MATTHEWS INTERNATIONAL FUNDS, 485APOS, 1998-10-30

MATTHEWS INTERNATIONAL FUNDS
485APOS, 1998-10-30

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As filed with the U.S. Securities and Exchange Commission on October 30, 1998.

File No. 33-78960
UNITED STATES File No. 811-8510

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ x ]
Pre-Effective Amendment No. [ ]
----------
Post Effective Amendment No. 10 [ x ]
-------

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ x ]
Amendment No. 13 [ x ]
---------

Matthews International Funds
(Exact name of Registrant as Specified in Charter)
655 Montgomery Street
Suite 1438
San Francisco, CA 94111
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code 415-788-7553

G. Paul Matthews, President
Matthews International Capital Management, LLC
655 Montgomery Street, Suite 1438
San Francisco, California 94111
(Name and Address of Agent for Service)

COPIES TO:

Kelvin K. Leung, Esq. Coleen Downs Dinneen, Esq.
Paul, Hastings, Janofsky &Walker LLP First Data Investor Services Group, Inc.
345 California Street 53 State Street
San Francisco, CA 94194-2635 Mail Stop: BOS865
Boston, MA 02109

Approximate date of proposed public offering:
It is proposed that this filing become effective:

[ ] immediately upon filing pursuant to Paragraph (b) of Rule 485.
[ ] on (date) , pursuant to Paragraph (b).
[ x ] 60 days after filing pursuant to paragraph (a).
[ ] on (date) pursuant to paragraph (a) of Rule 485.
[ ] 75 days after filing pursuant to paragraph (a)(ii).
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective
date for previously filed post-effective amendment.

The Registrant will file its Rule 24f-2 Notice for its fiscal year
ended August 31, 1998 on or before November 30, 1998.

<PAGE>

MATTHEWS INTERNATIONAL FUNDS
Cross Reference Sheet Pursuant to Rule 495a

Part A -- INFORMATION REQUIRED IN A PROSPECTUS

Form N-1A Item Caption in Prospectus

1. Cover Page Not Titled

2. Synopsis Prospectus Summary

3. Condensed Financial Information Financial Highlights

4. General Description of Registrant Investment Objectives;
Investment Policies and
Risks; Investment Strategies
and Risks; Risk Factors

5. Management of the Funds Management of the Funds

5A. Management's Discussion of Fund Contained in the Annual
Performance Report of Registrant

6. Capital Stock and Other Securities Net Asset Value; Dividends
and Taxes;GeneralInformation

7. Purchase of Securities Purchase of Shares;
Being Offered Shareholder Services; The
Distribution Plan
(Class A)

8. Redemption or Repurchase Redemption of Shares and
Redemption Fee

9. Pending Legal Proceedings Not Applicable

<PAGE>

Part B -- INFORMATION REQUIRED IN A STATEMENT OF
ADDITIONAL INFORMATION:

Form N-1A Item Caption in SAI

10. Cover Page Not Titled

11. Table of Contents Table of Contents

12. General Information and History The Funds

13. Investment Objectives and Policies Investment Policies and
Techniques; Investment
Restrictions

14. Management of the Fund Trustees and Officers

15. Control Persons and Principal Control Persons and Principal
Holers of Securities Holders of Securities

16. Investment Advisory and Other Investment Advisory and Other
Services Services

17. Brokerage Allocation Portfolio Transactions and
Brokerage

18. Capital Stock and Other Securities Other Information

19. Purchase, Redemption and Pricing of Covered in Part A;
of Securities Being Offered Determination of Net Asset
Value

20. Tax Status Taxes

21. Underwriters The Underwriter

22. Calculations of Performance Data Performance Information

23. Financial Statements Reports to Shareholders and
Financial Statements

<PAGE>

MATTHEWS INTERNATIONAL FUNDS
655 Montgomery Street, Suite 1438
San Francisco, CA 94111

MATTHEWS PACIFIC TIGER FUND
MATTHEWS ASIAN GROWTH AND INCOME FUND
MATTHEWS KOREA FUND
MATTHEWS DRAGON CENTURY CHINA FUND

CLASS I SHARES

PROSPECTUS
December 31, 1998

Matthews International Funds (the "Company") is an open-end investment
management company which currently consists of five 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 describes four series of the Company's
shares and pertains only to Class I shares of Matthews Pacific Tiger Fund,
Matthews Asian Growth and Income 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.

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

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

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 2.00% 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 $2,500. 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 $500. Subsequent
investment for any retirement plan is $50.

The Funds' principal underwriter is First Data Distributors, Inc.
("FDDI"), 4400 Computer Drive, Westboro, Massachusetts 01581-5108.

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, 1998, which has been filed with the Securities and Exchange Commission and
is available upon request without charge by contacting First Data Investor
Services Group, Inc. ("Investor Services Group"), at 3200 Horizon Drive, P.O.
Box 61503, King of Prussia, PA 19406-0903 or by calling (800) 892-0382. The
Statement of Additional Information is incorporated by reference into this
Prospectus.

Matthews Korea Fund may invest significantly in lower-quality debt securities,
sometimes called "junk bonds." These securities carry greater risks, such as the
risk of default, than other debt securities.

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>

TABLE OF CONTENTS

Page
PROSPECTUS SUMMARY...........................................................
EXPENSE INFORMATION..........................................................
FINANCIAL HIGHLIGHTS........................................................
INVESTMENT OBJECTIVES
Matthews Pacific Tiger Fund.......................................
Matthews Asian Growth and Income Fund...............................
Matthews Korea Fund..................................................
Matthews Dragon Century China Fund..................................
INVESTMENT POLICIES AND RISKS
Common to all Funds................................................
Specific to Matthews Pacific Tiger Fund.............................
Specific to Matthews Asian Growth and Income Fund...................
Specific to Matthews Korea Fund.....................................
Specific to Matthews Dragon Century China Fund.....................
INVESTMENT STRATEGIES AND RISKS
Common to all Funds................................................
Specific to Matthews Asian Growth and Income Fund..................
Specific to Matthews Korea Fund....................................
RISK FACTORS
Common to all Funds.................................................
Specific to Matthews Asian Growth and Income Fund...................
Specific to Matthews Korea Fund.....................................
Specific to Matthew Dragon Century China Fund......................
MANAGEMENT OF THE FUNDS.......................................................
ADMINISTRATION OF THE FUNDS...................................................
PURCHASE OF SHARES............................................................
EXCHANGE OF SHARES............................................................
REDEMPTION OF SHARES and REDEMPTION FEE.......................................
SHAREHOLDER SERVICES.........................................................
NET ASSET VALUE..............................................................
DIVIDENDS AND TAXES..........................................................
PERFORMANCE INFORMATION.......................................................
GENERAL INFORMATION...........................................................
APPENDIX......................................................................

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.

<PAGE>

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 five separate series of shares, although this Prospectus
only pertains to Class I shares of four series of the Company: Matthews Pacific
Tiger Fund, Matthews Asian Growth and Income 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 Growth and Income 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."

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. 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, 1998, the Advisor had approximately $115 million under management or
committed to management in various fiduciary or advisory capacities, primarily
from private and institutional accounts. FDDI, 4400 Computer Drive, Westboro,
Massachusetts 01581-5108 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. Investor Services Group, 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 October 19, 1998, 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 17.28% 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 $2,500 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 2.00%, 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 Growth and Income Fund intends to declare
and pay dividends semi-annually. See "DIVIDENDS AND TAXES."

<PAGE>

EXPENSE INFORMATION

Shareholder Transaction Expenses for Each Fund:

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)....................................................... 2.00%*

* The Redemption Fee of 2.00% applies only to those shares redeemed within
ninety days of purchase. See "Redemption Fee" under the heading "REDEMPTION
OF SHARES."
</TABLE>

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.

- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>

Annual Fund Operating Expenses as a Percentage of Average Net Assets for the
fiscal year ending August 31, 1998:
Estimated Other
Expenses Net Expense Ratio
Management Fees 12b-1 After Expense After Expense
Fund (1)(2) Expenses Reimbursement Reimbursement(3)
- ----------- -------- ------------- ----------------
Matthews Pacific Tiger Fund -Class I 1.00% None 0.90% 1.90%
Matthews Asian Growth and Income Fund - 1.00% None 0.90% 1.90%
Class I
Matthews Korea Fund - Class I 1.00% None 1.06% 2.06%
Matthews Dragon Century China Fund - Class 1.00% None 1.00% 2.00%
I
- -------------------------------------------- ---------------- ------------- ------------------- ---------------------
</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 Fund's 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 and Matthews Korea Fund offer two classes
of shares that invest in the same portfolio of securities. Shareowners
of Class A are subject to a sales charge and a 12b-1 Distribution Plan
and 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
Matthews Pacific Tiger Fund, Matthews Asian Growth and Income 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, 1998, Matthews Pacific Tiger Fund's advisory fee, estimated other
expenses, and net expense ratio would have been 1.00%, 1.06%, and 2.06%,
respectively. Matthews Asian Growth and Income Fund's advisory fee, estimated
other expenses, and net expense ratio would have been 1.00%, 2.76%, and 3.76%,
respectively. Matthews Korea Fund's advisory fee, estimated other expenses, and
net expense ratio would have been 1.00%, 1.06%, and 2.06%, respectively.
Matthews Dragon Century China Fund's advisory fee, estimated other expenses, and
approximate net expense ratio would be 1.00%, 6.84%, and 7.84% 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 Fund
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.

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>
<S> <C> <C> <C> <C>

Name of Fund 1 Year 3 Years 5 Years 10 Years
- ------------ ------ ------- ------- --------

Matthews Pacific Tiger Fund -Class I $19 $60 $103 $222
Matthews Asian Growth and Income Fund - Class I $19 $60 $103 $222
Matthews Korea Fund - Class I $21 $65 $111 $239
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.

<PAGE>

FINANCIAL HIGHLIGHTS

Matthews Pacific Tiger Fund
Matthews Asian Growth and Income Fund
Matthews Korea Fund
Matthews Dragon Century China Fund

The following Class I financial highlights are a part of the Funds'
financial statements which have been audited by Ernst & Young LLP, independent
auditors, for the most recent fiscal year. The following tables should be read
in conjunction with these financial statements and related notes included in the
Statement of Additional Information.

Matthews Asian
Matthews Pacific Tiger Fund Convertible Securities Fund
Year Year Year Period Year Ended Year Year Period
Ended Ended Ended Ended August Ended Ended Ended
August August August August 31, 1998 August August August
31, 31, 1997 31, 1996 31, 19951 31, 31, 31,
1998 1997 1996 19951
---------- ----------- ---------- ----------- ----------- ---------- ----------- -----------

Net Asset Value,
Beginning of period...... $11.30 $10.81 $9.77 $10.00 $11.71 $10.53 $9.88 $10.00
------ ------ ----- ------ ------ ------ ----- ------

Income from Investment Operations
Net investment income (loss) 0.024 0.02 0.01 0.02 0.13 0.10 0.25 0.23
Net realized and unrealized
Gain (loss) on investments
And foreign currency........... (7.18) 0.50 1.03 (0.23) (4.15) 1.42 0.75 (0.14)
------ ---- ---- ------ ------ ---- ---- ------
Total from investment operations 7.16 0.52 1.04 (0.21) (4.02) 1.52 1.00 0.09
---- ---- ---- ------ ------ ---- ---- ----

Less Distributions from:
Net investment income.......... (0.01) (0.01) 0.00 (0.02) (0.10) (0.10) (0.26) (0.21)
Net realized gains on investments (0.06) (0.02) 0.00 0.00 (1.05) (0.24) (0.09) 0.00
------ ------ ---- ---- ------ ------ ------ ----
Total distributions......... (0.07) (0.03) 0.00 (0.02) (1.15) (0.34) (0.35) (0.21)
------ ------ ---- ------ ------ ------ ------ ------
Net Asset Value, end of period. $4.07 $11.30 $10.81 $9.77 $6.54 $11.71 $10.53 $9.88
===== ====== ====== ===== ===== ====== ====== =====

Total Return................... (63.43%) 4.75% 10.64% (2.07%)++ (35.27%) 14.67% 10.24% 0.89%++

Ratios/Supplemental Data
Net assets, end of period (in $31,319 $43,647 $17,148 $1,082 $4,063 $6,166 $3,272 $863
000's).........................
Ratio of expenses to average net
Assets before reimbursement and
Waiver of expenses by Advisor
And Administrator.............. 2.06% 1.97% 4.35% 25.95%+ 3.76% 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% 1.90% 2.17%+ 1.90% 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.................. 0.14% 0.20% (2.13%) (23.41%)+ (0.36%) (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............ 0.30% 0.27% 0.32% 0.36%+ 1.50% 1.00% 2.75% 2.17%+
Portfolio turnover............. 73.09% 70.73% 124.69% 92.53%++ 54.67% 50.20% 88.16% 121.63%++

+ Annualized
++ Not Annualized
1 The Funds commenced operations on September 13, 1994.
2 The Fund commenced operations on January 3, 1995.
3 The Fund commenced operations on February 19, 1998
4 Calculated using the average shares method.

</TABLE>

<PAGE>

Matthews Dragon
Matthews Korea Fund Century Fund
Year Year Year Period Period
Ended Ended Ended Ended Ended
August August August August August 31,
31, 31, 1997 31, 1996 31, 19952 19983
1998
---------- ----------- ---------- ----------- ------------

Net Asset Value,
Beginning of period...... $6.19 $7.23 $9.13 $10.00 $10.00
----- ----- ----- ------ ------

Income from Investment Operations
Net investment income (loss) (0.03) (0.07) 0.084 0.10
(0.04)4
Net realized and unrealized
gain (loss) on investments
and foreign currency........... (4.13) (1.00)4 (1.75) (0.95)4 (5.74)
------ ------- ------ ------- ------
Total from investment operations (4.16) (1.04) (1.82) (0.87) (5.64)
------ ------ ------ ------ ------

Less Distributions from:
Net investment income.......... 0.00 0.00 0.00 0.00 0.00
Net realized gains on investments 0.00 0.00 (0.08) 0.00 0.00
---- ---- ------ ---- ----
Total distributions......... 0.00 0.00 (0.08) 0.00 0.00
---- ---- ------ ---- ----
Net Asset Value, end of period. $2.03 $6.19 $7.23 $9.13 $4.36
===== ===== ===== ===== =====

Total Return................... (67.21%) (14.38%) (20.11%) (8.70%)++ (56.40)++

Ratios/Supplemental Data
Net assets, end of period (in $66,607 $19,356 $2,721 $504 $1,576
000's).........................
Ratio of expenses to average net
Assets before reimbursement and
Waiver of expenses by Advisor
and Administrator.............. 2.07% 2.90% 11.36% 42.87%+ 7.84%+
Ratio of expenses to average net
Assets after reimbursement and
Waiver of expenses by Advisor
and Administrator............. 2.06% 2.50% 2.23% 0.24%+ 2.00%+
Ratio of net investment income
(loss) to average net assets
before reimbursement and waiver of
expenses by Advisor and
Administrator.................. (1.13%) (1.81%) (10.44%) (41.79%)+ (3.45%)+
Ratio of net investment income
(loss) to average net assets after
reimbursement and waiver of
expenses by Advisor and
Administrator............ (1.12%) (1.41%) (1.31%) 0.84%+ 2.38%+
Portfolio turnover............. 94.01% 112.68% 139.71% 42.16%++ 11.84%++

</TABLE>

<PAGE>

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
their 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 GROWTH AND INCOME FUND
Matthews Asian Growth and Income 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,
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 their 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, (iii) have the primary trading market for their
securities in South Korea or (iv) are governmental entities, 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, South Korea is one of the few fully
industrialized economies in East Asia with one of the highest Gross National
Products per capita and education levels in the region. 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.

<PAGE>

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."

INVESTMENT POLICIES AND RISKS COMMON TO ALL FUNDS

Asian-Pacific Region Opportunity
Although the Advisor believes that in contrast to more developed economics, the
newly industrialized countries of the Asian markets are in an earlier, more
dynamic growth stage of their development; there have been some recent
significant factors that would indicate higher risks in investment
opportunities.

The fiscal year ended August 31, 1998 was the most difficult period for the
Funds due to a series of currency devaluations in East Asia, which caused an
extremely turbulent financial environment and negative investor sentiment.
Coupled with the need for structured reform in the economy, East Asian markets
were negatively influenced by a rapid slow-down in economic growth, unsettled
political situations in some countries and wide-ranging restructuring effort
implemented by the International Monetary Fund.

While it is unlikely that East Asian economies will rapidly resume the high
growth rates seen over the last decade, the Advisor believes that East Asia
continues to offer investors many long-term investment opportunities. This
vision for investment opportunity in the Asian markets is characterized by,
among other factors, global competitiveness on the strength of their brands,
technology, distribution capabilities and new products. East Asia remains one of
the world's premier manufacturing regions.

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.

<PAGE>

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, as amended (the
"1940 Act"). The Funds may invest up to 10% of its assets in other investment
companies. See "INVESTMENT STRATEGIES AND RISKS."

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

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

INVESTMENT POLICIES AND RISKS SPECIFIC TO
MATTHEWS PACIFIC TIGER FUND

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

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

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

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

<PAGE>

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

INVESTMENT POLICIES AND RISKS SPECIFIC TO
MATTHEWS ASIAN GROWTH AND INCOME FUND

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

Many Asian convertible securities are unrated or are rated below investment
grade and the Fund may invest without limit in such securities. Investment grade
securities are securities rated Baa or higher by Moody's or BBB or higher by S&P
or if unrated are of comparable quality. It is expected that not more than 50%
of the Fund's portfolio will consist of securities rated CCC or lower by S&P or
Caa or lower by Moody's or, if unrated, are of comparable quality, and are
commonly referred to as "junk bonds." These securities are considered by the
rating agencies to be predominantly speculative and involve risk exposures such
as increased sensitivity to interest rate and economic changes and limited
liquidity. The Fund does not intend to invest in issuers which are in default.
See "RISK FACTORS."

<PAGE>

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.

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

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

The Fund may invest up to 35% of its total assets in securities rated below
investment grade (securities rated below Baa by Moody's 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 no ready market. The Fund may therefore not be able to
readily sell such securities. Such securities are unlike securities that are
traded in the open market and which can be expected to be sold immediately. The
sale price of securities that are not readily marketable may be lower or higher
than the Fund's most recent estimate of their fair value. Generally, less public
information is available with respect to the issuers of these securities than
with respect to companies whose securities are traded on an exchange. Securities
not readily marketable are more likely to be issued by start-up, small or family
business and therefore subject to greater economic, business and market risks
than the listed securities of more well-established companies.

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

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

<PAGE>

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.

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 or BBB or higher by
S&P 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."

<PAGE>

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.

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 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 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 Funds' total assets less
liabilities (other than borrowings). In the event that such asset coverage shall
at any time fall below 300%, the Fund shall, within three days thereafter (not
including Sunday or holidays) or such longer period as the U.S. Securities and
Exchange Commission may prescribe by rules and regulations, reduce the amount of
its borrowings to such an extent that the asset coverage of such borrowings
shall be at least 300%. Investment securities will not be purchased while a Fund
has an outstanding borrowing that exceeds 5% of the Funds' net assets.

<PAGE>

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

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

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

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

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

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

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

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

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

Illiquid Securities Matthews Pacific Tiger Fund, Matthews Asian Growth and
Income 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, as amended (the "1933
Act"), 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 1933 Act for resales of certain securities
to qualified institutional buyers.

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

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

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

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

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

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 Growth and Income 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 ASIAN GROWTH AND INCOME
FUND

Interest Rate Futures Contracts
Matthews Asian Growth and Income 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.

<PAGE>

RISK FACTORS COMMON TO ALL FUNDS

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

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

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

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

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

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

Year 2000 Problem The Funds and its service providers depend upon the smooth
functioning of their computer systems. Unfortunately, because of the way dates
are encoded and calculated, many computer systems in use today cannot recognize
the year 2000, but revert to 1900 or another incorrect date. Computer failures
due to the year 2000 problem could negatively impact the handling of securities
trades and pricing and account services.

The Funds' software vendors and service providers have assured the Funds that
their systems will be adapted in sufficient time to avoid serious problems.
There can be no guarantee, however, that all of their computer systems will be
adapted in time. The Funds do not expect year 2000 conversion costs to be
substantial for the Funds because those costs are borne by the Funds' vendors
and service providers and not directly by the Funds.

Brokers and other intermediaries that hold shareholder accounts may still
experience incompatibility problems. It is also important to keep in mind that
year 2000 issues may negatively impact the companies in which the Funds invest
and, by extension, the value of those companies' shares held by the Funds.

RISK FACTORS SPECIFIC TO MATTHEWS ASIAN GROWTH AND INCOME 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.

<PAGE>

RISK FACTORS SPECIFIC TO MATTHEWS KOREA FUND

Because the Fund intends to invest primarily in equity securities of South
Korean companies, an investor in the Fund should be aware of certain risks
relating to South Korea, the Korean securities markets and international
investments generally which are not typically associated with U.S. domestic
investments. In addition, the Fund may be more volatile than a geographically
diverse fund.

Security Valuation Considerations The Korean government 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 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.

<PAGE>

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

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

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

Political, economic and social uncertainty in North Korea, and the risk of
military action may adversely affect the prices of the Fund's portfolio
securities. Military action or the risk of military action or the economic
collapse of North Korea could have a material adverse effect on Korea, and
consequently, on the ability of the Fund to 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. The financial crisis has led to a recessionary environment,
which is continuing with serious consequences for unemployment and domestic
business activity. The government has initiated, in conjunction with the IMF,
wide-ranging reform activities. The full impact on corporate Korea cannot be
predicted but widespread restructuring and consolidation as well as a continued
high rate of bankruptcies can be expected.

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."

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 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.

<PAGE>

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 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 and also can be found contained in the
Statement of Additional Information dated December 31, 1998.

Trustees
and Officers
G. Paul Matthews
President
Brian Stableford
Treasurer
John H. Dracott
Trustee Emeritus and Secretary
Richard K. Lyons
Trustee
Robert K. Connolly
Trustee
David FitzWilliam-Lay*
Trustee
Norman W. Berryessa
Trustee
* This Trustee is considered an "interested person" of the Funds as
defined under the Act.

<PAGE>

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, 1998 were $115 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. If
Hambrecht and Convergent have acquired more than 25% ownership by the effective
date: [In addition, Convergent Capital Management, Inc. ("Convergent") and the
Hambrecht 1980 Revocable Trust ("Hambrecht") may be deemed to be control persons
of the Advisor on the basis of each entity's ownership of stock of the Advisor.
Convergent, a money management holding company that invests in investment
management firms, currently owns interests in [six] affiliated firms with
approximately $[5.5] billion in assets under management. Hambrecht is a
revocable trust whose trustees and beneficiaries are William and Sara
Hambrecht.]
OR
If neither Hambrecht nor Convergent exceed 25% ownership by the
effective date: [In addition, Convergent Capital Management, Inc. ("Convergent")
and the Hambrecht 1980 Revocable Trust ("Hambrecht") have each made an equity
investment in the Advisor and have the ability to purchase additional interests.
Convergent, a money management holding company that invests in investment
management firms, currently owns interests in [six] affiliated firms with
approximately $[5.5] billion in assets under management. Hambrecht is a
revocable trust whose trustees and beneficiaries are William and Sarah
Hambrecht. The purchase of additional interests by either Convergent or
Hambrecht could result in a change in control of the Advisor at some point in
the future. The shareholders of each Fund, at a meeting held on October 8, 1998,
approved new investment advisory agreements to take effect upon the acquisition
by Convergent or Hambrecht of more than 25% of the equity ownership of the
Advisor, provided however, that the acquisition occurs within a reasonable time
following shareholder approval. Upon the acquisition of more than 25% of the
equity ownership of the Advisor, Convergent or Hambrecht or each of them, as the
case may be, may be deemed to be control persons of the Advisor.] The Advisor
does not presently serve as investment advisor to any other investment companies
in the United States.

<PAGE>

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 27, 1996, the Advisor has voluntarily undertaken to reimburse
Class I shares of Matthews Pacific Tiger Fund, Matthews Asian Growth and Income
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.

Effective April 1998, a Shareholder Servicing Plan was adopted, which requires
each Fund to pay the Advisor a service fee up to 0.25% to the extent shareholder
costs are incurred.

Daewoo Capital Management Co., Ltd.
Until December 31, 1998, Daewoo Capital Management Co., Ltd. acted as Research
Advisor to the Advisor, pursuant to a Research and Advisory Agreement with the
Advisor. For its services, the Advisor paid the Research Advisor a monthly fee
equal to an annual rate of 0.50% of the Matthews Korea Fund's month-end net
assets.

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 all other investment portfolios managed by Matthews
International Capital Management, LLC.

Mark Headley joined Matthews International in April 1995 as Managing Director
and as Senior Analyst on the investment team. He has 10 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, 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
First Data Distributors, Inc. ("FDDI"), 4400 Computer Drive, Westboro,
Massachusetts 01581-5108, has been engaged as the underwriter of the shares of
the Company pursuant to a written agreement. FDDI'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 First Data Investor
Services Group, Inc. ("Investor Services Group"), 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 Investor Services Group provides to the Company
include: the coordination and monitoring of any third parties furnishing
services to the Funds; providing the necessary office space, equipment and
personnel to perform administrative and clerical functions for the Funds;
preparing, filing and distributing proxy materials and periodic reports to
shareholders, registration statements and other documents; and responding to
shareholder inquiries and fund accounting and pricing services (including the
daily calculation of the Fund's net asset value). Pursuant to this agreement,
Investor Services Group 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.

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" including any shareholder servicing agents; costs of obtaining
quotations of portfolio securities; and pricing of Fund shares.

<PAGE>

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 shareowner approval of
such plan or any amendment thereto), will be borne solely by shareowners 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 shareowner reports, prospectuses, and
proxy statements to current shareowners 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, as amended.

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.
Investor Services Group 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 FDDI, 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 Trust.

The minimum initial investment for each Fund is $2,500. 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 $500.
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 Investor Services
Group 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.

<PAGE>

Matthews Pacific Tiger Fund and Matthews Korea 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.

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 First Data Investor Services Group,
Inc., 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 First Data Investor
Services Group, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903. 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, Investor
Services Group. 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: FIRST DATA INVESTOR SERVICES
GROUP, INC. A/C 98-7037-071-9 FBO "Matthews Pacific Tiger Fund - Class I Shares"
"Matthews Asian Growth and Income Fund - Class I Shares" "Matthews Korea Fund -
Class I Shares" OR "Matthews Dragon Century China Fund - Class I Shares"
"SHAREHOLDER NAME AND ACCOUNT NUMBER"

<PAGE>

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 Investor
Services Group 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 Investor Services Group 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 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 First Data Investor Services Group, Inc.,
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903. Orders to
purchase shares are effective on the day Investor Services Group 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 Investor Services Group each reserve the right to reject any purchase
order in whole or in part.

<PAGE>

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 Investor
Services Group 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
Investor Services Group 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 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.

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 First
Data Investor Services Group, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903.

A written request must be in good order which means that it must: (i) identify
the shareholder's account name and account number; (ii) state the number of
shares or dollar amount to be redeemed; (iii) be signed by each registered owner
exactly as the shares are registered; and (iv) identify the name of the Fund. To
prevent fraudulent redemptions, a signature guarantee for the signature of each
person in whose name the account is registered is required for any of the
following: (i) on all written redemptions requests over $100,000; (ii) if the
proceeds (any amount) are to be paid to someone other than the registered
owner(s) of the account; or (iii) if the proceeds are to be sent to any address
other than the shareholder's address of record, pre-authorized bank account or
brokerage firm account. Signatures must be guaranteed by an "eligible guarantor
institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934. Eligible guarantor institutions include banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or maintain net capital of
at least $100,000. Notary public endorsement will not be accepted.

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

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

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

The Funds reserve the right to refuse a wire or telephone redemption if it is
believed advisable to do so. 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 2.00% 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 $2,500 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 $2,500 before the redemption is processed.

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

SHAREHOLDER SERVICES

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

Automatic Investing
The Funds offer an automatic monthly investment plan, details of which can be
obtained from the transfer agent. Shareholders simply authorize the automatic
withdrawal of funds from their bank account into the respective Fund. The
minimum subsequent investment pursuant to this plan is $100 per month. The
initial account must be opened first with the $2,500 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, Martin Luther King Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

The net asset value per share is computed by adding the value of all securities
and other assets in the portfolio, deducting any liabilities, and dividing by
the total number of outstanding shares. Expenses are accrued daily and applied
when determining the net asset value. The Funds' equity securities are valued
based on market quotations or, when no market quotations are available, at fair
value as determined in good faith by or under direction of the 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 distribute its net investment income annually in December.
Matthews Asian Growth and Income 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
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 Funds' shares. The tax treatment of distributions of ordinary
income or capital gains will be the same whether the shareholder reinvests the
distributions or elects to receive them in cash.

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

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

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

<PAGE>

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
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.

<PAGE>

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

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

<PAGE>

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.

<PAGE>

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.

<PAGE>

BOARD OF TRUSTEES
Richard K. Lyons
Robert K. Connolly
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

UNDERWRITER
First Data Distributors, Inc.
4400 Computer Drive
Westboro, MA 01581-5108

SHAREHOLDER SERVICES
First Data Investor Services Group, 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

<PAGE>

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 First Data Investor Services Group, Inc., P.O. Box
61503, 3200 Horizon Drive, King of Prussia, PA 19406-0903.

- ------ ----------------------------------------------------------------------
1 CHOOSE YOUR INVESTMENTS
- ------ ---------------------------------------------------------------------

There is an initial investment of $2,500.00, $500.00 for a Retirement Plan
account.
<TABLE>
<CAPTION>
<S> <C> <C>

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

- ------ -----------------------------------------------------------------------------------------------------------------
2 INVESTMENT METHOD
- ------ -----------------------------------------------------------------------------------------------------------------
|_| BY WIRE: Federal Funds were wired on
|_| BY CHECK: I have enclosed a check for $________ _____ /_____ /_____ for Acct. # ________________
MO. DAY YR.
- ------ -----------------------------------------------------------------------------------------------------------------
3 ACCOUNT REGISTRATION
- ------ -----------------------------------------------------------------------------------------------------------------

|_| INDIVIDUAL OR JOINT ACCOUNT |_| TRUST

as trustee(s) of
OWNER'S NAME TRUSTEE(S) NAME

- - for the benefit of
----------------------------------------------- ------------------------------------
OWNER'S SOCIAL SECURITY NO. NAME OF TRUST AGREEMENT

JOINT OWNER'S NAME BENEFICIARY'S NAME

- - - - / /
----------------------------------------------- ---------------------------- ------------------
JOINT OWNER'S SOCIAL SECURITY NO. TAXPAYER ID NUMBER DATE OF TRUST
AGREEMENT
|_| GIFT OR TRANSFER TO A MINOR |_| CORPORATION, PARTNERSHIP OR
OTHER ENTITY
as custodian for
CUSTODIAN NAME NAME OF CORPORATION OR OTHER ENTITY

under the
MINOR'S NAME TITLE OF ENTITY

Uniform Gifts/Transfers to Minors Act - -
STATE TAXPAYER ID NUMBER

- - /
------------------------------------ ----------
/
MINOR'S SOCIAL DATE OF BIRTH
SECURITY NO.
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
--------------------- ----------------------
DAY PHONE EVENING PHONE indicated.

CITIZEN OF:
|_| U.S. |_| OTHER
PLEASE SPECIFY

</TABLE>

<PAGE>

Class I

- ------ -----------------------------------------------------------------------------------------------------------------
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 complete below.

TELEPHONE PURCHASE |_| Yes |_| No
NAME OF BANK
TELEPHONE REDEMPTION |_| Yes |_| No

I (we) authorize First Data Investor Services Group, Inc. to CITY STATE
honor telephone instructions for my (our) account. Neither
the Fund nor First Data Investor Services Group, Inc. will
be liable for properly acting upon telephone instructions BANK EXCHANGE ACCOUNT |_|CHECKING |_| SAVINGS
believed to be genuine. Please attach a voided check on the NUMBER NUMBER
Transfer account and

</TABLE>

- ------ --------------------------------------------------------------------
7 SIGNATURE CERTIFICATION
- ------ --------------------------------------------------------------------

The following is required by Federal tax law to avoid 31% backup withholding:
"By signing below, I certify under the 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 First Data Investor Services
Group, Inc. for any loss or liability from acting or relying upon such
instructions.

DEALER NO. BRANCH NO. REP NO.

FIRM NAME REP'S NAME

FIRM ADDRESS

AUTHORIZED SIGNATURE OF DEALER REP'S SIGNATURE

<PAGE>

Matthews International Funds Automatic Investment Plan Class I

Please complete this application and mail to: Matthews International Funds, C/O
First Data Investor Services Group, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>

[ ] I am in the process of establishing a new Account. [ ] Matthews Asian Growth and Income Fund - Class I

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

[ ] Matthews Dragon Century China Fund - Class I

Account Number #

</TABLE>

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, First Data Investor
Services Group, Inc. 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, First Data
Investor Services Group, 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 First
Data Investor Services Group, Inc. upon 30 days written notice or at any
time by the investor by written notice to First Data Investor Services
Group, Inc. which is received no later than 5 business days prior to the
above designated investment date.

<PAGE>

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, 1998

Matthews International Funds (the "Company") is an open-end investment
management company which currently consists of five 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 describes three series of the Company's
shares and pertains only to Class A shares of Matthews Pacific Tiger Fund,
Matthews Korea Fund and Matthews Dragon Century China Fund, however, Class A
shares of Matthews Dragon Century China Fund are not being offered to investors
at this time. This Prospectus 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.

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 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 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 2.00% 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 minimum initial investment for each Fund is $2,500. Subsequent investments
will be accepted in minimum amounts of $500. The minimum initial investment for
IRAs, 401(k), 403(b)(7) plans and other retirement plans is $500. Subsequent
investment for any retirement plan is $50.

The Funds' principal underwriter is First Data Distributors, Inc. ("FDDI"), 4400
Computer Drive, Westboro, Massachusetts 01581-5108.

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, 1998, which has been filed with the Securities and Exchange Commission
("SEC") and is available upon request without charge by contacting First Data
Investor Services Group, Inc., at 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, Pennsylvania 19406-0903 or by calling (800) 892-0382. The Statement of
Additional Information is incorporated by reference into this Prospectus.

<PAGE>

TABLE OF CONTENTS
Page

PROSPECTUS SUMMARY............................................................
EXPENSE INFORMATION...........................................................
FINANCIAL HIGHLIGHTS..........................................................
INVESTMENT OBJECTIVES
Matthews Pacific Tiger Fund..........................................
Matthews Korea Fund.................................................
Matthews Dragon Century China Fund..................................
INVESTMENT POLICIES AND RISKS
Common to all Funds................................................
Specific to Matthews Pacific Tiger Fund............................
Specific to Matthews Korea Fund....................................
Specific to Matthews Dragon Century China Fund.....................
INVESTMENT STRATEGIES AND RISKS
Common to all Funds...............................................
Specific to Matthews Korea Fund...................................
RISK FACTORS
Common to all Funds................................................
Specific to Matthews Korea Fund....................................
Specific to Matthews Dragon Century China Fund....................
MANAGEMENT OF THE FUNDS......................................................
ADMINISTRATION OF THE FUNDS..................................................
DISTRIBUTION PLAN............................................................
PURCHASE OF SHARES...........................................................
EXCHANGE OF SHARES..........................................................
REDEMPTION OF SHARES and REDEMPTION FEE......................................
SHAREHOLDER SERVICES..........................................................
NET ASSET VALUE..............................................................
DIVIDENDS AND TAXES...........................................................
PERFORMANCE INFORMATION......................................................
GENERAL INFORMATION........................................................
APPENDIX....................................................................

<PAGE>

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 five separate series of shares. This Prospectus pertains
only to Class A shares of three series of the Company: Matthews Pacific Tiger
Fund, Matthews Korea Fund and Matthews Dragon Century China Fund however, Class
A shares of the Matthews Dragon Century China Fund are not being offered to
investors at this time. 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 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. 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, 1998, the Advisor had approximately $115 million under management or
committed to management in various fiduciary or advisory capacities, primarily
from private and institutional accounts. First Data Distributors, Inc. ("FDDI"
or the "Distributor"), 4400 Computer Drive, Westboro, Massachusetts 01581-5108
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. First
Data Investor Services Group, Inc. ("Investor Services Group"), 3200 Horizon
Drive, P.O. Box 61503, King of Prussia, Pennsylvania 19406-0903 serves as the
Funds' administrator, transfer agent and fund accounting agent.

As of December 19, 1998, 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 17.28% 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 $2,500 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 Class A 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 2.00%, 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."

<PAGE>

EXPENSE INFORMATION
<TABLE>
<CAPTION>
<S> <C>

Shareholder Transaction Expenses for Each Fund:

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).................................................. 2.00%*

* The Redemption Fee of 2.00% 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."

</TABLE>

Annual Fund Operating Expenses
as a Percentage of Average Net Assets
for the fiscal year ending
August 31, 1998:
Estimated
Other Expenses After Net Expense Ratio
Management 12b-1 Expense Reimbursement After Expense
Fund(1)(2) Fees Expenses Reimbursement(3)

Matthews Pacific Tiger Fund- 1.00% .25% .90% 2.15%
Class A4
Matthews Korea Fund-Class A 1.00% .25% 1.43% 2.68%
Matthews Dragon Century China 1.00% .25% 1.00% 2.25%
Fund-Class A

(1) For each Fund other than the 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 Fund's most recent fiscal year. For
the Matthews Dragon Century China Fund, the ratios set forth above
reflect the anticipated voluntary advisory fee waiver and/or expense
reimbursements by the Advisor.

(2) Matthews Pacific Tiger Fund and Matthews Korea Fund offer two classes of
shares that invest in the same portfolio of securities. Shareowners of
Class A are subject to a sales charge and a 12b-1 Distribution Plan and
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 A shares. See "General Information."

(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%, 1.06%, and 2.31%, respectively. Matthews Korea Fund's advisory fee,
12b-1 expenses, estimated other expenses, and net expense ratio would be
1.00%, 0.25%, 1.06%, and 2.31%, 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%, 6.84%, and 8.09%, 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 Fund 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.

</TABLE>

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>
<S> <C> <C> <C> <C>

Name of Fund 1 Year 3 Years 5 Years 10 Years
- ------------ ------ ------- ------- --------

Matthews Pacific Tiger Fund- $70 $113 $159 $285
Class A
Matthews Korea Fund-Class A $72 $118 $167 $301
Matthews Dragon Century $71 $116 $164 $295
China Fund-Class A

</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.

<PAGE>

FINANCIAL HIGHLIGHTS

Matthews Pacific Tiger Fund
Matthews Korea Fund
Matthews Dragon Century China Fund

The following financial highlights for the Matthews Pacific Tiger Fund and the
Matthews Korea Fund relate to another class of shares, except for the period
ended August 31, 1998, 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 1998 Annual Report to
Shareholders.

Matthews Pacific Tiger Fund Matthews Korea Fund
Period Year Year Period Period Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended
August 31, August August 31, August August August August August
19983 31, 1997 1996 31, 19951 31, 31, 31, 31,
19983 1997 1996 19952
----------- ----------- ------------ ----------- ----------- ----------- ----------- -----------

Net Asset Value, beginning of $10.84 $10.81 $9.77 $10.00 $5.32 $7.23 $9.13 $10.00
------ ----- ------ ----- ----- ----- ------
period................................
Income from
Investment Operations
Net investment income (loss)........0.0.34 0.02 0.01 0.02 (0.04) (0.04)4 (0.07) 0.084
Net realized and unrealized
gain (loss) (6.73) 0.50 1.03 (0.23) (0.27) (1.00)4 (1.75) (0.95)4
------ ---- ---- ------ ------ ------ -------
on investments and foreign
currency..............................
Total from investment 6.70 0.52 1.04 (0.21) (3.31) (1.04) (1.82) (0.87)
---- ---- ---- ------ ------ ------ ------ ------
operations..........................
Less Distributions from:
Net investment income...............(0.01) (0.01) 0.00 (0.02) 0.00 0.00 0.00 0.00
Net realized gains
on investments......................(0.06) (0.02) 0.00 0.00 0.00 0.00 (0.08) 0.00
------ ------ ---- ---- ---- ---- ------ ----
Total distributions..............(0.07) (0.03) 0.00 (0.02) 0.00 0.00 (0.08) 0.00
------ ------ ---- ------ ---- ---- ------ ----
Net Asset Value, end of period......$4.07 $11.30 $10.81 $9.77 $2.01 $6.19 $7.23 $9.13
===== ====== ====== ===== ===== ===== ===== =====
Total Return......................(61.87%)++5 4.75% 10.64% (2.07%)++ (62.03%)++5 (14.38%) (20.11%) (8.70%)++
Ratios/Supplemental Data
Net assets, end of period (in $146 $43,647 $17,148 $1,082 $4,123 $19,356 $2,721 $504
000's)................................
Ratio of expenses to average
net
Assets before reimbursement and
Waiver of expenses by Advisor 11.99%+ 1.97% 4.35% 25.95%+ 2.97%+ 2.90% 11.36% 42.87%+
and Administrator.....................
Ratio of expenses to average
net assets after reimbursement
and waiver of expenses by 1.91%+ 1.90% 1.90% 2.17%+ 2.68%+ 2.50% 2.23% 0.24%+
Advisor and Administrator.............
Ratio of net investment income
(loss) to average net assets
before reimbursement and waiver
of expenses by Advisor and (9.61%)+ 0.20% (2.13%) (23.41%)+ (2.03%)+ (1.81%) (10.44%) (41.79%)+
Administrator.........................
Ratio of net investment income
(loss) to average net assets
after reimbursement and waiver
of expenses by Advisor and 0.47%+ 0.27% 0.32% 0.36%+ (1.74%)+ (1.41%) (1.31%) 0.84%+
Administrator.........................
Portfolio turnover..................73.09% 70.73% 124.69% 92.53%++ 94.01% 112.68% 139.71% 42.16%++

+ Annualized
++ Not Annualized
1 The Fund commenced operations on September 13, 1994.
1 The Fund commenced operations on January 3, 1995.
1 Class A commenced operation on October 9, 1997.
1 Calculated using the average shares method.
1 Total return calculation does not reflect sales load.

</TABLE>

<PAGE>

INVESTMENT OBJECTIVES

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

<PAGE>

INVESTMENT POLICIES AND RISKS COMMON TO ALL FUNDS

While it is unlikely that Asian economies will rapidly resume the high growth
rates seen over the last decade, the Advisor believes that East Asia continues
to offer investors many long-term investment opportunities. This vision for
investment opportunity in the Asian markets is characterized by, among other
factors, global competitiveness on the strength of their brands, technology,
distribution capabilities and new products. East Asia remains one of the world's
premier manufacturing regions.

<PAGE>

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

<PAGE>

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.

<PAGE>

INVESTMENT POLICIES AND RISKS
SPECIFIC TO MATTHEWS KOREA FUND

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

INVESTMENT STRATEGIES 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).

<PAGE>

INVESTMENT STRATEGIES AND RISKS
COMMON TO ALL FUNDS

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.

<PAGE>

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.

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, as
amended (the "1933 Act"), 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 1933 Act
for resales of certain securities to qualified institutional buyers.

<PAGE>

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, as amended,
will be fully collateralized by securities in which the Funds may invest
directly.

<PAGE>

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.

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

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.

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.

<PAGE>

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

<PAGE>

RISK FACTORS SPECIFIC TO
MATTHEWS KOREA 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 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.

<PAGE>

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. The financial crisis has led to a recessionary environment,
which is continuing with serious consequences for unemployment and domestic
business activity. The government has initiated, in conjunction with the
International Monetary Fund, wide-ranging reform activities. The full impact on
corporate Korea cannot be predicted but widespread restructuring and
consolidation as well as a continued high rate of bankruptcies can be expected.

RISK FACTORS 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'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 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

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 and can also be found in the Statement
of Additional Information dated December 31, 1998.

<PAGE>

Trustees and Officers
G. Paul Matthews
President
Brian Stableford
Treasurer
John H. Dracott
Trustee Emeritus and Secretary
Richard K. Lyons
Trustee
Robert K. Connolly
Trustee
David FitzWilliam-Lay*
Trustee
Norman W. Berryessa
Trustee

* This Trustee is considered an "interested person" 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, 1998 were $115 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. If
Hambrecht and Convergent have acquired more than 25% ownership by the effective
date: [In addition, Convergent Capital Management, Inc. ("Convergent") and the
Hambrecht 1980 Revocable Trust ("Hambrecht") may be deemed to be control persons
of the Advisor on the basis of each entity's ownership of stock of the Advisor.
Convergent, a money management holding company that invests in investment
management firms, currently owns interests in [six] affiliated firms with
approximately $[5.5] billion in assets under management. Hambrecht is a
revocable trust whose trustees and beneficiaries are William and Sarah
Hambrecht.]
OR
If neither Hambrecht nor Convergent exceed 25% ownership by the
effective date: [In addition, Convergent Capital Management, Inc. ("Convergent")
and the Hambrecht 1980 Revocable Trust ("Hambrecht") have each made an equity
investment in the Advisor and have the ability to purchase additional interests.
Convergent, a money management holding company that invests in investment
management firms, currently owns interests in [six] affiliated firms with
approximately $[5.5] billion in assets under management. Hambrecht is a
revocable trust whose trustees and beneficiaries are William and Sarah
Hambrecht. The purchase of additional interests by either Convergent or
Hambrecht could result in a change in control of the Advisor at some point in
the future. The shareholders of each Fund, at a meeting held on October 8, 1998,
approved new investment advisory agreements to take effect upon the acquisition
by Convergent or Hambrecht of more than 25% of the equity ownership of the
Advisor, provided however, that the acquisition occurs within a reasonable time
following shareholder approval. Upon the acquisition of more than 25% of the
equity ownership of the Advisor, Convergent or Hambrecht or each of them, as the
case may be, may be deemed to be control persons of the Advisor.] 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.

As of August 1, 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%, and 2.75 % and
2.25% respectively. Such fee reimbursements may be terminated at the discretion
of the Advisor.

<PAGE>

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.

Effective April 1998, a Shareholder Servicing Plan was adopted, which requires
each Fund to pay the Advisor a service fee up to 0.25% to the extent shareholder
costs are incurred.

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 all other investment portfolios managed by Matthews
International Capital Management, LLC.

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

<PAGE>

ADMINISTRATION OF THE FUNDS

The Underwriter
FDDI, 4400 Computer Drive, Westboro, Massachusetts 01581-5108, has been engaged
as the underwriter of the shares of the Company pursuant to a written agreement.
FDDI'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
Investor Services Group, 3200 Horizon Drive, P.O. Box 61503, King of Prussia,
Pennsylvania 19406-0903 serves as administrator and provides fund accounting and
pricing services to the Funds pursuant to an Investment Company Services
Agreement. The services Investor Services Group 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; and responding to shareholder inquiries.
Pursuant to this agreement, Investor Services Group 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 of $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.

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.

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. Investor Services Group
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.

THE DISTRIBUTION PLAN

The Board of Trustees of the Fund has adopted a distribution plan for the Class
A shares pursuant to Rule 12b-1 under the 1940 Act (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."

<PAGE>

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 FDDI each reserve the right to reject any purchase order in whole or
in part.

Purchase orders for shares of each Fund that are received by FDDI 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 are authorized to offer two classes of shares. However, Class A
shares of Matthews Dragon Century China Fund are not being offered to investors
at this time. Only the Class A shares are offered under this Prospectus.

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 First Data Investor Services Group,
Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, Pennsylvania
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 First Data Investor
Services Group, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia,
Pennsylvania 19406-0903. Please enclose the stub of your account statement and
indicate the amount of the investment.

<PAGE>

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: FIRST DATA INVESTOR SERVICES GROUP, INC.
A/C 98-7037-071-9
FBO "Matthews Pacific Tiger Fund - Class A Shares"
OR
"Matthews Korea 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 Investor Services Group 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 Investor Services Group before 5:00 p.m., Eastern time.

<PAGE>

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 First Data Investor Services Group, 3200
Horizon Drive, P.O. Box 61503, King of Prussia, Pennsylvania 19406-0903. Orders
to purchase shares are effective on the day Investor Services Group 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 FDDI, 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>
<S> <C> <C> <C>
- ------------------------------------------------- ------------------ ------------------- ---------------------------

Sales Charge as Reallowance of Brokerage
Sales Charge as Percentage of Net Commission as Percentage
Percentage of Amount Invested of Offering Price
Class A Shares Amount to Purchase Offering Price
- ------------------------------------------------- ------------------ ------------------- ---------------------------
- ------------------------------------------------- ------------------ ------------------- ---------------------------

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>

<PAGE>

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 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 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.

<PAGE>

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

Redemption Fee
With certain exceptions, the Funds may impose a redemption fee of 2.00% 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.

NET ASSET VALUE

DIVIDENDS AND TAXES

Dividends
Matthews Pacific Tiger Fund, Matthews Korea Fund and Matthews Dragon Century
China Fund will distribute its 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 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.

<PAGE>

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
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, the Funds will limit its
investments so that, at the close of each quarter of its taxable year, (i) not
more than 25% of the market value of the Funds' total assets will be invested in
the securities of a single issuer, and (ii) with respect to 50% of the market
value of its total assets, not more than 5% of the market value of its total
assets will be invested in the securities of a single issuer, and it will not
own more than 10% of the outstanding voting securities of a single issuer.

<PAGE>

PERFORMANCE INFORMATION

<PAGE>

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

GENERAL INFORMATION

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. 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 and Matthews
Korea Fund offer two classes of shares: Class A shares which are offered by this
Prospectus, and Class I shares. Matthews Dragon Century China Fund is authorized
to issue Class A shares; however, Class A shares are not offered to investors at
this time. 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 has been passed on by Paul, Hastings, Janofsky and
Walker LLP, 345 California Street, San Francisco, California 94104-2635.
Partners and employees of Paul, Hastings, Janofsky and Walker LLP may own shares
of the Funds from time to time. All accounts will be maintained in book entry
form and no share certificates will be issued.

<PAGE>

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.