.S., and for companies wishing to raise equity
capital in securities markets outside the U.S. Most IDRs have been used to
represent shares although it is possible to use them for bonds, commercial paper
and certificates of deposit. IDRs can be convertible to ADRs in New York making
them particularly useful for arbitrage between the markets. The Funds have no
current intention to invest in unsponsored IDRs.

BORROWING
Each Fund has a fundamental policy that it may not borrow money, except that it
may (1) borrow money from banks for temporary or emergency purposes and not for
leveraging or investment and (2) enter into reverse repurchase agreements for
any purpose, so long as the aggregate amount of borrowings and reverse
repurchase agreements does not exceed one-third of the Fund's total assets less
liabilities (other than borrowings). In the event that such asset coverage shall
at any time fall below 300%, the Fund shall, within three days thereafter (not
including Sunday or holidays) or such longer period as the U.S. Securities and
Exchange Commission may prescribe by rules and regulations, reduce the amount of
its borrowings to such an extent that the asset coverage of such borrowings
shall be at least 300%. Investment securities will not be purchased while a Fund
has an outstanding borrowing that exceeds 5% of the Fund's net assets.

FOREIGN CURRENCY TRANSACTIONS
The Funds may engage in foreign currency transactions in connection with their
investment in foreign securities but will not speculate in foreign currency
exchange. The Funds will conduct their foreign currency exchange transactions
either on a spot (i.e. cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through forward contracts to purchase or sell
foreign currencies. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specified currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
directly between currency traders and their customers.

15
<PAGE> 17

dollar and such foreign currency. This tends to limit potential gains however,
that might result from a positive change in such currency relationships. The
Funds may also hedge their foreign currency exchange rate risk by engaging in
currency financial futures and options transactions.

When the Advisor believes that the currency of a particular foreign country may
suffer a substantial decline against the United States dollar, it may enter into
a forward contract to sell an amount of foreign currency approximating the value
of some or all of the Funds' securities denominated in such foreign currency. In
this situation the Funds may, in the alternative, enter into a forward contract
to sell a different foreign currency for a fixed United States dollar amount
where the Advisor believes that the United States dollar value of the currency
to be sold pursuant to the forward contract will fall whenever there is a
decline in the United States dollar value of the currency in which portfolio
securities of the Funds are denominated ("cross-hedge"). The forecasting of
short-term currency market movement is extremely difficult and whether such a
short-term hedging strategy will be successful is highly uncertain.

The Funds may enter into forward contracts to sell foreign currency with respect
to portfolio positions denominated or quoted in that currency provided that no
more than 15% of the Fund's total assets would be required to purchase
offsetting contracts. Foreign currency hedging transactions by MATTHEWS KOREA
FUND are not currently permitted under Korean laws and regulations.

FORWARD COMMITMENTS, WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS
The Funds may purchase or sell securities on a when-issued or delayed-delivery
basis and make contracts to purchase or sell securities for a fixed price at a
future date beyond customary settlement time. Debt securities are often issued
on this basis. No income will accrue on securities purchased on a when-issued or
delayed delivery basis until the securities are delivered. Each Fund will
establish a segregated account in which it will maintain cash and U.S.
Government securities or other high-grade debt obligations at least equal in
value to commitments for when-issued securities, forward commitments and
delayed-delivery transactions. Securities purchased or sold on a when-issued,
delayed-delivery or forward commitment basis involve a risk of loss if the value
of the security to be purchased declines prior to the settlement date. Although
the Funds would generally purchase securities on a when-issued, delayed-delivery
or a forward commitment basis with the intention of acquiring the securities,
the Funds may dispose of such securities prior to settlement if the Advisor
deems it appropriate to do so.

FUTURES CONTRACTS AND RELATED OPTIONS
The Funds may invest in futures contracts and options on futures contracts,
including index contracts or foreign currencies for hedging purposes or to
maintain liquidity. A Fund may not purchase or sell a futures contract; however,
unless immediately after any such transaction the sum of the aggregate amount of
margin deposits on its existing futures positions and the amount of premiums
paid for related options is 10% or less of its total assets.

At maturity, a futures contract obligates the Funds to take or make delivery of
certain securities or the cash value of a securities index. A Fund may sell a
futures contract in order to offset a decrease in the market value of its
portfolio securities that might otherwise result from a market decline. A Fund
may do so either to hedge the value of its portfolio of securities as a whole,
or to protect against declines, occurring prior to sales of securities, in the
value of the securities to be sold. Conversely, the Funds may purchase a futures
contract in anticipation of purchases of securities. In addition, a Fund may
utilize futures contracts in anticipation of changes in the composition of its
portfolio holdings.

16
<PAGE> 18

futures contracts to hedge against a possible increase in the price of
securities which the Funds intend to purchase. Similarly, if the market is
expected to decline, the Funds might purchase put options or sell call options
on futures contracts rather than sell futures contracts. In connection with the
Funds' position in a futures contract or option thereon, the Funds will create a
segregated account of liquid assets, such as cash, U.S. Government securities or
other liquid high grade debt obligations, or will otherwise cover its position
in accordance with applicable requirements of the SEC.

RISK FACTORS OF OPTIONS, FUTURES AND FORWARD CONTRACTS
The primary risks associated with the use of futures contracts and options
(commonly referred to as "derivatives") are: (i) imperfect correlation between
the change in market value of the securities held by the Funds and the price of
futures contracts and options; (ii) possible lack of a liquid secondary market
for a futures contract and the resulting inability to close a futures contract
when desired; (iii) losses, which are potentially unlimited, due to
unanticipated market movements; and (iv) the Advisor's ability to predict
correctly the direction of security prices, interest rates and other economic
factors. For a further discussion see "INVESTMENT POLICIES AND TECHNIQUES" in
the Statement of Additional Information.

ILLIQUID SECURITIES
MATTHEWS PACIFIC TIGER FUND, MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND and
MATTHEWS DRAGON CENTURY CHINA FUND will not invest more than 15% and MATTHEWS
KOREA FUND will not invest more than 10% of the value of their net assets in
securities that are illiquid because of restrictions on transferability or other
reasons. With respect to liquidity determinations generally, the Company's Board
of Trustees has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A, are liquid or
illiquid. Accordingly, the Board of Trustees is responsible for developing and
establishing the guidelines and procedures for determining the liquidity of Rule
144A securities. Repurchase agreements with deemed maturities in excess of seven
days and securities that are not registered under the Securities Act of 1933 but
that may be purchased by institutional buyers under SEC Rule 144A are subject to
this 15% limit (10% for the MATTHEWS KOREA FUND). Rule 144A allows for a broader
institutional trading market for securities otherwise subject to restriction on
resale to the general public by establishing a "safe harbor" from the
registration requirements of the Securities Act of 1933 for resales of certain
securities to qualified institutional buyers.

OPTIONS
The Funds may purchase and write put and call options on foreign or U.S.
securities and indices and enter into related closing transactions. A call
option enables the purchaser, in return for the premium paid, to purchase
securities from the writer (the seller of the option) of the option at an agreed
price up to an agreed date. The advantage is that the purchaser may hedge
against an increase in the price of securities it ultimately wishes to buy or
may take advantage of a rise in a particular index. A Fund will only purchase
call options to the extent premiums paid on all outstanding call options do not
exceed 10% of that Fund's total assets. The Funds will only write call options
on a covered basis. The Funds will receive premium income from writing call
options, which may offset the cost of purchasing put options and may also
contribute to the Funds' total return. The Funds may lose potential market
appreciation, however, if the Advisor's judgment is incorrect with respect to
interest rates, security prices or the movement of indices.

A put option enables the purchaser of the option, in return for the premium
paid, to sell the security underlying the option to the writer (the seller of
the option) at the exercise price during the option period and the writer of the
option has the obligation to purchase the security from the purchaser of the
option. A Fund will only purchase put options to the extent that the premiums on
all outstanding put options do not exceed 10% of the Fund's total assets.

17
<PAGE> 19

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 20

<TABLE>
<CAPTION>
MATTHEWS INTERNATIONAL FUNDS CLASS I

It only takes a few moments to fill out this step by step application. If you
have any questions, call us at (800) 789-ASIA, from 8:30 A.M. to 5:30 P.M.
Pacific Coast Time or at (800) 892-0382 from 9:00 A.M. to 5:00 P.M. Eastern
Time. Please print your information and send your signed application to Matthews
International Funds, C/O FPS Services, Inc., P.O. Box 61503, 3200 Horizon Drive,
King of Prussia, PA 19406-0903.

1 CHOOSE YOUR INVESTMENTS

There is an initial investment of $1,000.00, $250.00 for a Retirement Plan
account.
<S> <C> <C>
$ Make check payable to the appropriate
[ ] Matthews Pacific ----------------------- Fund. If you have an account in
Tiger Fund -- another Matthews Fund registered under
Class I the same name and tax identification
$ number and would like to use the same
[ ] Matthews Asian Convertible ----------------------- account number below, please indicate
Securities Fund -- the following:
Class I
$
[ ] Matthews Korea Fund -- -----------------------
Class I ---------------- ----------------
$ FUND NAME ACCOUNT #
[ ] Matthews Dragon Century -----------------------
China Fund -- Class I
Total Investment $
-----------------------
2 INVESTMENT METHOD

[ ] BY CHECK: I have enclosed a check for $ [ ] BY WIRE: Federal Funds were wired on
------------- / / for Acct. #
------------- -----------
MO. DAY YR.

4 ACCOUNT REGISTRATION

[ ] INDIVIDUAL OR JOINT ACCOUNT [ ] TRUST
as trustee(s) of
---------------------------------
------------------------------------------------ TRUSTEE(S) NAME
OWNER'S NAME for the benefit of
- - --------------------------------
------------------------------------------------ NAME OF TRUST AGREEMENT
OWNER'S SOCIAL SECURITY NO.
--------------------------------------------------
------------------------------------------------ BENEFICIARY'S NAME
JOINT OWNER'S NAME - - / /
------------------------- -----------------------
- - TAXPAYER ID NUMBER DATE OF TRUST AGREEMENT
------------------------------------------------
JOINT OWNER'S SOCIAL SECURITY NO.

[ ] GIFT OR TRANSFER TO A MINOR [ ] CORPORATION, PARTNERSHIP OR OTHER ENTITY

as custodian for -----------------------------------------------------
-------------------------------- NAME OF CORPORATION OR OTHER ENTITY
CUSTODIAN NAME
-----------------------------------------------------
under the TITLE OF ENTITY
--------------------------------------
MINOR'S NAME - -
-----------------------------------------------------
Uniform Gifts/Transfers to Minors Act TAXPAYER ID NUMBER
----------
STATE
- - / /
----------------------------- ---------------------
MINOR'S SOCIAL SECURITY NO. DATE OF BIRTH

4 ADDRESS 5 DIVIDEND OPTIONS

-------------------------------------- [ ] Reinvest all dividends and capital gains.
STREET OR P.O. BOX
[ ] Pay all dividends and capital gains to me by check.
--------------------------------------
CITY, STATE, ZIP [ ] Pay all dividends by check and reinvest capital gains.

( ) ( ) All distributions will be reinvested unless otherwise indicated.
------------------- ----------------
DAY PHONE EVENING PHONE

CITIZEN OF:
[ ] U.S. [ ] OTHER
------------
PLEASE SPECIFY

</TABLE>

<PAGE> 21

<TABLE>
<CAPTION>
CLASS I
<S> <C>
6 TELEPHONE OPTIONS

You automatically have the ability to exchange, redeem and purchase shares by
telephone unless you check the boxes below. Proceeds of telephone redemption
requests are paid by check and mailed to the address of record or wired to your
bank account. Exchanges must be between identically registered accounts. See the
prospectus for details.

TELEPHONE EXCHANGE [ ] Yes [ ] No be liable for properly acting upon telephone instructions believed to be
genuine. Please attach a voided check on the Transfer account and complete
TELEPHONE PURCHASE [ ] Yes [ ] No below.

TELEPHONE REDEMPTION [ ] Yes [ ] No ----------------------------------------------------------------
NAME OF BANK
I (we) authorize FPS Services to honor
telephone instructions for my (our) -----------------------------------------------------------------
account. Neither the Fund nor FPS CITY STATE
Services will
------------------------------------------------------------------
BANK EXCHANGE NUMBER ACCOUNT NUMBER [ ] CHECKING [ ] SAVINGS

7 SIGNATURE CERTIFICATION

The following is required by Federal tax law to avoid 31% backup withholding:
"By signing below, I certify under penalties of perjury that the social security
or taxpayer identification number entered above is correct (or I am waiting for
a number to be issued to me), and that I have not been notified by the IRS that
I am subject to backup withholding unless I have checked the box." If you have
been notified by the IRS that you are subject to backup withholding, check box [ ].

"THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING."

Receipt of current prospectus is hereby acknowledged.

- -------------------------------------------------------------------------------
SIGNATURE [ ] OWNER [ ] CUSTODIAN [ ] TRUSTEE DATE

- -------------------------------------------------------------------------------
SIGNATURE OF JOINT OWNER (IF APPLICABLE) DATE

8 DEALER INFORMATION

The undersigned ("Dealer") agrees to all applicable provisions in this
application and guarantees the genuineness of the signature on the application.
If the shareholder does not sign this application, the Dealer warrants that this
Application is completed in accordance with the shareholder's instructions and
agrees to indemnify the Fund, the Distributor and FPS Services, Inc. for any
loss or liability from acting or relying upon such instructions.

- ---------------------------- --------------------- ----------------
DEALER NO. BRANCH NO. REP. NO.

- ------------------------------------- ------------------------------------
FIRM NAME REP'S NAME

- -------------------------------------------------------------------------------
FIRM ADDRESS

- ------------------------------------------ ----------------------------------
AUTHORIZED SIGNATURE OF DEALER REP'S SIGNATURE
</TABLE>

<PAGE> 22

<TABLE>
<CAPTION>
MATTHEWS INTERNATIONAL FUNDS AUTOMATIC INVESTMENT PLAN CLASS I
<S> <C>
Please complete this application and mail to: Matthews International Funds, C/O
FPS Services, Inc., P.O. Box 61503, 3200 Horizon Drive, King of Prussia, PA
19406-0903.

Shareholder Services:

This letter serves as your authorization to set up an Automatic Investment Plan
for my Matthews International Funds account.

Please start an automatic investment plan. I would like to invest $ __________
($100 Min.) each month. The money should be debited from my bank account on the
[ ] 10th [ ] 15th [ ] 20th of each month and should be invested in the
following account.

[ ] I am in the process of establishing a new Account. [ ] Matthews Asian Convertible Securities Fund -- Class I

[ ] Matthews Pacific Tiger Fund -- Class A [ ] Matthews Korea Fund -- Class I

[ ] Matthews Dragon Century China Fund -- Class I

Account Number #
-----------------------------------

- ----------------------------------------------- ---------------------------------------------------
Bank Account # Registration of account to be debited

- ----------------------------------------------- ---------------------------------------------------
Name of Bank Street Address

- ------------------------------------- ------------------------------- -------------------------------------
City State Zip Code

Bank's ABA Number (9 digits)
-----------------------------------------------------------------------------------
Signature of Bank
account owner(s)
---------------------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

PLEASE ATTACH A VOIDED CHECK OR DEPOSIT SLIP

I (we) understand that my (our) ACH debit will be dated on the day of each month
indicated above. If that day falls on a day in which the NYSE is not open for
business, the debit will occur on the next available business day. I (we) agree
that if such debit is not honored, FPS Services reserves the right to
discontinue this service and any share purchase made upon such deposit will be
cancelled. I (we) further agree that if the net asset value of shares purchased
is less when said purchase is cancelled than when the purchase was made, FPS
Services, Inc. shall be authorized to liquidate other assets or fractions
thereof held in my (our) account to make up the deficiency. This Automatic
Investment Plan may be discontinued by FPS Services, Inc. upon 30 days written
notice or at any time by the investor by written notice to FPS Services, Inc.
which is received no later than 5 business days prior to the above designated
investment date.

</TABLE>

<PAGE> 23

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 24

premium income from writing put options, although they may be required, when the
put is exercised, to purchase securities at higher prices than the current
market price.

PORTFOLIO TURNOVER RATE
The Advisor buys and sells securities for the Funds whenever it believes it is
appropriate to do so. The rate of portfolio turnover will not be a limiting
factor in making portfolio decisions. A high rate of portfolio turnover may
result in the realization of substantial capital gains and involves
correspondingly greater transaction costs. It is currently estimated that under
normal market conditions the annual portfolio turnover rate for the Funds will
not exceed 100%. Portfolio turnover rates may vary greatly from year to year as
well as within a particular year. High portfolio turnover rates (i.e. over 100%)
will generally result in higher transaction costs to the Funds and also may
result in a higher level of taxable gain for a shareholder. Portfolio turnover
for the existing Funds' most recent fiscal period are set forth in "FINANCIAL
HIGHLIGHTS."

REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements to earn income. The Funds may
only enter into repurchase agreements with financial institutions that are
deemed to be creditworthy by the Advisor, pursuant to guidelines established by
the Funds' Board of Trustees. During the term of any repurchase agreement, the
Advisor will continue to monitor the creditworthiness of the seller. Repurchase
agreements are considered under the 1940 Act to be collateralized loans by the
Funds to the seller secured by the securities transferred to the Funds.
Repurchase agreements under the 1940 Act will be fully collateralized by
securities in which the Funds may invest directly.

Such collateral will be marked-to-market daily. If the seller of the underlying
security under the repurchase agreement should default on its obligation to
repurchase the underlying security, the Funds may experience delay or difficulty
in exercising its right to realize upon the security and, in addition, may incur
a loss if the value of the security should decline, as well as disposition costs
in liquidating the security. A Fund will not invest more than 15% of its net
assets in repurchase agreements maturing in more than seven days. The Funds must
treat each repurchase agreement as a security for tax diversification purposes
and not as cash, a cash equivalent or receivable. MATTHEWS KOREA FUND is not
currently permitted to engage in repurchase transactions in Korea under Korean
laws and regulations.

SECURITIES LENDING
To increase return on portfolio securities, a Fund may lend its portfolio
securities on a short-term basis to banks, broker/dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least the
market value of the securities loaned. A Fund will not lend portfolio securities
in excess of 33% of the value of its total assets. There may be risks of delay
in receiving additional collateral or in recovering the securities loaned or
even a loss of rights in the collateral should the borrower of the securities
fail financially. Loans are made only to borrowers deemed by the Advisor to be
of good standing however, and when, in the Advisor's judgment, the income to be
earned from the loan justifies the attendant risks. Lending portfolio securities
by MATTHEWS KOREA FUND is not currently permitted under Korean laws and
regulations.

SECURITIES OF OTHER INVESTMENT COMPANIES
MATTHEWS PACIFIC TIGER FUND, MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND and
MATTHEWS DRAGON CENTURY CHINA FUND may invest in securities issued by other
investment companies which invest in securities in which the Funds are permitted
to invest. MATTHEWS KOREA FUND may invest in securities issued by other
investment companies which invest a substantial portion of their assets in
Korean securities to the extent permitted by the 1940 Act. Under the 1940 Act, a
Fund may invest up to 10% of its assets in shares of investment companies and up
to 5% of its assets in any one investment company as long as the investment does
not represent more than 3% of the voting stock of the acquired investment
company.

As a shareholder of another investment company, a Fund would bear along with
other shareholders, its pro

18
<PAGE> 25

rata portion of the investment company's expenses, including advisory fees. In
the case of closed-end investment companies, these expenses would be in addition
to the advisory and other expenses that the Funds bear directly in connection
with their own operations.

INVESTMENT STRATEGIES AND RISKS SPECIFIC TO MATTHEWS ASIAN
CONVERTIBLE SECURITIES FUND

INTEREST RATE FUTURES CONTRACTS
MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND may buy and sell interest rate
futures contracts relating to debt securities and write and buy put and call
options relating to interest rate futures contracts. This Fund may enter into
contracts for the future delivery of fixed-income securities commonly referred
to as "interest rate futures contracts." These futures contracts will be used
only as a hedge against anticipated interest rate changes. The Fund will not
enter into an interest rate futures contract if immediately thereafter more than
5% of the value of the Fund's total assets will be committed to margin. The Fund
also will not enter into an interest rate futures contract if immediately
thereafter the sum of the aggregate futures market prices of financial
instruments required to be delivered under open futures contract purchases would
exceed 20% of the value of the Fund's total assets.

REVERSE REPURCHASE AGREEMENTS
In reverse repurchase agreements, the Fund sells a portfolio instrument to
another party, such as a bank or broker-dealer, in return for cash and agrees to
repurchase the instrument at a particular price and time. While a reverse
repurchase agreement is outstanding, the Fund will maintain appropriate liquid
assets in a segregated custodial account, cash, U.S. Government securities or
other liquid, high-grade debt securities in an amount at least equal to the
market value of the securities, plus accrued interest, subject to the agreement.
The Fund will enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by the Advisor. Such transactions
may increase fluctuations in the market value of the Fund's assets and may be
viewed as a form of leverage.

INVESTMENT STRATEGIES AND RISKS
SPECIFIC TO MATTHEWS KOREA FUND

SHORT-SELLING
MATTHEWS KOREA FUND may make short sales, which are transactions in which the
Fund sells a security it does not own in anticipation of a decline in the market
value of that security. The Fund is authorized to make short sales of securities
or maintain a short position provided that at all times when a short sale
position is open the Fund owns an equal amount of such securities of the same
issue as, and equal in amount to, the securities sold short. To complete such a
transaction, the Fund must borrow the security to make delivery to the buyer.
The Fund then is obligated to replace the security borrowed by purchasing it at
the market price at the time of replacement. The price at such time may be more
or less than the price at which the security was sold by the Fund. Until the
security is replaced, the Fund is required to pay the lender any dividends or
interest which accrue during the period of the loan. The proceeds of the short
sale will be retained by the broker, to the extent necessary to meet margin
requirements, until the short position is closed out. No securities will be sold
short if, after effect is given to any such short sale, the total market value
of all securities sold short would exceed 10% of the value of the Fund's net
assets.

RISK FACTORS
COMMON TO ALL FUNDS

RISKS ASSOCIATED WITH LOWER RATED SECURITIES
Securities rated below investment grade are subject to certain risks that may
not be present with higher rated securities. The prices of fixed-income
securities generally increase as interest rates fall and decrease as interest
rates rise. The prices of lower rated securities have been found to be less
sensitive to interest rate changes however, than higher rated investments and
have been more sensitive to broad economic changes, changes in the equity
markets and individual corporate developments. Thus, periods of economic
uncertainty and change can be expected to result in increased volatility in the
prices and yields of lower rated securities and thus in the Funds' net asset
value.

19
<PAGE> 26

Many lower rated securities are not as liquid as higher grade securities of the
same maturity and amount outstanding. A Fund's responsibility to value
accurately and its ability to sell lower rated securities at the value placed on
them by the Fund will be made more difficult to the extent that such securities
are thinly traded or illiquid. During such periods, there may be less reliable
objective information available and the judgment of the Company's Board of
Trustees plays a greater role. Further, adverse publicity about either the
economy or a particular issuer may adversely affect investor's perception of the
value, and thus liquidity, of a lower rated security, whether or not such
perceptions are based on a fundamental analysis.

RISKS ASSOCIATED WITH FOREIGN SECURITIES
Investments by the Funds in the securities of foreign issuers may involve
investment risks different from those of U.S. issuers including possible
political or economic instability of the country of the issuer, the difficulty
of predicting international trade patterns, the possibility of currency exchange
controls, the possible imposition of foreign withholding tax on the interest
income payable on such instruments, the possible establishment of foreign
controls, the possible seizure or nationalization of foreign deposits or assets,
or the adoption of other foreign government restrictions that might adversely
affect the foreign securities held by the Funds. Foreign securities may also be
subject to greater fluctuations in price than securities of domestic
corporations or the U.S. Government. There may be less publicly available
information about a foreign company than about a domestic company. Foreign
companies generally are not subject to uniform accounting, auditing, and
financial reporting standards, practices and requirements comparable to those
applicable to domestic companies. There is generally less government regulation
of stock exchanges, brokers, and listed companies abroad than in the United
States, and the absence of negotiated brokerage commissions in certain countries
may result in higher brokerage fees. With respect to certain foreign countries,
there is a possibility of expropriation, nationalization, confiscatory taxation,
or diplomatic developments that could affect investments in those countries.

In addition, brokerage commissions, custodian services, withholding taxes, and
other costs relating to investment in foreign markets generally are more
expensive than in the United States.

RISKS ASSOCIATED WITH EMERGING MARKETS
Investing in securities of issuers in Asia and the Pacific Basin involves
special risks. First, the Funds' investment focus on that region makes the Funds
particularly subject to political, social, or economic conditions experienced in
that region. Second, many of the countries in Asia and the Pacific Basin
constitute so-called "developing" or "emerging" economies and markets. The risks
of investing in foreign markets generally are greater for investments in
developing markets. Additional risks of investment in such markets include (i)
less social, political, and economic stability; (ii) the smaller size of the
securities markets in such countries and the lower volume of trading, which may
result in a lack of liquidity and in greater price volatility; (iii) certain
national policies which may restrict the Funds' investment opportunities,
including restrictions on investment in issuers or industries deemed sensitive
to national interests, or expropriation or confiscation of assets or property,
which could result in the Funds' loss of its entire investment in that market;
and (iv) less developed legal structures governing private or foreign investment
or allowing for judicial redress for injury to private property. For further
information, see "SPECIAL CONSIDERATIONS AFFECTING THE PACIFIC BASIN" in the
Statement of Additional Information.

20
<PAGE> 27

such currency management may result in increased losses to the Funds. Similarly,
if the Funds decrease their exposure to a currency and the currency's price
rises, the Funds will lose the opportunity to participate in the currency's
appreciation. Some currency prices may be volatile, and there is the possibility
of governmental controls on currency exchange or governmental intervention in
currency markets, which could adversely affect the Funds. Foreign investments
which are not U.S. dollar denominated may require the Funds to convert assets
into foreign currencies or to convert assets and income from foreign currencies
to U.S. dollars. Normally, exchange transactions will be conducted on a spot,
cash or forward basis at the prevailing rate in the foreign exchange market.

RISK FACTORS SPECIFIC TO
MATTHEWS ASIAN CONVERTIBLE
SECURITIES FUND

The Asian convertible bond market has developed largely as a result of the
complementary interests of issuers seeking funding in international capital
markets, and international investors seeking to commit capital in the Pacific
Rim. The proceeds of these securities have typically been used to finance
ongoing business activity (such as expansion of operations) or to retire more
costly debt. Proceeds typically have not been used for corporate restructuring
(such as leveraged buyouts). Despite the fact that many of the issuers are well
known in domestic and, sometimes, international capital markets, most Asian
convertible securities (excluding Japan) are unrated and many would likely be
considered below "investment grade" if they were rated. This lack of an
independent credit opinion constitutes an additional risk.

RISKS ASSOCIATED WITH EUROCONVERTIBLE SECURITIES
Most of the convertible securities in which the Fund will invest are unrated by
any rating agency and, therefore, there is no objective standard against which
the Advisor may evaluate such securities. Investing in a convertible security
denominated in a currency different from that of the security into which it is
convertible exposes the Fund to currency risk.

The theoretical value of convertible securities varies with a number of factors
including the value and volatility of the underlying stock, the level and
volatility of the interest rates, the passage of time, dividend policy, and
other variables. Euroconvertible securities, specifically, are also influenced
by the level and volatility of the foreign exchange rate between the security's
currency and the underlying stock's currency. While the volatility of
convertible fixed-income securities will typically be less than that of the
underlying securities, the volatility of warrants will typically be greater than
that of the underlying securities.

RISKS ASSOCIATED WITH FIXED-INCOME SECURITIES
All fixed-income securities are subject to two types of risks: the credit risk
and the interest rate risk. The credit risk relates to the ability of the issuer
to meet interest or principal payments or both as they come due. The interest
rate risk refers to the fluctuations in the net asset value of any portfolio of
fixed-income securities resulting from the inverse relationship between price
and yield of fixed-income securities; that is, when the general level of
interest rates rises, the prices of outstanding fixed-income securities decline,
and when interest rates fall, prices rise.

In addition, if the currency in which a security is denominated appreciates
against the U.S. dollar, the dollar value of the security will increase.
Conversely, a rise in interest rates or a decline in the exchange rate of the
currency would adversely affect the value of the security expressed in dollars.
Fixed-income securities denominated in currencies other than the U.S. dollar or
in multinational currency units are evaluated on the strength of the particular
currency against the U.S. dollar as well as on the current and expected levels
of interest rates in the country or countries.

RISK FACTORS SPECIFIC TO
MATTHEWS KOREA FUND

Because the Fund intends to invest primarily in equity securities of South
Korean companies, an investor in the Fund should be aware of certain risks
relating to South Korea, the Korean securities markets and international
investments generally which are not typically associated with U.S. domestic
investments. In addi-

21
<PAGE> 28

tion, the Fund may be more volatile than a geographically diverse fund.

SECURITY VALUATION CONSIDERATIONS
The 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 Korean companies, which may
adversely affect the performance of the Fund. Under the current regulations,
foreign investors are allowed to invest in almost all shares listed on the
Korean Stock Exchange (the "KSE"), subject to a 50% limit by a particular
foreign investor and a 50% limit by all foreign investors as a group. The two
50% limitations are reduced for certain government-designated public
corporations with shares listed on the KSE. As a result of these limitations,
many of the securities trade among non-Korean residents at a premium over the
market price. Foreign investors may effect transactions with other foreign
investors off the KSE in the shares of companies that have reached the maximum
aggregate foreign ownership limit through a securities company in Korea. These
transactions typically occur at a premium over prices on the KSE. There can be
no assurance that the Fund, if it purchases such shares at a premium, will be
able to realize such premium on the sale of such shares or that such premium
will not be adversely affected by changes in regulations or otherwise. Such
securities will be valued at fair value as determined in good faith by the Board
of Trustees.

RISKS ASSOCIATED WITH INVESTING IN KOREAN SECURITIES
Investments by the Fund in the securities of Korean issuers may involve
investment risks different from those of U.S. issuers, including possible
political, economic or social instability in Korea, and by changes in Korean law
or regulations. In addition, there is the possibility of the imposition of
currency exchange controls, foreign withholding tax on the interest income
payable on such instruments, foreign controls, seizure or nationalization of
foreign deposits or assets, or the adoption of other foreign government
restrictions that might adversely affect the Korean securities held by the Fund.
Political instability and/or military conflict involving North Korea may
adversely affect the value of the Fund's assets. Foreign securities may also be
subject to greater fluctuations in price than securities of domestic
corporations or the U.S. Government. There may be less publicly available
information about a Korean company than about a domestic company. Brokers in
Korea may not be as well capitalized as those in the U.S., so that they are more
susceptible to financial failure in times of market, political, or economic
stress. Additionally, Korean accounting, auditing and financial reporting
standards and requirements differ, in some cases, significantly, from those
applicable to U.S. issuers. In particular the assets and profits appearing on
the financial statements of a Korean issuer may not reflect its financial
position or results of operations in accordance with U.S. generally accepted
accounting principles. There is a possibility of expropriation, nationalization,
confiscatory taxation, or diplomatic developments that could affect investments
in Korea.

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

22
<PAGE> 29

that the sale of portfolio securities by the Korean Securities Stabilization
Fund (the "Stabilization Fund"), a fund established in order to stabilize the
Korean securities markets, or other large Korean institutional investors, may
adversely impact the market value of securities in the Fund's portfolio: (vii)
the risk that less information with respect to Korean companies may be available
due to the fact that Korean accounting, auditing and financial reporting
standards are not equivalent to those applicable to U.S. companies; and (viii)
heavy concentration of market capitalization and trading volume in a small
number of issuers, which result in potentially fewer investment opportunities
for the Fund.

RISKS ASSOCIATED WITH NORTH KOREA
Following World War II, the Korean peninsula was partitioned. The demilitarized
zone at the boundary between Korea and North Korea was established after the
Korean War of 1950-1953 and is supervised by United Nations forces. The United
States maintains a military force in Korea to help deter the ongoing military
threat from North Korean forces. The situation remains a source of tension
although negotiations to ease tensions and resolve the political division of the
Korean peninsula have been carried on from time to time. There also have been
efforts from time to time to increase economic, cultural and humanitarian
contacts between North Korea and Korea. There can be no assurance that such
negotiations or efforts will continue to occur or will result in an easing of
tension between North Korea and Korea.

Political, economic and social uncertainty in North Korea, and the risk of
military action may adversely affect the prices of the Fund's portfolio
securities. Military action or the risk of military action or the economic
collapse of North Korea could have a material adverse effect on Korea, and
consequently, on the ability of the Fund to achieve its investment objective.
Lack of available information regarding North Korea may be the greatest risk
factor.

RISKS ASSOCIATED WITH THE INFLUENCE OF THE KOREAN GOVERNMENT
The Korean government has historically exercised and continues to exercise
substantial influence over many aspects of the private sector. The Korean
government from time to time has informally influenced the payment of dividends
and the prices of certain products, encouraged companies to invest or to
concentrate in particular industries, induced mergers between companies in
industries suffering from excess capacity and induced private companies to
publicly offer their securities. The Korean government has sought to minimize
excessive price volatility on the KSE through various steps, including the
imposition of limitations on daily price movements of securities.

Investing in securities of South Korean companies and of the government of the
Republic of Korea involves certain considerations not typically associated with
investing in securities of United States companies or the United States
government. Among these are the risks of political, economic and social
uncertainty and instability, including the potential for increasing
militarization in North Korea. Relations between North and South Korea, while
improving, remain tense and the possibility of military action still exists. In
the event that military action were to take place, the value of the Fund's
Korean assets are likely to be adversely affected. The Funds may also be
affected by foreign currency fluctuations or exchange controls, differences in
accounting procedures and other risks. The Funds are also subject to typical
stock and bond market risk. In addition, limitations of foreign ownership
currently exist which may impact the price of a Korean security paid by a Fund.

In the latter part of 1997, Korea experienced a national financial crisis
requiring intervention by the International Monetary Fund and a large infusion
of foreign capital. While the extent of the financial crisis can not be
predicted, it would not be inconceivable if there were significant changes in
the financial services sector and other sectors, including massive wide-spread
restructuring, consolidation and bankruptcy.

23
<PAGE> 30

investment company because a higher percentage of investments among fewer
issuers may result in greater fluctuation in the total market value of the
Fund's portfolio, and economic, political or regulatory developments may have a
greater impact on the value of the Fund's portfolio than would be the case if
the portfolio were diversified among more issuers. The Fund intends to comply
with the diversification and other requirements however, applicable to regulated
investment companies under the Internal Revenue Code of 1986, as amended. See
"Dividends and Taxes."

RISKS SPECIFIC TO
MATTHEWS DRAGON CENTURY
CHINA FUND

Investing in the regional markets of China and Hong Kong involve risks and
considerations not present when investing in more established securities
markets. Investing in regionally concentrated investment funds should be
considered speculative and thus not appropriate for all investors. Prior to
purchasing shares in the Fund, an investor should carefully consider the risks
involved.

China remains a totalitarian society with the risk of nationalization,
expropriation or confiscation of property. The legal system is still in its
infancy making it more difficult to obtain and/or enforce judgments. Further,
the government could at any time alter or discontinue economic reform programs
implemented since 1978. Military conflicts, either in response to internal
social unrest or conflicts with other countries are an ever present
consideration.

In addition to political risk, investments in China are also subject to economic
risk. There is a potential risk of total loss, including interest, capital
appreciation and principal. There is also a greater risk involved in currency
fluctuations, currency convertibility, interest rate fluctuations and higher
rates of inflation. The emergence of a domestic consumer class is still at an
early stage, making China heavily dependent on exports.

China's securities markets have less regulation, are substantially smaller, less
liquid and more volatile then the securities markets of more developed
countries. Financial information on companies listed on these markets is limited
and can be inaccurate. Companies listed on these markets may trade at prices not
consistent with traditional valuation measures. Management of these companies
could have conflicting financial interests or little experience managing a
business.

MANAGEMENT OF THE FUNDS

THE BOARD OF TRUSTEES
The Company has a Board of Trustees that establishes the Funds' policies and
supervises and reviews the management of the Funds. The day-to-day operations of
the Funds are administered by the officers of the Company and by the Advisor
pursuant to the terms of the Investment Advisory Agreement with the Funds. The
Funds' Trustees review the various services provided by the Advisor to ensure
that the Funds' general investment policies and programs are being properly
carried out and that administrative services are being provided to the Funds in
a satisfactory manner. Information pertaining to the Trustees and executive
officers of the Trust is set forth below.

G. PAUL MATTHEWS*, Chairman of the Board of Trustees and President; 655
Montgomery Street, Suite 1438, San Francisco, CA 94111; President, founder and
Chief Investment Officer of Matthews International Capital Management since
1991; prior thereto President, G.T. Capital Holdings, San Francisco parent of
G.T.'s U.S. operations, with responsibility for all G.T.'s U.S. activities from
1988 through 1989; prior thereto, Managing Director, G.T. Management (Asia),
based in Hong Kong, and member of G.T. Group's London board of directors from
1986 through 1989. Retained overall responsibility for all Asian investments of
the group (excluding Japan); worked with G.T. Group in Hong Kong from 1982
through 1988.

JOHN H. DRACOTT*, Trustee and Vice-President and Secretary; 655 Montgomery
Street, Suite 1438, San Francisco, CA 94111; International mutual fund
consultant since 1991; President, Tyndall Distributors from 1988 through 1990;
prior thereto Senior Vice President, Integrated Capital Services from 1983
through 1988.

24
<PAGE> 31

RICHARD K. LYONS, Trustee; Haas School of Business, University of California,
Berkeley, CA; Assistant Professor (Step V), Haas School of Business, University
of California, Berkeley since Fall 1993; Associate Professor, Graduate School of
Business & School of International and Public Affairs, Columbia University, Fall
1991 to Fall 1993; Associate Professor, Graduate School of Business, Columbia
University, Fall 1987 to Fall 1991; Visiting Scholar, Foundation for Advanced
Information and Research (FAIR), Tokyo, Japan, Summer 1989.

ROBERT K. CONNOLLY, Trustee; P.O. Box 94, Sonoma, CA 95476; Retired; Most
recently until August 1990, Institutional Sales Manager and Securities Analyst
for Barrington Research Associates; 32 years in Institutional Sales throughout
the U.S. and Europe; for 20 years acted as an Officer and Senior Officer to New
York Stock Exchange Member Firms; including Spencer Trask & Co., A.G. Becker
Paribas and Wheat First Securities.

DONG WOOK PARK*, Trustee; Director, Portfolio Manager and head of the
International Department, Daewoo Capital Management Co., Ltd., Daewoo Securities
Building, 34-3, Yoido-dong, Yungdungpo-go, Seoul, Korea. Mr. Park has over
twenty years of investing experience and since 1984 has headed the investment
advisory team for a closed-end fund specializing in Korean investments. When the
Korea stock market was opened to foreign investors in 1992, he pioneered in
creating several investment vehicles for foreign investors. Mr. Park has also
launched two international funds which invest in the Pacific Rim and Japan.

DAVID FITZWILLIAM-LAY*, Trustee; 26 Chalfont House, 19 Chesham Street, London,
SWIX 8NG, United Kingdom; Director, USDC Investment Trust PLC and Berry
Starquest PLC; Mr. FitzWilliam-Lay retired in 1993 after three and a half years
as Chairman of G.T. Management PLC, an international investment management
company; prior thereto, Chairman of G.T. Management PLC's principal subsidiary
companies (United States, Japan and Hong Kong) and Group Chief Executive. Mr.
FitzWilliam-Lay joined the G.T. Management Group in 1978 and was involved in
international business development and client services in the United Kingdom,
Europe, South East Asia, Australia, Japan and the United States. He was a member
of the Board of Governors of the National Association of Securities Dealers,
Washington, DC between 1987 and 1990.

NORMAN W. BERRYESSA, Trustee; 100 Bush Street, Suite 1000, San Francisco, CA
94109; Independent Contractor, Emmett Larkin Co., Inc., since 1983; President &
CEO of Gallegoes Institutional Investors Inc. from 1990 to 1994.

*These Trustees are considered "interested persons" of the Funds as defined
under the Act.

The Trustees of the Funds receive fees and expenses for each meeting of the
Board of Trustees they attend. However, no officer or employee of the Advisor
receives any compensation from the Funds for acting as a Trustee of the Funds.
The officers of the Funds receive no compensation directly from the Fund for
performing the duties of their offices.

THE INVESTMENT ADVISOR
The Advisor, which has its offices at 655 Montgomery Street, Suite 1438, San
Francisco, California 94111, serves as the Funds' investment advisor and manager
and is an investment advisor registered under the Investment Advisers Act of
1940, as amended. The Advisor advises private and institutional accounts, which
include both U.S. and non-U.S. investors. The Advisor was founded in 1991 by G.
Paul Matthews to manage international portfolios for North American clients and
to provide U.S. investments for non-U.S. clients. The Advisor specializes in
Asian-Pacific investments and manages assets in a U.S. domiciled partnership,
offshore funds and separate accounts. Total assets under management as of
October 1, 1997 were $70 million. Mr. Matthews may be deemed to be a control
person of the Advisor on the basis of his ownership of stock of the Advisor. The
Advisor recently reorganized its business structure from a corporation to a
limited liability company. In connection with this reorganization, Convergent
Capital Management, Inc. ("Convergent") made an equity investment in the Advisor
and obtained a right of first refusal and an option to purchase additional
interests, the exercise of which could result in a change in control of the

25
<PAGE> 32

Advisor at some time in the future. Any such change in control would be subject
to the prior approval of the holders of at least a majority of the outstanding
shares of the respective Funds. The Advisor does not presently serve as
investment advisor to any other investment companies in the United States.

For providing investment advisory services, the Funds pay the Advisor a monthly
fee calculated daily by applying an annual rate of 1.00% to the Funds' assets.
While the advisory fee paid by the Funds is higher than that paid by most other
investment companies, the fee is comparable to the fees paid by other investment
companies with similar investment objectives and policies.

FEE WAIVERS AND EXPENSE REIMBURSEMENTS
From time to time, the Advisor may voluntarily waive all or a portion of its
management fee and/or absorb certain expenses of the Funds without further
notification of the commencement or termination of any such waiver or
absorption. Any such waiver or absorption will have the effect of lowering the
overall expense ratio for the Funds and increasing the Funds' overall return to
investors at the time any such amounts are waived and/or absorbed.

As of December 31, 1997, the Advisor has voluntarily undertaken to reimburse
Class I shares of MATTHEWS PACIFIC TIGER FUND, MATTHEWS ASIAN CONVERTIBLE
SECURITIES FUND, MATTHEWS KOREA FUND, AND MATTHEWS DRAGON CENTURY CHINA FUND for
operating expenses in excess of 1.90%, 1.90%, 2.50%, and 2.00%, respectively.
Such fee reimbursements may be terminated at the discretion of the Advisor.

When each Fund's net assets are not large enough to support all the various
expenses without exceeding the total expense limitations set forth in the
Prospectus, the Fund is considered to be in reimbursement mode for accounting
purposes. This is when the Advisor is waiving/reimbursing part or all of the
advisory fee and part or all of the operating expenses.

The Advisor may seek future reimbursement of any reduction made to its advisory
fee within the three-year period following such reduction, subject to the Fund's
ability to effect such reimbursement and remain in compliance with applicable
expense limitations. Any such reimbursement will be accounted for on the
financial statements of the Fund as a contingent liability of the Fund and will
appear as a footnote to the Fund's financial statement until such time as it
appears that the Fund will be able to effect such reimbursement. At such time as
it appears probable that the Fund is able to effect such reimbursement, the
amount of reimbursement that the Fund is able to effect will be accrued as an
expense of the Fund for that current period.

DAEWOO CAPITAL MANAGEMENT CO., LTD.
Daewoo Capital Management Co., Ltd. acts as Korean Advisor to the Advisor,
pursuant to a Research and Advisory Agreement with the Advisor. The Korean
Advisor has its main offices at 34-3, Yoido-dong, Yungdungpo-go, Seoul 150-010,
Korea. The Korean Advisor, organized in 1988 under the laws of the Republic of
Korea, is an investment advisor registered under the United States Investment
Advisers Act of 1940. The Korean Advisor is a wholly-owned subsidiary of Daewoo
Securities Co., Ltd., the largest Korean securities firm, and an affiliate of
Daewoo Research Institute. Total assets under management as of December 31, 1997
were in excess of $1.5 billion. Daewoo Securities Co., Ltd. is affiliated with
Daewoo Corporation, a conglomerate headquartered in Seoul, Korea. Daewoo
Corporation and certain affiliates of Daewoo Corporation own approximately 12%
of Daewoo Securities Co., Ltd. Orders for the purchase and sale of securities of
the Fund's portfolio may be placed with Daewoo Securities Co., Ltd., as well as
with other Korean brokers.

26
<PAGE> 33

The Korean Advisor provides an investment program for MATTHEWS KOREA FUND
subject to the supervision of the Advisor in accordance with the objective and
policies of the Fund. The Korean Advisor provides such investment advice,
research and assistance as the Advisor may from time to time request. The Korean
Advisor makes specific investment recommendations, which are then evaluated by
the Advisor's research department and portfolio managers in light of their own
expertise and information from other sources in making investment decisions for
the Fund.

For its services, the Advisor pays the Korean Advisor a monthly fee equal to an
annual rate of 0.50% of the Fund's month-end net assets. For purposes of
computing the monthly fee, the value of the net assets of the Fund is determined
as of the close of business on the last business day of each month. The annual
fee is payable in U.S. dollars.

PORTFOLIO MANAGEMENT
Investment decisions for the Funds are made by a team of portfolio managers at
Matthews International Capital Management, LLC, including G. Paul Matthews and
Mark Headley. Mr. Matthews is responsible for overseeing all investments made by
the Funds.

Mr. Matthews is also General Partner and portfolio manager of the M.I.C.
Asia-Pacific L.P. and responsible for the overall management of the Emerging
Asian Strategies Fund and all other investment portfolios managed by Matthews
International Capital Management, LLC.

Mr. Headley joined Matthews International in April 1995 as Managing Director and
as Senior Analyst on the investment team. He has 9 years of experience in the
Asian Tiger markets. He was a member of the team which managed the first
open-ended Asia ex-Japan fund, the Tyndall Newport Tiger Fund (now the Colonial
Newport Tiger Fund) and was Vice President of Newport Pacific Management. In
1992, Mr. Headley moved to Hong Kong, where he served as a Director of Regent
Fund Management. He returned in 1993 to join Litman/Gregory & Co. as Director of
International Investments.

Both Mr. Headley and Mr. Matthews travel extensively to Asia to conduct research
relating to those markets.

ADMINISTRATION OF THE FUNDS

THE UNDERWRITER
FPS Broker Services, Inc. (the "Underwriter"), 3200 Horizon Drive, P.O. Box
61503, King of Prussia, PA 19406-0903, has been engaged as the Underwriter of
the shares of the Company pursuant to a written agreement. The Underwriter's
duties under the agreement are limited to the facilitation of the registration
of shares of the Company under state securities laws.

THE ADMINISTRATOR, FUND ACCOUNTING AND
PRICING AGENT
FPS Services, Inc. ("FPS"), 3200 Horizon Drive, P.O. Box 61503, King of Prussia,
PA 19406-0903 serves as administrator and provides fund accounting and pricing
services to the Funds pursuant to an Investment Company Services Agreement. The
services FPS provides to the Funds include: the coordination and monitoring of
any third parties furnishing services to the Funds; providing the necessary
office space, equipment and personnel to perform administrative and clerical
functions for the Funds; preparing, filing and distributing proxy materials and
periodic reports to shareholders, registration statements and other documents;
responding to shareholder inquiries and fund accounting and pricing services
(including the daily calculation of the Fund's net asset value). Pursuant to
this agreement, FPS receives a fee at the annual rate of 0.10% on the first $250
million of the average net assets of each Fund, 0.075% on the next $250 million
of average net assets, 0.05% on the average net assets above $500 million, and
0.03% on average net assets in excess of $750 million. Such fee shall not be
less than $100,000 per year for each Fund, subject to certain reductions
provided for in the agreement.

27
<PAGE> 34

legal existence; and fees of industry organizations. General Fund expenses may
include but are not limited to: audit fees; brokerage commissions; registration
of Fund shares with the SEC and notification fees to the various state
securities commissions; fees of the Fund's Custodian, Administrator and Transfer
Agent or other "service providers" including any shareholder servicing agents;
costs of obtaining quotations of portfolio securities; and pricing of Fund
shares.

Class-specific expenses relating to distribution fee payments associated with a
Rule 12b-1 plan for a particular class of shares and any other costs relating to
implementing or amending such plan (including obtaining shareholder approval of
such plan or any amendment thereto), will be borne solely by shareholders of
such class or classes. Other expense allocations which may differ among classes,
or which are determined by the Trustees to be class-specific, may include but
are not limited to: printing and postage expenses related to preparing and
distributing required documents such as shareholder reports, prospectuses, and
proxy statements to current shareholders of a specific class; SEC registration
fees and state "blue sky" fees incurred by a specific class; litigation or other
legal expenses relating to a specific class; Trustee fees or expenses incurred
as a result of issues relating to a specific class; and different transfer
agency and/or shareholder servicing fees attributable to a specific class.

Notwithstanding the foregoing, the Investment Advisor or other service provider
may waive or reimburse the expenses of a specific class or classes to the extent
permitted under Rule 18f-3 under the 1940 Act.

THE CUSTODIAN AND TRANSFER AGENT
The Bank of New York, 90 Washington Street, New York, New York 10286 is the
custodian for the cash and securities of the Funds. FPS serves as the Funds'
transfer agent. As transfer agent, it maintains the records of each
shareholder's account, answers shareholder inquiries concerning accounts,
processes purchases and redemptions of the Funds' shares, acts as dividend and
distribution disbursing agent and performs other shareholder service functions.

PURCHASE OF SHARES

IN GENERAL
Shares of each Fund may be purchased directly from the Funds at the net asset
value next determined after receipt of the order in proper form by an agent of
the Funds. There is no sales load or charge in connection with the purchase of
Class I shares. Each Fund's shares are offered for sale by FPS Broker Services,
Inc., the Funds' Underwriter, 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903, (800) 892-0382; shares can also be purchased through
various brokers who have arrangements with the Company.

The minimum initial investment for each Fund is $1,000. Subsequent investments
for each Fund will be accepted in minimum amounts of $250. The minimum initial
investment for IRAs, 401(k), 403(b)(7) plans and other retirement plans is $250.
Subsequent investments for any retirement plan is $50.

The Funds reserve the right to reject any purchase order and to suspend the
offering of shares of the Funds. The Funds also reserve the right to vary the
initial investment minimum and minimums for additional investments at any time.
In addition, the Advisor may waive the minimum initial investment requirement
for any investor.

Purchase orders for shares of each Fund that are received by FPS or another
designated agent in proper form by the close of regular trading on the New York
Stock Exchange ("NYSE") (currently 4:00 p.m. Eastern time), on any day that the
NYSE is open for trading, will be purchased at the Fund's next determined net
asset value. Orders received after 4:00 p.m. Eastern time will be purchased at
the next-determined net asset value determined the business day following
receipt of the order.

MATTHEWS PACIFIC TIGER FUND, MATTHEWS KOREA FUND and MATTHEWS DRAGON CENTURY
CHINA FUND offer two classes of shares. Only Class I shares are offered under
this Prospectus.

Shares of each Fund may be purchased by mail, by wire, by telephone and through
broker-dealers.

28
<PAGE> 35

PURCHASES BY MAIL
Shares of each Fund may be purchased initially by completing the application
accompanying this Prospectus and mailing it to the transfer agent, together with
a check payable to the respective Fund, c/o 3200 Horizon Drive, P.O. Box 61503,
King of Prussia, PA 19406-0903.

Subsequent investments in an existing account in each Fund may be made at any
time by sending a check payable to the respective Fund c/o FPS Services, Inc.,
P.O. Box 412797, Kansas City, MO 64141-2797. Please enclose the stub of your
account statement and indicate the amount of the investment.

Checks will be accepted if drawn in U.S. currency on a domestic bank. Checks
drawn against a non-U.S. bank may be subject to collection delays and will be
accepted only upon actual receipt of the funds by the transfer agent, FPS. The
Funds will not accept a check endorsed over by a third-party. A charge (minimum
of $20) will be imposed if any check used for the purchase of Fund shares is
returned unpaid. Investors who purchase Fund shares by check or money order may
not receive redemption proceeds until there is reasonable belief that the check
has cleared, which may take up to fifteen calendar days after payment has been
received.

PURCHASES BY WIRE
Investors who wish to purchase shares of each Fund by federal funds wire should
first call the transfer agent at (800) 892-0382 to advise the transfer agent
that you intend to make an investment by wire and to request an account number
if establishing a new account. You must also furnish the respective Fund with
your social security number or other tax identification number. Following
notification to the transfer agent, federal funds and registration instructions
should be wired through the Federal Reserve System to:

UMB BANK KC NA
ABA # 10-10-00695
FOR: FPS SERVICES, INC.
A/C 98-7037-071-9
FBO "MATTHEWS PACIFIC TIGER FUND --
CLASS I SHARES"
"MATTHEWS ASIAN CONVERTIBLE SECURITIES FUND"
"MATTHEWS KOREA FUND -- CLASS I SHARES"
OR
"MATTHEWS DRAGON CENTURY CHINA FUND --
CLASS I SHARES"
"SHAREHOLDER NAME AND ACCOUNT NUMBER"

For initial purchases, the shareholder should complete and mail the application
with signature(s) of registrant(s) to the transfer agent subsequent to the
initial wire. Investors should be aware that banks generally impose a wire
service fee. The Funds will not be responsible for the consequence of delays,
including delays in the banking or Federal Reserve wire systems.

Federal funds wires and other direct purchase orders received by FPS by 4:00
p.m., Eastern time and accompanied by check or wire, are confirmed by that day's
public offering price. Direct purchase orders accompanied by check or wire
received by FPS after 4:00 p.m., Eastern time, are confirmed at the public
offering price determined on the following business day.

PURCHASES THROUGH BROKER-DEALERS
The Funds may accept telephone orders from brokers, financial institutions or
service organizations which have been previously approved by the Funds. It is
the responsibility of such brokers, financial institutions or service
organizations to promptly forward purchase orders and payments for the same to
the respective Fund. Shares of each Fund may be purchased through brokers,
financial institutions, service organizations, banks, and bank trust
departments, each of which may charge the investor a transaction fee or other
fee for its services at the time of purchase. In some cases the Advisor may make
supplemental payments to such financial intermediaries to reduce these fees.
Such payment will be made out of the Advisor's monies and will not be expenses
of the Fund. Such fees would not otherwise be charged if the shares were
purchased

29
<PAGE> 36

directly from the Funds. In addition, the Advisor may make payments out of its
own resources to dealers and other persons who distribute shares of the Funds.

Wire orders for shares of each Fund received by financial intermediaries prior
to 4:00 p.m., Eastern time, are confirmed at that day's public offering price.
Orders received by financial intermediaries after 4:00 p.m., Eastern time, are
confirmed at the public offering price on the following business day.

SUBSEQUENT INVESTMENTS
Once an account has been opened, subsequent purchases may be made by mail, bank
wire, exchange, automatic investing or direct deposit. The minimum for
subsequent investments for each Fund is $250. The minimum for subsequent
investments for all retirement accounts is $50. When making additional
investments by mail, simply return the remittance portion of a previous
confirmation with your investment in the envelope provided with each
confirmation statement. Your check should be made payable to the respective Fund
and mailed to the respective Fund c/o FPS Services, Inc., P.O. Box 412797,
Kansas City, MO 64141-2797. Orders to purchase shares are effective on the day
FPS receives your check or money order.

All investments must be made in U.S. dollars, and, to avoid fees and delays,
checks must be drawn only on banks located in the U.S. A charge (minimum of $20)
will be imposed if any check used for the purchase of shares is returned. The
Funds and FPS each reserve the right to reject any purchase order in whole or in
part.

EXCHANGE OF SHARES

IN GENERAL
Class I shares of any of the Funds may be exchanged for Class I shares of any of
the other Funds within the Company, provided such other shares may be sold
legally in the state of the investor's residence.

Exchanges are subject to the minimum initial investment requirement for the
respective Fund. Requests for telephone exchanges must be received by FPS by the
close of regular trading on the NYSE (currently 4:00 p.m. Eastern time) on any
day that the NYSE is open for regular trading. Shares may be exchanged by: (1)
written request, or (2) telephone, if a special authorization form has been
completed in advance and is on file with the Transfer Agent. A redemption fee
may apply.

The exchange privilege is a convenient way to respond to changes in your
investment goals or in market conditions. This privilege is not designed for
frequent trading in response to short-term market fluctuations. You may make
exchanges by mail or by telephone if you have previously signed a telephone
authorization on the application form. The telephone exchange privilege may be
difficult to implement during times of drastic economic or market changes. The
purchase of shares for any of the Funds through an exchange transaction is
accepted immediately. You should keep in mind that for tax purposes an exchange
is treated as a redemption, which may result in taxable gain or loss, and a new
purchase, each at net asset value of the appropriate Fund. The Funds and FPS
reserve the right to limit, amend, impose charges upon, terminate or otherwise
modify the exchange privilege on 60 days' prior written notice to shareholders.

REDEMPTION OF SHARES
AND REDEMPTION FEE

IN GENERAL
Shareholders may redeem their shares of the Funds on any business day that the
NYSE is open for business. Redemptions will be effective at the net asset value
per share next determined after the receipt by the transfer agent of a
redemption request meeting the requirements described below. Such redemption
proceeds may however, be reduced by the amount of any applicable redemption fee.
See "Redemption Fee" below. The Funds normally send redemption proceeds on the
next business day, but in any event redemption proceeds are sent within seven
calendar days of receipt of a redemption request in proper form. Payment may
also be made by wire directly to any bank previously designated by the
shareholder on a shareholder account application. There is a $9.00 charge for
redemptions made by wire. Please note that the shareholder's bank may also
impose a fee for wire service. There may

30
<PAGE> 37

be fees for redemptions made through brokers, financial institutions and service
organizations.

Except as noted below, redemption requests received in proper form by a
designated agent prior to the close of regular trading hours on the NYSE on any
business day that the Funds calculate their net asset value are effective that
day. Redemption requests received after the close of the NYSE will be effected
at the net asset value per share determined on the next business day following
receipt. No individual shareholder redemption will be processed until the
transfer agent has received a completed application with respect to the account.

Shareholders who hold shares through a financial intermediary such as a broker
should contact that financial intermediary.

The Funds will satisfy redemption requests in cash to the fullest extent
feasible, so long as such payments would not, in the opinion of the Board of
Trustees, result in the necessity of the Funds to sell assets under
disadvantageous conditions or to the detriment of the remaining shareholders of
the Funds.

Pursuant to the Funds' Trust Instrument, payment for shares redeemed may be made
either in cash or in-kind, or partly in cash and partly in-kind. When payments
are made in-kind the securities used for such payment must be readily
marketable. The Funds have elected, pursuant to Rule 18f-1 under the 1940 Act,
however, to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Funds, during any 90 day period for any one
shareholder. Payments in excess of this limit will also be made wholly in cash
unless the Board of Trustees believes that economic conditions exist which would
make such a practice detrimental to the best interests of the Funds. Any
portfolio securities paid or distributed in-kind would be valued as described
under "Net Asset Value." In the event that an in-kind distribution is made, a
shareholder may incur additional expenses, such as the payment of brokerage
commissions, on the sale or other disposition of the securities received from
the Funds. In-kind payments need not constitute a cross-section of the Fund's
portfolio. Where a shareholder has requested redemption of all or a part of the
shareholder's investment, and where the Funds complete such redemption in-kind,
the Funds will not recognize gain or loss for Federal tax purposes, on the
securities used to complete the redemption but the shareholder will recognize
gain or loss equal to the difference between the fair market value of the
securities received and the shareholder's basis in the Fund shares redeemed.

The Funds may suspend the right of redemption or postpone the date of payment
for more than seven days during any period when (1) trading on the NYSE is
restricted or the NYSE is closed, other than customary weekend and holiday
closings; (2) the Securities and Exchange Commission has by order permitted such
suspension; (3) an emergency, as defined by rules of the Securities and Exchange
Commission, exists making disposal of portfolio investments or determination of
the value of the net assets of the Funds not reasonably practicable.

REDEMPTION BY MAIL
Shares may be redeemed by submitting a written request for redemption to FPS,
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903.

A written request must be in good order which means that it must: (i) identify
the shareholder's account name and account number; (ii) state the number of
shares or dollar amount to be redeemed; (iii) be signed by each registered owner
exactly as the shares are registered; and (iv) identify the name of the Fund. To
prevent fraudulent redemptions, a signature guarantee for the signature of each
person in whose name the account is registered is required for any of the
following: (i) on all written redemptions requests over $100,000; (ii) if the
proceeds (any amount) are to be paid to someone other than the registered
owner(s) of the account; or (iii) if the proceeds are to be sent to any address
other than the shareholder's address of record, pre-authorized bank account or
brokerage firm account. Signatures must be guaranteed by an "eligible guarantor
institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934. Eligible guarantor institutions include banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or main-

31
<PAGE> 38

tain net capital of at least $100,000. Notary public endorsement will not be
accepted.

Credit unions must be authorized to issue signature guarantees. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program. A notarized signature will not be
sufficient for the request to be in proper form. The transfer agent may require
additional supporting documents for redemptions made by corporations, executors,
administrators, trustees or guardians and retirement plans.

A redemption request will not be deemed to be properly received until the
transfer agent receives all required documents in proper form. Questions with
respect to the proper form for redemption requests should be directed to the
transfer agent at (800) 892-0382.

REDEMPTION BY TELEPHONE
Shareholders who have so indicated on the application, or have subsequently
arranged in writing to do so, may redeem shares by instructing the transfer
agent by telephone. In order to arrange for redemption by wire or telephone
after an account has been opened, or to change the bank or account designated to
receive redemption proceeds, a written request must be sent to the transfer
agent with a signature guarantee at the address listed under "Redemption by
Mail," above.

The Funds reserve the right to refuse a wire or telephone redemption if it is
believed advisable to do so. Procedures for redeeming Fund shares by wire or
telephone may be modified or terminated at any time.

Shares of the Funds may be redeemed through certain brokers, financial
institutions or service organizations, banks and bank trust departments who may
charge the investor a transaction fee or other fee for their services at the
time of redemption. Such fees would not otherwise be charged if the shares were
purchased from the Funds.

REDEMPTION FEE
With certain exceptions, the Funds may impose a redemption fee of 1.00% on
shares that are redeemed within ninety days of purchase. The charge will be
assessed on an amount equal to the net asset value of the shares at the time of
redemption. If imposed, the redemption fee is deducted from the redemption
proceeds otherwise payable to the shareholder. The redemption fee is returned to
the assets of the Funds.

MINIMUM BALANCES
Due to the relatively high cost of maintaining smaller accounts, the Funds
reserve the right to make involuntary redemptions of shares in any account for
their then current net asset value (which will be promptly paid to the
shareholder) if at any time the total investment does not have a value of at
least $1,000 due to redemptions but not market fluctuations. The shareholder
will be notified that the value of his or her account is less than the required
minimum and will be allowed at least 60 days to bring the value of the account
up to at least $1,000 before the redemption is processed.

TELEPHONE TRANSACTIONS
Shareholders who wish to initiate purchase or redemption transactions by
telephone must first elect the option, as described above. Neither the Funds nor
any of their service contractors will be liable for any loss or expense in
acting upon telephone instructions that are reasonably believed to be genuine.
In this regard, the Funds and their transfer agent require personal
identification information before accepting a telephone redemption. To the
extent that the Funds or their transfer agent fail to use reasonable procedures
to verify the genuineness of telephone instructions, the Funds may be liable for
losses due to fraudulent or unauthorized instructions. Written confirmation will
be provided for all purchase, exchange and redemption transactions initiated by
telephone.

SHAREHOLDER SERVICES

The following special services are available to shareholders. An investor may
change or stop these plans at any time by written notice to the Funds.

32
<PAGE> 39

respective Fund. The minimum subsequent investment pursuant to this plan is $100
per month. The initial account must be opened first with the $1,000 minimum
prior to participating in this plan. Please complete the appropriate section on
the New Account Application enclosed with this Prospectus indicating the amount
of the automatic investment and bank account information.

RETIREMENT PLANS
The Funds are available for investment by pension and profit sharing plans
including Individual Retirement Accounts, 401(k) plans, and 403(b)(7) Retirement
Plans through which investors may purchase Fund shares. For details concerning
any of the retirement plans, please call the Funds at (800) 789-ASIA.

NET ASSET VALUE

The net asset value per share of the Funds is computed once daily as of the
close of regular trading on the NYSE, currently 4:00 p.m. Eastern time.
Currently, the NYSE is closed on the following holidays or days on which the
following holidays are observed: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and
Martin Luther King Day.

The net asset value per share is computed by adding the value of all securities
and other assets in the portfolio, deducting any liabilities, and dividing by
the total number of outstanding shares. Expenses are accrued daily and applied
when determining the net asset value. The Funds' equity securities are valued
based on market quotations or, when no market quotations are available, at fair
value as determined in good faith by or under direction of the Board of
Trustees. Foreign securities are valued as of the close of trading on the
primary exchange on which they trade.

The value is then converted to U.S. dollars using current exchange rates.
Securities listed on any national securities exchange are valued at their last
sale price on the exchange where the securities are principally traded or, if
there has been no sale on that date, at the mean between the last reported bid
and asked prices. Securities traded over-the-counter are priced at the mean of
the last bid and asked prices. Securities are valued through valuations obtained
from a commercial pricing service or at the most recent mean of the bid and
asked prices provided by investment dealers in accordance with procedures
established by the Board of Trustees. Options, futures and options on futures
are valued at the price as determined by the appropriate clearing corporation.

Short-term investments having a maturity of 60 days or less are valued at
amortized cost, which the Board of Trustees believes represents fair value. When
a security is valued at amortized cost, it is valued at its cost when purchased,
and thereafter by assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. All other securities and other assets are valued at
their fair value as determined in good faith under procedures established by and
under the supervision of the Board of Trustees. Foreign currency exchange rates
are generally determined prior to the close of trading on the NYSE.
Occasionally, events affecting the value of foreign investments and such
exchange rates occur between the time at which they are determined and the close
of trading on the NYSE. Such events would not normally be reflected in a
calculation of the Funds' net asset value on that day. If events that materially
affect the value of the Funds' foreign investments or the foreign currency
exchange rates occur during such period, the investments will be valued at their
fair value as determined in good faith by or under the direction of the Board of
Trustees. Foreign securities held by the Funds may be traded on days and at
times when the NYSE is closed. Accordingly, the net asset value of the Funds may
be significantly affected on days when shareholders have no access to the Funds.

For valuation purposes, quotations of foreign portfolio securities, other assets
and liabilities and forward contracts stated in foreign currency are translated
into U.S. dollar equivalents at the prevailing market rates.

DIVIDENDS AND TAXES

DIVIDENDS
MATTHEWS PACIFIC TIGER FUND, MATTHEWS KOREA FUND and MATTHEWS DRAGON CENTURY
CHINA FUND will dis-

33
<PAGE> 40

tribute net investment income annually in December. MATTHEWS ASIAN CONVERTIBLE
SECURITIES FUND will distribute its net investment income semi-annually in June
and December. Any net realized gain from the sale of portfolio securities and
net realized gains from foreign currency transactions are distributed at least
once each year unless they are used to offset losses carried forward from prior
years, in which case no such gain will be distributed. Such income dividends and
capital gain distributions are reinvested automatically in additional shares at
net asset value, unless a shareholder elects to receive them in cash.
Distribution options may be changed at any time by requesting a change in
writing.

Any check in payment of dividends or other distributions which cannot be
delivered by the Post Office or which remains uncashed for a period of more than
one year may be reinvested in the shareholder's account at the then current net
asset value and the dividend option may be changed from cash to reinvest.
Dividends are reinvested on the ex-dividend date (the "ex-date") at the net
asset value determined at the close of business on that date.

Dividends and distributions are treated the same for tax purposes whether
received in cash or reinvested in additional shares. Please note that shares
purchased shortly before the record date for a dividend or distribution may have
the effect of returning capital although such dividends and distributions are
subject to taxes.

Dividends paid by the Fund with respect to Class I shares are calculated in the
same manner and at the same time. Both Class A and Class I shares of the Fund
will share proportionately in the investment income and expenses of the Fund,
except that the per share dividends of Class I shares will differ from the per
share dividend of Class A shares as a result of additional distribution expenses
applicable to Class A shares.

TAXES
Except for the MATTHEWS DRAGON CENTURY CHINA FUND which intends to elect and
qualify as soon as possible, each Fund has elected and intends to continue to
qualify and elect to be treated as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986. Such qualification relieves
the Funds of liability for Federal income taxes to the extent the Funds'
earnings are distributed in accordance with the Code. To so qualify, among other
requirements, each 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.

An investment in the Funds has certain tax consequences, depending on the type
of account. Distributions are subject to Federal income tax and may also be
subject to state and local income taxes. Distributions are generally taxable
when they are paid, whether in cash or by reinvestment in additional shares,
except that distributions declared in October, November or December and paid in
the following January are taxable as if they were paid on December 31. If you
have a qualified retirement account, taxes are generally deferred until
distributions are made from the retirement account.

For Federal income tax purposes, income dividends and short-term capital gain
distributions are taxed as ordinary income. Distributions of net capital gains
(the excess of net long-term capital gain over net short-term capital loss) are
usually taxed as long-term capital gains, regardless of how long a shareholder
has held the Fund's shares. The tax treatment of distributions of ordinary
income or capital gains will be the same whether the shareholder reinvests the
distributions or elects to receive them in cash.

Shareholders may be subject to a 31 percent back-up withholding on reportable
dividend and redemption payments ("back-up withholding") if a certified taxpayer
identification number is not on file with the Funds, or if to the Funds'
knowledge, an incorrect number has been furnished. An individual's taxpayer
identification number is his/her social security number.

34
<PAGE> 41

Shareholders will be advised annually of the source and tax status of all
distributions for Federal income tax purposes. Information accompanying a
shareholder's statement will show the portion of those distributions that are
not taxable in certain states. Further information regarding the tax
consequences of investing in the Funds is included in the Statement of
Additional Information. The above discussion is intended for general information
only. Investors should consult their own tax advisors for more specific
information on the tax consequences of particular types of distributions.

Dividends and interest received by the Funds with respect to foreign securities
may give rise to withholding and other taxes imposed by foreign countries. Tax
consequences between certain countries and the United States may reduce or
eliminate such taxes. In addition, foreign countries generally do not impose
taxes on capital gains with respect to investments by non-resident investors.
MATTHEWS KOREA FUND does not intend to engage in activities that will create a
permanent establishment in Korea within the meaning of the Korea-U.S. Tax
Treaty. Therefore, MATTHEWS KOREA FUND generally will not be subject to any
Korean income taxes other than Korean withholding taxes. Exemptions or
reductions in these taxes apply if the Korea-U.S. Tax Treaty applies to the
Fund. If the treaty provisions are not, or cease to be, applicable to MATTHEWS
KOREA FUND, significant additional withholding taxes would apply.

PERFORMANCE INFORMATION

IN GENERAL
Performance information such as yield or total return for the Funds may be
quoted in advertisements or in communications to shareholders. Such performance
information may be useful in reviewing the performance of the Funds and for
providing a basis for comparison with other investment alternatives. Since net
investment return of the Funds changes in response to fluctuations in market
conditions, interest rates and the Funds' expenses however, any given
performance quotation should not be considered representative of the Funds'
performance for any future period. The value of an investment in the Funds will
fluctuate and an investor's shares, when redeemed, may be worth more or less
than their original cost.

TOTAL RETURN
The Funds' total return is the change in value of an investment in the Funds
over a particular period, assuming that all distributions have been reinvested.
Thus, total return reflects not only income earned, but also variations in share
prices at the beginning and end of the period. Average annual return reflects
the average percentage change per year in the value of an investment in the
Funds. Aggregate total return reflects the total percentage change over the
stated period. Please refer to the Statement of Additional Information for more
information on performance.

YIELD
The current yield will be calculated by dividing the net investment income
earned per share by the Funds during the period stated by the maximum net asset
value per share on the last day of the period and annualizing the result on a
semi-annual compounded basis.

You may obtain current performance information about the Funds by calling the
Funds at (800) 789-ASIA.

GENERAL INFORMATION

ORGANIZATION
Each Fund is a separate series of shares of Matthews International Funds, a
Delaware business trust organized pursuant to a Trust Instrument dated April 8,
1994. The Company is registered under the 1940 Act as an open-end management
investment company, commonly known as a mutual fund. The Trustees of the Company
may establish additional series or classes of shares without the approval of
shareholders. The assets of each series will belong only to that series, and the
liabilities of each series will be borne solely by that series and no other.

TRUSTEES AND OFFICERS
The Trustees of the Company have overall responsibility for the operations of
the Funds. The Statement of Additional Information contains general background

35
<PAGE> 42

information about each Trustee and officer of the Trust. The officers of the
Company who are employees or officers of the Advisor serve without compensation
from the Funds.

DESCRIPTION OF SHARES
Each Fund is authorized to issue an unlimited number of shares of beneficial
interest, 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 (except for
class-specific voting 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.

MULTIPLE CLASSES OF SHARES
Currently, MATTHEWS PACIFIC TIGER FUND, MATTHEWS KOREA FUND and MATTHEWS DRAGON
CENTURY CHINA FUND offer two classes of shares: Class I shares which are offered
by this Prospectus, and Class A shares. The classes offered have different sales
charges and other expenses which may affect performance. Class I shares are
offered by this Prospectus and information about Class A shares, which are
offered to retail investors, may be obtained by calling (800) 789-ASIA. The
validity of shares of beneficial interest offered by this prospectus will be
passed on by Paul, Hastings, Janofsky and Walker LLP, 345 California Street, San
Francisco, CA 94104-2635. All accounts will be maintained in book entry form and
no share certificates will be issued.

VOTING RIGHTS
A shareholder is entitled to one vote for each full share held (and fractional
vote for each fractional share held). All shares of each Fund participate
equally in dividends, distributions, and liquidations with respect to the Funds,
except that Class I shares do not have voting rights with respect to the
Distribution Plan. Shareholders do not have preemptive, conversion or cumulative
voting rights.

SHAREHOLDER MEETINGS
The Trustees of the Company do not intend to hold annual meetings of
shareholders of the Funds. The Trustees have undertaken to the SEC, however,
that they will promptly call a meeting for the purpose of voting upon the
question of removal of any Trustee when requested to do so by holders of not
less than 10% of the outstanding shares of the respective Fund. In addition,
subject to certain conditions, shareholders of each Fund may apply to the Funds
to communicate with other shareholders to request a shareholders' meeting to
vote upon the removal of a Trustee or Trustees.

CERTAIN PROVISIONS OF TRUST INSTRUMENT
Under Delaware law, the shareholders of the Funds will not be personally liable
for the obligations of any Fund; a shareholder is entitled to the same
limitation of personal liability extended to shareholders of corporations.

SHAREHOLDER SERVICING AGENTS
The Funds may enter into Shareholder Servicing Agreements with one or more
unaffiliated Shareholder Servicing Agents. The Shareholder Servicing Agent may,
as agent for its customers, among other things: answer customer inquiries
regarding account history and purchase and redemption procedures; assist
shareholders in designating and changing dividend options, account designations
and addresses; provide necessary personnel and facilities to establish and
maintain shareholder accounts and records; assist in processing purchase and
redemption transactions; arrange for the wiring of funds; transmit and receive
funds with customer orders to purchase or redeem shares; verify and guarantee
shareholder signatures in connection with redemption orders and transfers and
changes in shareholder-designated accounts; furnish monthly and year-end
statements and confirmations of purchases and redemptions; transmit, on behalf
of the Funds, proxy statements, annual reports, updated prospectuses and other
communications to shareholders of the Funds; receive, tabulate and transmit to
the Funds proxies executed by shareholders with respect to meetings of
shareholders of the Funds; and provide such other related services as the Funds
or a shareholder may request. For these services, each Shareholder Servicing
Agent receives fees to cover its out-of-pocket and operating costs to provide
these services, which may be paid periodically, provided that such fees will not

36
<PAGE> 43

exceed, on an annual basis, 0.25% of the average daily net assets of the Funds
represented by shares owned during the period for which payment is made. Each
Shareholder Servicing Agent may, from time to time, voluntarily waive all or a
portion of the fees payable to it.

SHAREHOLDER REPORTS AND INQUIRIES
Shareholders will receive annual financial statements which are examined by the
Funds' independent accountants, as well as unaudited semi-annual financial
statements. Shareholder inquiries should be addressed to the respective Fund c/o
Matthews International Funds, 655 Montgomery Street, Suite 1438, San Francisco,
CA 94111, (800) 789-ASIA.

37
<PAGE> 44

APPENDIX

BOND RATINGS

MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") describes classifications of
corporate bonds as follows:

Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.

Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.

A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.

Baa Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.

Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.

Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B Bonds which are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.

Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.

Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other market
shortcomings.

C Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate and municipal
bond rating system. The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
mid-ranking; and the modifier 3 indicates that the issue ranks in the lower end
of its generic rating category.

38
<PAGE> 45

STANDARD & POOR'S CORPORATION ("S&P") describes classification of corporate and
municipal debt as follows:

AAA Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.

A Debt rated A has a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-
rated categories.

BBB Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than for debt in higher-rated
categories.

Bonds rated AAA, AA, A and BBB are considered investment grade bonds.

BB Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payment.

B Debt rated B has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity
or willingness to pay interest and repay principal.

CCC Debt rated CCC has a current identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions
to meet timely payments of interest and repayments of principal. In the
event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal.

CC The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.

C The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC -- debt rating.

CI The rating CI is reserved for income bonds on which no interest is being
paid.

D Debt rated D is in default. The D rating is assigned on the day an
interest or principal payment is missed.

NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a
particular type of obligation as a matter of policy.

39
<PAGE> 46

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 47

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 48

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 49

BOARD OF TRUSTEES
G. Paul Matthews
John H. Dracott
Richard K. Lyons
Robert K. Connolly
Dong Wook Park
David FitzWilliam-Lay
Norman W. Berryessa

OFFICERS
G. Paul Matthews
John H. Dracott
Brian Stableford

INVESTMENT ADVISOR
Matthews International Capital Management, LLC
655 Montgomery Street, Suite 1438
San Francisco, CA 94111
(800) 789-ASIA

KOREAN ADVISOR
Daewoo Capital Management Co., Ltd.
34-3, Yoido-dong, Yungdungpo-go
Seoul, 150-010 Korea

UNDERWRITER
FPS Broker Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
(800) 892-0382

SHAREHOLDER SERVICES
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
(800) 892-0382

CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286

LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, CA 94104-2635

AUDITORS
Ernst & Young LLP
555 California Street, Suite 1700
San Francisco, CA 94104

For Additional Information about the
Matthews International Funds call:
(800) 789-ASIA

Logo

MATTHEWS PACIFIC
TIGER FUND

MATTHEWS ASIAN CONVERTIBLE
SECURITIES FUND

MATTHEWS KOREA FUND

MATTHEWS DRAGON
CENTURY CHINA FUND

CLASS I SHARES

PROSPECTUS

December 31, 1997

---------------------------------------------------------
MATTHEWS INTERNATIONAL FUNDS
---------------------------------------------------------
<PAGE> 50

MATTHEWS INTERNATIONAL FUNDS
655 MONTGOMERY STREET, SUITE 1438
SAN FRANCISCO, CA 94111

MATTHEWS PACIFIC TIGER FUND
MATTHEWS KOREA FUND
MATTHEWS DRAGON CENTURY CHINA FUND

CLASS A SHARES

PROSPECTUS DECEMBER 31, 1997
- --------------------------------------------------------------------------------

Matthews International Funds (the "Company") is an open-end investment
management company which currently consists of four separate investment series
(each a "Fund" and collectively, the "Funds") designed to offer investors a
variety of investment opportunities. Each series has distinct investment
objectives and policies. This Prospectus pertains only to Class A shares of
MATTHEWS PACIFIC TIGER FUND, MATTHEWS KOREA FUND and MATTHEWS DRAGON CENTURY
CHINA FUND and is intended to aid investors in understanding the similarities
and differences among the Funds.

Class A shares of each Fund may be purchased directly from the Funds, but those
in amounts less than $1,000,000 are subject to sales charges. In addition, the
Advisor and other institutions may charge their customers a fee for services
provided in connection with their investments.

A REDEMPTION FEE OF 1% WILL BE IMPOSED ON REDEMPTIONS FROM ORIGINAL PURCHASES OF
$1,000,000 OR MORE WHICH ARE THEN REDEEMED WITHIN NINETY DAYS OF PURCHASE, THE
PROCEEDS OF WHICH WILL BE RETAINED BY THE FUNDS.

The Funds' principal Underwriter is FPS Broker Services, Inc., 3200 Horizon
Drive, P.O. Box 61503, King of Prussia, PA 19406-0903.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUMMARY........................................................................... 3
EXPENSE INFORMATION.......................................................................... 4
FINANCIAL HIGHLIGHTS......................................................................... 7
INVESTMENT OBJECTIVES
Matthews Pacific Tiger Fund............................................................. 8
Matthews Korea Fund..................................................................... 8
Matthews Dragon Century China Fund...................................................... 9
INVESTMENT POLICIES AND RISKS
Common to all Funds..................................................................... 9
Specific to Matthews Pacific Tiger Fund................................................. 10
Specific to Matthews Korea Fund......................................................... 11
Specific to Matthews Dragon Century China Fund.......................................... 13
INVESTMENT STRATEGIES AND RISKS
Common to all Funds..................................................................... 13
Specific to Matthews Korea Fund......................................................... 17
RISK FACTORS
Common to all Funds..................................................................... 18
Specific to Matthews Korea Fund......................................................... 19
Specific to Matthews Dragon Century China Fund.......................................... 21
MANAGEMENT OF THE FUNDS...................................................................... 22
ADMINISTRATION OF THE FUNDS.................................................................. 25
THE DISTRIBUTION PLAN........................................................................ 26
PURCHASE OF SHARES........................................................................... 26
EXCHANGE OF SHARES........................................................................... 29
REDEMPTION OF SHARES and REDEMPTION FEE...................................................... 29
SHAREHOLDER SERVICES......................................................................... 31
NET ASSET VALUE.............................................................................. 32
DIVIDENDS AND TAXES.......................................................................... 32
PERFORMANCE INFORMATION...................................................................... 34
GENERAL INFORMATION.......................................................................... 34

APPENDIX
DEBT RATINGS................................................................................. 36
</TABLE>

2
<PAGE> 52

PROSPECTUS SUMMARY

THE COMPANY
Matthews International Funds (the "Company") is an open-end investment
management company organized as a business trust under the laws of the state of
Delaware. The Company is organized to offer separate series of shares and is
currently comprised of four separate series of shares, although this Prospectus
pertains only to Class A shares of MATTHEWS PACIFIC TIGER FUND, MATTHEWS KOREA
FUND AND MATTHEWS DRAGON CENTURY CHINA FUND. Additional series of the Company
may be established from time to time at the discretion of the Board of Trustees
of the Company.

INVESTMENT MANAGEMENT, UNDERWRITER AND SERVICING AGENTS
Matthews International Capital Management, LLC (the "Advisor"), 655 Montgomery
Street, Suite 1438, San Francisco, California 94111, a limited liability company
and registered investment advisor, is the investment advisor for the Funds. The
Advisor manages the investments of each Fund according to its investment
objectives. As of October 1, 1997, the Advisor had approximately $70 million
under management or committed to management in various fiduciary or advisory
capacities, primarily from private and institutional accounts. Daewoo Capital
Management Co., Ltd., (the "Korean Advisor"), 34-3, Yoido-dong, Yungdungpo-gu,
Seoul 150-010, Korea, is registered under the U.S. Investment Advisers Act of
1940 and acts as Korean Advisor to MATTHEWS KOREA FUND. The Korean Advisor is a
subsidiary of Daewoo Securities Co., Ltd., the largest Korean securities firm
and an affiliate of Daewoo Research Institute. The Advisor is responsible for
the fees of the Korean Advisor under the terms of a separate agreement. See
"MANAGEMENT OF THE FUNDS." FPS Broker Services, Inc., 3200 Horizon Drive, P.O.
Box 61503, King of Prussia, PA 19406-0903 serves as the Funds' underwriter. The
Bank of New York, 90 Washington Street, New York, New York 10286 serves as the
custodian of the Funds' assets. FPS Services, Inc., 3200 Horizon Drive, P.O. Box
61503, King of Prussia, PA 19406-0903 serves as the Funds' administrator,
transfer agent and fund accounting agent.

3
<PAGE> 53

PURCHASE OF SHARES
The minimum initial investment for each Fund is $1,000 for all accounts.
Subsequent investments will be accepted in minimum amounts of $250 for all
accounts. Purchases of Class A Shares are subject to a maximum sales charge of
4.95% and are subject to annual 12b-1 Plan expenses. The public offering price
for shares of each Fund is the net asset value per share next determined,
subject to any applicable sales charge, after receipt of a purchase order at the
transfer agent in proper form with accompanying check or bank wire arrangements.
See "PURCHASE OF SHARES."

SALES AT NET ASSET VALUE
The Funds reserve the right to sell Class A shares at net asset value (i.e.,
without the usual initial sales charge) to certain categories of investors,
including but not limited to, investment advisory clients of the Advisor, its
affiliates and specific broker-dealers pursuant to prior arrangements with the
Distributor.

REDEMPTION OF SHARES
Shares of the Funds may be redeemed at the net asset value per share next
determined after receipt by the transfer agent of a redemption request in proper
form. IF ANY SHARES OF A FUND ARE REDEEMED WITHIN NINETY DAYS OF AN ORIGINAL
PURCHASE OF $1,000,000 OR MORE (AND HENCE NO SALES CHARGE WAS APPLIED TO SUCH
PURCHASE), THE PROCEEDS OF THAT REDEMPTION WILL BE SUBJECT TO A REDEMPTION FEE
OF 1.00%, THE PROCEEDS OF WHICH WILL BE RETAINED BY THE FUND FROM WHICH THE
SHARES ARE REDEEMED. Signature guarantees may be required for certain redemption
requests. See "Redemption Fee" under "REDEMPTION OF SHARES."

DIVIDENDS
Each Fund intends to distribute substantially all of its net investment income
and net realized capital gains, if any, to shareholders. Distributions of net
capital gains, if any, will be made annually. All distributions are reinvested
at net asset value, in additional full and fractional shares of each Fund unless
the shareholder notifies the transfer agent in writing requesting payments in
cash. MATTHEWS PACIFIC TIGER FUND, MATTHEWS KOREA FUND AND MATTHEWS DRAGON
CENTURY CHINA FUND intend to declare and pay dividends annually. See "DIVIDENDS
AND TAXES."

EXPENSE INFORMATION

SHAREHOLDER TRANSACTION EXPENSES FOR EACH FUND:

<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)... 4.95%
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price)................................ 0.00%
Contingent Deferred Sales Charge (as a
percentage of original purchase
price)................................ 0.00%
REDEMPTION FEE (as a percentage of
amount redeemed)...................... 1.00%*
</TABLE>

* The Redemption Fee of 1.00% applies only to those shares redeemed within
ninety days of purchase from an original purchase of $1,000,000 or more and on
which no sales charge was imposed. See "Redemption Fee" under the heading
"REDEMPTION OF SHARES."

4
<PAGE> 54

- --------------------------------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES
as a Percentage of Average Net Assets:

<TABLE>
<CAPTION>
ESTIMATED
OTHER
EXPENSES
AFTER NET EXPENSE RATIO
MANAGEMENT 12b-1 EXPENSE AFTER EXPENSE
FUND(1)(2) FEES EXPENSES REIMBURSEMENT REIMBURSEMENT(3)
- ---------------------------------- --------------- ----------- ---------------- ------------------
<S> <C> <C> <C> <C>
MATTHEWS PACIFIC TIGER
FUND-CLASS A(4)................. 1.00% .25% 0.90% 2.15%
MATTHEWS KOREA FUND-CLASS A....... 1.00% .25% 1.50% 2.75%
MATTHEWS DRAGON CENTURY CHINA
FUND-CLASS A................. 1.00% .25% 1.00% 2.25%
</TABLE>

- --------------------------------------------------------------------------------

(1) For each Fund other than MATTHEWS DRAGON CENTURY CHINA FUND, the ratios set
forth above reflect the Advisor's voluntary advisory fee waivers and/or
expense reimbursements, which have been estimated based upon the net expense
limitations to be in effect during the initial period of operations for this
new Class. For the MATTHEWS DRAGON CENTURY CHINA FUND, the ratios set forth
above reflect the anticipated voluntary advisory fee waivers and/or expense
reimbursements by the Advisor.

(3) Although not required to do so, Advisor has agreed to limit the annual
operating expenses of the MATTHEWS PACIFIC TIGER FUND to 2.15%, MATTHEWS
KOREA FUND to 2.75% and MATTHEWS DRAGON CENTURY CHINA FUND to 2.25% of each
Fund's respective net assets. Absent fee waivers and/or expense
reimbursements, MATTHEWS PACIFIC TIGER FUND'S advisory fee, 12b-1 expenses,
estimated other expenses, and net expense ratio would be 1.00%, 0.25%,
1.07%, and 2.32%, respectively. MATTHEWS KOREA FUND'S advisory fee, 12b-1
expenses, estimated other expenses, and net expense ratio would be 1.00%,
0.25%, 1.90%, and 3.15%, respectively. MATTHEWS DRAGON CENTURY CHINA FUND'S
advisory fee, 12b-1 expenses, estimated other expenses, and net expense
ratio would be 1.00%, 0.25%, 3.35%, and 4.60%, respectively.

(4) The Advisor reserves the right to impose a service fee (subject to Board of
Trustees' approval) of up to 0.10% annually of the average net assets of the
Class A shares of the MATTHEWS PACIFIC TIGER FUND. If such fee is imposed,
the Net Expenses Ratio after Expense Reimbursement for the Class A shares of
the MATTHEWS PACIFIC TIGER FUND will increase to 2.25%. Shareholders will be
notified in advance of any such changes.

In subsequent years, overall operating expenses for each Fund may not fall below
the applicable percentage limitation until the Advisor has been fully reimbursed
for fees foregone or expenses it paid under the Advisory Agreement. Each will
reimburse the Advisor in the three following years if operating expenses (before
reimbursement) are less than the applicable percentage limitation charged to the
Fund.

5
<PAGE> 55

- --------------------------------------------------------------------------------

EXAMPLE

<TABLE>
<CAPTION>
NAME OF FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
MATTHEWS PACIFIC TIGER FUND-CLASS A................... $70 $113 $159 $285
MATTHEWS KOREA FUND-CLASS A........................... $76 $131 $188 $342
MATTHEWS DRAGON CENTURY CHINA FUND-CLASS A............ $71 $116 $164 $295
</TABLE>

- --------------------------------------------------------------------------------

6
<PAGE> 56

FINANCIAL HIGHLIGHTS

MATTHEWS PACIFIC TIGER FUND
MATTHEWS KOREA FUND

The following financial highlights for MATTHEWS PACIFIC TIGER FUND and MATTHEWS
KOREA FUND relate to another class of shares of the Funds not subject to the
Class A Rule 12b-1 fee because Class A shares were not offered during those
periods. The financial highlights are a part of the Funds' financial statements
which have been audited by Ernst & Young LLP, independent auditors, for the most
recent fiscal year. The following tables should be read in conjunction with
these financial statements and related notes which appear in the 1997 Annual
Report to Shareholders.

<TABLE>
<CAPTION>
MATTHEWS PACIFIC MATTHEWS KOREA
TIGER FUND FUND
------------------------------------ ------------------------------------
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1997 1996 1995* 1997 1996 1995**
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period............ $ 10.81 $ 9.77 $ 10.00 $ 7.23 $ 9.13 $ 10.00
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)................... 0.02 0.01 0.02 (0.04)*** (0.07) 0.08***
Net realized and unrealized gain (loss) on
investments and foreign currency.............. 0.50 1.03 (0.23) (1.00)*** (1.75) (0.95)***
------- ------- ------- ------- ------- -------
Total from investment operations............. 0.52 1.04 (0.21) (1.04) (1.82) (0.87)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net investment income.......................... (0.01) 0.00 (0.02) 0.00 0.00 0.00
Net realized gains on investments.............. (0.02) 0.00 0.00 0.00 (0.08) 0.00
------- ------- ------- ------- ------- -------
Total distributions.......................... (0.03) 0.00 (0.02) 0.00 (0.08) 0.00
------- ------- ------- ------- ------- -------
Net Asset Value, end of period.................. $ 11.30 $ 10.81 $ 9.77 $ 6.19 $ 7.23 $ 9.13
======= ======= ======= ======= ======= =======
TOTAL RETURN.................................... 4.75% 10.64% (2.07%)++ (14.38%) (20.11%) (8.70%)++
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)........... $ 43,647 $ 17,148 $ 1,082 $ 19,356 $ 2,721 $ 504
Ratio of expenses to average net assets before
reimbursement and waiver of expenses by
Advisor and Administrator..................... 1.97% 4.35% 25.95%+ 2.90% 11.36% 42.87%+
Ratio of expenses to average net assets after
reimbursement and waiver of expenses by
Advisor and Administrator..................... 1.90% 1.90% 2.17%+ 2.50% 2.23% 0.24%+
Ratio of net investment income (loss) to
average net assets before reimbursement and
waiver of expenses by Advisor and
Administrator................................. 0.20% (2.13%) (23.41%)+ (1.81%) (10.44%) (41.79%)+
Ratio of net investment income (loss) to
average net assets after reimbursement and
waiver of expenses by Advisor and
Administrator................................. 0.27% 0.32% 0.36%+ (1.41%) (1.31%) 0.84%+
Portfolio turnover............................. 70.73% 124.69% 92.53% 112.68% 139.71% 42.16%
Average commission rate paid................... $ 0.0065 $ 0.0064 N/A $ 0.0911 $ 0.1397 N/A
+ Annualized.
++ Not Annualized.
* The Funds commenced operations on September 13, 1994.
** The Fund commenced operations on January 3, 1995.
*** Calculated using the average shares method.
</TABLE>

7
<PAGE> 57

INVESTMENT OBJECTIVES

8
<PAGE> 58

planned development of an export-oriented economy in a vigorously
entrepreneurial society.

INVESTMENT POLICIES AND RISKS
COMMON TO ALL FUNDS

Many of the debt and convertible securities in which the Funds will invest are
unrated by any rating agency and, therefore, there is no objective standard
against which the Advisor may evaluate such securities. The Advisor seeks to
minimize the risks of investing in lower-rated securities through investment
analysis and attention to current developments in interest rates and economic
conditions. In selecting debt and convertible securities for the Funds, the
Advisor will assess the following factors: 1) potential for capital
appreciation; 2) price of security relative to price of underlying stock, if a
convertible security; 3) yield of security relative to yield of other
fixed-income securities; 4) interest or dividend income; 5) call and/or put
features; 6) creditworthiness; 7) price of security relative to price of other
comparable securities; 8) size of issue;

9
<PAGE> 59

9) currency of issue; and 10) impact of security on diversification of the
portfolios.

The Advisor intends to be fully invested in the economies appropriate to each
Funds' investment objectives as is practicable, in light of economic and market
conditions and the Funds' cash needs. When, in the opinion of the Advisor, a
temporary defensive position is warranted, the Funds are permitted to invest
temporarily and without limitation in money market instruments of U.S. or
foreign issuers or maintain a cash position. Such instruments include but are
not limited to the following: obligations issued or guaranteed by the U.S. or
foreign governments, their agencies or instrumentalities; obligations of
international organizations designed or supported by multiple foreign
governmental entities to promote economic reconstruction or development; bank
obligations, including bankers' acceptances, certificates of deposit, time
deposits, and demand deposits. The Funds' investment objective may not be
achieved at such times when a temporary defensive position is taken. Foreign
investments which are not U.S. dollar denominated may require the Funds to
convert assets into foreign currencies or to convert assets and income from
foreign currencies to U.S. dollars. Normally, exchange transactions will be
conducted on a spot or cash basis at the prevailing rate in the foreign exchange
market.

INVESTMENT POLICIES
AND RISKS SPECIFIC TO
MATTHEWS PACIFIC TIGER FUND

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

10
<PAGE> 60

INVESTMENT POLICIES AND RISKS
SPECIFIC TO MATTHEWS KOREA FUND

The Fund may invest up to 35% of its total assets in non-convertible debt
securities provided that such securities are rated, at the time of investment,
BBB or higher by Standard & Poor's Corporation ("S&P") or Baa or higher by
Moody's Investors Service, Inc. ("Moody's") or rated of equivalent credit
quality by an internationally recognized statistical rating organization or, if
not rated, are of equivalent credit quality as determined by the Advisor.
Securities rated BBB by S&P or Baa by Moody's are considered to have speculative
characteristics. Nonconvertible debt securities in which the Fund may invest
include U.S. dollar or Won-denominated debt securities issued by the South
Korean government or South Korean companies and obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities. Korean law does not
currently permit foreign investors such as the Fund to acquire debt securities
denominated in Won or equity securities of companies organized under the laws of
Korea that are not listed on the Korea Stock Exchange ("KSE"). At the present
time, however, foreign investors are permitted to invest in debt securities
issued by Korean companies outside of Korea and denominated in currencies other
than Won.

11
<PAGE> 61

The Fund may invest up to 10% of its total assets in equity or debt securities
for which there are no ready markets. The Fund may therefore not be able to
readily sell such securities. Such securities are unlike securities that are
traded in the open market and which can be expected to be sold immediately. The
sale price of securities that are not readily marketable may be lower or higher
than the Fund's most recent estimate of their fair value. Generally, less public
information is available with respect to the issuers of these securities than
with respect to companies whose securities are traded on an exchange. Securities
not readily marketable are more likely to be issued by start-up, small or family
business and therefore subject to greater economic, business and market risks
than the listed securities of more well-established companies.

12
<PAGE> 62

standing shares, while a single foreign investor may only invest up to 6% of
each class of outstanding shares. See "RISK FACTORS."

INVESTMENT POLICIES AND RISKS
SPECIFIC TO MATTHEWS DRAGON
CENTURY CHINA FUND

Equity securities in which the Fund may invest include common stocks, preferred
stocks, warrants, and securities convertible into common stocks, such as
convertible bonds and debentures. The Fund may hold a significant weighting in
securities listed on either the Shanghai and/or Shenzhen stock exchanges.
Securities listed on these exchanges are divided into two classes, A shares,
which are limited to domestic investors, and B shares, which are allocated for
international investors. The Fund's exposure to securities listed on either the
Shanghai and Shenzhen exchanges will initially be through B shares, until the
regulatory environment eliminates the share class distinction. 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 the majority of their revenues derived
form business conducted in China (regardless of the exchange the security is
listed on or the country the company is based).

INVESTMENT STRATEGIES AND RISKS COMMON TO ALL FUNDS

13
<PAGE> 63

United States for most ADRs. The Funds may also invest in European Depositary
Receipts ("EDRs") which are receipts evidencing an arrangement with a European
bank similar to that for ADRs and are designed for use in the European
securities markets.

EDRs are not necessarily denominated in the currency of the underlying security.
The Funds have no current intention to invest in unsponsored ADRs and EDRs.

When a Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the United States
dollar cost or proceeds, as the case may be. By entering into a forward contract
in United States dollars for the purchase or sale of the amount of foreign
currency involved in an underlying security transaction, a Fund is able to
protect itself against a possible loss between trade and settlement dates
resulting from an adverse change in the relationship between the United States
dollar and such foreign currency. This tends to limit potential gains however,
that might result from a positive change in such currency relationships. The
Funds may also hedge their foreign currency exchange rate risk by engaging in
currency financial futures and options transactions.

14
<PAGE> 64

The Funds may purchase and sell call and put options on futures contracts traded
on an exchange or board of trade. When a Fund purchases an option on a futures
contract, it has the right to assume a position as a purchaser or seller of a
futures contract at a specified exercise price at any time during the option
period. When a Fund sells an option on a futures contract, it becomes obligated
to purchase or sell a futures contract if the option is exercised. In
anticipation of a market advance, the Funds may purchase call options on futures
contracts as a substitute for the purchase of futures contracts to hedge against
a possible increase in the price of securities which the Funds intend to
purchase. Similarly, if the market is expected to decline, the Funds might
purchase put options or sell call options on futures contracts rather than sell
futures contracts. In connection with the Funds' position in a futures contract
or option thereon, the Funds will create a segregated account of liquid assets,
such as cash, U.S. Government securities or other liquid high grade debt
obligations, or will otherwise cover its position in accordance with applicable
requirements of the SEC.

15
<PAGE> 65

and other economic factors. For a further discussion see "INVESTMENT POLICIES
AND TECHNIQUES" in the Statement of Additional Information.

ILLIQUID SECURITIES
MATTHEWS PACIFIC TIGER FUND and MATTHEWS DRAGON CENTURY CHINA FUND will not
knowingly invest more than 15% and MATTHEWS KOREA FUND will not knowingly invest
more than 10% of the value of their net assets in securities that are illiquid
because of restrictions on transferability or other reasons. With respect to
liquidity determinations generally, the Company's Board of Trustees has the
ultimate responsibility for determining whether specific securities, including
restricted securities pursuant to Rule 144A, are liquid or illiquid.
Accordingly, the Board of Trustees is responsible for developing and
establishing the guidelines and procedures for determining the liquidity of Rule
144A securities. Repurchase agreements with deemed maturities in excess of seven
days and securities that are not registered under the Securities Act of 1933 but
that may be purchased by institutional buyers under SEC Rule 144A are subject to
this 15% limit (10% for the MATTHEWS KOREA FUND). Rule 144A allows for a broader
institutional trading market for securities otherwise subject to restriction on
resale to the general public by establishing a "safe harbor" from the
registration requirements of the Securities Act of 1933 for resales of certain
securities to qualified institutional buyers.

The advantage is that the purchaser can be protected should the market value of
the security decline or should a particular index decline. The Funds will, at
all times during which they hold a put option, own the security underlying such
option. The Funds will receive premium income from writing put options, although
they may be required, when the put is exercised, to purchase securities at
higher prices than the current market price.

16
<PAGE> 66

SECURITIES OF OTHER INVESTMENT COMPANIES
MATTHEWS PACIFIC TIGER FUND and MATTHEWS DRAGON CENTURY CHINA FUND may invest in
securities issued by other investment companies which invest in securities in
which the Funds are permitted to invest. MATTHEWS KOREA FUND may invest in
securities issued by other investment companies which invest a substantial
portion of their assets in Korean securities to the extent permitted by the 1940
Act. Under the 1940 Act, a Fund may invest up to 10% of its assets in shares of
investment companies and up to 5% of its assets in any one investment company as
long as the investment does not represent more than 3% of the voting stock of
the acquired investment company.

As a shareholder of another investment company, a Fund would bear along with
other shareholders, its pro rata portion of the investment company's expenses,
including advisory fees. In the case of closed-end investment companies, these
expenses would be in addition to the advisory and other expenses that the Funds
bear directly in connection with their own operations.

INVESTMENT STRATEGIES AND RISKS SPECIFIC TO MATTHEWS KOREA FUND

17
<PAGE> 67

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 68

MATTHEWS INTERNATIONAL FUNDS CLASS A

1 CHOOSE YOUR INVESTMENTS

There is an initial investment of $1,000.00, $250.00 for a Retirement Plan
account.

<TABLE>
<CAPTION>
<S> <C> <C>
$
[ ] Matthews Pacific
Tiger Fund -- ----------------------- Make check payable to the appropriate
Class A Fund. If you have an account in
$ another Matthews Fund registered under
[ ] Matthews Korea Fund -- ----------------------- the same name and tax identification
Class A number and would like to use the same
$ account number below, please indicate
[ ] Matthews Dragon Century ----------------------- the following:
China Fund -- Class A
$ ---------------- ----------------
Total Investment ----------------------- FUND NAME ACCOUNT #

2 INVESTMENT METHOD

[ ] BY CHECK: I have enclosed a check for $ [ ] BY WIRE: Federal Funds were wired on
------------- / / for Acct. #
------------- -----------
MO. DAY YR.

3 REDUCED SALES CHARGES (CLASS A ONLY)

[ ] RIGHT OF ACCUMULATION Please link the accounts listed below for Right of
Accumulation privileges so that this purchase will receive any allowable
discount.

If you, your spouse or minor children own shares in other Matthews
International Funds, you may be eligible for a reduced sales charge. List
any existing accounts to be considered and, if eligible, complete the Rights
of Accumulation of the Letter of Intent sections below.

----------------------------------------------------------------------------
FUND ACCOUNT NUMBER FUND ACCOUNT NUMBER

[ ] LETTER OF INTENT I agree to the terms of the Letter of Intent set forth in
the prospectus (including escrowing of shares). Although I am not obligated
to do so, it is my intention to invest the following amount over a 13-month
period in one or more Matthews International Funds in an aggregate amount at
least equal to:

[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $1,000,000

If the full amount indicated is not purchased within 13 months, I understand an
additional sales charge must be paid from my account.

4 ACCOUNT REGISTRATION

[ ] GIFT OR TRANSFER TO A MINOR -----------------------------------------------------
NAME OF CORPORATION OR OTHER ENTITY
as custodian for
-------------------------------- -----------------------------------------------------
CUSTODIAN NAME TITLE OF ENTITY

under the - -
-------------------------------------- -----------------------------------------------------
MINOR'S NAME TAXPAYER ID NUMBER

Uniform Gifts/Transfers to Minors Act
----------
STATE
- - / /
----------------------------- ---------------------
MINOR'S SOCIAL SECURITY NO. DATE OF BIRTH
</TABLE>

CLASS A
<S> <C>
5 ADDRESS 6 DIVIDEND OPTIONS

( ) ( ) All distributions will be reinvested unless otherwise indicated.
------------------- ----------------
DAY PHONE EVENING PHONE

CITIZEN OF:
[ ] U.S. [ ] OTHER
------------
PLEASE SPECIFY

7 TELEPHONE OPTIONS

8 SIGNATURE CERTIFICATION

"THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING."

Receipt of current prospectus is hereby acknowledged.

- -------------------------------------------------------------------------------
SIGNATURE [ ] OWNER [ ] CUSTODIAN [ ] TRUSTEE DATE

- -------------------------------------------------------------------------------
SIGNATURE OF JOINT OWNER (IF APPLICABLE) DATE

9 DEALER INFORMATION

- ---------------------------- --------------------- ----------------
DEALER NO. BRANCH NO. REP. NO.

- ------------------------------------- ------------------------------------
FIRM NAME REP'S NAME

- -------------------------------------------------------------------------------
FIRM ADDRESS

- ------------------------------------------ ----------------------------------
AUTHORIZED SIGNATURE OF DEALER REP'S SIGNATURE
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
MATTHEWS INTERNATIONAL FUNDS AUTOMATIC INVESTMENT PLAN CLASS A
<S> <C>
Please complete this application and mail to: Matthews International Funds, C/O
FPS Services, Inc., P.O. Box 61503, 3200 Horizon Drive, King of Prussia, PA
19406-0903.

Shareholder Services:

This letter serves as your authorization to set up an Automatic Investment Plan
for my Matthews International Funds account.

[ ] I am in the process of establishing a new Account. [ ] Matthews Korea Fund -- Class A

[ ] Matthews Pacific Tiger Fund -- Class A [ ] Matthews Dragon Century China Fund -- Class A

Account Number #
-----------------------------------

- ----------------------------------------------- ---------------------------------------------------
Bank Account # Registration of account to be debited

- ----------------------------------------------- ---------------------------------------------------
Name of Bank Street Address

- ------------------------------------- ------------------------------- -------------------------------------
City State Zip Code

- --------------------------------------------------------------------------------

PLEASE ATTACH A VOIDED CHECK OR DEPOSIT SLIP

<PAGE> 71

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE> 72

sold by the Fund. Until the security is replaced, the Fund is required to pay
the lender any dividends or interest which accrue during the period of the loan.
The proceeds of the short sale will be retained by the broker, to the extent
necessary to meet margin requirements, until the short position is closed out.
No securities will be sold short if, after effect is given to any such short
sale, the total market value of all securities sold short would exceed 10% of
the value of the Fund's net assets.

RISK FACTORS COMMON TO ALL FUNDS

In addition, brokerage commissions, custodian services, withholding taxes, and
other costs relating to investment in foreign markets generally are more
expensive than in the United States.

18
<PAGE> 73

on investment in issuers or industries deemed sensitive to national interests,
or expropriation or confiscation of assets or property, which could result in
the Funds' loss of its entire investment in that market; and (iv) less developed
legal structures governing private or foreign investment or allowing for
judicial redress for injury to private property.

For further information, see "SPECIAL CONSIDERATIONS AFFECTING THE PACIFIC
BASIN" in the Statement of Additional Information.

RISKS ASSOCIATED WITH FOREIGN CURRENCY
The U.S. dollar market value of the Funds' investments and of dividends and
interest earned by the Funds may be significantly affected by changes in
currency exchange rates. The value of 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 Funds may
attempt to manage currency exchange rate risks, there is no assurance that the
Funds will do so at an appropriate time or that they will be able to predict
exchange rates accurately. For example, if the Funds increase their exposure to
a currency and that currency's price subsequently falls, such currency
management may result in increased losses to the Funds. Similarly, if the Funds
decrease their exposure to a currency and the currency's price rises, the Funds
will lose the opportunity to participate in the currency's appreciation. Some
currency prices may be volatile, and there is the possibility of governmental
controls on currency exchange or governmental intervention in currency markets,
which could adversely affect the Funds. Foreign investments which are not U.S.
dollar denominated may require the Funds to convert assets into foreign
currencies or to convert assets and income from foreign currencies to U.S.
dollars. Normally, exchange transactions will be conducted on a spot, cash or
forward basis at the prevailing rate in the foreign exchange market.

RISK FACTORS SPECIFIC TO
MATTHEWS KOREA FUND

19
<PAGE> 74

the Fund. Political instability and/or military conflict involving North Korea
may adversely affect the value of the Fund's assets. Foreign securities may also
be subject to greater fluctuations in price than securities of domestic
corporations or the U.S. Government. There may be less publicly available
information about a Korean company than about a domestic company. Brokers in
Korea may not be as well capitalized as those in the U.S., so that they are more
susceptible to financial failure in times of market, political, or economic
stress. Additionally, Korean accounting, auditing and financial reporting
standards and requirements differ, in some cases, significantly, from those
applicable to U.S. issuers. In particular the assets and profits appearing on
the financial statements of a Korean issuer may not reflect its financial
position or results of operations in accordance with U.S. generally accepted
accounting principles. There is a possibility of expropriation, nationalization,
confiscatory taxation, or diplomatic developments that could affect investments
in Korea.

RISKS ASSOCIATED WITH THE KOREAN SECURITIES MARKETS
The Korean securities markets are smaller than the securities markets of the
U.S. or Japan. Specifically, the following considerations should be considered
by investors of the Korean securities markets: (i) certain restrictions on
foreign investment in the Korean securities markets may preclude investments in
certain securities by the Fund and limit investment opportunities for the Fund;
(ii) fluctuations in the rate of exchange between the dollar and the Won with
the resultant fluctuations in the net asset value of the Fund; (iii) substantial
government involvement in, and influence on, the economy and the private sector;
(iv) political, economic and social instability, including the potential for
increasing militarization in North Korea; (v) the substantially smaller size and
lower trading volume of the securities markets for Korean equity securities
compared to the U.S. or Japanese securities markets, resulting in a potential
lack of liquidity and increased price volatility; (vi) the risk that the sale of
portfolio securities by the Korean Securities Stabilization Fund (the
"Stabilization Fund"), a fund established in order to stabilize the Korean
securities markets, or other large Korean institutional investors, may adversely
impact the market value of securities in the Fund's portfolio: (vii) the risk
that less information with respect to Korean companies may be available due to
the fact that Korean accounting, auditing and financial reporting standards are
not equivalent to those applicable to U.S. companies; and (viii) heavy
concentration of market capitalization and trading volume in a small number of
issuers, which result in potentially fewer investment opportunities for the
Fund.

20
<PAGE> 75

RISKS ASSOCIATED WITH A NON-DIVERSIFIED INVESTMENT COMPANY
The Fund is a "non-diversified" investment company, which means that it may
invest a larger portion of its assets in the securities of a single issuer than
a diversified fund. An investment in the Fund therefore will entail greater risk
than an investment in a diversified investment company because a higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio, and economic, political or
regulatory developments may have a greater impact on the value of the Fund's
portfolio than would be the case if the portfolio were diversified among more
issuers. The Fund intends to comply with the diversification and other
requirements however, applicable to regulated investment companies under the
Internal Revenue Code of 1986, as amended. See "Dividends and Taxes."

RISK FACTORS SPECIFIC TO MATTHEWS DRAGON CENTURY CHINA FUND

China remains a totalitarian society with the risk of nationalization,
expropriation or confiscation of property. The legal system is still in its
infancy making it more difficult to obtain and/or enforce judgements. Further,
the government could at any time alter or discontinue economic reform programs
implemented since 1978. Military conflicts, either in response to internal
social unrest or conflicts with other countries are an ever present
consideration.

In addition to political risk, investments in China are also subject to economic
risk. There is a potential risk of total loss, including interest, capital
appreciation and principle. There is also a greater risk involved in currency
fluctuations, currency convertibility, interest rate fluctuations and higher
rates of inflation. The emergence of a domestic consumer class is still at an
early stage, making China heavily dependent on exports.

China's securities markets have less regulation, are substantially smaller, less
liquid and more volatile then

21
<PAGE> 76

the securities markets of more developed countries. Financial information on
companies listed on these markets is limited and can be inaccurate. Companies
listed on theses markets may trade at prices not consistent with traditional
valuation measures. Management of these companies could have conflicting
financial interests or little experience managing a business.

MANAGEMENT OF THE FUNDS

22
<PAGE> 77

the United Kingdom, Europe, South East Asia, Australia, Japan and the United
States. He was a member of the Board of Governors of the National Association of
Securities Dealers, Washington, DC between 1987 and 1990.

*These Trustees are considered "interested persons" of the Funds as defined
under the Act.

THE INVESTMENT ADVISOR
The Advisor, which has its offices at 655 Montgomery Street, Suite 1438, San
Francisco, California 94111, serves as the Funds' investment advisor and manager
and is an investment advisor registered under the Investment Advisers Act of
1940, as amended. The Advisor advises private and institutional accounts, which
include both U.S. and non U.S. investors. The Advisor was founded in 1991 by G.
Paul Matthews to manage international portfolios for North American clients and
to provide U.S. investments for non-U.S. clients. The Advisor specializes in
Asian-Pacific investments and manages assets in a U.S. domiciled partnership,
offshore funds and separate accounts. Total assets under management as of
October 1, 1997 were $70 million. Mr. Matthews may be deemed to be a control
person of the Advisor on the basis of his ownership of stock of the Advisor. The
Advisor recently reorganized its business structure from a corporation to a
limited liability company. In connection with this reorganization, Convergent
Capital Management, Inc., ("Convergent") made an equity investment in the
Advisor and obtained a right of first refusal and an option to purchase
additional interests, the exercise of which could result in a change in control
of the Advisor at some time in the future. Any such change in control would be
subject to the prior approval of the holders of at least a majority of the
outstanding shares of the respective Funds. The Advisor does not presently serve
as investment advisor to any other investment companies in the United States.

The Funds have retained the Advisor to invest the Funds' assets, manage the
Funds' business affairs and supervise its overall day-to-day operations.
Pursuant to an investment advisory agreement with the Funds, the Advisor
provides advice on buying and selling securities in accordance with the Funds'
investment policies, limitations and restrictions. The Advisor also furnishes
the Funds with office space and certain administrative and clerical services,
and provides the personnel needed by the Funds with respect to the Advisor's
responsibilities under the investment advisory agreement. The terms of the
Funds' investment advisory agreement permit the Advisor, at its own expense, to
obtain statistical and other factual information and advice as it deems
necessary or desirable to fulfill its investment responsibilities under the
contract. In addition, the Advisor may engage certain organizations, at the
Advisor's expense, to assist in the distribution of the shares of the Fund or to
provide services to the Funds' shareholders.

FEE WAIVERS AND EXPENSE REIMBURSEMENTS
From time to time, the Advisor may voluntarily waive all or a portion of its
management fee and/or absorb certain expenses of the Funds without further
notification of the commencement or termination of any such waiver or
absorption. Any such waiver or absorption will have the effect of lowering the
overall expense ratio of the Funds and increasing the Funds' overall return to
investors at the time any such amounts are waived and/or absorbed.

23
<PAGE> 78

As of December 31, 1997 the Advisor has voluntarily undertaken to reimburse
Class A shares of MATTHEWS PACIFIC TIGER FUND, MATTHEWS KOREA FUND, and MATTHEWS
DRAGON CENTURY CHINA FUND for operating expenses in excess of 2.15%, 2.75%, and
2.25%, respectively. Such fee reimbursements may be terminated at the discretion
of the Advisor.

When each Fund's net assets are not large enough to support all the various
expenses without exceeding the total expense limitation set forth in the
Prospectus, the Fund is considered to be in reimbursement mode for accounting
purposes. This is when the Advisor is waiving/reimbursing part or all of the
advisory fee and part or all of the operating expenses.

24
<PAGE> 79

Mr. Headley moved to Hong Kong, where he served as a Director of Regent Fund
Management. He returned in 1993 to join Litman/Gregory & Co. as Director of
International Investments.

Both Mr. Headley and Mr. Matthews travel extensively to Asia to conduct research
relating to those markets.

ADMINISTRATION OF THE FUNDS

EXPENSES
Expenses attributable to the Fund, but not to a particular Class, will be
allocated to each Fund thereof on the basis of relative net assets. Similarly,
expenses attributable to a particular Fund, but not to a particular class, will
be allocated to each class thereof on the basis of relative net assets. General
Company expenses may include but are not limited to: insurance premiums; Trustee
fees; expenses of maintaining the Company's legal existence; and fees of
industry organizations. General Fund expenses may include but are not limited
to: audit fees; brokerage commissions; registration of Fund shares with the SEC
and notification fees to the various state securities commissions; fees of the
Fund's Custodian, Administrator and Transfer Agent or other "service providers";
costs of obtaining quotations of portfolio securities; and pricing of Fund
shares.

25
<PAGE> 80

records of each shareholder's account, answers shareholder inquiries concerning
accounts, processes purchases and redemptions of the Funds' shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions.

THE DISTRIBUTION PLAN

The Board of Trustees of the Fund has adopted a distribution plan for the shares
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"Plan"). As provided in the Plan, the Fund will pay an annual fee up to 0.25% of
the average daily net assets to the Underwriter. From this amount, the
Underwriter may make payments to financial institutions and intermediaries such
as banks, savings and loan associations, insurance companies, investment
counselors, and broker-dealers who assist in the distribution of the shares of
the Fund or provide services with respect to Class A shares of the Fund,
pursuant to service agreements with the Fund. The Plan is characterized as a
compensation plan because the distribution fee will be paid to the Underwriter
without regard to the distribution or shareholder service expenses incurred by
the Underwriter or the amount of payments made to financial institutions and
intermediaries. The Fund intends to operate the Plan in accordance with its
terms and within NASD rules concerning sales charges.

The fees paid to the Underwriter under the Plan are subject to the review and
approval by the Trust's unaffiliated trustees who may reduce the fees or
terminate the Plan at any time. All such payments made pursuant to the Plan
shall be made for the purpose of selling shares issued by each respective class
of shares. The distribution fee of one class will not be used to subsidize the
sale of the other class of shares.

PURCHASE OF SHARES
IN GENERAL
The Fund offers these shares to the general public on a continuous basis through
the Underwriter by mail, wire, telephone and broker-dealer subject to annual
distribution expenses pursuant to Rule 12b-1. See "THE DISTRIBUTION PLAN."

Purchase orders for shares of each Fund that are received by FPS in proper form
by the close of regular trading on the New York Stock Exchange ("NYSE")
(currently 4:00 p.m. Eastern time), on any day that the NYSE is open for
trading, will be purchased at the Fund's next determined net asset value. Orders
received after 4:00 p.m. Eastern time will be purchased at the next-determined
net asset value determined the business day following receipt of the order.

MATTHEWS PACIFIC TIGER FUND, MATTHEWS KOREA FUND and MATTHEWS DRAGON CENTURY
CHINA FUND offer two classes of shares. Only the Class A shares are offered
under this Prospectus.

26
<PAGE> 81

UMB BANK KC NA
ABA # 10-10-00695
FOR: FPS SERVICES, INC.
A/C 98-7037-071-9
FBO "MATTHEWS PACIFIC TIGER FUND --
CLASS A SHARES"
"MATTHEWS KOREA FUND -- CLASS A SHARES"
OR
"MATTHEWS DRAGON CENTURY CHINA FUND --
CLASS A SHARES"
"SHAREHOLDER NAME AND ACCOUNT NUMBER"

PURCHASES THROUGH BROKER-DEALERS
The Funds may accept telephone orders from brokers, financial institutions or
service organizations which have been previously approved by the Funds. It is
the responsibility of such brokers, financial institutions or service
organizations to promptly forward purchase orders and payments for the same to
the respective Fund. Shares of each Fund may be purchased through brokers,
financial institutions, service organizations, banks, and bank trust
departments, each of which may charge the investor a transaction fee or other
fee for its services at the time of purchase. Such fees would not otherwise be
charged if the shares were purchased directly from the Funds. In addition, the
Advisor may make payments out of its own resources to dealers and other persons
who distribute shares of the Funds.

Wire orders for shares of each Fund received by dealers prior to 4:00 p.m.,
Eastern time, and received by FPS before 5:00 p.m., Eastern time, on the same
day are confirmed at that day's public offering price. Orders received by
dealers after 4:00 p.m., Eastern time, are confirmed at the public offering
price on the following business day. It is the dealer's obligation to place the
order with FPS before 5:00 p.m., Eastern time.

27
<PAGE> 82

Fund and mailed to the respective Fund c/o FPS Services, Inc., P.O. Box 412797,
Kansas City, MO 64141-2797. Orders to purchase shares are effective on the day
FPS receives your check or money order.

SALES CHARGES
Class A Shares of the Fund are offered at the public offering price which is the
current net asset value per share next determined after receipt of a purchase
order in proper form by the transfer agent, plus any applicable sales charge.
The sales charge is a variable percentage of the offering price, depending upon
the amount of the sale. No sales charge will be assessed on the reinvestment of
distributions. See "Reduced Sales Charges". Shares may also be bought and sold
through any securities dealer having a dealer agreement with FPBS, the Fund's
principal underwriter.

The following table shows the regular sales charge on Class A Shares of the Fund
together with the reallowance paid to dealers and the agency commission paid to
brokers, collectively the "commission":

<TABLE>
<CAPTION>
REALLOWANCE
SALES OF BROKERAGE
SALES CHARGE AS COMMISSION
CHARGE AS PERCENTAGE AS
PERCENTAGE OF NET PERCENTAGE
CLASS A SHARES AMOUNT OF OFFERING AMOUNT OF OFFERING
TO PURCHASE PRICE INVESTED PRICE
- ----------------------- ----------- ----------- ------------
<S> <C> <C> <C>
Less than $50,000...... 4.95% 5.21% 4.50%
$50,000 or more but
less than $100,000... 4.25% 4.44% 3.85%
$100,000 or more but
less than $250,000... 3.25% 3.36% 2.90%
$250,000 or more but
less than $500,000... 2.50% 2.36% 2.15%
$500,000 or more but
less than
$1,000,000........... 2.00% 2.04% 1.80%
$1,000,000 and over.... 0.00% 0.00% 0.00%
</TABLE>

The commissions shown in the table apply to sales through financial institutions
and intermediaries. Under certain circumstances, the Distributor or a sub-
distributor may use its own funds to compensate financial institutions and
intermediaries in amounts that are in addition to the commissions shown above.
The Distributor or a sub-distributor may, from time to time and at its own
expense, provide promotional incentive, in the form of cash or other
compensation, to certain financial institutions and intermediaries whose
registered representatives have sold or are expected to sell significant amounts
of shares of the Fund. Such other compensation may take the form of payments for
travel expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives to places within or outside of the United
States. Under certain circumstances, commissions up to the amount on the entire
sales charge may be reallowed to certain financial institutions and
intermediaries, who might then be deemed to be "underwriters" under the
Securities Act of 1933, as amended.

REDUCED SALES CHARGES
The sales charge for purchases of Class A Shares of the Fund may be reduced
through Rights of Accumulation or Letter of Intent. To qualify for a reduced
sales charge, an investor must so notify his or her distributor at the time of
each purchase of shares which qualifies for the reduction.

RIGHTS OF ACCUMULATION
A shareholder may qualify for a reduced sales charge by aggregating the net
asset values of shares requiring the payment of an initial sales charge,
previously purchased and currently owned, with the dollar amount of shares to be
purchased.

LETTER OF INTENT
An investor of Class A Shares may qualify for a reduced sales charge immediately
by signing a non-binding Letter of Intent stating the investor's intention to
invest during the next 13 months a specified amount which, if made at one time,
would qualify for a reduced sales charge. The first investment cannot be made
more than 90 days prior to the date of the Letter of Intent. Any redemptions
made during the 13-month period will be subtracted from the amount of purchases
in determining whether the Letter of Intent has been completed. During the term
of the Letter of Intent, the

28
<PAGE> 83

transfer agent will hold shares representing 5% of the indicated amount in
escrow for payment of a higher sales load if the full amount indicated in the
Letter of Intent is not purchased. The escrowed shares will be released when the
full amount indicated has been purchased. If the full amount indicated is not
purchased within the 13 month period, a shareholder's escrowed shares will be
redeemed in an amount equal to the difference in the dollar amount of sales
charge actually paid and the amount of sales charge the shareholder would have
had to pay on his or her aggregate purchases if the total of such purchases had
been made at a single time. It is the shareholder's responsibility to notify the
transfer agent at the time the Letter of Intent is submitted that there are
prior purchases that may apply.

The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Fund for their own account or for trust or
custodial accounts of their minor children, or (iii) a fiduciary purchasing for
any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401 and 457 of the Internal Revenue Code of 1986, as
amended, including related plans of the same employer.

EXCHANGE OF SHARES

IN GENERAL
Class A shares of any of the Funds may be exchanged for Class A shares of any of
the other Funds within the Company, provided such other shares may be sold
legally in the state of the investor's residence.

REDEMPTION OF SHARES
AND REDEMPTION FEE

Except as noted below, redemption requests received in proper form by the
transfer agent prior to the close of regular trading hours on the NYSE on any
business day that the Funds calculate their net asset value are effective that
day. Redemption requests received after the close of the NYSE will be effected
at the net asset

29
<PAGE> 84

value per share determined on the next business day following receipt. No
redemption will be processed until the transfer agent has received a completed
application with respect to the account.

Pursuant to the Funds' Trust Instrument, payment for shares redeemed may be made
either in cash or in-kind, or partly in cash and partly in-kind. When payments
are made in-kind the securities used for such payment must be readily
marketable. The Funds have elected, pursuant to Rule 18f-1 under the 1940 Act,
however, to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Funds, during any 90 day period for any one
shareholder. Payments in excess of this limit will also be made wholly in cash
unless the Board of Trustees believes that economic conditions exist which would
make such a practice detrimental to the best interests of the Funds. Any
portfolio securities paid or distributed in-kind would be valued as described
under "Net Asset Value." In the event that an in-kind distribution is made, a
shareholder may incur additional expenses, such as the payment of brokerage
commissions, on the sale or other disposition of the securities received from
the Funds. In-kind payments need not constitute a cross-section of the Fund's
portfolio. Where a shareholder has requested redemption of all or a part of the
shareholder's investment, and where the Funds complete such redemption in-kind,
the Funds will not recognize gain or loss for federal tax purposes, on the
securities used to complete the redemption but the shareholder will recognize
gain or loss equal to the difference between the fair market value of the
securities received and the shareholder's basis in the Fund shares redeemed.

REDEMPTION BY MAIL
Shares may be redeemed by submitting a written request for redemption to FPS,
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903.

30
<PAGE> 85

REDEMPTION FEE
With certain exceptions, the Funds may impose a redemption fee of 1.00% on
shares, from original purchases of $1,000,000 or more, that are redeemed within
ninety days of purchase. The charge will be assessed on an amount equal to the
net asset value of the shares at the time of redemption. If imposed, the
redemption fee is deducted from the redemption proceeds otherwise payable to the
shareholder. The redemption fee is returned to the assets of the Funds.

SHAREHOLDER SERVICES

The following special services are available to shareholders. An investor may
change or stop these plans at any time by written notice to the Funds.

AUTOMATIC INVESTING
The Funds offer an automatic monthly investment plan, details of which can be
obtained from the transfer agent. Shareholders simply authorize the automatic
withdrawal of funds from their bank account into the respective Fund. The
minimum subsequent investment pursuant to this plan is $100 per month. The
initial account must be opened first with the $1,000 minimum prior to
participating in this plan. Please complete the appropriate section on the New
Account Application enclosed with this Prospectus indicating the amount of the
automatic investment and bank account information.

31
<PAGE> 86

NET ASSET VALUE

DIVIDENDS AND TAXES

DIVIDENDS
MATTHEWS PACIFIC TIGER FUND, MATTHEWS KOREA FUND and MATTHEWS DRAGON CENTURY
CHINA FUND will distribute net investment income 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, in which case
no such gain will be distributed. Such income dividends and capital gain
distributions are reinvested automatically in additional shares at net

32
<PAGE> 87

asset value, unless a shareholder elects to receive them in cash. Distribution
options may be changed at any time by requesting a change in writing.

Dividends paid by the Fund with respect to Class A shares are calculated in the
same manner and at the same time. Both Class A and Class I shares of the Fund
will share proportionately in the investment income and expenses of the Fund,
except that the per share dividends of Class I shares will differ from the per
share dividends of Class A shares as a result of additional distribution
expenses applicable to Class A shares.

TAXES
Except for the MATTHEWS DRAGON CENTURY CHINA FUND which intends to elect and
qualify as soon as possible, each Fund has elected and intends to continue to
qualify and elect to be treated as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986. Such qualification relieves
the Funds of liability for Federal income taxes to the extent the Funds'
earnings are each distributed in accordance with the Code. To so qualify, among
other requirements, each 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.

33
<PAGE> 88

mation on the tax consequences of particular types of distributions.

PERFORMANCE INFORMATION

You may obtain current performance information about the Funds by calling the
Funds at (800) 789-ASIA.

GENERAL INFORMATION

TRUSTEES AND OFFICERS
The Trustees of the Company have overall responsibility for the operations of
the Funds. The Statement of Additional Information contains general background
information about each Trustee and officer of the Trust. The officers of the
Company who are employees or officers of the Advisor serve without compensation
from the Funds.

DESCRIPTION OF SHARES
Each Fund is authorized to issue an unlimited number of shares of beneficial
interest 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 (except for
Class-specific voting rights). All shares issued are fully paid and
non-assessable, and shareholders have no preemptive or other right to

34
<PAGE> 89

subscribe to any additional shares and no conversion rights.

MULTIPLE CLASSES OF SHARES
Currently, MATTHEWS PACIFIC TIGER FUND, MATTHEWS KOREA FUND and MATTHEWS DRAGON
CENTURY CHINA FUND offer two classes of shares: Class A shares which are offered
by this Prospectus, and Class I shares. The classes offered have different sales
charges and other expenses which may affect performance. Class A shares are
offered by this Prospectus and information about Class I shares, which are
offered to institutional investors, may be obtained by calling (800) 789-ASIA.
The validity of shares of beneficial interest offered by this prospectus will be
passed on by Paul, Hastings, Janofsky and Walker LLP, 345 California Street, San
Francisco, CA 94104-2635. All accounts will be maintained in book entry form and
no share certificates will be issued.

35
<PAGE> 90

APPENDIX

BOND RATINGS

MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") describes classifications of
corporate bonds as follows:

Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.

Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.

Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other market
shortcomings.

C Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

36
<PAGE> 91