UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

Item 1. Reports to Stockholders.

The Report to Shareholders is attached herewith.

Matthews Asia Funds | Semi-Annual Report

June 30, 2013 | matthewsasia.com

ASIA FIXED INCOME STRATEGY

Matthews Asia Strategic Income Fund

ASIA GROWTH AND INCOME STRATEGIES

Matthews Asian Growth and Income Fund

Matthews Asia Dividend Fund

Matthews China Dividend Fund

ASIA GROWTH STRATEGIES

Matthews Asia Focus Fund

Matthews Asia Growth Fund

Matthews Pacific Tiger Fund

Matthews Emerging Asia Fund

Matthews China Fund

Matthews India Fund

Matthews Japan Fund

Matthews Korea Fund

ASIA SMALL COMPANY STRATEGIES

Matthews Asia Small Companies Fund

Matthews China Small Companies Fund

ASIA SPECIALTY STRATEGY

Matthews Asia Science and Technology Fund

'13

Performance and Expenses

*  These figures are from the Fund's current prospectus and may differ from the actual expense ratios for the preceding fiscal year, as shown in the Financial Highlights section of this report.

1  Matthews has contractually agreed to waive fees and reimburse expenses until August 31, 2014 to the extent needed to limit Total Annual Fund Operating Expenses to 1.25% for the Institutional Class and agreed to reduce the expense ratio by an equal amount for the Investor Class. Because certain expenses of the Investor Class are higher than the Institutional Class, the Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may exceed 1.25%. The amounts of the waivers and reimbursements are based on estimated Fund expenses. The fee waivers and expense reimbursements may be terminated at any time by the Board of Trustees or the Trust on behalf of the Fund on 60 days' written notice.

2  Matthews has also agreed to waive fees and reimburse additional expenses for the Institutional Class of the Fund on a voluntary basis if its expense ratio exceeds 1.00%. Furthermore, any amounts voluntarily waived by Matthews in respect of the Institutional Class, excluding any voluntary waiver of class-specific shareholder servicing fees, may also be waived for the Investor Class. These voluntary waivers and/or reimbursements may be terminated at any time in the sole and absolute discretion of Matthews.

3  Actual return, not annualized.

4  Matthews has contractually agreed to waive fees and reimburse expenses until August 31, 2015 to the extent needed to limit Total Annual Fund Operating Expenses to 1.75% for the Institutional Class of the Asia Focus Fund and to 2.00% for the Institutional Class of the Emerging Asia Fund, and agreed to reduce the expense ratio by an equal amount for the corresponding Investor Class of each Fund. Because certain expenses of the Investor Class are higher than the Institutional Class, the Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may exceed 1.75% or 2.00%, respectively. The amounts of the waivers and reimbursements are based on estimated Fund expenses. The fee waivers and expense reimbursements may be terminated at any time by the Board of Trustees or the Trust on behalf of the Fund on 60 days' written notice.

5  Matthews has also agreed to waive fees and reimburse additional expenses for the Institutional Class of each Fund on a voluntary basis if its expense ratio exceeds 1.50% for the Asia Focus Fund and 1.75% for the Emerging Asia Fund. Furthermore, any amounts voluntarily waived by Matthews in respect of an Institutional Class, excluding any voluntary waiver of class-specific shareholder servicing fees, may also be waived for its corresponding Investor Class. These voluntary waivers and/or reimbursements may be terminated at any time in the sole and absolute discretion of Matthews.

6  Institutional Class Shares were first offered on April 30, 2013. For performance since that date, please see each Fund's performance table in the report. Performance for the Institutional Class Shares prior to its inception is based on the performance of the Investor Class. Performance differences between the Institutional Class and Investor Class may arise due to differences in fees charged to each class.

7  Gross annual operating expenses are estimated.

8  The Advisor has contractually agreed to waive the Fund's fees and reimburse expenses until at least August 31, 2014 to the extent needed to limit total annual operating expenses to 2.00%. The amounts of the waivers and reimbursements are based on estimated Fund expenses. The fee waivers and expense reimbursements may be terminated at any time by the Board of Trustees or the Trust on behalf of the Fund on 60 days' written notice.

Past Performance: All performance quoted in this report is past performance and is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the returns quoted. If certain of the Funds' fees and expenses had not been waived, returns would have been lower. For the Funds' most recent month-end performance, please call 800.789.ASIA (2742) or visit matthewsasia.com.

Contents

Cover photo: Matsumoto Castle, Japan

This report has been prepared for Matthews Asia Funds shareholders. It is not authorized for distribution to prospective investors unless accompanied or preceded by a current Matthews Asia Funds prospectus, which contains more complete information about the Funds' investment objectives, risks and expenses. Additional copies of the prospectus may be obtained at matthewsasia.com. Please read the prospectus carefully before you invest or send money.

The views and opinions in this report were current as of June 30, 2013. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of a Fund's future investment intent. Current and future portfolio holdings are subject to risk.

Statements of fact are from sources considered reliable, but neither the Funds nor the Investment Advisor makes any representation or guarantee as to their completeness or accuracy.

Investment Risk: Mutual fund shares are not deposits or obligations of, or guaranteed by, any depositary institution. Shares are not insured by the FDIC, Federal Reserve Board or any government agency and are subject to investment risks, including possible loss of principal amount invested. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Fixed income investments are subject to additional risks, including, but not limited to, interest rate, credit and inflation risks. In addition, single-country and sector funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific industry, sector or geographic location. Investing in small and mid-size companies is more risky than investing in large companies as they may be more volatile and less liquid than larger companies. Please see the Funds' prospectus and Statement of Additional Information for more risk disclosure.

Matthews Asia Funds are distributed in the United States by Foreside Funds Distributors LLC, Berwyn, Pennsylvania

Matthews Asia Funds are distributed in Latin America by HMC Partners

"Asia is still a region of strong demand in a world that seems stuck in a rut, with high unemployment and tighter money."

Message to Shareholders
from the Investment Advisor

Dear Valued Shareholder,

Those of you who know Matthews Asia well, or have visited us in San Francisco, may know that the most important piece of furniture on the investment team floor is our pool table. It has survived now for about 15 years and is in surprisingly decent shape. Its presence on the floor is a product of the Asian Financial Crisis of 1997-98, when Matthews Asia was still finding its feet. With markets collapsing around the region, our chairman Mark Headley decided that what Matthews Asia needed was a pool table to serve as a center of gravity, pulling analysts and portfolio managers away from their flashing red computer screens and getting them to discuss Asia in a more relaxed manner.

Back then, the U.S. dollar rallied while many Asian governments and corporations were laden with dollar debt. A few years later, however, a weakened dollar and strong global growth accompanied Asia's comeback from 2000 to 2007. Conversely, over the past couple of years, the slowdown in growth in the region has been concurrent with the gentle rise in the dollar.

Towards the end of the second quarter of the year, indications that monetary policy might be tightened by the U.S. Federal Reserve, even as growth increased only moderately, caused a sudden liquidation of Asian assets and a rush to cash. As the greenback has strengthened, bonds, gold and equities have all fallen. Fortunately, however, Matthews Asia has some experience reflecting on volatile markets with the composure of a seasoned billiard player.

Investors appear to be rushing to hold cash—particularly in U.S. dollars—or, in some regards, shrinking their investment time horizons. As those timelines shorten, the opportunities lie further into the future. However, with money tightening in the U.S., Japan and China, economic activity could certainly be squeezed in the short term. I expect near-term GDP figures to be weak even as I aim to avoid a game of "guessing the quarterly GDP growth." So, it may be time again to step away from those computer screens and consider the longer-term developments of Asia's economies.

Media pundits exclaim that China's shadow banking and wealth management products are "sub-prime," casually comparing the current China liquidity squeeze to a "Lehman event," a "Minsky moment" or a U.S. housing bubble repeated (all of which simply replaces analysis with catchphrases). China does not have a sub-prime mortgage market—people buy houses with cash. Nor are its households highly leveraged or the central government highly indebted. The average Chinese household still has a positive savings rate and the country as a whole runs a current account surplus. To be sure, China's credit has grown rapidly in the past few years and the government has been acting to slow it, which will impact growth. But China is entering this liquidity squeeze with a market trading at 8.4x forward 12-month earnings* and one that has already fallen by nearly 70% since its peak in 2007. And it is not as if China lacks investment opportunities either at home or abroad that could cause it to get stuck in a rut as the U.S. has since the global financial crisis five years ago. So, whatever the current situation, it is not simply a replay of the U.S.'s recent woes.

Whereas the current monetary policy is bad for economic growth, policymakers already seem to be walking back on their hawkish comments while markets appear to have had some cushion from low valuations. There is no doubt that moves by monetary authorities can have a profound impact on growth; if

everyone increases demand to hold cash just as the central banks slow the growth in the supply of that cash, spending will fall. And because, generally speaking, your spending is someone else's income, we all end up poorer. But self-defeating spirals tend to end. I wonder how prolonged such a spiral could be this time. It seems strange, even bizarre, that monetary authorities in the U.S. and Japan would want to deflate expectations when inflation rates remain below 2% in the U.S. and are still negative in Japan. In my mind, this was much too quick on the draw! For, given the already reasonable valuations that markets were trading at before the sell-off, real value has emerged for the long-run investor. Even some of the high-yielding stocks, which had performed well in the recent past and had become somewhat expensive relative to history, were sold down aggressively on the back of rising U.S. yields and have since returned to reasonable valuations. I suspect that either growth will be stronger than we expect and support equity valuations or there will come a point in which the downwardly revised expectations of growth put a halt to the rise in bond yields.

So, whilst our pool table sees little action these days, we do appeal to the same sentiment that made it a Matthews Asia institution. Asia is still a region of strong demand in a world that seems stuck in a rut, with high unemployment and tighter money. Asia, too, has the potential to continue to grow at rates in excess of the developed world, due to its fast-growing rates of productivity. The region suffers in the capital markets, of course, from being seen through the prism of the U.S. dollar.

So, what to do in this environment? The strategies we employ to manage portfolios tend not to change. But we do have to be ever more alert for possible dislocations in market prices. This is to say that some stocks may be sold down over the short term. We may wish to trim other positions to add to holdings that have sold off aggressively or even to initiate new positions. But this should not be considered a change in our approach or a desire to "time" market movements. It is merely that our long-term view will seem relatively fixed in comparison to the short-run gyrations of market prices as speculators run to cash. Such price moves are likely to be unevenly distributed across countries and sectors, in our eyes, and we may have many new opportunities with which to implement our long-term view.

We would also like to inform you that, as of July 19, 2013, there were portfolio management changes to the Matthews Asia Dividend Fund. The Fund is now co-lead managed by Yu Zhang, CFA, and myself. Jesper Madsen, CFA, has decided to leave Matthews Asia, as of October 31, 2013, in order to pursue personal interests outside of finance.

As always, we feel privileged to be your investment advisor for Asia, and thank you for your support.

Robert Horrocks, PhD
Chief Investment Officer
Matthews International Capital Management, LLC

*  Forward earnings are calculated by dividing market price per share by expected earnings per share.

ASIA FIXED INCOME STRATEGY

PORTFOLIO MANAGERS

FUND FACTS

Portfolio Statistics

Benchmarks

HSBC Asian Local Bond Index

J.P. Morgan Asia Credit Index

Redemption Fee

2% within first 90 calendar days of purchase

OBJECTIVE

Total return over the long term with an emphasis on income.

STRATEGY

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total assets, which include borrowings for investment purposes, in income-producing securities including, but not limited to, debt and debt-related instruments issued by governments, quasi-governmental entities, supra-national institutions, and companies in Asia. Asia consists of all countries and markets in Asia and includes developed, emerging, and frontier countries and markets in the Asian region. Investments may be denominated in any currency, and may represent any part of a company's capital structure from debt to equity or with features of both.

1  Matthews Asia Funds does not charge 12b-1 fees.

2  Matthews has contractually agreed to waive fees and reimburse expenses until August 31, 2014 to the extent needed to limit Total Annual Fund Operating Expenses to 1.25% for the Institutional Class and agreed to reduce the expense ratio by an equal amount for the Investor Class. Because certain expenses of the Investor Class are higher than the Institutional Class, the Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may exceed 1.25%. The amounts of the waivers and reimbursements are based on estimated Fund expenses. The fee waivers and expense reimbursements may be terminated at any time by the Board of Trustees or the Trust on behalf of the Fund on 60 days' written notice.

3  Matthews has also agreed to waive fees and reimburse additional expenses for the Institutional Class of the Fund on a voluntary basis if its expense ratio exceeds 1.00%. Furthermore, any amounts voluntarily waived by Matthews in respect of the Institutional Class, excluding any voluntary waiver of class-specific shareholder servicing fees, may also be waived for the Investor Class. These voluntary waivers and/or reimbursements may be terminated at any time in the sole and absolute discretion of Matthews.

4  Modified duration measures the percent change in value of the fixed income portion of the portfolio in response to a 1% change in interest rates. In a multi-currency denominated portfolio with sensitivities to different interest rate regimes, modified duration will not accurately reflect the change in value of the overall portfolio from a change in any one interest rate regime.

5  The lesser of fiscal year 2012 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.

Matthews Asia Strategic Income Fund

Portfolio Manager Commentary

For the first half of 2013, the Matthews Asia Strategic Income Fund returned –3.41% (Investor Class) and –3.32% (Institutional Class), while its primary benchmark, the HSBC Asian Local Bond Index and its secondary benchmark, the J.P. Morgan Asia Credit Index, returned –4.20% and –4.14%, respectively. For the quarter ended June 30, the Fund returned –5.37% (Investor Class) and –5.42% (Institutional Class), while its primary benchmark and secondary benchmarks returned –4.78% and –4.34%, respectively.

With the world's two largest central banks signaling the tapering of loose monetary policies late in the quarter, investors re-priced risk across all markets. In the U.S., 10-year Treasury yields rose almost 100 basis points (1.0%) from 1.63% on May 2 to 2.61% on June 25. With such a drastic rise in "risk-free" rates, yields rose globally. As expected, bond markets that tend to be most correlated with the U.S., such as Hong Kong and Singapore, saw close to a one-for-one rise in yields. Asian bond markets that are less sensitive to market movements, such as Malaysia and Thailand, saw yields rising by about half as much. Emerging Asian countries saw yields rise by about twice as much. For example, in Indonesia yields rose by nearly 2%.

The depreciation of most Asian currencies also compounded the negative price impact of rising U.S. yields. The Australian dollar, which fell more than 12%, the Indian rupee and the New Zealand dollar were the worst-performing currencies over the quarter. The best performers were the Chinese renminbi, the Hong Kong dollar and the Taiwan dollar. During the quarter, we added to the Fund's exposure of Sri Lankan rupee government bonds as we view them to be among the region's best risk-adjusted return opportunities. We also cut our exposure to Philippine peso-denominated and Australian dollar-denominated securities as we see limited upside in them over the medium term.

During the quarter, widening credit spreads also negatively impacted performance. Within the context of this sell-off, it is not surprising that the riskiest positions suffered most, with high yields widening more than investment grade credits. The biggest detractors to Fund performance this quarter were the peso-denominated Republic of the Philippines bonds. The Shimao Property Holdings, Ltd. bond and Indian rupee currency forwards were also detractors. However, fundamentals for these issuers showed no significant deterioration over the quarter. In fact, economic data out of the Philippines has been strong, and Shimao was recently upgraded by a rating agency. In recent months, the Indian government has also taken on reforms including a diesel price hike that we believe should lead to lower fiscal and current account deficits over the medium term. Common to the detractors, however, has been the perception that these countries are relatively risky and illiquid. Therefore, these were among the first names to be sold.

Among the Fund's biggest contributors for the quarter were shares of Advanced Info Service Public Co., Ltd., a short position in U.S. Treasury futures and Galaxy Entertainment Group, Ltd. bonds. Advanced Info Service benefited from the transition into 3G mobile technology and the new license regime in Thailand. As a managed currency, the Chinese renminbi bucked the trend and continued on its own slow path of appreciation during the second quarter. Despite a liquidity squeeze in the

(continued)

PERFORMANCE AS OF JUNE 30, 2013

Performance assumes reinvestment of all dividends and/or distributions before taxes. All performance quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate with market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund's fees and expenses had not been waived. For the Fund's most recent month-end performance visit matthewsasia.com.

INCOME DISTRIBUTION HISTORY

Note: This table does not include capital gains distributions. Totals may differ by $0.01 due to rounding. For income distribution history, visit matthewsasia.com.

30-DAY YIELD:

4.23% (Investor Class) 4.41% (Institutional Class)

The 30-Day Yield represents net investment income earned by the Fund over the 30-day period ended 6/30/13, expressed as an annual percentage rate based on the Fund's share price at the end of the 30-day period. The 30-Day Yield should be regarded as an estimate of the Fund's rate of investment income, and it may not equal the Fund's actual income distribution rate.

Source: BNY Mellon Investment Servicing (US) Inc.

YIELD TO WORST:

5.72%

Yield to worst is the lowest yield that can be received on a bond assuming that the issuer does not default. It is calculated by utilizing the worst case assumptions for a bond with respect to certain income-reducing factors, including prepayment, call or sinking fund provisions. It does not represent the yield that an investor should expect to receive. Past yields are no guarantee of future yields.

Source: FactSet Research Systems

GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION—INVESTOR CLASS

Plotted monthly. The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on dividends, capital gains distributions or redemption of Fund shares. Values are in US$.

6  It is not possible to invest directly in an index. Source: Index data from HSBC, J.P. Morgan and Bloomberg; total return calculations performed by BNY Mellon Investment Servicing (US) Inc. Please see page 79 for index definitions.

7  The Lipper Category Average does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains for the stated periods.

TOP TEN POSITIONS⁸

8  Holdings may combine more than one security from same issuer and related depositary receipts.

CURRENCY ALLOCATION (%)^9,10

COUNTRY ALLOCATION (%)^10,11

SECTOR ALLOCATION (%)¹⁰

ASSET TYPE BREAKDOWN (%)^9,10

9  Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent; the values may not sum to 100% due to rounding.

10  Cash and other assets may include forward currency exchange contracts and certain derivative instruments that have been marked-to-market.

11  Not all countries are included in the benchmark index(es).

Matthews Asia Strategic Income Fund

Portfolio Manager Commentary (continued)

interbank market, China's central bank did not inject liquidity into the market, signaling its resolve to slow its credit growth. Tightening credit in China could negatively impact those sectors most tied to liquidity, particularly banks, property and gaming sectors. Despite this, Galaxy Entertainment bonds demonstrated solid price stability due to both its renminbi denomination and short duration.

Looking forward, while yields have come off their historical lows in the U.S. and Asia, we believe there is more room for interest rates to rise in the medium term. For the next several months, however, rates may consolidate at current levels. One reason for interest rate rises to be capped in Asia is slowing growth from China, which may leave little room for the region's monetary policies to be excessively tight. A slowing Chinese economy may have the positive effect of offsetting some upward pressure on Asian rates from the U.S. Federal Reserve's plans to taper quantitative easing.

Second, spreads may have some room to widen given a repricing of risk across global markets. However, credit spreads are unlikely to spike as long as default rates stay low. Global high yield rates are still hovering at about 3%, with recovery rates currently better than average. Furthermore, if U.S. growth should prove to be solid, we believe this should eventually have a positive spillover into higher cash flows and may lower leverage for global companies.

Finally, rising yields and a solid U.S. recovery may bode well for the U.S. dollar. As such, we expect local Asian currencies to underperform against the U.S. dollar in the near term. This is especially true for countries with fiscal and current account deficits. However, the silver lining is that it is also precisely in such tough times that governments may feel pushed to take on tough reforms. In Indonesia, for example, a controversial fuel price hike was recently passed. While this will likely increase inflation and inflation expectations in the near term, we believe the long-term positive effects far outweigh the negative. The removal of the subsidies can free up much-needed funds for other sectors that may be more critical for future growth, such as infrastructure and education. This serves as a reminder that crisis begets change, and it is precisely these seeds for change that we hope will blossom over the long term. As our strategy allows us the flexibility to invest in both U.S. dollar and local currency bonds, we may be well-positioned in either a strong or a weak U.S. dollar regime.

Fixed income investments are subject to additional risks, including, but not limited to, interest rate, credit and inflation risks. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets.

Matthews Asia Strategic Income Fund  June 30, 2013

Schedule of Investments^a (unaudited)

FOREIGN GOVERNMENT OBLIGATIONS: 28.2%

NON-CONVERTIBLE CORPORATE BONDS: 61.0%

Matthews Asia Strategic Income Fund  June 30, 2013

Schedule of Investments^a (unaudited) (continued)

NON-CONVERTIBLE CORPORATE BONDS (continued)

COMMON EQUITIES: 5.2%

CONVERTIBLE CORPORATE BONDS: 4.7%

a  Certain securities were fair valued under the discretion of the Board of Trustees (Note 2-B).

b  Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. The security may be resold in transactions exempt from registration normally to qualified institutional buyers. The security has been determined to be liquid in accordance with procedures adopted by the Fund's Board of Directors.

c  Variable rate security. The rate represents the rate in effect at June 30, 2013.

d  Cost for federal income tax purposes is $53,173,765 and net unrealized depreciation consists of:

*  All values are in USD unless otherwise noted.

AUD  Australian Dollar

BHD  Berhad

Cnv.  Convertible

CNY  Chinese Renminbi (Yuan)

IDR  Indonesian Rupiah

INR  Indian Rupee

JPY  Japanese Yen

KRW  Korean Won

LKR  Sri Lanka Rupee

MYR  Malaysian Ringgit

PHP  Philippine Peso

REIT  Real Estate Investment Trust

SGD  Singapore Dollar

THB  Thailand Baht

TWD  Taiwan Dollar

USD  U.S. Dollar

Matthews Asia Strategic Income Fund  June 30, 2013

Schedule of Investments^a (unaudited) (continued)

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS:

FINANCIAL FUTURES CONTRACTS SOLD AS OF JUNE 30, 2013 WERE AS FOLLOWS:

See accompanying notes to financial statements.

ASIA GROWTH AND INCOME STRATEGIES

PORTFOLIO MANAGERS

Robert J. Horrocks, PhD

Lead Manager

Kenneth Lowe, CFA

Co-Manager

FUND FACTS

Portfolio Statistics

Benchmark

MSCI AC Asia ex Japan Index

Redemption Fee

2% within first 90 calendar days of purchase

OBJECTIVE

Long-term capital appreciation. The Fund also seeks to provide some current income.

STRATEGY

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in dividend-paying common stock, preferred stock and other equity securities, and convertible securities as well as fixed-income securities, of any duration or quality, of companies located in Asia, which consists of all countries and markets in Asia, including developed, emerging and frontier countries and markets in the Asian region.

1  Matthews Asia Funds does not charge 12b-1 fees.

2  The lesser of fiscal year 2012 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.

Matthews Asian Growth and Income Fund

Portfolio Manager Commentary

For the first half of 2013, the Matthews Asian Growth and Income Fund gained 1.78% (Investor Class) and 1.86% (Institutional Class), outperforming its benchmark, the MSCI All Country Asia ex Japan Index, which fell -5.61%. For the quarter ended June 30, the Fund declined -2.52% (Investor Class) and -2.49% (Institutional Class) while its benchmark fell -5.21%.

Asian markets were somewhat challenging during the second quarter as the region experienced extreme volatility throughout May and June, sparked by three notable macroeconomic incidents. First, we witnessed some initial chatter from the U.S. Federal Reserve regarding a potential pullback in its ongoing quantitative easing program should we start to see improving data in the country. Second, we saw a spike up in China's interbank rates as its central bank, the People's Bank of China, began to restrict liquidity to its banking system in order to try to set a new tone for how credit in China should be deployed going forward. Its aim has been to begin to rein in what has been unsustainable credit growth over the last five years and potentially even end the days of guaranteed spreads for banks. As a reminder, the Fund holds no Chinese banks due to concerns such as these. Third, we saw comments from Japanese Prime Minister Shinzo Abe targeting 3% nominal GDP growth and 2% real GDP growth annually for the next decade—implying an inflation level of merely 1%, substantially lower than the 2% inflation target Japan previously stated it would aim to achieve within two years. This caused many market participants to question the Bank of Japan's conviction in what is still an early stage in an unprecedentedly large monetary policy experiment. These three events have weighed on market sentiment and particularly impacted emerging markets as the U.S. dollar strengthens with the prospect of monetary tightening in the world's two largest economies.

With volatile macroeconomic policy shifts across the globe grabbing headlines and dragging markets into negative territory, we are pleased to note that the Fund has largely been able to provide what it sets out to—that is to participate in the growth available within Asia's economies while also protecting capital in times of extreme volatility such as those that we have witnessed more recently. The Fund has a long history of investing in alternative instruments such as convertible bonds and preferred shares as part of our strategy to achieve this objective, and both helped performance over the quarter.

Our preferred share holdings, all of which are within Korean companies, comprised just a small part of the portfolio but generated solid returns. One reason for this relates to the continued low interest rates available to investors, particularly in a country such as South Korea where attractive dividend yields are hard to find. This reignited interest in an area of the market where some form of current income is still available. Further, we have witnessed small improvements in South Korea's corporate governance standards and this has led to a reduction in the premium paid for the shareholder voting rights that an investor loses by owning preferred shares. For convertible bonds, we were helped by the defensiveness of such assets. They typically provide the portfolio with some ballast as the cash flows of the underlying businesses backing these hybrid instruments remain in little doubt.

(continued)

PERFORMANCE AS OF JUNE 30, 2013

Performance assumes reinvestment of all dividends and/or distributions before taxes. All performance quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate with market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund's fees and expenses had not been waived. For the Fund's most recent month-end performance, visit matthewsasia.com.

INCOME DISTRIBUTION HISTORY

Note: This table does not include capital gains distributions. Totals may differ by $0.01 due to rounding. For income distribution history, visit matthewsasia.com.

30-DAY YIELD:

1.64% (Investor Class) 1.81% (Institutional Class)

The 30-Day Yield represents net investment income earned by the Fund over the 30-day period ended 6/30/13, expressed as an annual percentage rate based on the Fund's share price at the end of the 30-day period. The 30-Day Yield should be regarded as an estimate of the Fund's rate of investment income, and it may not equal the Fund's actual income distribution rate.

Source: BNY Mellon Investment Servicing (US) Inc.

DIVIDEND YIELD: 3.34%

The dividend yield (trailing) for the portfolio is the weighted average sum of the dividend paid per share during the last 12 months divided by the current price. The annualized dividend yield for the Fund is for the equity-only portion of the portfolio. Please note that this is based on gross equity portfolio holdings and does not reflect the actual yield an investor in the Fund would receive. Past yields are no guarantee of future yields.

Source: FactSet Research Systems, Bloomberg, MICM

GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION—INVESTOR CLASS

Plotted monthly. The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on dividends, capital gains distributions or redemption of Fund shares. Values are in US$.

3  It is not possible to invest directly in an index. Source: Index data from Morgan Stanley Capital International and Bloomberg; total return calculations performed by BNY Mellon Investment Servicing (US) Inc. Please see page 79 for index definition.

4  Calculated from 8/31/94.

5  The Lipper Category Average does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains for the stated periods.

TOP TEN HOLDINGS⁶

6  Holdings may combine more than one security from same issuer and related depositary receipts.

COUNTRY ALLOCATION (%)⁷