MATTHEWS INTERNATIONAL FUNDS, 485APOS, 1999-10-01

MATTHEWS INTERNATIONAL FUNDS
485APOS, 1999-10-01

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UNITED STATES
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. 11 [ X ]

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 14 [ X ]

Matthews International Funds
(Exact name of Registrant as Specified in Charter)

456 Montgomery Street, Suite 1200, 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. Joseph M. O'Donnell, Esq.
Paul, Hastings, Matthews International Capital
Janofsky & Walker LLP Management, LLC
345 California Street 456 Montgomery Street, Suite 1200
San Francisco, CA 94194-2635 San Francisco, California 94104-1245

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).
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)of Rule 485.
[ X ] 75 days after filing pursuant to paragraph (a)(2).
[ ] on (date) pursuant to paragraph (a)(2) 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, 1999 on or before November 30, 1999.

MATTHEWS INTERNATIONAL FUNDS
WWW.MATTHEWSFUNDS.COM

CLASS I SHARES

Prospectus Dated December 15, 1999

[Dragon Art]

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

THE U.S.SECURITIES AND EXCHANGE COMMISSION (the "SEC") HAS NOT APPROVED OF, OR
DISAPPROVED OF THE FUNDS OR THE SECURITIES THAT THE FUNDS SELL. ALSO, THE SEC
HAS NOT PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS.
ANYONE WHO INFORMS YOU OTHERWISE IS COMMITTING A CRIME.

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may any
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities law of any State.

<PAGE>

How to use this document.

This document is called a prospectus. It is intended to explain to you the
information that you need to know so that you may make an informed decision as
to whether an investment in one or more of Matthews International Funds is right
for you.

This prospectus begins with some general information which is then explained in
greater detail further in the document. A second document called the "Statement
of Additional Information" or SAI for short, provides expanded information and
much greater detail than the prospectus.

The SAI is available to you free of charge. To receive an SAI, please call
1.800.789.2742, visit our site on the internet at "www.matthewsfunds.com" or
visit the SEC's web site at "www.sec.gov" and go into the EDGAR database.

Please read this document carefully before you make any investment decision and
if you have any questions, do not hesitate to contact us at 1.800.789.2742.
Also, please keep this prospectus with your papers for future reference.

Definitions - The following words have special meaning in this prospectus:

Funds means the six individual mutual funds that make up Matthews
International Funds. They are: MATTHEWS ASIAN GROWTH AND INCOME FUND, MATTHEWS
ASIAN TECHNOLOGY FUND, MATTHEWS DRAGON CENTURY CHINA FUND, MATTHEWS JAPAN FUND,
MATTHEWS KOREA FUND, and MATTHEWS PACIFIC TIGER FUND

Pacific Tiger refers to certain Asian countries whose economies have been and
are expected to continue to rapidly develop. Those countries include: China,
Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan
and Thailand, but not Japan.

Asia refers to the Pacific Tiger countries plus Japan and India.

What is considered to be an "Asian Company?" A company is considered to be
"Asian" or "located" in a particular country in Asia if: (i) it is organized
under the laws of China, Hong Kong, India, Indonesia Japan, Malaysia, the
Philippines, Singapore, South Korea, Taiwan or Thailand, or (ii) it derives at
least 50% of its revenues or profits from goods produced or sold, investments
made, services performed, or has at least 50% of its assets located in one of
these countries or (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 or the Advisor means Matthews International Capital Management, LLC,
the company which manages the money that is invested into the Funds.

Summary Information

Investment Goals of the Funds

The investment goal of all six Matthews International Funds is long term capital
appreciation. In addition, Matthews Asian Growth and Income Fund seeks to
provide some current income as well.

Matthews' Investment Strategy

How Matthews chooses investments for each of the funds is known as an investment
strategy. The strategy Matthews uses is called "Growth at a Reasonable Price."
This means that the investment team studies the fundamental characteristics of
companies appropriate for each Fund and from those fundamentals makes a judgment
that certain companies are poised for growth, and at the same time are available
to the Funds at a reasonable price. In addition Matthews may use currency
hedging techniques which help neutralize the impact of the changes in the value
of local Asian currencies as compared to the U.S. dollar.

Fundamental characteristics of a company include the people who are running the
company, the products it makes, the marketing strategy it is following and its
financial health.

If Matthews believes that market conditions are developing in a way that is not
good for the shareholders, it may sell all of a Fund's securities and
temporarily invest the Fund's money in U.S. Government securities or money
market instruments backed by U.S. Government securities. As of the date of this
prospectus this has never happened, but if it were to occur, the investment
goals of the Fund may not be achieved.

Principal Risks of Investing in the Funds

The most important risk to understand is that there is no guarantee that your
investment in the Funds will increase in value. The value of your investment in
the Funds could go down, meaning you could lose money.

The Funds concentrate their investments in Asia. The Asian markets can be very
volatile for many reasons including the size of the local economies (as compared
with the United States) and each country's unique political structure. This
volatility can cause the price of the Funds' shares (the net asset value or
"NAV") to go up or down dramatically. Because of this volatility, we recommended
that you invest in the Funds as a long term investment only, and only for a
portion of your investment portfolio, not for all of it.

Further, when a Fund buys or sells stock on an Asian stock market, the
transaction is made in the local currency. The price at which the Funds must
purchase or sell local currency will impact the value of your shares in the
Funds. These and other risks are more fully discussed below and in the SAI.

Long Term Investing and Volatility

Dramatic changes (volatility) in the price of an investment can be dangerous
because you may have planned or may need to sell your investment just at a time
when its value has decreased. We recommend investment in the Funds only as a
long term investment (5 years and longer) because you will be better able to
plan to sell your shares at a time when this volatility will not be as great a
factor in your decision process.

Principal Investment Strategies of the Funds

Matthews Asian Growth and Income Fund

Investment Strategy: Investing in securities which may be converted into equity
securities of companies located in Asia. Examples of convertible securities are
convertible bonds and debentures.

Unique Risks: Many Asian convertible securities and bonds are not rated by
rating agencies like Moody's or Standard & Poors, or if they are rated, they're
rated below investment grade. These securities are commonly referred to as "junk
bonds" and may have a greater risk of default.

Matthews Asian Technology Fund

Investment Strategy: Investing in the equity securities of companies located in
Asia which produce technology related products or provide technology related
services.

Unique Risks: This Fund will concentrate its investments in the equity
securities of companies within the technology sector. This means that the
performance of this sector as opposed to the local economy as a whole will
impact the performance of this Fund. The Advisor believes that there is long
term growth opportunity within this specific sector, but acknowledges that it
has been especially volatile in recent months.

Matthews Dragon Century China Fund

Investment Strategy: Investing in the equity securities of companies located in
China. China includes Taiwan and Hong Kong.

Unique Risks: Although Matthews believes that the potential within China is
great, its market driven economy is still in the early stages of development. In
addition its government, banking sector and securities markets are in a period
of change which can cause dramatic volatility in the prices of the stock of
Chinese companies.

Matthews Japan Fund

Investment Strategy: Investing in the equity securities of companies located in
Japan.

Unique Risks: Japan is the second largest economy in the world, but it has been
in recession lately. The government there has been working to change certain
regulations and policies that could help its economy, but there is no guarantee
that these changes will occur or be effective.

Matthews Korea Fund

Investment Strategy: Investing in the equity securities of companies located in
South Korea.

Unique Risks: The government of South Korea has embarked upon a dramatic
business reform program that may let certain companies fail because they are not
profitable. In the long term we believe that this is a very important positive
step in Korea's continued growth and development, but it will cause uncertainty
and volatility in the short term. There is no guarantee that this program will
be effective.

Matthews Pacific Tiger Fund

Investment Strategy: Investing in the equity securities of companies located in
the Pacific Tiger countries.

Unique Risks: Since this Fund may invest in companies from many different
countries, each country's size, level of economic development and governmental
stability will have an impact on the value of those companies. In general, the
economies of these countries are smaller and less developed than in the United
States. Their stock exchanges and brokerage industries do not have the level of
government oversight as do those in the United States and sometimes their
governments are unstable. Each of these factors can cause these stock markets to
be more volatile. Please read the SAI for an extensive presentation of these and
other risk factors.

Past Performance

The bar charts and performance table help show some of the risks of investing in
the Funds. The bar charts show each Fund's performance from prior years. Below
the charts you will find the best and worst returns since each Fund began. You
can then compare those returns with that of a broad based index found next. This
information only speaks to the past. We do not know how the Funds will perform
in the future.

[To be filed by subsequent amendment]

The Dragon Century China Fund, Japan Fund and Asian Technology Fund have not
been in operation for a full calendar year and therefore have no meaningful past
performance.

Average Annual Total Return
Index Comparison
1998 Since Inception to 12-31-98
Growth and Income Fund xxx% xxx% xxx% (From 9/12/94)
Pacific Tiger Fund xxx% xxx% xxx% (From 9/12/94)
MSCI All Country
Far East ex Japan Index xxx% xxx% xxx% (From 9/12/94)

Korea Fund xxx% xxx% xxx% (From 1/2/95)

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of any of the Funds:

Shareholder Fees

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 0.00%

Contingent Deferred Sales Charge
as a percentage of original purchase price 0.00%

*Redemption Fee
as a percentage of amount redeemed within 90 days of purchase 2.00%

Other Other Net
Expenses Expenses
Management 12b-1 After Expense After Expense
Matthews Fund, Class I Fees Expenses Reimbursement* Reimbursement

Asia Technology 1.00% None 1.00% 2.00%
Asian Growth and Income 1.00% None 0.90% 1.90%
Dragon Century China 1.00% None 1.00% 2.00%
Korea 1.00% None 1.06% 2.06%
Japan 1.00% None 1.00% 2.00%
Pacific Tiger 1.00% None 0.90% 1.90%

Under a written agreement between the Funds and the Advisor, the Advisor agrees
to reimburse money to a Fund if its expense ratio exceeds a certain percentage
level. That level is 1.9% for Asian Growth and Income and Pacific Tiger, 2% for
Asian Technology, Dragon Century China and Japan, and 2.5% for Korea. In turn,
if a Funds' expenses fall below the level noted above within three years after
the Advisor has made such a reimbursement, a Fund may reimburse the Advisor up
to an amount not to exceed its expense limitation. This agreement will continue
through at least August 31, 2000, the end of the Funds' fiscal year. Had the
Advisor not reimbursed expenses to the Funds, the actual expense ratios would
have been: Asia Tech, ___%, Asian Growth and Income _____%, Dragon Century
China, _____%, Japan, _____%, Korea, _____% and Pacific Tiger, _____%.

Example

Based on the level of expenses listed above, the total expenses relating to an
investment of $10,000 would be as follows, assuming a 5% annual return,
reinvestment of all dividends and distributions and redemption at the end of
each time period.

Name of Fund 1 Year 3 Years 5 Years 10 Years

Asian Growth and Income Fund
Asian Technology Fund
Dragon Century China Fund
Japan Fund
Korea Fund
Pacific Tiger Fund

*This fund is new for 2000 and does not have an operating history. The figures
here are estimates.

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 will most likely be different than
those shown.

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.

The Investment Process

The investment goal of each Fund noted above is fundamental. This means that it
can not be changed without a vote of a majority of the voting securities of each
respective Fund.

The way Matthews attempts to achieve each Fund's investment goal is not
fundamental and may change without shareholder approval. While an investment
policy or restriction may be changed by the Trustees of the Company without
shareholder approval, you will be notified before we make any material change.

Management Of The Funds

Matthews International Capital Management LLC is the investment advisor to the
Funds. Matthews' address is 456 Montgomery Street, Suite 1200, San Francisco,
California 94104-1245 and can be reached by telephone toll-free at
1-800-789-2742. The Advisor was founded in 1991 by G. Paul Matthews who serves
as President. Each Fund pays an annual fee of 1% of its total assets to Matthews
for the services it provides to the Funds.

Matthews invests the Funds' assets, manages the Funds' business affairs and
supervises overall day-to-day operations. Matthews 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.

Portfolio Managers

Asian Growth and Income Fund G. Paul Matthews
Asian Technology Fund Mark W. Headley and [__________]
Dragon Century China Fund G. Paul Matthews, Mark W. Headley and
Richard H. Gao
Japan Fund James M. Bogin and Mark W. Headley
Korea Fund Mark W. Headley and G. Paul Matthews
Pacific Tiger Fund Mark W. Headley and G. Paul Matthews

G. Paul Matthews has been actively involved in the Asian financial markets since
1982. Prior to founding Matthews International Capital Management in 1991, he
served as portfolio manager of G. T. Pacific Growth Fund from 1982-85. While
residing in Hong Kong, Mr. Matthews oversaw all Asian investment from 1985-88
for G. T. Management Asia. From 1989 to 1991 he was self-employed. Mr. Matthews
holds an M. A. in history and law from Cambridge University in the United
Kingdom.

Mark W. Headley joined Matthews International as Managing Director and as Senior
Analyst on the investment team in 1995. He has over 10 years of experience in
the Asian Tiger markets. From 1989 to 1992 he was a Vice President of Newport
Pacific Management. In 1992, Mr. Headley moved to Hong Kong, where he served as
a Director of Regent Fund Management. He returned to San Francisco in 1993 and
joined Litman/Gregory & Co. as Director of International Investments. Mr.
Headley holds a B.A. in Economics and Politics from the University of California
at Santa Cruz.

James M. Bogin joined Matthews International in 1998 as a Portfolio Manager.
Prior to joining Matthews, Mr. Bogin served as Senior Portfolio Manager from
1993-97 at LGT Asset Management in San Francisco where he managed Global
Developing Markets portfolios. Mr. Bogin began his investment career in Tokyo
where he worked as an equity analyst from 1985-87. In 1987, he moved to Hong
Kong where he worked as a Portfolio Manager. Mr. Bogin moved back to Tokyo in
1989 as a Portfolio Manager for Nomura Investment Management Tokyo where he
managed mutual funds investing in Asian equities. Mr. Bogin is fluent in
Japanese. He holds a masters' degree in International Management, Finances from
American Graduate School of International Management in Glendale Arizona as well
as a B.A. in the Classics from Harvard College in Cambridge Massachusetts.

Richard H. Gao joined Matthews International in 1997 as China analyst and
assistant portfolio manager In 1989 Mr. Gao served as a loan officer at the Bank
of China in the city of Guanzhow, China. He later became a foreign exchange
trader at the Bank of China's Treasury Department in 1991. From 1993 through
1994 he serves as assistant manager in charge of foreign exchange trading for
import/export companies at the Bank. Mr. Gao holds an M.B.A. from Dominican
College of San Rafael and is fluent in three Chinese languages: Mandarin,
Cantonese and Shanghaiese.

Andrew T. Foster joined Matthews International in November 1998 as an analyst
and was promoted to assistant portfolio manager in August 1999. Prior to joining
Matthews, Mr. Foster provided management consulting services for A.T. Kearney
and was based in Singapore from 1996 to 1998. During the years 1992 through 1998
Mr. Foster attended Stanford University where he was awarded a dual degree in
Public Policy, with honors, and in Economics.

All members of the investment team travel extensively to Asia to conduct
research relating to those markets.

Shareholder Information

Pricing of Fund Shares

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

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

A Fund's 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. A Fund that uses
fair value to price securities may value those securities higher or lower than
another fund that uses market quotations to price the same securities.

Securities listed on any U.S. 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.

Short-term fixed-income securities having a maturity of 60 days or less are
valued at amortized cost, which the Board of Trustees believes represents fair
value. When a security is valued at amortized cost, it is first valued at its
purchase price. After it is purchased, it is valued by assuming a constant
amortization to maturity of any discount or premium (because the Fund will hold
the security till it matures and then receive its face value), regardless of the
way of changing interest rates could change the market value of the instrument.

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. 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.

Purchase Of Shares

You may purchase Fund shares directly from the Funds by mail or by wire without
paying any sales charge. The price for each share you buy will be the NAV
calculated after your order is "accepted" by the Fund. "Accepted" means that
payment for your purchase and all the information needed to complete your order
must be received by the Fund before your order is processed. If your order is
accepted before 4:00 p.m. on a day the Funds' NAVs are calculated, the price you
pay will be that day's NAV. If your order is Accepted after 4:00 p.m., the price
you will pay will be the next NAV calculated.

The Funds' shares are sold through an underwriter. The Funds' underwriter is
First Data Distributors, Inc. ("FDDI"), a registered broker-dealer. FDDI's
address is 4400 Computer Drive, Westborough, MA 01581 and can be reached by
telephone toll-free at (800) 892-0382. Shares of the Funds may also be purchased
through various brokers who have arrangements with it.

You may purchase and sell shares through securities brokers and benefit plan
administrators or their subagents. You should contact them directly for
information regarding how to invest or redeem through them. They may also charge
you service or transaction fees. If you purchase or redeem shares through them,
you will receive the NAV calculated after receipt of the order by them
(generally, 4:00 p.m. Eastern time)on any day the NYSE is open. If your order is
received by them after that time, it will be purchased or redeemed at the
next-calculated NAV. Brokers and benefit plan administrators who perform
shareholder servicing for the Fund may receive fees from the Funds or Matthews
for providing these services. These brokers may charge you a fee for their
services.

Minimum Initial Investment (non-retirement plan account): $2,500.
Subsequent Investments: $250.

Minimum Initial Investment (*retirement plan account): $500.
Subsequent Investments: $50.
Retirement Plan Accounts include IRAs, 401(k) and 403(b)(7) plans.
*Speak with the Funds' agents for the many retirement plans available.

The Funds may reject any purchase order or stop selling shares of the Funds at
any time. Also, the Funds may vary or waive the initial investment minimum and
minimums for additional investments.

Open an Account Adding to an Account

By Mail Complete and sign application Make check payable to:
Make check payable to: Matthews (name of Fund)
Matthews (name of Fund) Mail check with a statement stub to
Mail application and check to: address at left.
Matthews International Funds
Post Office Box 61767
211 South Gulph Road
King of Prussia, PA 19406

By Phone You can not open an account over When you open your account, you must
the telephone. Check the box for "Telephone Options." Note that you may only
exchange shares from one Matthews Fund to another.

*By Wire Complete and sign application Notify Funds' agent by calling:
Mail application to: 800-892-0382. Then wire funds to:
Matthews International Funds Boston Safe Deposit & Trust
Post Office Box 61767 ABA # 011001234
211 South Gulph Road Credit:[name of specific Matthews Fund]
King of Prussia, PA 19406 Account # 000221
Wire funds using FBO: [your name and account number]
instructions at right.
By N/A Complete the Automatic Investment
Automatic Plan section of the application. Be
Investment sure to sign the application and
Plan include a voided check when returning
it to the Fund.

*Note that wire fees are charged by most banks.

Selling (Redeeming) Shares

You may sell your shares back to a Fund on any day it is open for business. To
receive a specific day's NAV, your request must be received by the Funds before
4:00 p.m. of that day. If it is received after 4:00 p.m., you will receive the
next NAV calculated.

If you used a check to buy your shares, your request to sell your shares will
not be processed until the Funds are sure that your check has cleared. This
could take as much as 15 days or more.

If your request to sell your shares is made be telephone, you may have
difficulty getting through to the Funds in times of drastic market conditions.
If the Funds believe that it is in the best interest of all the shareholders, it
may modify or discontinue telephone transactions without any notice.

Telephone Security

The convenience of using telephone transactions may have a cost in decreased
security. The Funds employ certain security measures as they process telephone
transactions. If these security procedures are used, the Funds or its agents
will not be responsible for any losses that you incur because of a fraudulent
telephone transaction. If the security measures are not followed and you incur a
loss because of a fraudulent telephone transaction, the Funds or its agents will
be responsible for that loss.

Selling (Redeeming) Shares

By Mail Send a letter to the Funds at the following address:
Matthews International Funds
Post Office Box 61767
211 South Gulph Road
King of Prussia, PA 19406

The letter must include your name and account number, the name of the Fund and
the amount you want to sell in dollars or shares. This letter must be signed by
each owner of the account.

For security purposes, a signature guarantee will be required
if:
- your request is for an amount over $100,000, or
- the money is to be paid to anyone other than the registere
owners or
- the money is to be sent to an address which is different
than the registered address or to a bank account other
than the account which was pre-authorized.

By Phone When you opened your account, you must have checked the
appropriate part of the Application or after you opened your
account, you have instructed the Funds to allow telephone
transactions. Any such instruction must be made by mail with
signature guarantees Call 800-892-0382

By Wire Same as by phone above.

Through a
Broker Contact your broker directly. Note that your Broker may charge
you a fee.

Redemption Fee

Please remember that if you sell your shares within 90 days of the day you
bought them, the money you receive will be 2% less than the total amount
redeemed. This 2% fee is retained by the Funds to compensate the Funds for the
extra expense it incurs because of short term trading. In addition, the Funds
hope that the fee will discourage short term trading of its shares.

Redemption In Kind

Under certain circumstances, you could receive your redemption proceeds as a
combination of cash and securities. Receiving securities in stead of cash is
called "redemption in kind." Even though the Funds are permitted to do this, the
first $250,000 of any redemption must be paid to you in cash. Note that if you
receive securities as well, you will incur transactions charges if you sell
them.

Minimum Size of an Account

The Funds are charged by their service providers a fee for each account. If an
account balance falls below $2,500, it becomes too expensive to keep it open. If
this happens to your account we will give you the option of investing more money
into you account, or closing it. You will receive a letter from the fund
discussing your options in the event your account falls below $2,500.

Distributions

All of the Funds except Growth and Income will distribute their net investment
income annually in December. Growth and Income 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.

All such distributions are reinvested automatically in additional shares at net
asset value, unless you elect to receive them in cash. The way you receive
distributions may be changed at any time by writing the Funds.

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 will be reinvested in the shareholder's account at the then current net
asset value and the dividend option changed from cash to reinvest.

Distributions are treated the same for tax purposes whether received in cash or
reinvested. 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.

Taxes

An investment in the Funds has certain tax consequences, depending on the type
of account that you have. Distributions are subject to federal income tax and
may also be subject to state and local income taxes. Distributions are generally
taxable when they are paid, whether in cash or by reinvestment. Distributions
declared in October, November or December, but paid in the following January are
taxable as if they were paid on December 31.

The exchange of one Matthews Fund for another is a "taxable event" which means
that if you have a gain you may be obligated to pay tax on it.

If you have a qualified retirement account, taxes are generally deferred until
distributions are made from the retirement account.

For federal income tax purposes:

Type of Distribution: Taxed as:

Income dividends Ordinary Income
Short-term capital gains Ordinary Income
Long term capital gains Capital Gains

Make sure you have a social security number or tax I.D. number on file with the
Funds. If you do not, you may be subject to a 31 percent back-up withholding on
your distributions.

Speak with your tax counselor for complete information concerning the tax
implications of your ownership of the Funds.

Financial Highlights

[To be filed by subsequent amendment]

<PAGE>

[back cover]

General Information

If you with to know more about Matthews International Funds, You will find
additional information in the following documents.

SHAREOWNER REPORTS
You will receive Semi-Annual Reports dated February 28 and Annual Reports,
audited by independent accountants, dated August 31. These reports contain a
discussion of the market conditions and investment strategies that significantly
affected each Fund's performance during its last fiscal year.

STATEMENT OF ADDIDITONAL INFORMATION (SAI) The SAI, which is incorporated into
this prospectus by reference and dated December 15, 1999, is available to you
without charge. It contains more detailed information about the Funds.

HOW TO OBTAIN REPORTS
Contacting Matthews International Funds You can get free copies of the reports
and SAI, request other information and discuss your questions about the Funds by
contacting:

Address: Matthews International Funds
P.O. Box 61767
211 South Gulph Road
King of Prussia, PA 19406

Phone: 800-789-2742

Web site: www.matthewsfunds.com

Obtaining Information from the SEC
You can visit the SEC's web site at http://www.sec.gov to view the SAI and other
information. You can also view and copy information about the Funds at the SEC's
Public Reference Room in Washington, D.C. Also, you can obtain copies of this
information by sending your request and duplication fee to the SEC's Public
Reference Room, Washington D.C. 20549-6009. To find out more about the Public
Reference Room, you can call the SEC at 1-800-SEC-0300

Investment Company Act File Number: 811-08510

MATTHEWS INTERNATIONAL FUNDS
WWW.MATTHEWSFUNDS.COM

CLASS A SHARES

Prospectus Dated December 15, 1999

[Dragon Art]

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

THE U.S.SECURITIES AND EXCHANGE COMMISSION (the "SEC") HAS NOT APPROVED OF, OR
DISAPPROVED OF THE FUND OR THE SECURITIES THAT THE FUND SELLS. ALSO, THE SEC HAS
NOT PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANYONE WHO INFORMS
YOU OTHERWISE IS COMMITTING A CRIME.

<PAGE>

How to use this document.

The SAI is available to you free of charge. To receive an SAI, please call
1.800.789.2742, visit our site on the internet at "www.matthesfunds.com" or
visit the SEC's web site at "www.sec.gov" and go into the EDGAR database.

Definitions - The following words have special meaning in this prospectus:

Funds means the three individual mutual funds that make up Matthews
International Funds' Class "A" Shares. They are: MATTHEWS DRAGON CENTURY CHINA
FUND, MATTHEWS KOREA FUND, and MATTHEWS PACIFIC TIGER FUND. Please note that as
of this date, Dragon Century China Fund is not being offered as a Class A share.

Asia refers to the Pacific Tiger countries plus Japan and India.

What is considered to be an "Asian Company?" A company is considered to be
"Asian" or "located" in a particular country in Asia if: (i) it is organized
under the laws of China, Hong Kong, India, Indonesia, Japan, Malaysia, the
Philippines, Singapore, South Korea, Taiwan or Thailand, or (ii) it derives at
least 50% of its revenues or profits from goods produced or sold, investments
made, services performed, or has at least 50% of its assets located in one of
these countries or (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 or The Advisor means Matthews International Capital Management, LLC,
the company which manages the money which is invested into the Funds.

Summary Information

Investment Goals of the Funds

The investment goal of these three Matthews International Funds is long term
capital appreciation.

<PAGE>

Matthews' Investment Strategy

How Matthews chooses investments for each of the Funds is known as an investment
strategy. The strategy Matthews uses is called "Growth at a Reasonable Price."
This means that the investment team studies the fundamental characteristics of
companies appropriate for each Fund and from those fundamentals makes a judgment
that certain companies are poised for growth, and at the same time are available
to the Fund at a reasonable price. In addition Matthews may use currency hedging
techniques which helps neutralize the impact of the changes in the value of
local Asian currencies as compared to the U.S. dollar.

Fundamental characteristics of a company include the people who are running the
company, the products it makes, the marketing strategy it is following and its
financial health.

Principal Risks of Investing in the Funds

Further, when one of the Funds buys or sells stock on an Asian stock market, the
transaction is made in the local currency. The price that the Funds must
purchase or sell local currency will impact the value of your shares in the
Funds. These and other risks are more fully discussed below and in the SAI.

Long Term Investing and Volatility

Dramatic changes (volatility) in the price of an investment can be dangerous
because you may have planned or may need to sell your investment just at a time
when its value has decreased. We recommend an investment in the Funds only as a
long term investment (5 years and longer) because you will be better able to
plan to sell your shares at a time when this volatility will not be as great a
factor in your decision process.

Principal Investment Strategies of the Funds

Matthews Dragon Century China Fund

Investment Strategy: investing in the equity securities of companies located in
China. China includes Taiwan and Hong Kong.

Matthews Korea Fund

Investment Strategy: investing in the equity securities of companies located in
South Korea.

Matthews Pacific Tiger Fund

Investment Strategy: investing in the equity securities of companies located in
the Pacific Tiger countries.

Unique Risks Since this Fund may invest in companies from many different
countries, each country's size, level of economic development and governmental
stability will have an impact on the value of those companies. In general, the
economies of these countries are smaller and less developed than in the United
States. Their stock exchanges and brokerage industries do not have the level of
government oversight as do those in the United States and sometimes their
governments are unstable. Each of these factors can cause these stock markets to
be more volatile. Please read the SAI for an extensive presentation of these and
other risk factors.

Past Performance

The bar charts and performance table help show some of the risks of investing in
the Funds. The bar charts show each Funds' performance from prior years. Below
the charts you will find the best and worst returns since each fund began. You
can then compare those returns with that of a broad based index found next. This
information only speaks to the past. We do not know how the Funds will perform
in the future.

[To be filed by subsequent amendment]

<PAGE>

Index Comparison
1998 Since Inception to 12-31-98
MSCI All Country
Far East ex Japan Index xxx% xxx% xxx% (From 9/12/94)

Pacific Tiger Fund

Korea Fund xxx% xxx% xxx% (From 1/2/95)

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of any of the Funds:

Shareholder Fees

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 0.00%

Contingent Deferred Sales Charge
as a percentage of original purchase price 0.00%

*Redemption Fee
as a percentage of amount redeemed within 90 days of purchase 2.00%

Other Net
Expenses Expense
Management 12b-1 After Expense After Expense
Matthews Fund, Class A Fees Expenses Reimbursement* Reimbursement

Dragon Century China 1.00% 0.25% 1.00% 2.15%
Korea 1.00% 0.25% 1.06% 2.75%
Pacific Tiger 1.00% 0.25% 0.90% 2.15%

Under a written agreement between the Funds and the Advisor, the Advisor agrees
to reimburse money to a Fund if its expense ratio exceeds a certain percentage
level. That level for Class A shares is 2.15% for Pacific Tiger, 2.25 for Dragon
Century China and, and 2.75% for Korea. In turn, if a Funds' expenses fall below
the level noted above within three years after the Advisor has made such a
reimbursement, a Fund may reimburse the Advisor up to an amount not to exceed
its expense limitation. This agreement will continue through at least August 31,
2000, the end of the Funds' fiscal year. Had the Advisor not reimbursed expenses
to the Funds, the actual expense ratios would have been: Dragon Century China,
_____%, Korea, _____% and Pacific Tiger, _____%.

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.

Name of Fund Year 3 Years 5 Years 10 Years

Dragon Century China Fund $20 $63 $108 $233
Korea Fund $21 $65 $111 $239
Pacific Tiger Fund $19 $60 $103 $222

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.

The Investment Process

The investment goal of each Fund noted above is fundamental. This means that it
can not be changed without a vote of a majority of the voting securities of each
respective Fund.

The way Matthews attempts to achieve each Funds' investment goals is not
fundamental and may change without shareholder approval. While an investment
policy or restriction may be changed by the Trustees of the Company without
shareholder approval, you will be notified before we make any material change.

Management Of The Funds

Matthews invests the Funds' assets, manages the Funds' business affairs and
supervises its overall day-to-day operations. Matthews 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.Portfolio Managers

Dragon Century China Fund G. Paul Matthews, Mark W. Headley and
Richard H. Gao
Korea Fund Mark W. Headley and G. Paul Matthews
Pacific Tiger Fund Mark W. Headley and G. Paul Matthews

G. Paul Matthews: has been actively involved in the Asian financial markets
since 1982. Prior to founding Matthews International Capital Management in 1991,
he served as portfolio manager of G. T. Pacific Growth Fund from 1982-85. While
residing in Hong Kong, Mr. Matthews oversaw all Asian investment from 1985-88
for G. T. Management Asia. From 1989 to 1991 he was self-employed. Mr. Matthews
holds an M. A. in history and law from Cambridge University in the United
Kingdom.

Mark W. Headley: joined Matthews International as Managing Director and as
Senior Analyst on the investment team in 1995. He has over 10 years of
experience in the Asian Tiger markets. From 1989 to 1992 he was a Vice President
of Newport Pacific Management. In 1992, Mr. Headley moved to Hong Kong, where he
served as a Director of Regent Fund Management. He returned to San Francisco in
1993 and joined Litman/Gregory & Co. as Director of International Investments.
Mr. Headley holds a B.A. in Economics and Politics from the University of
California at Santa Cruz.

James M. Bogin: joined Matthews International in 1998 as a Portfolio Manager.
Prior to joining Matthews, Mr. Bogin served as Senior Portfolio Manager from
1993-97 at LGT Asset Management in San Francisco where he managed Global
Developing Markets portfolios. Mr. Bogin began his investment career in Tokyo
where he worked as an equity analyst from 1985-87. In 1987, he moved to Hong
Kong where he worked as a Portfolio Manager. Mr. Bogin moved back to Tokyo in
1989 as a Portfolio Manager for Nomura Investment Management Tokyo where he
managed mutual funds investing in Asian equities. Mr. Bogin is fluent in
Japanese. He holds a masters' degree in International Management, Finances from
American Graduate School of International Management in Glendale Arizona as well
as a B.A. in the Classics from Harvard College in Cambridge Massachusetts.

Richard H. Gao: joined Matthews International in 1997 as China analyst and
assistant portfolio manager In 1989 Mr. Gao served as a loan officer at the Bank
of China in the city of Guanzhow, China. He later became a foreign exchange
trader at the Bank of China's Treasury Department in 1991. From 1993 through
1994 he serves as assistant manager in charge of foreign exchange trading for
import/export companies at the Bank. Mr. Gao holds an M.B.A. from Dominican
College of San Rafael and is fluent in three Chinese languages: Mandarin,
Cantonese and Shanghaiese.

Andrew T. Foster: joined Matthews International in November 1998 as an analyst
and was promoted to assistant portfolio manager in August 1999. Prior to joining
Matthews, Mr. Foster provided management consulting services for A.T. Kearney
and was based in Singapore from 1996 to 1998. During the years 1992 through 1998
Mr. Foster attended Stanford University where he was awarded a dual degree in
Public Policy, with honors, and in Economics.

All members of the investment team travel extensively to Asia to conduct
research relating to those markets.

Shareholder Information

Pricing of Fund Shares

The price at which the Funds' shares are bought is called the "Public Offering
Price." The Public Offering Price equals the net asset value per share or "NAV"
plus any sales charge applicable to the amount purchased. The price at which
share are sold back to the Fund is the NAV. The NAV is computed once daily as of
the close of regular trading on the New York Stock Exchange ("NYSE"), generally
4:00 p. m. Eastern time. In addition to Saturday and Sunday the NYSE is closed
on the days that the following holidays are observed: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.

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

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.

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.

Purchase Of Shares

You may purchase Fund shares directly from the Funds by mail or by wire at the
Public Offering Price (NAV + any applicable sales charge). The price for each
share you buy will be the Public Offering Price calculated after your order is
"accepted" by the Fund. "Accepted" means that payment for your purchase and all
the information needed to complete your order must be received by the Fund
before your order is processed. If your order is accepted before 4:00 p.m. on a
day the Funds' NAVs are calculated, the price you pay will be that day's NAV. If
your order is Accepted after 4:00 p.m., the price you will pay will be the next
NAV calculated.

The Funds' shares are sold through an underwriter. The Funds' underwriter is
First Data Distributors, Inc. ("FDDI"), a registered broker-dealer. FDDI's
address is 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406 and can
be reached by telephone toll-free at (800) 892-0382. Shares of the Funds may
also be purchased through various brokers who have arrangements with it. These
brokers may charge you fee for their services.

Minimum Initial Investment (non-retirement plan account): $2,500.
Subsequent Investments: $250.

The Funds may reject any purchase order or stop selling shares of the Funds at
any time. Also, the Funds may vary or waive the initial investment minimum and
minimums for additional investments.

Open an Account Adding to an Account

By N/A Complete the Automatic Investment
Automatic Plan section of the application. Be
Investment sure to sign the application and
Plan include a voided check when returning
it to the Fund.

*Note that wire fees are charged by most banks.

Distribution Arrangements

The Shares of the Funds are sold at the Public Offering Price which is
calculated by adding the applicable sales load to the NAV. There is no sales
load charged on the dividends or capital gains paid by the Funds which are then
reinvested. The chart below shows the amount of the sales load compared to the
amount of the Funds purchased and as a percentage of both the offering price as
well as the net amount.

Sales Sales Reallowance
Charges as Charge of Brokerage as
Percentage of Percentage of Percentage of
Class A Shares Purchased Offering Price Net Amount Invested 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%

The Fund is also permitted to pay for certain distribution expenses through a
distribution plan known as a Rule 12b-1 Plan. This rule is part of the law that
regulates the mutual fund industry. Under the Funds' Rule 12b-1 Plan, the Funds
may pay up to 1/4(cent) of each dollar in the fund annually (put another way, an
annual rate of 0.25% of the Funds' net assets) for services such as printing,
mailings, or fees charged by investment professionals who service shareholder
accounts.

Please note that these fees are paid out of the Funds on an ongoing basis and
over time, they increase the cost of your investment and may cost you more that
paying other types of sales charges.

Selling (Redeeming) Shares

You may sell your shares back to the Funds on any day it is open for business.
To receive a specific day's NAV, your request must be received by the Funds
before 4:00 p.m. of that day. If it is received after 4:00 p.m., you will
receive the next NAV calculated.

If you used a check to buy your shares, your request to sell your shares will
not be processed until the Funds are sure that your check has cleared. This
could take as much as 15 days or more.

Telephone Security

Selling (Redeeming) Shares

By Mail Send a letter to the Funds at the following address:
Matthews International Funds
Post Office Box 61767
211 South Gulph Road
King of Prussia, PA 19406

The letter must include your name and account number, the name of
the Fund and the amount you want to sell in dollars or shares. This
letter must be signed by each owner of the account.

For security purposes, a signature guarantee will be required if:
- your request is for an amount over $100,000, or
- the money is to be paid to anyone other than the registered owners
or
- the money is to be sent to an address which is different that
the registered address or to a bank account other than the
account which was pre-authorized.

By Phone When you opened your account, you must have checked the appropriate
part of the Application or after you opened your account, you have
instructed the Funds to allow telephone transactions. Any such
instruction must be made by mail with signature guarantees
call 800-892-0382

By Wire Same as by phone above.

Through a
Broker Contact your broker directly. Note that your Broker may charge you a
fee.

Redemption Fee

Redemption In Kind

Minimum Size of an Account

The Funds are charged by its service providers a fee for each account. If an
account balance falls below $2,500, it becomes too expensive to keep it open. If
this happens to your account we will give you the option of investing more money
into you account, or closing it. You will receive a letter from the fund
discussing your options in the event your account falls below $2,500.

Distributions

Taxes

An investment in the Funds has certain tax consequences, depending on the type
of account that you have. Distributions are subject to federal income tax and
may also be subject to state and local income taxes. Distributions are generally
taxable when they are paid, whether in cash or by reinvestment. Distributions
declared in October, November or December, but and paid in the following January
are taxable as if they were paid on December 31.

The exchange of one Matthews Fund for another is a "taxable event" which means
that if you have a gain you may be obligated to pay tax on it.

If you have a qualified retirement account, taxes are generally deferred until
distributions are made from the retirement account.

For federal income tax purposes:

Type of Distribution: Taxed as:

Income dividends Ordinary Income
Short-term capital gains Ordinary Income
Long term capital gains Capital Gains

Make sure you have a social security number or tax I.D. number on file with the
Funds. If you do not, you may be subject to a 31 percent back-up withholding on
your distributions.

Speak with your tax counselor for complete information concerning the tax
implications of your ownership of the Funds.
Financial Highlights

[To be filed by subsequent amendment]

[back page]

General Information

If you with to know more about Matthews International Funds, You will find
additional information in the following documents.

HOW TO OBTAIN REPORTS
Contacting Matthews International Funds You can get free copies of the reports
and SAI, request other information and discuss your questions about the Funds by
contacting:

Address: Matthews International Funds
P.O. Box 61767
211 South Gulph Road
King of Prussia, PA 19406

Phone: 800-789-2742

Web site: www.matthewsfunds.com

Investment Company Act File Number: 811-08510

<PAGE>

MATTHEWS INTERNATIONAL FUNDS

WWW.MATTHEWSFUNDS.COM

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

STATEMENT OF ADDITIONAL INFORMATION

December 15, 1999

This Statement of Additional Information or "SAI" is not a prospectus, but it
does relate to the prospectuses of Matthews International Funds Class A and
Class I both dated December 15, 1999.

Read this document in conjunction with the Prospectuses. A copy of each
Prospectus may be obtained without charge from the companies at the addresses
and telephone numbers below.

Underwriter: Investment Advisor:

Matthews International
First Data Distributors, Inc. Capital Management, LLC
4400 Computer Drive 456 Montgomery Street, Suite 1200
Westboro, MA 01581-5108 San Francisco, CA 94104
(800) 892-0382 (800) 789-2742

No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Prospectuses in connection with the offering made by the Prospectuses and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Funds or its Underwriter. The Prospectuses do not
constitute an offering by the Funds or by the Underwriter in any jurisdiction in
which such offering may not lawfully be made.

<PAGE>

TABLE OF CONTENTS

Page

Fund History 3

Description of the Fund and Its Investments and Risks
a. Classification 3
b. Investment Strategies and Risk 3
Matthews' Investment Process 3
c. Funds' Policies 29
d. Temporary Defensive Position 29
e. Portfolio Turnover 30

Management of the Funds
a. Board of Trustees; Affiliations, Compensation 31
b. Sales Loads 32

Control Persons and Principal Holders of Securities
a. Control Persons, Principal Holders and Management Ownership 33

Investment Advisory and Other Services
a. The Investment Advisor 34
b. Principal Underwriter 36
c. Service Agreements 36
d. Dealer Roallowances 37
e. Rule 12b-1 Plans 37
f. Other Service Providers 38

Brokerage Allocation and Other Practices 38

Capital Stock and Other Securities
a. Capital Stock 40
b. Other Securities None

Purchase, Redemption and Pricing of Shares
a. Purchase of Shares 40
b. Fund Reorganizations None
c. Offering Price 41
d. Redemption in Kind 42

Taxation of the Fund
a. Subchapter M, IRS Code 43
b. Unique Foreign Tax Issues 44

Underwriters 45

Calculation of Performance Data 45

Other Information 49

Appendix: Bond Ratings 49

Financial Statements 52

<PAGE>

Fund History

Matthews International Funds (the "Trust"), 456 Montgomery Street, Suite 1200,
San Francisco, California 94104, is a family of mutual funds currently offering
six separate series of shares named:

Matthews Asian Growth And Income Fund
Matthews Asian Technology Fund
Matthews Dragon Century China Fund
Matthews Japan Fund
Matthews Korea Fund
Matthews Pacific Tiger Fund

(collectively referred to as the "Funds" or individually as a "Fund"). Dragon
Century China, Korea and Pacific Tiger Funds have registered two classes of
shares: the Retail Class (Class A) and the Institutional Class (Class I). Each
Class of shares is offered in its own prospectus. These two prospectuses are
referred to herein as the "Prospectuses." The Class A Dragon Century China
shares are not being distributed to the public at this time. Shareholders of the
Retail Class shares are subject to a sales charge and annual 12b-1 expenses.

The Trust was organized as a Delaware business trust on April 13, 1994 and
commenced operations on September 13, 1994. It has never been engaged in any
other business.

Description of the Funds and Their Investments and Risks

Please read the following information together with the information contained in
the Prospectuses concerning the investment strategies, risks and policies of the
Funds. The information here supplements the information in the Prospectuses.

Classification: The Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended. Each Fund is
"diversified" except for the Korea Fund which is non diversified. Diversified
means that as to 75% of the assets of a Fund, one holding can not represent more
than 5% of the assets of the Fund, nor can any holding represent more that 10%
of its company's shares. The remaining 25% of the Fund could be invested in one
holding, or in multiple holdings not subject to the above limitations.

Investment Strategies and Risks: As a general matter, the Advisor believes that
the discipline of company evaluation and choosing good stocks (and in the case
of the Growth and Income Fund, convertible securities) is the best way to manage
the assets of the Funds, and to be fully invested as appropriate with cash
needs.

Matthews' Investment Process

Matthews International Capital Management LLC, serves as the investment advisor
to the Trust. In this SAI, they are referred to as "Matthews" or the "Advisor."
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, technology, research and development,
productivity, labor costs, raw material costs and sources, profit margins,
capital resources, governmental regulation, a debt/equity ratio less than the
market average, and other factors. 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.

The Funds may invest in securities of issuers of various sizes, large or small.
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.

Many of the debt and convertible securities in which the Funds 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.

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.

Foreign Currency Transactions:

The Funds must 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 each Fund's total assets (except for Matthews Japan Fund) would
be required to purchase offsetting contracts. Matthews Japan Fund has the option
to invest up to 100% of its total assets to purchase offsetting contracts.

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. Again, we remind you that generally
speaking, the Trust's investment strategy is to invest the shareholders' money
in equity securities (convertible securities in the case of Asian Growth and
Income Fund) consistent with each Funds' investment goal.

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 risks
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. 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.

Risks Associated with Euroconvertible Securities

Most of the 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. 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 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 their 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.

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 Fund 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.

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.

INVESTMENT STRATEGIES 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.

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.

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 STRATEGIES AND RISKS SPECIFIC TO MATTHEWS ASIAN TECHNOLOGY 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 of companies related to the technology sector.
Since this fund is concentrated in this sector, the movements in its NAV will
follow the sector, as opposed to the general movement of the economies of the
countries where the companies are located. This concentration will have a
tendency to make the NAV more volatile than a non concentrated portfolio.

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
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."

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.

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.

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.

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 than 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.

INVESTMENT STRATEGIES AND RISKS 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.

Interest Rate Futures Contracts

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.

INVESTMENT STRATEGIES AND RISKS SPECIFIC TO MATTHEWS JAPAN FUND AND MATTHEWS
KOREA FUND

Short-Selling

Matthews Korea Fund and Matthews Japan Fund may make short sales, which are
transactions in which a Fund sells a security it does not own in anticipation of
a decline in the market value of that security. Each 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.

INVESTMENT STRATEGIES AND RISKS SPECIFIC TO MATTHEWS JAPAN FUND

Equity securities in which the Fund may invest include Japanese common stocks,
preferred stocks (including convertible preferred stock), bonds, notes and
debentures convertible into common or preferred stocks, warrants and rights,
depositary receipts and equity interests in trusts, partnerships, joint ventures
or similar enterprises.

The Fund may invest in equity and other securities of issuers located outside of
Japan, including the United States, and in non-convertible bonds and other debt
securities issued by foreign issuers and foreign government entities. The Fund
may invest 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 yen-denominated
debt securities issued by the Japanese government or Japanese companies and
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

The Fund may invest up to 5% 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.

The Fund may invest 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. 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).

The Fund may invest its assets in a broad spectrum of securities of Japanese
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 15% of its net 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
which are 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.

Under normal circumstances, the Advisor expects that the portfolio of the fund
will be comprised of 25 to 75 individual stocks in the Japanese economy. When
purchasing portfolio securities for the Fund, the Advisor's philosophy is a buy
and hold strategy versus buying for short-term trading.

Concentration in Japanese Securities

The Fund concentrates its investments in equity securities of Japanese
companies. Consequently, the Fund's share value may be more volatile than that
of mutual funds not sharing this geographic concentration. The value of the
Fund's shares may vary in response to political and economic factors affecting
companies in Japan. The Fund should not be considered a complete investment
program, rather it may be used as a vehicle for diversification.

Securities in Japan are denominated and quoted in yen. Yen are fully convertible
and transferable based on floating exchange rates into all readily convertible
currencies, without administrative or legal restrictions for both non-residents
and residents of Japan. In determining the net asset value of shares of the
Fund, assets or liabilities initially expressed in terms of Japanese yen will be
translated into U.S. dollars at the current selling rate of Japanese yen against
U.S. dollars. As a result, in the absence of a successful currency hedge, the
value of the Fund's assets as measured in U.S. dollars may be affected favorably
or unfavorably by fluctuations in the value of Japanese yen relative to the U.S.
dollar.

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

Japan is largely dependent on foreign economies for raw materials. International
trade is important to Japan's economy, as exports provide the means to pay for
many of the raw materials it must import. Because of the concentration of the
Japanese exports in highly visible products such as automobiles, machine tools
and semiconductors, and the large trade surpluses ensuing therefrom, Japan has
entered a difficult phase in its relations with its trading partners,
particularly with respect to the United States, with whom the trade imbalance is
the greatest. 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 (the "Code"). 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.

INVESTMENT STRATEGIES 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 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 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.

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.
From time to time, many of the securities trade among non-Korean residents at a
premium over the market price. Foreign investors may effect transactions with
other foreign investors off the KSE in the shares of companies that have reached
the maximum aggregate foreign ownership limit through a securities company in
Korea. These transactions typically occur at a premium over prices on the KSE.
There can be no assurance that the Fund, if it purchases such shares at a
premium, will be able to realize such premium, on the sale of such shares or
that such premium will not be adversely affected by changes in regulations or
otherwise. Such securities will be valued at fair value as determined in good
faith by the Board of Trustees.

Risks Associated with Investing in Korean Securities

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

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

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 Fund may also be affected
by foreign currency fluctuations or exchange controls, differences in accounting
procedures and other risks. The Fund is 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 the Fund.

In the latter part of 1997, Korea experienced a national financial crisis
requiring intervention by the International Monetary Fund ("IMF") 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."

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.

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).

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.

RISKS RELATED TO LOWER RATED DEBT SECURITIES

Debt securities rated lower than Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's Corporation ("S&P") (commonly referred
to as "junk bonds") are considered to be of poor standing and predominantly
speculative. Such securities are subject to a substantial degree of credit risk.
There can be no assurance that the Funds would be protected from widespread bond
defaults brought about by a sustained economic downturn or other market and
interest rate changes.

The value of lower-rated debt securities will be influenced not only by changing
interest rates, but also by the bond market's perception of credit quality and
the outlook for economic growth. When economic conditions appear to be
deteriorating, low and medium-rated bonds may decline in market value due to
investors' heightened concern over credit quality, regardless of prevailing
interest rates. Adverse publicity and investor perceptions, whether or not based
on fundamental analysis, may decrease the value and liquidity (liquidity refers
to the ease or difficulty which the Fund could sell a security at its perceived
value) of lower-rated securities held by a Fund, especially in a thinly traded
foreign market.

To the extent that an established secondary market does not exist and a
particular lower-rated debt security is thinly traded, that security's fair
value may be difficult to determine because of the absence of reliable objective
data. As a result, a Fund's valuation of the security and the price it could
obtain upon its disposition could differ. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of lower-rated securities held by the Funds, especially in
a thinly traded market.

The credit ratings of S&P and Moody's are evaluations of the safety of principal
and interest payments, not market value risk, of lower-rated securities. These
ratings are provided as an Appendix to this SAI. Also, credit rating agencies
may fail to change timely the credit ratings to reflect subsequent events.
Therefore, in addition to using recognized rating agencies and other sources,
the Advisor may perform its own analysis of issuers in selecting investments for
the Funds. The Advisor's analysis of issuers may include, among other things,
historic and current financial condition and current and anticipated cash flows.

Non Principal Investment Strategies

The following strategies and specific type of investments are not the principal
investment strategies of the Funds, but are reserved by the Advisor for its use
in the event that the Advisor deems it appropriate to do so to achieve the
Funds' fundamental goals.

1. Loans of Portfolio Securities

The Funds may lend portfolio securities to broker-dealers and financial
institutions. In return, the broker-dealers and financial institutions pay the
Funds money to borrow these securities. The Funds may lend portfolio securities
provided:

(1) the loan is secured continuously by collateral marked-to-market daily and
maintained in an amount at least equal to the current market value of the
securities loaned; (2) the Funds may call the loan at any time and receive the
securities loaned; (3) the Funds will receive any interest or dividends paid on
the loaned securities; and (4) the aggregate market value of securities loaned
by a Fund will not at any time exceed 33% of the total assets of such Fund.

Collateral will consist of U.S. Government securities, cash equivalents or
irrevocable letters of credit. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to maintain the proper
amount of collateral. Therefore, the Funds will only enter into portfolio loans
after a review by the Advisor, under the supervision of the Board of Trustees,
including a review of the creditworthiness of the borrower. Such reviews will be
monitored on an ongoing basis. Lending portfolio securities by Matthews Korea
Fund is not currently permitted under Korean laws and regulations. In the event
that these laws change, the Fund will take advantage of this strategy as it
deems appropriate.

2. Repurchase Agreements

The Funds may purchase repurchase agreements to earn income. The Funds may also
enter into repurchase agreements with financial institutions that are deemed to
be creditworthy by the Advisor, pursuant to guidelines established by the
Trust's Board of Trustees. The repurchase price under the repurchase agreements
equals the price paid by each Fund plus interest negotiated on the basis of
current short-term rates (which may be more or less than the rate on the
securities underlying the repurchase agreement). Repurchase agreements may be
considered to be collateralized loans by the Funds under the Investment Company
Act of 1940, as amended (the "1940 Act").

Any collateral will be marked-to-market daily. If the seller of the underlying
security under the repurchase agreement should default on its obligation to
repurchase the underlying security, a Fund may experience delay or difficulty in
exercising its right to realize upon the security and, in addition, may incur a
loss if the value of the security should decline, as well as disposition costs
in liquidating the security. 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.

The financial institutions with whom the Funds may enter into repurchase
agreements are banks and non-bank dealers of U.S. Government securities that are
listed on the Federal Reserve Bank of New York's list of reporting dealers and
banks, if such banks and non-bank dealers are deemed creditworthy by the
Advisor. The Advisor will continue to monitor the creditworthiness of the seller
under a repurchase agreement, and will require the seller to maintain during the
term of the agreement the value of the securities subject to the agreement at
not less than the repurchase price. The Funds will only enter into a repurchase
agreement where the market value of the underlying security, including interest
accrued, will be at all times equal to or exceed the value of the repurchase
agreement.

The Funds may invest in repurchase agreements with foreign parties, or in a
repurchase agreement based on securities denominated in foreign currencies.
Legal structures in foreign countries, including bankruptcy laws, may offer less
protection to investors such as the Funds, and foreign repurchase agreements
generally involve greater risks than a repurchase agreement in the United
States.

3. Reverse Repurchase Agreements

The Funds may enter into reverse repurchase agreements to raise cash on a
short-term basis. Reverse repurchase agreements involve the sale of securities
held by the Funds pursuant to the Funds' agreement to repurchase the securities
at an agreed upon price, date and rate of interest. Such agreements are
considered to be borrowings under the 1940 Act, and may be entered into only for
temporary or emergency purposes. While reverse repurchase transactions are
outstanding, the Funds will maintain in a segregated account of cash, U.S.
Government securities or other liquid, high-grade debt securities in an amount
at least equal to the market value of the securities, plus accrued interest,
subject to the agreement. Reverse repurchase agreements involve the risk that
the market value of the securities sold by the Funds may decline below the price
of the securities the Funds are obligated to repurchase such securities.

4. Securities of Other Investment Companies

The Funds may invest in the securities of other investment companies and
currently intend to limit their investments in securities issued by other
investment companies so that, as determined immediately after a purchase of such
securities is made: (i) not more than 5% of the value of any the individual
Funds' total assets will be invested in the securities of any one investment
company; (ii) not more than 10% of their total assets will be invested in the
aggregate in securities of investment companies as a group; and (iii) not more
than 3% of the outstanding voting stock of any one investment company will be
owned by the respective Fund.

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. These expenses would be in addition to the advisory and
other expenses that the Funds bear directly in connection with their own
operations.

5. Illiquid Securities

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

6. Rule 144A Securities (Restricted Securities)

Securities which are not registered with the SEC pursuant to Rule 144A of the
Securities Act of 1933, as amended, are only traded among institutional
investors. These securities are sometimes called "Restricted Securities" because
they are restricted from being sold to the general public because they are not
registered with the SEC.

Some of these securities are also illiquid because they can not be sold at its
market price within 7 days of wanting to do so. The Funds will limit their
investments in securities of issuers which are restricted from selling to the
public without registration under the 1933 Act. This 15% does not include any
restricted securities that have been determined to be liquid by the Funds' Board
of Trustees.

7. Convertible Securities

Each Fund may purchase convertible securities. While Common stock occupies the
most junior position in a company's capital structure convertible securities
entitle the holder to exchange the securities for a specified number of shares
of common stock, usually of the same company, at specified prices within a
certain period of time. In addition, the owner of convertible securities
receives interest or dividends until the security is converted. The provisions
of any convertible security determine its ranking in a company's capital
structure. In the case of subordinated convertible debentures, the holder's
claims on assets and earnings are subordinated to the claims of other creditors,
and are senior to the claims of preferred and common shareholders. In the case
of preferred stock and convertible preferred stock, the holder's claims on
assets and earnings are subordinated to the claims of all creditors but are
senior to the claims of common shareholders.

To the extent that a convertible security's investment value is greater than its
conversion value, its price will be primarily a reflection of such investment
value and its price will be likely to increase when interest rates fall and
decrease when interest rates rise, as with a fixed-income security. If the
conversion value exceeds the investment value, the price of the convertible
security will rise above its investment value and, in addition, may sell at some
premium over its conversion value. At such times the price of the convertible
security will tend to fluctuate directly with the price of the underlying equity
security.

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

The Funds may purchase securities on a when-issued basis, or purchase or sell
securities on a forward commitment basis or purchase securities on a
delayed-delivery basis. The Funds will normally realize a capital gain or loss
in connection with these transactions. For purposes of determining the Funds'
average dollar-weighted maturity, the maturity of when-issued or forward
commitment securities will be calculated from the commitment date.

When the Funds purchase securities on a when-issued, delayed-delivery or forward
commitment basis, the Funds' custodian will maintain in a segregated account:
cash, U.S. Government securities or other high grade liquid debt obligations
having a value (determined daily) at least equal to the amount of the Funds'
purchase commitments. In the case of a forward commitment to sell portfolio
securities, the custodian will hold the portfolio securities themselves in a
segregated account while the commitment is outstanding. These procedures are
designed to ensure that the Funds will maintain sufficient assets at all times
to cover their obligations under when-issued purchases, forward commitments and
delayed-delivery transactions.

Securities purchased or sold on a when-issued, delayed-delivery or forward
commitment basis involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date. Although the 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.

9. Fixed-Income Securities (Bonds etc.)

All fixed-income securities are subject to two types of risks: credit risk (will
the borrower be able to pay back the money) 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.

10. Short-Selling

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

A Fund may incur a loss as a result of a short sale if the price of the security
increases between the date of the short sale and the date on which the Fund
replaced the borrowed security. The amount of any loss will be increased, by the
amount of any premium, dividends or interest the Fund may be required to pay in
connection with a short sale. No securities will be sold short if, after effect
is given to any such short sale, the total market value of all securities sold
short would exceed 10% of the value of the Fund's net assets. The Fund will
place in a segregated account with its custodian bank an amount of cash or U.S.
Government securities equal to the difference between the market value of the
securities sold short at the time they were sold short and any cash or U.S.
Government securities required to be deposited as collateral with the broker in
connection with the short sale.

This segregated account will be marked to market daily, provided that at no time
will the amount deposited in it plus the amount deposited with the broker as
collateral be less than the market value of the securities at the time they were
sold short.

11. Interest Rate Futures Contracts

The Funds 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 Funds will not enter into an interest rate futures contract if
immediately thereafter more than 5% of the value of the respective Fund's total
assets will be committed to margin. The principal risks related to the use of
such instruments are (1) the offsetting correlation between movements in the
market price of the portfolio investments being hedged and in the price of the
futures contract or option may be imperfect (the Advisor guessed wrong about how
interest rates would change); (2) possible lack of a liquid secondary market for
closing out futures or option positions; (3) the need for additional portfolio
management skills and techniques; and (4) losses due to unanticipated market
price movements.

12. Futures Transactions

The Funds may engage in futures transactions for the purchase or sale for future
delivery of securities. While futures contracts provide for the delivery of
securities, deliveries usually do not occur. Contracts are generally terminated
by entering into offsetting transactions. The Funds may invest in futures
transactions 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, a Fund 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 engage in futures transactions on U.S. or foreign exchanges or
boards of trade. In the U.S., futures exchanges and trading are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission (CFTC), a
U.S. Government agency.

The Funds may enter into such futures transactions to protect itself against the
adverse effects of fluctuations in security prices, or interest rates, without
actually buying or selling the securities underlying the contract. A stock index
futures contract obligates the seller to deliver (and the purchaser to take) an
amount of cash equal to a specific dollar amount times the difference between
the value of a specific stock index at the close of the last trading day of the
contract and the price at which the agreement was made.

With respect to options on futures contracts, when the Funds are temporarily not
fully invested, they may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates. The purchase of a call
option on a futures contract is similar in some respects to the purchase of a
call option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based, or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities.

The writing of a call option on a futures contract constitutes a partial hedge
against the declining price of the security or foreign currency which is
deliverable upon exercise of the futures contract. The writing of a put option
on a futures contract constitutes a partial hedge against the increasing price
of the security or foreign currency which is deliverable upon exercise of the
futures contract.

To the extent that market prices move in an unexpected direction, the Funds may
not achieve the anticipated benefits of futures contracts or options on futures
contracts or may realize a loss. Further, with respect to options on futures
contracts, the Funds may seek to close out an option position by writing or
buying an offsetting position covering the same securities or contracts and have
the same exercise price and expiration date. The ability to establish and close
out positions on options will be subject to the maintenance of a liquid
secondary market, which cannot be assured.

The 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.

Restrictions on the Use of Futures Contracts

Each Fund may enter into futures contracts provided that such obligations
represent no more than 20% of the Fund's net assets. Under the Commodity
Exchange Act, each Fund may enter into futures transactions for hedging purposes
without regard to the percentage of assets committed to initial margin and for
other than hedging purposes provided that assets committed to initial margin do
not exceed 5% of the Fund's net assets. To the extent required by law, the Fund
will set aside cash and appropriate liquid assets in a segregated account to
cover its obligations related to futures contracts.

Risk Factors of Futures Transactions

The primary risks associated with the use of futures contracts and options
(commonly referred to as "derivatives") are: (i) imperfect correlation between
the change in market value of the securities held by the 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.

13. Foreign Currency Hedging Strategies

Special Considerations

The Funds may use options and futures on foreign currencies and forward currency
contracts to hedge against movements in the values of the foreign currencies in
which the Funds' securities are denominated. Such currency hedges can protect
against price movements in a security the Funds own or intend to acquire that
are attributable to changes in the value of the currency in which it is
denominated. Such hedges do not, however, protect against price movements in the
securities that are attributable to other causes.

The value of hedging instruments on foreign currencies depends on the value of
the underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of such hedging instruments, a
Fund could be disadvantaged by having to deal in the odd lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.

The Funds might seek to hedge against changes in the value of a particular
currency when no hedging instruments on that currency are available or such
hedging instruments are more expensive than certain other hedging instruments.

In such cases, the Funds may hedge against price movements in that currency by
entering into transactions using hedging instruments on other currencies, the
values of which the Advisor believes will have a high degree of positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the hedging instrument will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.

Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
the Funds might be required to accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.

a. Forward Currency Contracts: A forward currency contract involves an
obligation to purchase or sell a specific currency at a specified future date,
which may be any fixed number of days from the contract date agreed upon by the
parties, at a price set at the time the contract is entered into.

The Funds may enter into forward currency contracts to purchase or sell foreign
currencies for a fixed amount of U.S. dollars or another foreign currency. The
Funds also may use forward currency contracts for "cross-hedging." Under this
strategy, the Funds would increase their exposure to foreign currencies that the
Advisor believes might rise in value relative to the U.S. dollar, or the Funds
would shift their exposure to foreign currency fluctuations from one country to
another.

The cost to each Fund of engaging in forward currency contracts varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
When a Fund enters into a forward currency contract, it relies on the contra
party to make or take delivery of the underlying currency at the maturity of the
contract. Failure by the contra party to do so would result in the loss of any
expected benefit of the transaction.

As is the case with futures contracts, holders and writers of forward currency
contracts can enter into offsetting closing transactions, similar to closing
transactions on futures, by selling or purchasing, respectively, an instrument
identical to the instrument held or written. Secondary markets generally do not
exist for forward currency contracts, with the result that closing transactions
generally can be made for forward currency contracts only by negotiating
directly with the contra party. Thus, there can be no assurance that the Funds
will in fact be able to close out a forward currency contract at a favorable
price prior to maturity. In addition, in the event of insolvency of the contra
party, the Funds might be unable to close out a forward currency contract at any
time prior to maturity. In either event, the Funds would continue to be subject
to market risk with respect to the position, and would continue to be required
to maintain a position in securities denominated in the foreign currency or to
maintain cash or securities in a segregated account.

The precise matching of forward currency contracts amounts and the value of the
securities involved generally will not be possible because the value of such
securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, the Funds might need to purchase
or sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.

Limitations on the Use of Forward Currency Contracts

The Funds may enter into forward currency contracts or maintain a net exposure
to such contracts only if (1) the consummation of the contracts would not
obligate the Funds to deliver an amount of foreign currency in excess of the
value of their portfolio securities or other assets denominated in that
currency, or (2) the Funds maintain cash, U.S. Government securities or liquid,
high-grade debt securities in a segregated account in an amount not less than
the value of their total assets committed to the consummation of the contract
and not covered as provided in (1) above, as marked to market daily.

14. Options

The Funds may buy put and call options and write covered call and secured put
options. Such options may relate to particular securities, stock indices, or
financial instruments and may or may not be listed on a national securities
exchange and issued by the Options Clearing Corporation. Options trading is a
highly specialized activity which entails greater than ordinary investment risk.
Options on particular securities may be more volatile than the underlying
securities, and therefore, on a percentage basis, an investment in options may
be subject to greater fluctuation than an investment in the underlying
securities themselves.

a. Writing Call Options

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

The Funds will write call options only if they are "covered." In the case of a
call option on a security, the option is "covered" if a Fund owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or, if additional cash
consideration is required, liquid assets, such as cash, U.S. Government
securities or other liquid high-grade debt obligations, in such amount held in a
segregated account by its custodian) upon conversion or exchange of other
securities held by it.

For a call option on an index, the option is covered if a Fund maintains with
its custodian a diversified stock portfolio, or liquid assets equal to the
contract value. A call option is also covered if a Fund holds a call on the same
security or index as the call written here the exercise price of the call held
is (i) equal to or less than the exercise price of the call written; or (ii)
greater than the exercise price of the call written provided the difference is
maintained by the Fund in liquid assets such as cash, U.S. Government securities
and other high-grade debt obligations in a segregated account with its
custodian.

The Funds' obligation under a covered call option is terminated upon the
expiration of the option or upon entering a closing purchase transaction. In a
closing purchase transaction, a Fund, as writer of an option, terminates its
obligation by purchasing an option of the same series as the option previously
written.

Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable the Fund to write
another call option on the underlying security with either a different exercise
price or expiration date or both. The Funds may realize a net gain or loss from
a closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.

During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. A closing purchase transaction cannot be effected with respect
to an option once the option writer has received an exercise notice for such
option.

b. Writing Put Options

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

Following the writing of a put option, the Fund may wish to terminate the
obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Fund may not, however, effect such
a closing transaction after it has been notified of the exercise of the option.

c. Purchasing Call Options

The Funds may purchase call options to the extent that premiums paid by the
Funds do not aggregate more than 10% of a Fund's total assets. When the Funds
purchase a call option, in return for a premium paid by the Fund to the writer
of the option, the Fund obtains the right to buy the security underlying the
option at a specified exercise price at any time during the term of the option.
The writer of the call option, who receives the premium upon writing the option,
has the obligation, upon exercise of the option, to deliver the underlying
security against payment of the exercise price. The advantage of purchasing call
options is that the Fund may alter portfolio characteristics and modify
portfolio maturities without incurring the cost associated with such
transactions.

The Funds may, following the purchase of a call option, liquidate their position
by effecting a closing sale transaction. This is accomplished by selling an
option of the same series as the option previously purchased. The Funds will
realize a profit from a closing sale transaction if the price received on the
transaction is more than the premium paid to purchase the original call option;
the Funds will realize a loss from a closing sale transaction if the price
received on the transaction is less than the premium paid to purchase the
original call option.

Although the Funds will generally purchase only those call options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option, or
at any particular time, and for some options no secondary market on an exchange
may exist. In such event, it may not be possible to effect closing transactions
in particular options, with the result that the Funds would have to exercise
their options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Funds may expire without any value
to the Funds, in which event the Funds would realize a capital loss which will
be short-term unless the option was held for more than one year.

d. Purchasing Put Options

Each Fund may invest up to 10% of its total assets in the purchase of put
options. Each Fund will, at all times during which it holds a put option, own
the security covered by such option. The purchase of the put options on
substantially identical securities held will constitute a short sale for tax
purposes, the effect of which is to create short-term capital gain on the sale
of the security and to suspend running of its holding period (and treat it as
commencing on the date of the closing of the short sale) or that of a security
acquired to cover the same if at the time the put was acquired, the security had
not been held for more than one year.

A put option purchased by a Fund gives it the right to sell one of its
securities for an agreed price up to an agreed date. Each Fund intends to
purchase put options in order to protect against a decline in the market value
of the underlying security below the exercise price less the premium paid for
the option ("protective puts"). The Funds may sell a put option which they have
previously purchased prior to the sale of the securities underlying such option.
Such sale will result in a net gain or loss depending on whether the amount
received on the sale is more or less than the premium and other transaction
costs paid on the put option which is sold.

The Funds may sell a put option purchased on individual portfolio securities.
Additionally, the Funds may enter into closing sale transactions. A closing sale
transaction is one in which a Fund, when it is the holder of an outstanding
option, liquidate its respective position by selling an option of the same
series as the option previously purchased.

Fund Policies

The Policies set forth below are fundamental and may not be changed as to a Fund
without the approval of a majority of the outstanding voting shares (as defined
in the 1940 Act) of the Fund. Unless otherwise indicated, all percentage
limitations listed below apply to the Funds and apply only at the time of the
transaction. Accordingly, if a percentage restriction is adhered to at the time
an investment is made, a later increase or decrease in the percentage which
results from a relative change in values or from a change in a Fund's total
assets will not be considered a violation.

Except as otherwise set forth herein and in the Prospectuses each Fund may not:

1. Issue senior securities or
2. Borrow money, except that each Fund may borrow from banks and enter into
reverse repurchase agreements for temporary purposes in amounts up to one-third
of the value of its total assets at the time of such borrowing; or mortgage,
pledge, or hypothecate any assets, except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts borrowed or 10%
of the value of the total assets of the Fund at the time of its borrowing. All
borrowing will be done from a bank and asset coverage of at least 300% is
required. A Fund will not purchase securities when borrowings exceed 5% of that
Fund's total assets;

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

4. Purchase the securities of issuers conducting their principal
business activities in the same industry (other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if
immediately after such purchase the value of a Fund's investments in such
industry would exceed 25% of the value of the total assets of the Fund.
This Policy does not apply to the Technology Fund;

5. Purchase or sell real estate real estate limited partnership
interests, interests in oil, gas and/or mineral exploration or development
programs or leases. This restriction shall not prevent the Funds from investing
directly or indirectly in portfolio instruments secured by real estate or
interests therein or acquiring securities of real estate investment trusts or
other issuers that deal in real estate.;

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

7. Change its diversification status under the 1940 Act.

8. Purchase or sell commodities or commodity contracts, except that a Fund may
purchase or sell currencies, may enter into futures contracts on securities,
currencies, or on indexes of such securities or currencies, or any other
financial instruments, and may purchase or sell options on such futures
contracts;

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

10. Purchase the securities of any one issuer if, immediately after such
purchase, a Fund would own more than 10% of the outstanding voting securities of
such issuer;

11. Invest more than 5% of its total assets in securities of companies less than
three years old. Such three-year period shall include the operation of any
predecessor company or companies.

Temporary Defensive Position

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 hold cash
or invest temporarily and without limitation in U.S. Government securities or
money market instruments backed by U.S. Government securities. The Funds'
investment objective may not be achieved at such times when a temporary
defensive position is taken.

<PAGE>

Portfolio Turnover

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. 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 Fund 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"
table in the Prospectuses

Management of the Fund

Trustees and Officers

Information pertaining to the Trustees and executive officers of the Funds is
set forth below. Note that the Trustees nor the officers of the Funds receive
any pension or retirement benefits from the Funds.
<TABLE>

Aggregate Total
Compensation Compensation
Principal From Funds From Funds
Position(s) Occupation for Fiscal and Fund
Held with During Past Five Year Ended Complex Paid
Name and Address Age Registrant Years Aug. 31, 1998 to Trustees

Norman W. Berryessa 71 Trustee Independent Contractor, Emmett $5,000 $5,000
100 Bush Street Larkin Co., since 1983; President &
Suite 1000 CEO of Gallegoes Institutional
San Francisco, CA 94109 Investors, Inc. From 1990 to 1994.

Robert K. Connolly 67 Trustee Retired since 8/90. Prior thereto $5,000 $5,000
P.O. Box 941990 Institutional Sales Manager and
Sonoma, CA 95476 Securities Analyst for Barrington
Research Associates.

John H. Dracott* 71 Trustee International mutual fund consultant $0 $0
1795 Vistaza West Emeritus since 1991
P.O. Box 162
Tiburon, CA 94920

David FitzWilliam-Lay* 69 Trustee Director, USDC Investment Trust PLC & $0 $0
26 Chalfont House, Berry Starquest PLC. Retired in 1993
19 Chesham Street after 3 yrs. as Chairman of
London SWIX 8NG GT Management, PLC.
United Kingdom

Richard K. Lyons 39 Trustee Professor, Haas School of Business $5,000 $5,000
University of California since 1995; Assistant Professor
350 Barrows Hill 1993-1995.
Berkeley, CA 94720

</TABLE>

G. Paul Matthews* 44 President President & Chief Investment $0 $0
456 Montgomery Street Officer of Matthews International
Suite 1200 Capital Management LLC since 1991.
San Francisco, CA 94104

Mark W. Headley* 41 Vice Managing Director and Senior Analyst $0 $0
456 Montgomery Street President Matthews International Capital
Suite 1200 Management LLC since 1995. Director
San Francisco, CA 94104 of International Investments at
Litman/Gregory & Co. from 1993 to 1995.

Joseph M.O'Donnell 45 Secretary Chief Operating Officer & General $0 $0
456 Montgomery Street Counsel, Matthews International
Suite 1200 Capital Management, LLC since 8/99.
San Francisco, CA 94104 From 1/98 to 6/99, Vice President, Legal
SEI Investments Co. From 3/93 to 12/97
Vice President and General Counsel, FPS
Services, Inc.

Brian Stableford* 37 Treasurer Vice President, Matthews International $0 $0
456 Montgomery Street Capital Matthews Management,LLC since 1994
Suite 1200 prior thereto, Mitubishi Global Custody
San Francisco, CA 94104

</TABLE>

These Trustees and officers are considered "interested persons" of the Funds as
defined under the 1940 Act. The Trust currently does not maintain any pension or
retirement benefits plan for the benefit of the Trustees.

The Trustees of the Funds receive a retainer of $4,000 per year, plus $250 per
meeting and expenses for each meeting of the Board of Trustees they attend.
However, no officer or employee of the Advisor receives any compensation from
the Funds for acting as a Trustee of the Funds. The officers of the Funds
receive no compensation directly from the Funds for performing the duties of
their offices.

Sales Loads

The Trustees as well as any investor may purchase the "I" shares of any of the
Funds at no load.

<PAGE>

Control Persons and Principal Holders Of Securities

As of December _____, 1999 the Trustees and officers as a group owned less than
1% of the outstanding shares of the Trust.

As of December _____, 1999 the following persons owned of record or beneficially
more than 5% of the outstanding voting shares of the:

Name & Address of Record Number of Percentage
Shares

Matthews Pacific Tiger Fund - Class I:
Charles Schwab & Co., Inc. 3,616,367.813 48.08%
FBO Special Custody Acct for
Exclusive Benefit of Customers
ATTN: Mutual Funds 101 Montgomery Street
San Francisco, CA 94104

National Financial Services Corp. 519,138.22 16.90%
FBO Exclusive Benefit of our Customers
ATTN: Mutual Funds
5th Floor 200 Liberty Street
New York, NY 10281

Hasso Plattner 501,296.780 6.66%
c/o SAP AG Neurottstrasse
16 Walldorf,
Germany D96190

FTC & Co. 462,868.710 6.15%
ATTN: Datalynx 002
P.O. Box 173736
Denver, CO 80217

Matthews Pacific Tiger Fund - Class A:
Donaldson Lufkin Jenrette 11,500.581 79.65%
P.O. Box 2052
Jersey City, NJ 07304-9998

Joy L. Miesen 1,005.377 6.96%
Wedbush Morgan Sec.
CTDN AC 5880H1764
1000 Wilshire Blvd.
Los Angeles, CA 90017

Gary A. Hoch 817.231 5.66%
203 Highland Ave.
Buffalo, NY 14222

Dennis Tedlock and Barbara Tedlock, 811.472 5.62%
JT TEN P.O. Box 671 East
Aurora, NY 14052

Matthews Asian Growth and Income Fund:

Charles Schwab & Co., Inc. 371,243.603 64.61%
FBO Special Custody Acct for
Exclusive Benefit of Customers
ATTN: Mutual Funds 101 Montgomery Street
San Francisco, CA 94104

Matthews Korea Fund - Class I:

Goodness Limited 5,806,759.396 17.28%
PO Box N-7776
Nassau Bahamas

Charles Schwab & Co., Inc. 9,530,387.958 28.37%
FBO Special Custody Acct for
Exclusive Benefit of Customers
ATTN: Mutual Funds 101 Montgomery Street
San Francisco, CA 94104

National Financial Services Corp. 6,384,436.836 19.00%
FBO Exclusive Benefit of our Customers
FBO Sal Vella
ATTN: Mutual Funds
200 Liberty Street, 5th floor
New York, NY 10281

Matthews Korea Fund - Class A:

RDV Capital Management, LP 1,369,300.780 67.07%
126 Ottawa Ave. NW, Ste. 500
Grand Rapids, MI 49503-2829

Emilie Wierda TTEE. 104,166.667 5.10%
Emilie Wierda Living Trust DTD 3 1 94
Eagle Companies Inc.
P.O. Box 2235
Holland, MI 69422-2235

Matthews Dragon Century China Fund - Class I

Charles Schwab & Co., Inc. 334,526.050 87.99%
FBO Special Custody Acct for
Exclusive Benefit of Customers
ATTN: Mutual Funds 101 Montgomery Street
San Francisco, CA 94104

Investment Advisory and Other Services

Investment Advisors

Currently the Trust employs only one investment advisor, Matthews International
Capital Management LLC. The Advisor performs its duties and is paid pursuant to
a contract. Some of the terms of this contract are set by the 1940 Act such as
that it is reviewed each year by the Board of Trustees and that the Board may
cancel it without penalty on 60 days notice.

The advisory services provided by the Advisor and the fees received by it for
such services are described in each Prospectus. As stated in each Prospectus,
the Advisor may from time to time voluntarily waive its advisory fees with
respect to any Fund.

Under the Advisory Contract, the Advisor is not liable for any error of judgment
or mistake of law or for any loss suffered by the Trust or a Fund in connection
with the performance of the Advisory Agreement, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its duties and
obligations thereunder.

The terms of the Advisory Contract provide that it will continue from year to
year provided that it is approved at least annually by the vote of the holders
of at least a majority of the outstanding shares of the respective Fund, or by
the Trustees of the respective Fund. The Advisory Contract may be terminated
with respect to a Fund by vote of the Board of Trustees or by the holders of a
majority of the outstanding voting securities of the Fund, at any time without
penalty, on 60 days' written notice to the Advisor. The Advisor may also
terminate its advisory relationship with respect to a Fund on 60 days' written
notice to the Trust. The Advisory Contract terminates automatically in the event
of an assignment.

Under its respective Advisory Contract, each Fund pays the following expenses:

1. the fees and expenses of the Trust's disinterested Trustees;

2. the salaries and expenses of any of the Trust's officers or employees who are
not affiliated with the Advisor;

3. interest expenses;

4. taxes and governmental fees;

5. brokerage commissions and other expenses incurred in acquiring or
disposing of portfolio securities;

6. the expenses of registering and qualifying shares for sale with the
Securities and Exchange Commission (" SEC") and with various state
securities commissions;

7. accounting and legal costs;

8. insurance premiums;

9. fees and expenses of the Trust's custodian, administrator and transfer
agent and any related services;

10. expenses of obtaining quotations of the Funds' portfolio securities and
of pricing the Funds' shares;

11. expenses of maintaining the Trust's legal existence and of shareholders'
meetings;

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

13. fees and expenses of membership in industry organizations.

The ratio of each Fund's expenses to its relative net assets can be expected to
be higher than the expense ratios of funds investing solely in domestic
securities, since the cost of maintaining the custody of foreign securities and
the rate of investment management fees paid by each Fund generally are higher
than the comparable expenses of such other funds.

General expenses of the Trust (such as costs of maintaining corporate existence,
legal fees, insurance, etc.) and expenses shares by the Funds will be allocated
among the Funds on a basis deemed fair and equitable, which may be based on the
relative net assets of the Funds or the nature of the services performed and
relative applicability to each Fund. Expenses which relate exclusively to a
particular Fund or Class, such as certain registration fees, brokerage
commissions and other portfolio expenses, will be borne directly by that Fund or
Class.

During the fiscal years ended August 31, 1997, 1998 and 1999, the aggregate
advisory fees earned by the Advisor, before voluntary waivers, totaled $506,535,
$1,155,889 and $1,946,821, respectively.

<PAGE>

Gross Advisory Gross Advisory Gross Advisory
Fees Earned Fees Earned Fees Earned
During FYE During FYE During FYE
Matthews Fund 08-31, 1997 08-31, 1998 08-31, 1999

Asian Technology N/A N/A N/A
Dragon Century China N/A $15,893 xxx,xxx
Growth and Income $ 44,164 $ 48,161 xxx,xxx
Japan Fund N/A N/A xxx,xxx
Korea $104,316 $640,716 xxx,xxx
Pacific Tiger $358,055 $451,119 xxx,xxx

Principal Underwriter

First Data Distributors, Inc. ("FDDI"), 4400 Computer Drive, Westboro, MA
01581-5108, acts as an underwriter of the Funds' shares for the purpose of
facilitating the registration of shares of the Funds under state securities laws
and assists in the continuous offering of shares pursuant to an underwriting
agreement (the "Underwriting Agreement") approved by the Trust's Trustees.

In this regard, FDDI has agreed at its own expense to qualify as a broker-dealer
under all applicable Federal or state laws in those states which the Trust shall
from time to time identify to FDDI as states in which it wishes to offer its
shares for sale, in order that state registrations may be maintained for the
Funds.

FDDI is a broker-dealer registered with the SEC and a member in good standing of
the National Association of Securities Dealers, Inc.

Pursuant to its Underwriter Compensation Agreement with the Trust, FDDI is paid
for certain registration and transaction fees.

Service Agreements

First Data Investor Services Group, 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903 ("Investor Services Group"), provides certain
administrative services to the Trust pursuant to an Investment Company Services
Agreement (the "Investment Company Services Agreement"). The Funds pay the
Administrator a fee at the annual rate of:

0.10% of the first $250 million of average net assets of each Fund
0.075% of the next $250 million of such average net assets
0.05% of the next $250 million of such average net assets 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 (except for
Matthews Japan Fund, which is subject to a minimum fee of $55,000), subject to
certain reductions provided for in the Investment Company Services Agreement.

Under the Investment Company Services Agreement, Investor Services Group: (1)
coordinates with the custodian and transfer agent and monitors the services they
provide to the Funds; (2) coordinates with and monitors any other third parties
furnishing services to the Funds; (3) provides the Funds with necessary office
space, telephones and other communications facilities and personnel competent to
perform administrative and clerical functions; (4) supervises the maintenance by
third parties of such books and records of the Funds as may be required by
applicable federal or state law; (5) prepares or supervises the preparation by
third parties of all Federal, state and local tax returns and reports of the
Funds required by applicable law; (6) prepares and files and arranges for the
distribution of proxy materials and periodic reports to shareholders of the
Funds as required by applicable law; (7) prepares and arranges for the filing of
such registration statements and other documents with the SEC and other Federal
and state regulatory authorities as may be required by applicable law; (8)
reviews and submits to the officers of the Trust for their approval invoices or
other requests for payment of the Funds' expenses and instructs the Custodian to
issue checks in payment thereof; and (9) takes such other action with respect to
the Trust or the Funds as may be necessary in the opinion of the Administrator
to perform its duties under the agreement.

During the fiscal years ended August 31, 1997, 1998 and 1999, the aggregate fees
paid to the Administrator by the Funds totaled $89,779, $127,419 and $xxx,xxx,
respectively and is broken down as follows:

Administrative Administrative Administrative
Fees Paid Fees Paid Fees Paid
During FYE During FYE During FYE
Matthews Fund 08-31, 1997 08-31, 1998 08-31, 1999

Asia Technology xx,xxx xx,xxx xx,xxx
Dragon Century China N/A $22,432 xx,xxx
Growth and Income $28,801 $30,649 xx,xxx
Japan N/A N/A xx,xxx
Korea $30,046 $39,772 xx,xxx
Pacific Tiger $30,932 $34,566 xx,xxx

Dealer Reallowances

The "A" shares charges a 4.95% sales load on all purchases. Of that 4.5% is paid
to the broker which made the sale and the remainder is retained by the
Underwriter.

Rule 12b-1 Plan (Distribution Plan)

The Board of Trustees of the Trust has adopted a Plan of Distribution (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act which permits the Class A
shares of each Fund (except Matthews Asian Growth and Income Fund and Matthews
Japan Fund) to pay certain expenses associated with the distribution of its
shares. Under the Plan, each Fund may pay actual expenses not exceeding, on an
annual basis, 0.25% of a Fund's average daily net assets. The Underwriter will
use the amounts received under the Plan for the promotion and distribution of
the Class A shares of each Fund, including, but not limited to, the printing of
prospectuses and reports used for sales purposes, expenses of preparation of
sales literature and related expenses, advertisements, and other distribution
related expenses, as well as any distribution fees paid to securities dealers or
others who have executed a selling agreement with the Trust on behalf of Class A
shares of the Funds or the Distributor. To the Trust's knowledge, no interested
person of the Trust, nor any of its Trustees who are not "interested persons",
has a direct or indirect financial interest in the operation of the Plan. The
Trust anticipates that each Fund will benefit from additional shareholders and
assets as a result of implementation of the Plan.

For the fiscal year ended August 31, 1999, the Matthews Pacific Tiger Fund and
the Matthews Korea Fund made distribution payments to the Underwriter pursuant
to the Plan in the approximate total amount of $xx,xxx. Such payments made by
the Matthews Pacific Tiger Fund consisted of payments of approximately: $xxxx
for printing, postage and stationary, and $xxxx for compensation to brokers.
Such payments made by the Matthews Korea Fund consisted of payments of
approximately: $x,xxx for printing, postage and stationary, and $x,xxx for
compensation to brokers. The Matthews Dragon Century China Fund made no
distribution payments to the Underwriter for the period ended August 31, 1999.

Other Service Providers

Custodian

Custodian The Bank of New York, 90 Washington Street, New York, New York 10286
is the custodian of the Trust's assets pursuant to a custodian agreement. Under
the custodian agreement, The Bank of New York (i) maintains a separate account
or accounts in the name of each Fund (ii) holds and transfers portfolio
securities on account of each Fund, (iii) accepts receipts and makes
disbursements of money on behalf of each Fund, (iv) collects and receives all
income and other payments and distributions on account of each Fund's securities
and (v) makes periodic reports to the Board of Trustees concerning each Fund's
operations.

Counsel to the Trust

Paul, Hastings, Janofsky and Walker LLP, 345 California Street, San Francisco,
CA 94104-2635 is a law firm which serves as counsel to the Trust.

Independent Auditors

Tait Weller and Baker [_] Penn Center, Philadelphia, Pennsylvania 19103 were
selected as the independent auditors for the Trust by the Board of Trustees on
July 16, 1999 and provide audit services and assistance and consultation with
respect to regulatory filings with the SEC. The books of each Fund will be
audited at least once each year by Tait Weller and Baker.

Ernst & Young LLP, 555 California Street, Suite 1700, San Francisco, CA 94101
served as the independent auditors for the Trust from its inception through June
30, 1999.

Brokerage Allocation and Other Practices

The Advisor is responsible for decisions to buy and sell securities for the
Funds and for the placement of its portfolio business and the negotiation of
commissions, if any, paid on such transactions. Fixed-income securities and many
equity securities in which the Funds invest are traded in over-the-counter
markets. These securities are generally traded on a net basis with dealers
acting as principal for their own accounts without a stated commission. In
over-the-counter transactions, orders are placed directly with a principal
market-maker unless a better price and execution can be obtained by using a
broker. Brokerage commissions are paid on transactions in listed securities,
futures contracts and options thereon.

The Advisor is responsible for effecting portfolio transactions and will do so
in a manner deemed fair and reasonable to the Funds. The primary consideration
in all portfolio transactions will be prompt execution of orders in an efficient
manner at the most favorable price.

In selecting and monitoring broker-dealers and negotiating commissions, the
Advisor may consider a number of factors, including, for example, net price,
reputation, financial strength and stability, efficiency of execution and error
resolution, block trading and block positioning capabilities, willingness to
execute related or unrelated difficult transactions in the future, order of
call, offering to the Advisor on-line access to computerized data regarding the
Funds' accounts, and other matters involved in the receipt of brokerage services
generally.

The Advisor may also purchase from a broker or allow a broker to pay for certain
research services, economic and market information, portfolio strategy advice,
industry and company comments, technical data, recommendations, general reports,
consultations, performance measurement data and on-line pricing and news service
and periodical subscription fees.

The Advisor may pay a brokerage commission in excess of that which another
broker-dealer might charge for effecting the same transaction in recognition of
the value of these research services. In such a case, however, the Advisor will
determine in good faith that such commission is reasonable in relation to the
value of brokerage and research provided by such broker-dealer, viewed in terms
of either the specific transaction or the Advisor's overall responsibilities to
the portfolios over which Advisor exercises investment authority. Research
services furnished by brokers through whom the Advisor intends to effect
securities transactions may be used in servicing all of the Advisor's accounts;
not all of such services may be used by the Advisor in connection with accounts
which paid commissions to the broker providing such services. In conducting all
of its soft dollar relationships, the Advisor will seek to take advantage of the
safe harbor provided by Section 28(e) of the Securities Exchange Act of 1934, as
amended.

The Advisor will attempt to equitably allocate portfolio transactions among the
Funds and other accounts whenever concurrent decisions are made to purchase or
sell securities by the Funds and other accounts. In making such allocations
between the Funds and others, the main factors to be considered are the
respective investment objectives, the relative size of portfolio holdings of the
same or comparable securities, the availability of cash for investment, the size
of investment commitments generally held, and the opinions of the persons
responsible for recommending investments to the Funds and the others. In some
cases, this procedure could have an adverse effect on the Fund. In the opinion
of the Advisor, however, the results of such procedures will, on the whole, be
in the best interests of each of the clients.

For the fiscal years ended August 31, 1997, 1998 and 1999, the aggregate
brokerage commissions paid by the Trust on behalf of the Funds amounted to
$576,519, $1,295,324 and $x,xxx,xxx respectively. The total brokerage
commissions attributable to each Fund are set forth below.

Brokerage Brokerage Brokerage
Commissions Commissions Commissions
Paid Paid Paid
During FYE During FYE During FYE
Fund 08-31, 1997 08-31, 1998 08-31, 1999

Asia Technology N/A N/A N/A
Dragon Century China N/A $ 16,307 $xxx,xxx
Growth and Income $ 5,838 $ 2,956 $xxx,xxx
Japan N/A N/A N/A
Korea $196,599 $906,617 $xxx,xxx
Pacific Tiger $374,082 $369,443 $xxx,xxx

There are no brokers which the Advisor uses which are affiliated with the Trust
or the Advisor. Daewoo Securities formerly rendered advisory services to Korea
Fund, but no longer does so.

The percentage of Total Brokerage Commissions paid to Daewoo Securities and the
percentage of Total Transactions involving Commissions paid to Daewoo Securities
for the fiscal year ended August 31, 1998 was 14.79% and 14.53%, respectively.
The percentage of Total Brokerage Commissions paid to Daeyu Securities Co. and
the percentage of Total Transactions involving Commission paid to Daeyu for the
fiscal year ended August 31, 1998 was 2.35% and 2.29%, respectively.

Shares of Beneficial Interest

Each Fund is authorized to issue an unlimited number of shares of beneficial
interest, each with a $0.001 par value. Shares of each Fund represent equal
proportionate interests in the assets of that 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.

Currently, Matthews Pacific Tiger Fund and Matthews Korea Fund offer two classes
of shares: Class I and Class A. The classes offered have different sales charges
and other expenses which may affect performance.

The validity of shares of beneficial interest offered by this registration
statement 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.

Purchase, Redemption and Pricing of Shares

Purchase of Shares

The shares are offered to the public through the Underwriter or through
investment professionals.

Determination of Net Asset Value

Generally, the net asset value of a Fund will be determined as of the close of
trading on each day the New York Stock Exchange ("NYSE") is open for trading.
The Funds do not determine net asset value on days that the NYSE is closed and
at other times described in the respective Prospectus. The NYSE is closed on the
day which the following holidays are observed: New Year's Day, Martin Luther
King Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Additionally, if any of the
aforementioned holidays falls on a Saturday, the NYSE will not be open for
trading on the preceding Friday and when such holiday falls on a Sunday, the
NYSE will not be open for trading on the succeeding Monday, unless unusual
business conditions exist, such as the ending of a monthly or the yearly
accounting period.

Trading in securities on Asian and Pacific Basin securities exchanges and
over-the-counter markets is normally completed well before the close of the
business day in New York. In addition, Far Eastern securities trading may not
take place on all business days in New York. Furthermore, trading takes place in
Japanese markets and in various foreign markets on days which are not business
days the NYSE is open and therefore the Fund's respective net asset values are
not calculated.

The calculation of the Funds' net asset values may not take place
contemporaneously with the determination of the prices of portfolio securities
held by the Funds. Events affecting the values of portfolio securities that
occur between the time their prices are determined and the close of the NYSE
will not be reflected in the Funds' calculation of net asset value unless the
Board of Trustees deems that the particular event would materially affect the
net asset value, in which case an adjustment will be made. Assets or liabilities
initially expressed in terms of foreign currencies are translated prior to the
next determination of the net asset value of the Funds' shares into U.S. dollars
at the prevailing market rates. The fair value of all other assets is added to
the value of securities to arrive at the total assets.

Portfolio securities for Matthews Korea Fund and Matthews Japan Fund which are
traded on the Korean exchange and Japanese exchanges, respectively, are valued
at the most recent sale price reported on the exchange. If no sale occurred, the
security is then valued at the calculated mean between the most recent bid and
asked quotations. If there are no such bid and asked quotations, the most recent
bid quotation is used. All other securities are valued at fair value as
determined in good faith by the Board of Trustees including certain investments
in Korean equity securities and Japanese equity securities that have met the
limit for aggregate foreign ownership and for which premiums to the local stock
exchange prices are offered by prospective foreign investors.

Generally portfolio securities subject to a "foreign share" premium are valued
at the local share prices (i.e., without including any foreign share premium)
because of the uncertainty of realizing the premium and the recent trend toward
the reduction or disappearance of such foreign premiums.

Offering Price

Class A Shares of the Trust are offered at the "public offering price." The
public offering price is the sum of any applicable sales charge plus the current
net asset value per share next determined after receipt of a purchase order in
proper form by the transfer agent. 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 distribution. 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 Trust together with the re-allowance paid to dealers
and the agency commission paid to brokers, collectively the "commission":

The commissions shown in the table apply to sales through financial institutions
and intermediaries. Under certain circumstances, the Underwriter 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 Underwriter 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 a 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 a 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.

Redemption in Kind

At the organizational meeting of the Trust, the Trustees directed that the Trust
elect to pay redemptions in cash as consistent with Rule 18f-1 of the 1940 Act.
The Trustees further directed that Form N-18F-1 be filed with the SEC on the
Trust's behalf committing the Trust to pay in cash all requests for redemption
by any shareholder of record, limited in amount with respect to each shareholder
during any 90-day period to the lesser of $250,000 or 1 percent of the net asset
value of such company at the beginning of such period. This means that the Trust
could, if the redemption is larger that $250,000 or 1% of the net asset value of
the Trust, pay a redemption with the securities held in the Trust's portfolios.
It this occurred, the shareholder receiving these portfolio securities would
incur transactions charges if they were to convert the securities into cash.

Taxation of the Trust

In General

Each Fund has elected and intends to continue to qualify each year as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). In order to so qualify for any taxable year, a
fund must, among other things, (i) derive at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, gains
from the sale of securities or foreign currencies, or other income (including
but not limited to gains from options, futures or forward contracts) derived
with respect to its business of investing in such stock, securities or
currencies; (ii) distribute at least 90% of its dividend, interest and certain
other taxable income each year; and (iii) at the end of each fiscal quarter
maintain at least 50% of the value of its total assets in cash, government
securities, securities of other regulated investment companies, and other
securities of issuers which represent, with respect to each issuer, no more than
5% of the value of a fund's total assets and 10% of the outstanding voting
securities of such issuer, and have no more than 25% of its assets invested in
the securities (other than those of the U.S. Government or other regulated
investment companies) of any one issuer or of two or more issuers which the fund
controls and which are engaged in the same, similar or related trades and
businesses.

To the extent the Funds qualify for treatment as a regulated investment company,
they will not be subject to Federal income tax on income paid to shareholders in
the form of dividends or capital gains distributions.

An excise tax will be imposed on the excess, if any, of the Funds' "required
distributions" over actual distributions in any calendar year. Generally, the
"required distribution" is 98% of a fund's ordinary income for the calendar year
plus 98% of its capital gain net income recognized during the one-year period
ending on October 31 plus undistributed amounts from prior years. The Funds
intend to make distributions sufficient to avoid imposition of the excise tax.
For a distribution to qualify as such with respect to a calendar year under the
foregoing rules, it must be declared by a Fund during October, November or
December to shareholders of record during such months and paid by January 31 of
the following year. Such distributions will be taxable in the year they are
declared, rather than the year in which they are received.

Shareholders will be subject to Federal income taxes on distributions made by
the Funds whether received in cash or additional shares of the Funds.
Distributions of net investment income and net capital gains, if any, will be
taxable to shareholders without regard to how long a shareholder has held shares
of the Fund. Dividends paid by the Funds may qualify in part for the dividends
received deduction for corporations.

The Funds will notify shareholders each year of the amount of dividends and
distributions, and the portion of its dividends which qualify for the corporate
deduction.

Taxes Regarding Options, Futures and Foreign Currency Transactions

When the Funds write a call, or purchase a put option, an amount equal to the
premium received or paid by them is included in the Funds' accounts as an asset
and as an equivalent liability. In writing a call, the amount of the liability
is subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the last sale
price on the principal exchange on which such option is traded or, in the
absence of a sale, the mean between the last bid and asked prices. If an option
which a Fund has written expires on its stipulated expiration date, the Fund
recognizes a short-term capital gain. If the Fund enters into a closing purchase
transaction with respect to an option which the Fund has written, the Fund
realizes a short-term gain (or loss if the cost of the closing transaction
exceeds the premium received when the option was sold) without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a call option which the Fund has written is
exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received.

The premium paid by the Fund for the purchase of a put option is recorded in the
Fund's assets and liabilities as an investment and subsequently adjusted daily
to the current market value of the option. For example, if the current market
value of the option exceeds the premium paid, the excess would be unrealized
appreciation and, conversely, if the premium exceeds the current market value,
such excess would be unrealized depreciation. The current market value of a
purchased option is the last sale price on the principal exchange on which such
option is traded or, in the absence of a sale, the mean between the last bid and
asked prices. If an option which the Fund has purchased expires on the
stipulated expiration date, the Fund realizes a short-term or long-term capital
loss for Federal income tax purposes in the amount of the cost of the option. If
the Fund exercises a put option, it realizes a capital gain or loss (long-term
or short-term, depending on the holding period of the underlying security) from
the sale which will be decreased by the premium originally paid.

Accounting for options on certain stock indices will be in accordance with
generally accepted accounting principles. The amount of any realized gain or
loss on closing out such a position will result in a realized gain or loss for
tax purposes. Such options held by a Fund at the end of each fiscal year on a
broad-based stock index will be required to be "marked-to-market" for Federal
income tax purposes. Sixty percent of any net gain or loss recognized on such
deemed sales or on any actual sales will be treated as long-term capital gain or
loss, and the remainder will be treated as short-term capital gain or loss
("60/40 gain or loss"). Certain options, futures contracts and options on
futures contracts utilized by the Fund are "Section 1256 contracts." Any gains
or losses on Section 1256 contracts held by the Fund at the end of each taxable
year (and on October 31 of each year for purposes of the 4% excise tax) are
"marked-to-market" with the result that unrealized gains or losses are treated
as though they were realized and the resulting gain or loss is treated as a
60/40 gain or loss.

Unique Foreign Tax Issues

Foreign governments may withhold taxes from dividends or interest paid with
respect to foreign securities typically at a rate between 10% and 35%. Tax
conversions between certain countries and the United States may reduce or
eliminate such taxes. The Funds intend to elect to pass-through foreign taxes
paid in order for a shareholder to take a credit or deduction if, at the close
of its fiscal year, more than 50% of a Fund's total assets are invested in
securities of foreign issuers.

Under the United States-Korea income tax treaty, as presently in effect, the
government of Korea imposes a nonrecoverable withholding tax and resident tax
aggregating 10.125% on dividends and 12.9% on interest paid to Matthews Korea
Fund by Korean issuers. Under United States-Korea income tax treaty, there is no
Korean withholding tax on realized capital gains.

The above discussion and the related discussion in the Prospectuses are not
intended to be complete discussions of all applicable Federal tax consequences
of an investment in the Funds. Dividends and distributions also may be subject
to state and local taxes. Shareholders are urged to consult their tax advisors
regarding specific questions as to Federal, state and local taxes.

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

Underwriters

Other than FDDI, which serves as a nominal statutory underwriter, the Trust has
not engaged an underwriter which actively distributes its shares.

Calculation of Performance Data

In General

From time to time, the Trust may include general comparative information, such
as statistical data regarding inflation, securities indices or the features or
performance of alternative investments, in advertisements, sales literature and
reports to shareholders. The Trust may also include calculations, such as
hypothetical compounding examples or tax-free compounding examples, which
describe hypothetical investment results in such communications. Such
performance examples will be based on an express set of assumptions and are not
indicative of the performance of any Fund.

In addition, the yield and total return of a Fund may be quoted in
advertisements, shareholder reports or other communications to shareholders.

Average Total Return Quotation

The Funds compute their average annual total return by determining the average
annual compounded rate of return during specified periods that equate the
initial amount invested to the ending redeemable value of such investment.

This is done by dividing the ending redeemable value of a hypothetical $1,000
initial payment by $1,000 and raising the quotient to a power equal to one
divided by the number of years (or fractional portion thereof) covered by the
computation and subtracting one from the result. This calculation can be
expressed as follows:

P(1+T)n = ERV

ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the beginning of the
period.

P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of years.
T = average annual total return.

The Funds compute their aggregate total return by determining the aggregate
compounded rate of return during specified period that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:

Aggregate Total Return = [ ERV - 1 ] P
ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the beginning of the
period.
P = hypothetical initial payment of $1,000.

The average annual total returns for the Funds which quote such performance were
as follows for the periods shown:

*Inception 9/1/98
through through
SERIES Class 8/31/98 8/31/99

Asia Technology I N/A N/A

Asian Growth and Income I ( 4.71%) N/A

Dragon Century China I (79.19%) N/A

Japan I N/A N/A

Korea I (34.63%) N/A
A, No Load (35.25%) (68.74%)
A, Load (36.14%) (70.58%)

Pacific Tiger I (19.87%) N/A
A, No Load (19.87%) (66.03%)
A, Load (20.89%) (67.91%)

*Asian Growth and Income Funds commenced operations on September 13, 1994; Asia
Technology commenced operations of December 15, 1999. Dragon Century China
commenced operations on February 19, 1998; Japan commenced operations on
December 31, 1998; and Korea commenced operations on January 3, 1995; Pacific
Tiger and Growth and Income Funds commenced operations on September 13, 1994;

The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.

Since performance will fluctuate, performance data for the Funds should not be
used to compare an investment in the Funds' shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed-upon
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.

Yield Quotation

Yield, in its simplest form, is the ratio of income per share derived from the
Fund's investments to a current maximum offering price expressed in terms of
percent. The yield is quoted on the basis of earnings after expenses have been
deducted. The yield of a Fund is calculated by dividing the net investment
income per share earned during a 30-day (or one month) period by the maximum
offering price per share on the last day of the period and annualizing the
result. The Funds' net investment income per share earned during the period is
based on the average daily number of shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period minus expenses accrued for the period, net of reimbursements. This
calculation can be expressed as follows:

YIELD = 2 [(a - b + 1)6 - 1 ]
cd

Where:

a= dividends and interest earned during the period.
b= expenses accrued for the period (net of reimbursements).
c= the average daily number of shares outstanding during the period that were
entitled to receive dividends.
d = maximum offering price per share on the last
day of the period.

For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by a
Fund is recognized by accruing 1/360 of the stated dividend rate of the security
each day that the security is in the Fund. Except as noted below, interest
earned on any debt obligations held by a Fund is calculated by computing the
yield to maturity of each obligation held by that Fund based on the market value
of the obligation (including actual accrued interest) at the close of business
on the last business day of the month, the purchase price (plus actual accrued
interest) and dividing the result by 360 and multiplying the quotient by the
market value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is held by that Fund. For purposes of this
calculation, it is assumed that each month contains 30 days. The date on which
the obligation reasonably may be expected to be called or, if none, the maturity
date. With respect to debt obligations purchased at a discount or premium, the
formula generally calls for amortization of the discount or premium. The
amortization schedule will be adjusted monthly to reflect changes in the market
values of such debt obligations.

Expenses accrued for the period (variable "b" in the formula) include all
recurring fees charged by a Fund to all shareholder accounts in proportion to
the length of the base period and the Fund's mean (or median) account size.
Undeclared earned income will be subtracted from the offering price per capital
share (variable "d" in the formula).

Performance and Advertisements

The Funds' performance may from time to time be compared, in marketing and other
fund literature, to the performance of other mutual funds in general or to the
performance of particular types of mutual funds with similar investment goals,
as tracked by independent organizations. Among these organizations, Lipper
Analytical Services, Inc. ("Lipper"), a widely used independent research firm
which ranks mutual funds by overall performance, investment objectives, and
assets, may be cited. Lipper performance figures are based on changes in net
asset value, with all income and capital gains dividends reinvested. Such
calculations do not include the effect of any sales charges imposed by other
funds. The Funds will be compared to Lipper's appropriate fund category, that
is, by fund objective and portfolio holdings. The Funds' performance may also be
compared to the average performance of their Lipper category.

The Funds' performance may also be compared to the performance of other mutual
funds by Morningstar, Inc. ("Morningstar") which ranks funds on the basis of
historical risk and total return. Morningstar's rankings range from five stars
(highest) to one star (lowest) and represent Morningstar's assessment of the
historical risk level and total return of a fund as a weighted average for
three, five and ten year periods. Ranks are not absolute or necessarily
predictive of future performance.

Matthews Asian Growth and Income Fund, and Pacific Tiger Fund may compare their
performance to a wide variety of indices including the Morgan Stanley All
Country Far East ex-Japan Index and the Morgan Stanley All Country Far East Free
ex-Japan Index. The Index is expressed in US Dollars to provide a benchmark for
US Dollar-denominated investors.

The Matthews Dragon Century China Fund may compare its performance to a wide
variety of indices including the Credit Lyonnais China World Index, a market
capitalization weighted index of Chinese equities which are listed on the Hong
Kong, Shanghai, and Shenzen stock exchanges.

The Matthews Japan Fund may compare its performance to a wide variety of indices
including the Tokyo Stock Price Index (TOPIX), a market capitalization weighted
index of over 1100 stocks traded in the Japanese market.

The Matthews Korea Fund may compare its performance to a wide variety of indices
including the South Korea Stock Market Price Index, a market capitalization
weighted index of all common stocks traded in the South Korean Market.

In assessing such comparisons of yield, return, or volatility, an investor
should keep in mind that the composition of the investments in the reported
indices and averages is not identical to those of the Funds, that the averages
are generally unmanaged, and that the items included in the calculations of such
averages may not be identical to the formula used by a Fund to calculate its
figures.

Because the Funds' investments primarily are denominated in foreign currencies,
the strength or weakness of the U.S. dollar as against these currencies may
account for part of the Funds' investment performance. Historical information
regarding the value of the dollar versus foreign currencies may be used from
time to time in advertisements concerning the Funds. Marketing materials may
cite country and economic statistics and historical stock market performance for
any of the countries in which the Funds invest. Sources for such statistics may
include official publications of various foreign governments, exchanges, or
investment research firms.

<PAGE>

OTHER INFORMATION

Statements contained in the Prospectuses or in this Statement of Additional
Information as to the contents of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectuses and this Statement of Additional Information
form a part. Each such statement is qualified in all respects by such reference.

Reports to Shareholders Shareholders will receive unaudited semi-annual reports
describing the Funds' investment operations and annual financial statements
audited by independent certified public accountants. Inquiries regarding the
Funds may be directed to the Advisor at (800) 789-2742.

APPENDIX

Bond Ratings

Moody's Investors Service, Inc. ("Moody's") describes classifications of
corporate bonds as follows:

AaaBonds 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.

BaaBonds 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.

CaaBonds 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.

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>

FINANCIAL STATEMENTS
Dated: October 1, 1999
[To be filed by subsequent amendment]

<PAGE>

MATTHEWS INTERNATIONAL FUNDS

Form N-1A
Part C - Other Information

Item 23. Exhibits

(a) Trust Instrument and Certificate of Trust is incorporated herein by
reference to and was filed electronically with Post-Effective Amendment No. 5 on
December 27, 1996.

(b) By-Laws are incorporated herein by reference to and was filed electronically
with Post-Effective Amendment No. 5 on December 27, 1996.

(d)(1) Investment Advisory Agreement for Matthews Pacific Tiger Fund with
Matthews International Capital Management, effective September 12, 1994, is
incorporated herein by reference to and was filed electronically with
Post-Effective Amendment No. 5 on December 27, 1996.

(d)(2) Investment Advisory Agreement for Matthews Asian Growth and Income Fund
(formerly Matthews Asian Convertible Securities Fund) with Matthews
International Capital Management, effective September 12, 1994, is incorporated
herein by reference to and was filed electronically with Post-Effective
Amendment No. 5 on December 27, 1996.

(d)(3) Investment Advisory Agreement for Matthews Korea Fund with Matthews
International Capital Management, effective December 13, 1994, is incorporated
herein by reference to and was filed electronically with Post-Effective
Amendment No. 5 on December 27, 1996.

(d)(4) Investment Advisory Agreement for Matthews Dragon Century China Fund with
Matthews International Capital Management, effective December 22, 1997 is
incorporated herein by reference to and was filed electronically with
Post-Effective Amendment No. 8 on December 31, 1997.

(d)(5) Form of Investment Advisory Agreement for Matthews Japan Fund with
Matthews International Capital Management, is incorporated herein by reference
to and was filed electronically with Post-Effective Amendment No. 9 on October
16, 1998.

(d)(6) Research and Advisory Agreement between Matthews International Capital
Management, Inc. and Daewoo Capital Management Co., Ltd., effective December 13,
1994, is incorporated herein by reference to and was filed electronically with
Post-Effective Amendment No. 5 on December 27, 1996.

(d)(7) Form of Investment Advisory Agreement between Matthews International
Funds, on behalf of Matthews Asian Technology Fund and Matthews International
Capital Management, LLC to be filed by subsequent amendment.

(e)(1) Form of Underwriting Agreement for Matthews International Funds with
First Data Distributors, Inc., effective January 1, 1999, is incorporated herein
by reference to and was filed electronically with Post-Effective Amendment No. 9
on October 16, 1998.

(f)Not Applicable.

(g) (1) Custody Agreement with The Bank of New York, effective June 1, 1995 is
incorporated herein by reference to and was electronically filed with
Post-Effective Amendment No. 4 on December 29, 1995.

(h) (1) Transfer Agent Services Agreement for Matthews International Funds with
FPS Services, Inc., effective August 12, 1994, is incorporated herein by
reference to and was filed electronically with Post-Effective Amendment No. 5 on
December 27, 1996.

(h)(2) Amended Transfer Agent Services Agreement adding Matthews Korea Fund,
effective December 13, 1994, is incorporated herein by reference to and was
filed electronically with Post-Effective Amendment No. 5 on December 27, 1996.

(h)(3) Investment Company Services Agreement for Matthews International Funds
with FPS Services, Inc., effective October 1, 1997, is incorporated herein by
reference to and was filed electronically with Post-Effective Amendment No. 8 on
December 31, 1997.

(h)(4) Amendment to Investment Company Services Agreement adding new series and
new classes for Matthews Pacific Tiger Fund and Matthews Korea Fund, effective
November 11, 1997, is incorporated herein by reference to and was filed
electronically with Post-Effective Amendment No. 8 on December 31, 1997.

(h)(5) Form of Amendment to Investment Company Services Agreement adding
Matthews Japan Fund is incorporated herein by reference to and was filed
electronically with Post-Effective Amendment No. 9 on October 16, 1998.

(i) Not Applicable.

(j) Not Applicable.

(k) Not Applicable.

(l) Not Applicable.

(m) 12b-1 Plan to be filed by subsequent amendment.

(n) Not Applicable.

(o) 18f-3 Plan to be filed by subsequent amendment.

(p)(1) Power of Attorney is incorporated herein by reference to and was filed
electronically with Post-Effective Amendment No. 9 on October 16, 1998.

Item 24. Persons Controlled by or under Common Control with the Registrant
Not Applicable.

Item 25. Indemnification

Section 10.2 of the Registrant's Trust Instrument provides as follows:

10.2 Indemnification. The Trust shall indemnify each of its Trustees against all
liabilities and expenses (including amounts paid in satisfaction of judgments,
in compromise, as fines and penalties, and as counsel fees) reasonably incurred
by him in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be involved or with
which he may be threatened, while as a Trustee or thereafter, by reason of his
being or having been such a Trustee except with respect to any matter as to
which he shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of his duties, provided that
as to any matter disposed of by a compromise payment by such person, pursuant to
a consent decree or otherwise, no indemnification either for said payment or for
any other expenses shall be provided unless the Trust shall have received a
written opinion from independent legal counsel approved by the Trustees to the
effect that if either the matter of willful misfeasance, gross negligence or
reckless disregard of duty, or the matter of bad faith had been adjudicated, it
would in the opinion of such counsel have been adjudicated in favor of such
person. The rights accruing to any person under these provisions shall not
exclude any other right to which he may be lawfully entitled, provided that no
person may satisfy any right of indemnity or reimbursement hereunder except out
of the property of the Trust. The Trustees may make advance payments in
connection with the indemnification under this Section 10.2, provided that the
indemnified person shall have given a written undertaking to reimburse the Trust
in the event it is subsequently determined that he is not entitled to such
indemnification.

The Trust shall indemnify officers, and shall have the power to indemnify
representatives and employees of the Trust, to the same extent that Trustees are
entitled to indemnification pursuant to this Section 10.2

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in that Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a trustee, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in that Act and will
be governed by the final adjudication of such issue.

Section 10.3 of the Registrant's Trust Instrument, incorporated herein by
reference as Exhibit 1 to Post-Effective Amendment No. 5, also provides for the
indemnification of shareholders of the Registrant. Section 10.3 states as
follows:

10.3 Shareholders. In case any Shareholder or former Shareholder of any Series
shall be held to be personally liable solely by reason of his being or having
been a shareholder of such Series and not because of his acts or omissions or
for some other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or, in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets belonging to the applicable Series to be held
harmless from and indemnified against all loss and expense arising from such
liability. The Trust, on behalf of the affected Series, shall, upon request by
the Shareholder, assume the defense of any claim made against the Shareholder
for any act or obligation of the Trust and satisfy any judgment thereon from the
assets of the Series.

In addition, Registrant currently has a trustees' and officers' liability policy
covering certain types of errors and omissions.

Item 26. Business and Other Connections of Advisor and Korean Advisor:

Matthews International Capital Management, LLC provides investment advisory
services to individual and institutional investors, and as of October 1, 1998
had approximately $115 million in assets under management.

For information as to any other business, vocation or employment of a
substantial nature in which each Trustee or officer of the Registrant's
investment advisor has been engaged for his own account or in the capacity of
Trustee, officer, employee, partner or trustee, reference is made to the Form
ADV (File #801-39520) filed by it under the Investment Advisers Act of 1940.

Daewoo International Capital Management, Ltd. (the "Research Advisor") was
organized in February 1988 under the laws of the Republic of Korea. The Research
Advisor is wholly owned by Daewoo Securities Co., Ltd., Daewoo Securities
Building, 34-3 Yoido-dong, Yungdungpo-gu, Seoul, Korea, the largest Korean
securities firm in terms of paid-in capital and revenues in 1992. Daewoo
Securities Co., Ltd. is affiliated with Daewoo Corporation, a conglomerate
headquartered in Seoul, Korea. Daewoo Corporation and certain affiliates of
Daewoo Corporation own approximately 12% of Daewoo Securities Co., Ltd. For
information as to any other business, vocation or employment of a substantial
nature in which each Trustee or officer of the Registrant's Research Advisor has
been engaged for his own account or in the capacity of Trustee, officer,
employee, partner or trustee, reference is made to the Form ADV (File
#801-32282) filed by it under the Investment Advisers Act of 1940.

ITEM 27. PRINCIPAL UNDERWRITERS

(a) First Data Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary
of First Data Investor Services Group, Inc. and an indirect wholly owned
subsidiary of First Data Corporation, acts as distributor for Northern Funds
pursuant to a distribution agreement dated January 1, 1999. The Distributor also
acts as underwriter for ABN AMRO Funds, Alleghany Funds, BT Insurance Funds
Trust, First Choice Funds Trust, LKCM Funds, The Galaxy Fund, The Galaxy VIP
Fund, Galaxy Fund II, IBJ Funds Trust, Panorama Trust, Undiscovered Managers
Fund, New Convenant Funds, Forward Funds, Inc., Light Index Funds, Inc. Weiss
Peck & Greer Funds Trust, Weiss Peck & Greer International Fund, WPG Growth
Fund, WPG Growth & Income Fund, WPG Tudor Fund, RWB/WPG U.S. Large Stock Fund,
Tomorrow Funds Retirement Trust, The Govett Funds, Inc., IAA Trust Growth Fund,
Inc., IAA Trust Asset Allocation Fund, Inc., IAA Trust Tax Exempt Bond Fund,
Inc., IAA Trust Taxable Fixed Income Series Fund, Inc., Matthews International
Funds, MCM Funds, Metropolitan West Funds, Smith Breeden Series Fund, Smith
Breeden Trust, Stratton Growth Fund, Inc., Stratton Monthly Dividend REIT
Shares, Inc., The Stratton Funds, Inc., Trainer, Wortham First Mutual Funds,
Wilshire Target Funds, Inc. and Worldwide Index Funds. The Distributor is
registered with the Securities and Exchange Commission as a broker-dealer and is
a member of the National Association of Securities Dealers, Inc.

(b) The information required by this Item 27(b) with respect to each director,
officer, or partner of First Data Distributors, Inc. is incorporated by
reference to Schedule A of Form BD filed by First Data Distributors, Inc. with
the Securities and Exchange Commission pursuant to the Securities Act of 1934
(File No. 8-45467).

Item 28. Location of Accounts and Records

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

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

The Bank of New York, 90 Washington Street, New York, N.Y. 10286

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

First Data Investor Services Group, Inc., 3200 Horizon Drive, King of Prussia,
19406-0903.

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

Matthews International Capital Management, LLC, 655 Montgomery Street, Suite
1438, San Francisco, CA 94111

Item 29. Management Services

Not Applicable.

Item 30. Undertakings

Not Applicable.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has caused this
Post-Effective Amendment No. 11 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, and State of California
on the 1st day of October 1999.

Matthews International Funds
Registrant
By /s/G.Paul Matthews G.
Paul Matthews, President

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement of Matthews International Funds has been signed below by the following
persons in the capacities and on the date indicated.

Signature Capacity Date

/s/ G. Paul Matthews* President and October 1, 1999
G. Paul Matthews Principal Executive Officer

/s/ Brian Stableford* Treasurer October 1, 1999
Brian Stableford

/s/ John Dracott* Trustee Emeritus October 1, 1999
John Dracott

/s/ Robert K. Connolly* Trustee October 1, 1999
Robert K. Connolly

/s/ Richard K. Lyons* Trustee October 1, 1999
Richard K. Lyons

/s/ David FitzWilliam-Lay * Trustee October 1, 1999
David FitzWilliam-Lay

/s/ Norman W. Berryessa * Trustee October 1, 1999
Norman W. Berryessa

* By: /s/ Daniel J. Igo, as Attorney-in-Fact and Agent pursuant to Power of
Attorney