Matthews Asia Growth Fund NCSRS Certified semi-annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-08510

Matthews International Funds

(Exact name of registrant as specified in charter)

Four Embarcadero Center, Suite 550

San Francisco, CA 94111

(Address of principal executive offices) (Zip code)

William J. Hackett, President

Four Embarcadero Center, Suite 550

San Francisco, CA 94111

(Name and address of agent for service)

Registrant’s telephone number, including area code: 415-788-7553

Date of fiscal year end: December 31

Date of reporting period: June 30, 2018

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, 450 Fifth Street, NW, Washington, DC 20549-0609. 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, 2018 | matthewsasia.com

ASIA FIXED INCOME STRATEGIES

Matthews Asia Strategic Income Fund

Matthews Asia Credit Opportunities Fund

ASIA GROWTH AND INCOME STRATEGIES

Matthews Asian Growth and Income Fund

Matthews Asia Dividend Fund

Matthews China Dividend Fund

ASIA VALUE STRATEGY

Matthews Asia Value Fund

ASIA GROWTH STRATEGIES

Matthews Asia Focus Fund

Matthews Asia Growth Fund

Matthews Pacific Tiger Fund

Matthews Asia ESG Fund

Matthews Emerging Asia Fund

Matthews Asia Innovators 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

LOGO

Investor Class Performance and Expenses (June 30, 2018)


			Average Annual Total Return^†						Inception Date		Prospectus Expense Ratios*		Prospectus Expense Ratios after Fee Waiver and Expense Reimbursement*
Investor Class	1 year		5 years		10 years		Since Inception		Inception Date		Prospectus Expense Ratios*
ASIA FIXED INCOME STRATEGIES
Asia Strategic Income Fund (MAINX)		-0.09%		3.83%		n.a.		4.28%		11/30/11		1.29%		1.15%	¹
Asia Credit Opportunities Fund (MCRDX)		-0.45%		n.a.		n.a.		4.39%		4/29/16		1.86%		1.15%	¹
ASIA GROWTH AND INCOME STRATEGIES
Asian Growth and Income Fund (MACSX)		-0.51%		2.51%		4.99%		9.06%		9/12/94		1.07%		1.07%
Asia Dividend Fund (MAPIX)		9.27%		8.22%		9.17%		9.62%		10/31/06		1.03%		1.02%	²
China Dividend Fund (MCDFX)		21.22%		13.52%		n.a.		11.60%		11/30/09		1.19%		1.19%
ASIA VALUE STRATEGY
Asia Value Fund (MAVRX)		8.64%		n.a.		n.a.		13.91%		11/30/15		2.32%		1.50%	³
ASIA GROWTH STRATEGIES
Asia Focus Fund (MAFSX)		5.38%		4.93%		n.a.		3.41%		4/30/13		2.45%		1.50%	³
Asia Growth Fund (MPACX)		20.61%		9.55%		9.34%		10.05%		10/31/03		1.12%		1.12%
Pacific Tiger Fund (MAPTX)		10.15%		8.99%		8.77%		8.86%		9/12/94		1.08%		1.06%	²
Asia ESG Fund (MASGX)		9.93%		n.a.		n.a.		5.85%		4/30/15		2.65%		1.50%	³
Emerging Asia Fund (MEASX)		-5.13%		8.67%		n.a.		7.18%		4/30/13		1.70%		1.48%	³
Asia Innovators Fund (MATFX)		19.09%		15.36%		10.32%		4.23%		12/27/99		1.24%		1.24%
China Fund (MCHFX)		22.37%		11.72%		7.10%		10.38%		2/19/98		1.09%		1.09%
India Fund (MINDX)		5.66%		17.06%		10.05%		11.87%		10/31/05		1.09%		1.09%
Japan Fund (MJFOX)		16.27%		11.73%		7.93%		6.69%		12/31/98		0.95%		0.94%	²
Korea Fund (MAKOX)		0.00%		10.46%		7.95%		6.39%		1/3/95		1.15%		1.15%
ASIA SMALL COMPANY STRATEGIES
Asia Small Companies Fund (MSMLX)		12.87%		5.90%		n.a.		11.74%		9/15/08		1.49%		1.46%	³
China Small Companies Fund (MCSMX)		36.21%		14.78%		n.a.		7.36%		5/31/11		2.34%		1.50%	³

*	These figures are from the Funds’ prospectus dated as of April 30, 2018, and may differ from the actual expense ratios for fiscal year 2018, as shown in the financial highlights section of this report.

†	Annualized performance for periods of at least one year, otherwise cumulative.

Matthews has contractually agreed (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class to 0.90% first by waiving class specific expenses (i.e., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving non-class specific expenses of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 0.90% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 0.90%. If the operating expenses fall below the expense limitation in a year within three years after Matthews has made a waiver or reimbursement, the Fund may reimburse Matthews up to an amount that does not cause the expenses for that year to exceed the lesser of the (i) expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will remain in place until April 30, 2019 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.

Matthews has contractually agreed to waive a portion of its advisory fee and administrative and shareholder services fee if the Fund’s average daily net assets are over $3 billion, as follows: for every $2.5 billion average daily net assets of the Fund that are over $3 billion, the advisory fee rate and the administrative and shareholder services fee rate for the Fund with respect to such excess average daily net assets will be each reduced by 0.01%, in each case without reducing such fee rate below 0.00%. Any amount waived by Matthews pursuant to this agreement may not be recouped by Matthews. This agreement will remain in place until April 30, 2019 and may be terminated (i) at any time by the Board of Trustees upon 60 days’ prior written notice to Matthews; or (ii) by Matthews at the annual expiration date of the agreement upon 60 days’ prior written notice to the Trust, in each case without payment of any penalty.

Matthews has contractually agreed (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class to 1.25% first by waiving class specific expenses (i.e., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving non-class specific expenses of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 1.25% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 1.25%. If the operating expenses fall below the expense limitation in a year within three years after Matthews has made a waiver or reimbursement, the Fund may reimburse Matthews up to an amount that does not cause the expenses for that year to exceed the lesser of (i) the expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will remain in place until April 30, 2019 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.


1		MATTHEWS ASIA FUNDS

Institutional Class Performance and Expenses (June 30, 2018)


Institutional Class			Average Annual Total Return^†						Inception Date		Prospectus Expense Ratios*		Prospectus Expense Ratios after Fee Waiver and Expense Reimbursement*
Institutional Class	1 year		5 years		10 years		Since Inception		Inception Date		Prospectus Expense Ratios*
ASIA FIXED INCOME STRATEGIES
Asia Strategic Income Fund (MINCX)		0.25%		4.09%		n.a.		4.51%		11/30/11		1.08%		0.90%	¹
Asia Credit Opportunities Fund (MICPX)		-0.27%		n.a.		n.a.		4.60%		4/29/16		1.62%		0.90%	¹
ASIA GROWTH AND INCOME STRATEGIES
Asian Growth and Income Fund (MICSX)		-0.40%		2.67%		n.a.		4.03%		10/29/10		0.93%		0.93%
Asia Dividend Fund (MIPIX)		9.39%		8.35%		n.a.		7.75%		10/29/10		0.92%		0.91%	²
China Dividend Fund (MICDX)		21.40%		13.72%		n.a.		10.61%		10/29/10		1.04%		1.04%
ASIA VALUE STRATEGY
Asia Value Fund (MAVAX)		8.85%		n.a.		n.a.		14.19%		11/30/15		2.08%		1.25%	³
ASIA GROWTH STRATEGIES
Asia Focus Fund (MIFSX)		5.62%		5.20%		n.a.		3.67%		4/30/13		2.27%		1.25%	³
Asia Growth Fund (MIAPX)		20.82%		9.77%		n.a.		8.53%		10/29/10		0.93%		0.93%
Pacific Tiger Fund (MIPTX)		10.32%		9.19%		n.a.		6.77%		10/29/10		0.91%		0.89%	²
Asia ESG Fund (MISFX)		10.28%		n.a.		n.a.		6.13%		4/30/15		2.46%		1.25%	³
Emerging Asia Fund (MIASX)		-4.91%		8.91%		n.a.		7.41%		4/30/13		1.52%		1.25%	³
Asia Innovators Fund (MITEX)		19.23%		15.57%		n.a.		14.65%		4/30/13		1.05%		1.05%
China Fund (MICFX)		22.57%		11.88%		n.a.		4.74%		10/29/10		0.93%		0.93%
India Fund (MIDNX)		5.84%		17.28%		n.a.		6.71%		10/29/10		0.89%		0.89%
Japan Fund (MIJFX)		16.36%		11.85%		n.a.		11.87%		10/29/10		0.87%		0.86%	²
Korea Fund (MIKOX)		0.14%		10.63%		n.a.		8.77%		10/29/10		1.01%		1.01%
ASIA SMALL COMPANY STRATEGIES
Asia Small Companies Fund (MISMX)		13.07%		6.13%		n.a.		5.20%		4/30/13		1.35%		1.25%	³
China Small Companies Fund (MICHX)⁴		36.36%		14.81%		n.a.		7.38%		11/30/17		2.09%		1.25%	³

*	These figures are from the Funds’ prospectus dated as of April 30, 2018, and may differ from the actual expense ratios for fiscal year 2018, as shown in the financial highlights section of this report.

†	Annualized performance for periods of at least one year, otherwise cumulative.

Matthews has contractually agreed to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class to 1.25%. If the operating expenses fall below the expense limitation in a year within three years after Matthews has made a waiver or reimbursement, the Fund may reimburse Matthews up to an amount that does not cause the expenses for that year to exceed the lesser of (i) the expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will remain in place until April 30, 2019 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.

Institutional Class Shares were first offered on November 30, 2017. For performance since that date, please see the Fund’s performance table in the report. Performance for the Institutional Class Shares prior to its inception represents 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.

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.


matthewsasia.com \| 800.789.ASIA			2

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Contents


Message to Shareholders from the Investment Advisor			4
Manager Commentaries, Fund Characteristics and Schedules of Investments:

ASIA FIXED INCOME STRATEGIES
Matthews Asia Strategic Income Fund			6
Matthews Asia Credit Opportunities Fund			11

ASIA GROWTH AND INCOME STRATEGIES
Matthews Asian Growth and Income Fund			16
Matthews Asia Dividend Fund			21
Matthews China Dividend Fund			26

ASIA VALUE STRATEGY
Matthews Asia Value Fund			31

ASIA GROWTH STRATEGIES
Matthews Asia Focus Fund			35
Matthews Asia Growth Fund			39
Matthews Pacific Tiger Fund			43
Matthews Asia ESG Fund			48
Matthews Emerging Asia Fund			53
Matthews Asia Innovators Fund			58
Matthews China Fund			62
Matthews India Fund			67
Matthews Japan Fund			72
Matthews Korea Fund			77

ASIA SMALL COMPANY STRATEGIES
Matthews Asia Small Companies Fund			82
Matthews China Small Companies Fund			87

Index Definitions			92
Disclosures			93
Disclosure of Fund Expenses			94
Statements of Assets and Liabilities			98
Statements of Operations			106
Statements of Changes in Net Assets			110
Financial Highlights			119
Notes to Financial Statements			138

Cover photo: Beautiful garden with Chinese architectural bridge and reflection in the lake.

This report has been prepared for Matthews International Funds (d/b/a 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 or summary 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, 2018. 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 a 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.

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Message to Shareholders from the Investment Advisor

Dear Valued Investors,

The past two quarters have been volatile and difficult for Asia’s markets. This has led to the usual calls to try and time the market—to jump the gun on monetary cycles and to second guess the headlines. I have always found this a dangerous game. At Matthews Asia, we have found patience to be a virtue at times like this. The headline clamor has been all about trade wars and politics. These, we are told, create an atmosphere of uncertainty within which it is difficult for markets to perform. “Expect more volatility,” the pundits cry. And by this they really mean: “Markets will likely fall!” The sentiment surrounding Asia, which never really turned wholly positive, has once again swung back to one of caution and suspicion.

I’ve never really liked this way of describing market movements, which seems to border on the metaphysical. Why would the trade scuffles do much from a broad macroeconomic perspective? It makes no sense. Certain industries could surely be impacted. But what may be bad for Chinese manufacturers could be good for those in Malaysia or Vietnam. It is too complex an issue to be treated in a binary way. Is it so complex that people are just throwing their hands up in the air and standing clear until the dust settles? Maybe. But that is potentially a costly move. The actual macroeconomic impact of tariffs is small and investors can largely sidestep it by owning domestically focused businesses. So if that indecision is really driving Asia’s stock markets down, it’s a bit of a giveaway to long-term investors right now. So is it really true that a swirling uncertainty of trade and politics is causing investors to be illogically nervous about Asia and selling out at ridiculous prices?

If only it were so simple. For then, we could easily take advantage. But I suspect there is a much simpler (and more concrete) explanation for the weakness in Asia’s markets: money. Or, rather, the increasing scarcity of money. The monetary cycle has turned. The U.S. Federal Reserve is intent on raising rates, even as the spread between longer- and shorter-dated bond yields narrows (the so-called “two-ten spread,” which now stands at just 0.31%).¹ Are we barely one rate rise away from an inverted yield curve and an economic slowdown in the U.S.? The other central banks are not exactly leaning against the Fed’s tightening. You can make a case that the Bank of Japan is still pursuing looser money, yes; however, the European Central Bank has stayed pat, even as the European banking system continues to teeter on the brink. The share price of Deutsche Bank—an institution large enough to cause a systemic liquidity shock should it run into trouble—continues to hit new lows. The liquidity conditions in China are tightening, too. And peripheral nations such as Indonesia and the Philippines are already raising interest rates. These are real concerns for investors, as tighter money will impact nominal growth and feed into profit growth for listed companies and therefore impact their share prices. So, it is not illogical that markets are falling, nor is it due to some unspecified funk that investors have gotten into. It’s real and it’s calculated.

But that doesn’t mean we can’t take advantage of these calculated fears. How? What do we have that the price-setters in the market lack? Patience. I do not argue that investors that are selling are doing so illogically, but they are doing so with a shorter-term time horizon than we have. It is the marginal investor who sets the price, the investor who is most emotionally driven, the investor who palpably feels Greed and Fear. These emotions are amplified when you look at the short term. I have often thought their calculations are guided by the same kind of thought process that author Douglas Adams taught us was the key to flying: “You must learn how to throw yourself at the ground and miss.... Clearly, it is the second part, the missing, which presents the difficulties.” And for the marginal investors now, they are mostly concerned with trying to miss the ground. You have to focus elsewhere.

¹	Federal Reserve Bank of St. Louis


4		MATTHEWS ASIA FUNDS

I try to remember at times like this that monetary cycles are a “fluttering veil” that can hide or disguise the underlying real forces in an economy. So long as entrepreneurialism, investment, good governance flourishes underneath that veil, it will only temporarily be hidden from view. With that in mind, I do see opportunities arising for the patient investor. For the long-run secular trends in Asia all remain in place. These include high savings, productivity growth, infrastructure spending, openness to trade, and the pursuit of institutional and market reform. The medium-term cycle of credit, profits and wages has largely been subdued in Asia, with the exception of Japan. And so there are not really any cyclical excesses built up in the economic system—not to the extent that corporates are over-indebted or that political and class tensions are awoken, or that banking systems are stretched.

The medium- to long-term cycles both look favorable. It is only the monetary cycle that has brought what I see as a temporary halt to the macroeconomic tailwinds for the region. The focus on short-term rewards has also caused a great divergence in market prices, where those companies that are able to meet short-run expectations and feed those emotional desires have been bid up. Those companies that require patience have seen their share prices languish.

In the reversal of sentiment we have seen lately, therefore, I do believe that opportunities are arising for long-term investors. Parts of Southeast Asia appear to have been unnecessarily acutely sold down. Some of the bank stocks, while always the most vulnerable in a monetary cycle, look quite cheap. There are opportunities, too, in some of the companies that will patiently accumulate returns, as their stocks seem to be trading now at outright cheap valuations. Certainly, I find in my conversations with my investment team colleagues that they see real value and opportunities in some good-quality businesses. We don’t focus our attention trying to guess where the bottom of the market is. Rather, we continue to focus on the businesses that we believe will survive through the bad times and prosper in the good, and we take our opportunities where we find them.

LOGO

Robert Horrocks, PhD

Chief Investment Officer

Matthews International Capital Management, LLC


matthewsasia.com \| 800.789.ASIA			5

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PORTFOLIO MANAGERS
Teresa Kong, CFA
Lead Manager
Satya Patel	Wei Zhang
Co-Manager	Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MAINX	MINCX
CUSIP	577125503	577125602
Inception	11/30/11	11/30/11
NAV	$10.38	$10.38
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	1.29%	1.08%
After Fee Waiver and Reimbursement²	1.15%	0.90%
Portfolio Statistics
Total # of Positions		45
Net Assets		$116.7 million
Modified Duration³		2.74
Portfolio Turnover⁴		36.58%
Benchmark
Markit iBoxx Asian Local Bond Index*

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 net assets, which include borrowings for investment purposes, in income-producing securities including, but not limited to, dividend paying equity securities, and 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, such as China and India, 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.

Matthews Asia Strategic Income Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Asia Strategic Income Fund returned –3.49% (Investor Class) and –3.28% (Institutional Class) while its benchmark, the Markit iBoxx Asian Local Bond Index, returned –3.33%. For the quarter ending June 30, the Fund returned –5.26% (Investor Class) and –5.20% (Institutional Class) compared to the benchmark return of –4.31% over the same period.

Market Environment:

The key pillars for Asia’s strength were firmly in place as the year began, but some of these pillars looked increasingly fragile in the second quarter. Stability in the first quarter was followed by a notable return of volatility in the second quarter. While U.S. growth remains strong, European economic indicators surprised on the downside in the first quarter. Rising trade tensions between the U.S. and China also led to market swings.

On the interest rate front, volatility in rates markets led to a repricing of risk globally as investors demanded higher risk premiums. Strong economic data in the U.S. has increased rate hike expectations for the remainder of 2018 and 2019. As rates in the U.S. moved higher in the second quarter, interest rates in most Asian countries followed suit. The notable exception was China. The higher bond yields resulting from efforts by Chinese authorities to deleverage the financial system began easing earlier in the year and continued through June.

Asia high yield credit spreads are now significantly wider than historical averages. With the attractive value of Asia high yield relative to its U.S. and European counterparts, demand for Asia bonds may turn positive. It is important to put this mild depreciation in the context of the more severe sell-off in the currencies of emerging market countries such as Turkey, Brazil and South Africa—all of which experienced depreciation of more than 15% relative to the U.S. dollar in the second quarter.

After a stable first quarter, Asia high-yield credit spreads widened by 100 basis points (1.0%) in the second quarter, driven by issuers in China and Indonesia. Dispersion among dollar-denominated bonds increased, presenting an opportunity to identify attractive relative value. In this environment, security selection is paramount and we continued to move our portfolio into low duration, higher quality issuers where we believe we are well-compensated for the risk.

Performance Contributors and Detractors:

In the second quarter, among the biggest contributors to portfolio returns were our holdings in the bonds of Sprint Communications, KWG Property Holding and DFCC Bank in Sri Lanka. Sprint Communications, which is majority-owned by the Japanese firm Softbank, benefited from a renewed effort to merge the company with its rival, T-Mobile. The combined company would likely benefit from increased scale and lower leverage. The bonds of Chinese property developers have been under pressure this year as spreads have widened and credit conditions continued to be tight in onshore China. KWG is a high-quality developer with ample liquidity and solid prospects. DFCC Bank bonds mature in October this year and, given their short remaining life, we earned attractive carry with little price volatility by owning them.

The largest detractors in the second quarter were sub-investment grade Indonesian corporate bonds issued by Lippo Karawaci^†, the convertible bonds of CP Foods, a

(continued)

†	Lippo Karawaci is listed as Theta Capital Pte, Ltd.

*	The Index performance reflects the returns of the discontinued predecessor HSBC Asian Local Bond Index up to December 31, 2012 and the returns of the successor Markit iBoxx Asian Local Bond Index thereafter.

1	Prospectus expense ratios.

Matthews has contractually agreed (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class to 0.90% first by waiving class specific expenses (i.e., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving non-class specific expenses of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 0.90% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 0.90%. If the operating expenses fall below the expense limitation in a year within three years after Matthews has made a waiver or reimbursement, the Fund may reimburse Matthews up to an amount that does not cause the expenses for that year to exceed the lesser of (i) the expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will remain in place until April 30, 2019 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.

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.

4	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


6		MATTHEWS ASIA FUNDS



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		Since Inception		Inception Date
Investor Class (MAINX)		-5.26%		-3.49%		-0.09%		4.41%		3.83%		4.28%		11/30/11
Institutional Class (MINCX)		-5.20%		-3.28%		0.25%		4.70%		4.09%		4.51%		11/30/11
Markit iBoxx Asian Local Bond Index⁵		-4.31%		-3.33%		0.88%		2.09%		1.56%		1.96%
Lipper Emerging Markets Hard Currency Debt Funds Category Average⁶		-5.29%		-5.74%		-2.20%		3.47%		2.47%		3.76%

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
	2018										2017
	Q1		Q2		Q3		Q4		Total		Q1		Q2		Q3		Q4		Total
Investor (MAINX)	$	0.12	$	0.10		n.a.		n.a.		n.a.	$	0.07	$	0.08	$	0.13	$	0.14	$	0.42
Inst’l (MINCX)	$	0.13	$	0.11		n.a.		n.a.		n.a.	$	0.08	$	0.08	$	0.14	$	0.15	$	0.45

Note: This table does not include capital gains distributions. Totals may differ by $0.02 due to rounding. For income distribution history, visit matthewsasia.com.

30-DAY YIELD:

Investor Class: 4.15% (4.06% excluding waivers)

Institutional Class: 4.41% (4.29% excluding waivers)

The 30-Day Yield represents net investment income earned by the Fund over the 30-day period ended 6/30/2018, 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: 6.54%

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

LOGO

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$.

It is not possible to invest directly in an index. Source: Index data from HSBC, Markit iBoxx and Bloomberg; total return calculations performed by BNY Mellon Investment Servicing (US) Inc. Please see page 92 for index definitions. The Index performance reflects the returns of the discontinued predecessor HSBC Asian Local Bond Index up to December 31, 2012 and the returns of the successor Markit iBoxx Asian Local Bond Index thereafter.

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 HOLDINGS
	Sector	Currency	% of Net Assets
Ctrip.com International, Ltd., Cnv., 1.250%, 09/15/2022	Consumer Discretionary	U.S. Dollar		4.8%
Debt and Asset Trading Corp., 1.000%, 10/10/2025	Financials	U.S. Dollar		4.2%
Wanda Properties International Co., Ltd., 7.250%, 01/29/2024	Real Estate	U.S. Dollar		4.1%
China Overseas Finance Investment Cayman V, Ltd., Cnv., 0.000%, 01/05/2023	Real Estate	U.S. Dollar		3.9%
KWG Property Holding, Ltd., 6.000%, 09/15/2022	Real Estate	U.S. Dollar		3.6%
Malaysia Government Investment Issue, 3.226%, 04/15/2020	Foreign Government Bonds	Malaysian Ringgit		3.5%
Standard Chartered PLC, 6.500%, 12/29/2049	Financials	U.S. Dollar		3.1%
LIC Housing Finance, Ltd., 7.830%, 09/25/2026	Financials	Indian Rupee		2.9%
CIFI Holdings Group Co., Ltd., 6.875%, 04/23/2021	Real Estate	U.S. Dollar		2.7%
Malaysia Government Investment Issue, 4.194%, 07/15/2022	Foreign Government Bonds	Malaysian Ringgit		2.6%
% OF ASSETS IN TOP TEN				35.4%


matthewsasia.com \| 800.789.ASIA			7



CURRENCY ALLOCATION (%)^7,8
U.S. Dollar (USD)			53.9
Chinese Renminbi (CNY)			14.3
Malaysian Ringgit (MYR)			7.2
Indian Rupee (INR)			5.9
Indonesian Rupiah (IDR)			4.7
Hong Kong Dollar (HKD)			3.3
Vietnamese Dong (VND)			1.7
South Korean Won (KRW)			0.3
Cash and Other Assets, Less Liabilities			8.6



COUNTRY ALLOCATION (%)^7,8,9
China/Hong Kong			50.2
Indonesia			11.4
Malaysia			7.2
India			5.9
Vietnam			5.9
Sri Lanka			4.0
Thailand			2.5
Japan			2.4
United States			1.6
South Korea			0.3
Cash and Other Assets, Less Liabilities			8.6



SECTOR ALLOCATION (%)^7,8
Real Estate			21.1
Financials			19.3
Foreign Government Bonds			15.3
Consumer Discretionary			10.4
Utilities			7.3
Energy			5.6
Industrials			4.3
Telecommunication Services			3.9
Consumer Staples			2.5
Information Technology			1.7
Cash and Other Assets, Less Liabilities			8.6

Please note: Foreign Government Bonds category includes Supranationals.



ASSET TYPE BREAKDOWN (%)^7,8
Non-Convertible Corporate Bonds			53.3
Government Bonds			19.4
Convertible Corporate Bonds			18.7
Cash and Other Assets, Less Liabilities			8.6

7	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

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

9	Not all countries where the Fund may invest are included in the benchmark index.

Matthews Asia Strategic Income Fund

Portfolio Manager Commentary (unaudited) (continued)

Thai company, and Indonesian government bonds. Lippo Karawaci is a property developer in Indonesia. Bonds performed poorly in the quarter as high yield spreads widened and the Indonesian central bank raised interest rates to help stabilize the Indonesian rupiah, potentially dampening property purchases in the country. CP Foods’ convertible bonds performed poorly as shares of its subsidiary CP All corrected on softer growth. Indonesian government bonds performed poorly as the Indonesian rupiah depreciated versus the dollar and rates moved higher.

Notable Portfolio Changes:

In the second quarter, we started a number of positions in local currency, high yield and convertible bonds. We selectively added to our local currency bond holdings. For instance, we invested in Malaysian government bonds and the dim sum bonds of Franshion, a leading property developer. As high yield spreads widened and expectations for rate hikes from the U.S. Federal Reserve increased, we added shorter duration bonds with mid-single digit yields, which we expect will have potentially limited interest rate sensitivity while earning reasonable returns. These include the bonds of Chinese companies like KWG Property and Tsinghua Unigroup, which we added after they fell in price. We also added the convertible bonds of companies like Zhongsheng Group, a leading Chinese auto-dealership, and China Overseas Land & Investment, a high quality Chinese property developer.

We also closed a handful of positions in the quarter. Notably, we decreased both our local currency exposure and duration in Indonesia and India. Both countries have relatively high beta currencies and saw rates move higher in the second quarter, and we proactively reduced risk in each. We also exercised our put on the convertible bonds of Saratoga Investama, an Indonesian holding company with stakes in leading Indonesian companies, as we saw limited upside in continuing to hold the bonds.

Outlook:

While we anticipate that Asia’s fixed income markets may remain volatile through the second half of 2018, we do believe that current prices have corrected to account for much of the uncertainty in the global environment. We expect U.S. rates to set the tone for local rates in Asia’s developed countries as the U.S. economic cycle gathers momentum and starts to create mild inflation. Recent Federal Reserve commentary has led to somewhat higher expectations for rate hikes in 2018 and 2019. We expect inflation to remain subdued in emerging economies such as India and Indonesia, offering insulation from the rising rate environment globally. The wild card is for tariffs, which can create inflation in the U.S.

We expect Asian currencies to rebound in the second half of the year as the U.S. dollar loses the strong momentum it displayed in the second quarter. One significant driver of dollar strength has been euro weakness. Some measures of Eurozone economic sentiment hit lows experienced during the Global Financial Crisis and Greek Crisis, so we think the euro is more likely to strengthen than weaken given the amount of negativity priced in.

Finally, Asia high yield spreads are now significantly wider than historical averages, with room to fall given default rates of less than 2%. With the attractive value of Asia high yield relative to its U.S. and European counterparts, we expect greater demand for Asia bonds. On the supply side, the move by Chinese regulators to limit offshore issuance to just refinancing of existing issues might create scarcity value. The relative value of Asia combined with little net new supply should drive spreads lower. Here, too, there is potential downside in the negative headlines associated with the inevitable rise of defaults in China. While we have consistently highlighted the need for more defaults to drive a more appropriate credit risk premia onshore, some investors might conflate the Chinese onshore corporate market, which we believe is expensive, with that of the Chinese offshore market, which already has experienced a substantial correction. In sum, we see value in U.S. dollar-denominated debt of Asia corporates because the valuation can be grounded in intrinsic value. As long as we maintain a long-term investment horizon of greater than three years, and experience no defaults, the total return potential for U.S. dollar bonds offers compelling investment opportunity at current levels.


8		MATTHEWS ASIA FUNDS

Matthews Asia Strategic Income Fund

June 30, 2018

Schedule of Investments^a (unaudited)

NON-CONVERTIBLE CORPORATE BONDS: 53.3%


	Face Amount^*		Value
CHINA/HONG KONG: 32.8%
Wanda Properties International Co., Ltd. 7.250%, 01/29/24^b		5,000,000		$4,787,500
KWG Property Holding, Ltd. 6.000%, 09/15/22^b		4,500,000		4,157,266
Standard Chartered PLC 6.500%^c, 04/02/20^b,d		3,700,000		3,671,984
CIFI Holdings Group Co., Ltd. 6.875%, 04/23/21^b		3,200,000		3,159,376
PetroChina Co., Ltd., Series A 3.030%, 01/19/21		CNY 20,000,000		2,900,068
State Grid Corp. of China, Series B 3.150%, 11/14/21		CNY 20,000,000		2,877,681
Tsinghua Unic, Ltd. 4.750%, 01/31/21^b		3,000,000		2,845,389
HSBC Holdings PLC 6.375%^c, 03/30/25^d		2,500,000		2,453,125
PetroChina Co., Ltd. 3.150%, 03/03/21		CNY 15,000,000		2,163,185
Unigroup International Holdings, Ltd. 6.000%, 12/10/20^b		2,000,000		1,969,810
China Southern Power Grid Co., Ltd. 3.140%, 03/11/21		CNY 12,000,000		1,750,838
China National Petroleum Corp., Series INBK
4.690%, 01/11/22		CNY 10,000,000		1,518,168
State Grid Corp. of China 3.750%, 11/11/20		CNY 10,000,000		1,478,387
Huaneng Power International, Inc., Series A 3.480%, 06/13/21		CNY 10,000,000		1,464,322
Franshion Brilliant, Ltd. 5.200%, 03/08/21^b		CNY 7,000,000		1,052,537

Total China/Hong Kong				38,249,636


INDONESIA: 6.6%
Theta Capital Pte, Ltd. 6.750%, 10/31/26^b		3,500,000		2,462,880
Modernland Overseas Pte, Ltd. 6.950%, 04/13/24^b		1,900,000		1,634,800
Alam Synergy Pte, Ltd. 6.950%, 03/27/20^e		1,500,000		1,357,500
Theta Capital Pte, Ltd. 7.000%, 04/11/22^b		1,200,000		957,521
Listrindo Capital BV 4.950%, 09/14/26^b		1,000,000		895,000
Alam Synergy Pte, Ltd. 6.950%, 03/27/20^b		500,000		452,500

Total Indonesia				7,760,201


INDIA: 5.9%
LIC Housing Finance, Ltd., Series 309 7.830%, 09/25/26		INR 240,000,000		3,430,765
Housing Development Finance Corp., Ltd., Series K-24
8.950%, 03/21/23		INR 100,000,000		1,480,684
Power Finance Corp., Ltd., Series 151A 7.470%, 09/16/21		INR 90,000,000		1,274,309
Rural Electrification Corp., Ltd., Series 122 9.020%, 06/18/19		INR 50,000,000		738,238

Total India				6,923,996


	Face Amount^*		Value
SRI LANKA: 4.0%
DFCC Bank PLC 9.625%, 10/31/18^b		2,650,000		$2,685,801
National Savings Bank 5.150%, 09/10/19^b		2,000,000		1,970,800

Total Sri Lanka				4,656,601


JAPAN: 2.4%
SoftBank Group Corp. 6.000%^c, 07/19/23^b,d		3,150,000		2,746,882

Total Japan				2,746,882


UNITED STATES: 1.6%
Sprint Communications, Inc. 6.000%, 11/15/22		1,863,000		1,846,699

Total United States				1,846,699


TOTAL NON-CONVERTIBLE CORPORATE BONDS				62,184,015

(Cost $64,793,734)

FOREIGN GOVERNMENT OBLIGATIONS: 19.4%
MALAYSIA: 7.2%
Malaysia Government Investment Issue
3.226%, 04/15/20		MYR 16,600,000		4,075,845
Malaysia Government Investment Issue
4.194%, 07/15/22		MYR 12,000,000		2,993,652
Malaysia Government Investment Issue
3.872%, 08/30/18		MYR 5,500,000		1,362,363

Total Malaysia				8,431,860


VIETNAM: 5.9%
Debt and Asset Trading Corp. 1.000%, 10/10/25^b		6,969,000		4,860,877
Socialist Republic of Vietnam 5.200%, 01/12/22		VND 43,000,000,000		1,994,295

Total Vietnam				6,855,172


INDONESIA: 4.7%
Indonesia Treasury Bond 8.375%, 03/15/24		IDR 40,500,000,000		2,887,003
Indonesia Treasury Bond 7.875%, 04/15/19		IDR 38,000,000,000		2,658,409

Total Indonesia				5,545,412


CHINA/HONG KONG: 1.3%
China Government Bond 3.550%, 12/12/21^b		CNY 10,000,000		1,497,682

Total China/Hong Kong				1,497,682


SOUTH KOREA: 0.3%
Korea Treasury Bond 3.500%, 03/10/24		KRW 400,000,000		378,728

Total South Korea				378,728


TOTAL FOREIGN GOVERNMENT OBLIGATIONS				22,708,854

(Cost $22,866,961)


matthewsasia.com \| 800.789.ASIA			9

Matthews Asia Strategic Income Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)

CONVERTIBLE CORPORATE BONDS: 18.7%


	Face Amount^*		Value
CHINA/HONG KONG: 16.2%
Ctrip.com International, Ltd., Cnv. 1.250%, 09/15/22		5,500,000		$5,644,485
China Overseas Finance Investment Cayman V, Ltd., Cnv.
0.000%, 01/05/23^b		4,400,000		4,609,000
Harvest International Co., Cnv. 0.000%, 11/21/22^b		HKD 22,000,000		2,947,831
Vipshop Holdings, Ltd., Cnv. 1.500%, 03/15/19		2,700,000		2,659,770
Johnson Electric Holdings, Ltd., Cnv.
1.000%, 04/02/21^b		2,000,000		2,132,500
Zhongsheng Group Holdings, Ltd., Cnv.
0.000%, 05/23/23^b		HKD 7,000,000		888,874

Total China/Hong Kong				18,882,460


THAILAND: 2.5%
CP Foods Holdings, Ltd., Cnv. 0.500%, 09/22/21^b		2,800,000		2,947,000

Total Thailand				2,947,000


TOTAL CONVERTIBLE CORPORATE BONDS				21,829,460

(Cost $22,071,504)

TOTAL INVESTMENTS: 91.4%				106,722,329
(Cost $109,732,199)

CASH AND OTHER ASSETS, LESS LIABILITIES: 8.6%				9,979,358


NET ASSETS: 100.0%				$116,701,687

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

b	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

c	Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of period end.

d	Perpetual security with no stated maturity date. First call date is disclosed.

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 Funds’ Board of Trustees. At June 30, 2018, the aggregate value is $1,357,500, which is 1.16% of net assets.

*	All Values in USD unless otherwise specified

Cnv.	Convertible

CNY	Chinese Renminbi (Yuan)

HKD	Hong Kong Dollar

IDR	Indonesian Rupiah

INR	Indian Rupee

KRW	Korean Won

MYR	Malaysian Ringgit

SGD	Singapore Dollar

THB

Thai Baht

USD	U.S. Dollar

VND	Vietnamese Dong

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

Currency
Purchased

Currency Sold

Counterparty

Settlement
Date

Unrealized
Appreciation
(Depreciation)

USD 7,973,612

SGD 10,714,940

Merrill Lynch & Co., Inc.

07/18/18

$106,547

USD 1,564,334

INR 103,512,000

Merrill Lynch & Co., Inc.

07/30/18

58,921

165,468

THB 233,643,750

USD 7,500,000

Merrill Lynch & Co., Inc.

07/11/18

(445,518

)

SGD 21,429,880

USD 16,400,000

Merrill Lynch & Co., Inc.

07/18/18

(665,870

)

INR 103,512,000

USD 1,600,000

Merrill Lynch & Co., Inc.

07/30/18

(94,586

)

KRW 8,146,440,000

USD 7,600,000

Merrill Lynch & Co., Inc.

09/14/18

(267,482

)

(1,473,456

)

Net Unrealized Depreciation

($1,307,988

)

See accompanying notes to financial statements.


10		MATTHEWS ASIA FUNDS

LOGO


PORTFOLIO MANAGERS
Teresa Kong, CFA	Satya Patel
Lead Manager	Lead Manager

FUND FACTS
	Investor	Institutional
Ticker	MCRDX	MICPX
CUSIP	577130677	577130669
Inception	4/29/16	4/29/16
NAV	$9.93	$9.92
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	1.86%	1.62%
After Fee Waiver and Reimbursement²	1.15%	0.90%
Portfolio Statistics
Total # of Positions		36
Net Assets		$43.2 million
Modified Duration³		3.15
Portfolio Turnover⁴		27.86%
Benchmark
J.P. Morgan Asia Credit Index

OBJECTIVE

Total return over the long term.

STRATEGY

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in debt and debt-related instruments issued by companies as well as governments, quasi-governmental entities, and supranational institutions in Asia. Debt and debt-related instruments typically include bonds, debentures, bills, securitized instruments (which are vehicles backed by pools of assets such as loans or other receivables), notes, certificates of deposit and other bank obligations, bank loans, senior secured bank debt, convertible debt securities, credit-linked notes, inflation linked instruments, repurchase agreements, payment-in-kind securities and derivative instruments with fixed income characteristics. Asia consists of all countries and markets in Asia, such as China and Indonesia, in addition to the developed, emerging, and frontier countries and markets in the Asian region.

Matthews Asia Credit Opportunities Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Asia Credit Opportunities Fund returned –2.77% (Investor Class) and –2.75% (Institutional Class), while its benchmark, the J.P. Morgan Asia Credit Index (JACI), returned –2.55% over the same period. For the quarter ending June 30, the Fund returned –3.40% (Investor Class) and –3.45% (Institutional Class) compared to the benchmark return of –1.20%.

Market Environment:

The first half of the year was notable for the volatility in financial markets across the world. U.S. Treasury yields continued to move higher as the U.S. Federal Reserve raised interest rates. Continued solid economic data in the U.S., on the margin, has increased rate hike expectations for the remainder of 2018 and 2019. Meanwhile, concerns around trade wars, the reversal of investor flows and politics in Latin America led to a sell-off across emerging markets.

Asia’s credit markets were not immune to this volatility, and in the second quarter, Asian high yield credit spreads widened by 100 basis points (1.0%). Returns were largely negatively correlated to risk, with longest duration and highest spread bonds selling off the most. By country and sector, Chinese issuers came under pressure as policymakers onshore continued to keep credit markets tight, while Indonesian issuers were weak as the Indonesian central bank raised interest rates to combat depreciation in the Indonesian rupiah. The combination of rising interest rates and widening credit spreads created a challenging market environment in the second quarter.

Performance Contributors and Detractors:

Our holdings from China and Thailand were broadly positive performance contributors for the first half of the year. In the second quarter, the biggest contributors to portfolio returns were our holdings in the bonds of Chinese property developers KWG Property Holding and CIFI Holdings Group, as well as the bonds of DFCC Bank in Sri Lanka. The bonds of Chinese property developers have been under pressure this year as spreads have widened and credit conditions continued to be tight in onshore China. Both KWG and CIFI are high quality developers with ample liquidity and solid prospects. DFCC Bank bonds mature in October, and given their short remaining life, we earned attractive carry with little price volatility by owning them.

The largest detractors in the second quarter were sub-investment grade Indonesian corporate bonds issued by Lippo Karawaci and Modernland, and the convertible bonds of CP Foods, a Thai company. Lippo Karawaci and Modernland are both property developers in Indonesia. Bonds performed poorly in the quarter as high yield spreads widened, and the Indonesian central bank raised interest rates to help stabilize the rupiah, potentially dampening property purchases in the country. CP Foods’ convertible bonds performed poorly as its subsidiary CP All’s shares corrected on softer growth.

Notable Portfolio Changes:

In the second quarter, we started a number of new positions in high yield and convertible bonds. As high yield spreads widened and expectations for rate hikes

(continued)

1	Prospectus expense ratios.

Matthews has contractually agreed (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class to 0.90% first by waiving class specific expenses (i.e., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving non-class specific expenses of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 0.90% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 0.90%. If the operating expenses fall below the expense limitation in a year within three years after Matthews has made a waiver or reimbursement, the Fund may reimburse Matthews up to an amount that does not cause the expenses for that year to exceed the lesser of (i) the expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will remain in place until April 30, 2019 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.

4	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


matthewsasia.com \| 800.789.ASIA			11



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Retuns
	3 Months		YTD		1 Year		Since Inception		Inception Date
Investor Class (MCRDX)		-3.40%		-2.77%		-0.45%		4.39%		4/29/2016
Institutional Class (MICPX)		-3.45%		-2.75%		-0.27%		4.60%		4/29/2016
J.P. Morgan Asia Credit Index⁵		-1.20%		-2.55%		-0.70%		2.06%
Lipper Alternative Credit Focus Funds Cateory Average⁶		-0.67%		-0.46%		1.08%		8.51%

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
	2018										2017
	Q1		Q2		Q3		Q4		Total		Q1		Q2		Q3		Q4		Total
Investor (MCRDX)	$	0.09	$	0.09		n.a.		n.a.		n.a.	$	0.12	$	0.08	$	0.14	$	0.10	$	0.43
Inst’l (MICPX)	$	0.09	$	0.09		n.a.		n.a.		n.a.	$	0.12	$	0.08	$	0.15	$	0.10	$	0.46

Note: This table does not include capital gains distributions. Totals may differ by $0.02 due to rounding. For income distribution history, visit matthewsasia.com.

30-DAY YIELD:

Investor Class: 4.07% (3.83% excluding waivers)

Institutional Class: 4.33% (4.04% excluding waivers)

The 30-Day Yield represents net investment income earned by the Fund over the 30-day period ended 6/30/18, 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: 6.75%

Source: FactSet Research Systems

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

LOGO

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$.

It is not possible to invest directly in an index. Source: Index data from J.P. Morgan and Bloomberg; total return calculations performed by BNY Mellon Investment Servicing (US) Inc. Please see page 92 for index definition.

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 HOLDINGS
	Sector	Currency	% of Net Assets
Ctrip.com International, Ltd., Cnv., 1.250%, 09/15/2022	Consumer Discretionary	U.S. Dollar		4.4%
Debt and Asset Trading Corp., 1.000%, 10/10/2025	Financials	U.S. Dollar		4.4%
China Overseas Finance Investment Cayman V, Ltd., Cnv., 0.000%, 01/05/2023	Real Estate	U.S. Dollar		3.9%
Wanda Properties International Co., Ltd., 7.250%, 01/29/2024	Real Estate	U.S. Dollar		3.4%
Huaneng Power International, Inc., 3.480%, 06/13/2021	Utilities	Chinese Renminbi		3.4%
Socialist Republic of Vietnam, 5.500%, 03/12/2028	Foreign Government Bonds	U.S. Dollar		3.3%
Tsinghua Unic, Ltd., 4.750%, 01/31/2021	Industrials	U.S. Dollar		3.3%
KWG Property Holding, Ltd., 6.000%, 09/15/2022	Real Estate	U.S. Dollar		3.2%
SoftBank Group Corp., 6.000%, 07/19/2049	Telecom Services	U.S. Dollar		3.0%
Standard Chartered PLC, 6.500%, 12/29/2049	Financials	U.S. Dollar		3.0%
% OF ASSETS IN TOP TEN				35.3%


12		MATTHEWS ASIA FUNDS

Matthews Asia Credit Opportunities Fund

Portfolio Manager Commentary (unaudited) (continued)

from the U.S. Federal Reserve increased, we added shorter duration bonds with mid-single digit yields, which we expect will have limited interest rate sensitivity while earning reasonable returns. We opportunistically added bonds of Chinese property issuers such as KWG Property Holding and CIFI Holdings after they fell in price. We also added the convertible bonds of companies, including those of Johnson Electric, one of the largest producers of micro motors in China; Zhongsheng Group, a leading Chinese auto-dealership; and China Overseas Land & Investment, a high-quality Chinese property developer.

We also closed a handful of positions during the second quarter. We exercised our put on the convertible bonds of Saratoga Investama, an Indonesian holding company with stakes in leading Indonesian companies, as we saw limited upside in continuing to hold the bonds. Our bonds of China Hongqiao Group, the largest aluminum producer in the world, matured, while we sold bonds in Bangkok Dusit Medical, a hospital chain in Thailand.

Outlook:

In our view, Asian high yield bonds appear attractively valued, while U.S. and European high yield bonds appear overvalued. Credit spreads for Asia high yield bonds are almost 100 basis points (1.0%) higher than historic averages. In contrast, spreads for U.S. and European high yield bonds are about 200 basis points (2.0%) below average. In simple terms, Asian high yield bonds are compensating investors for taking credit risk, in our view, while U.S. and European high yield bonds are not.

To be sure, risks remain on the horizon. If a further slowdown in global growth materializes, we expect investor appetite for emerging markets to diminish. Any escalation in trade shocks or further outflows stemming from policy normalization in the U.S. also could put pressure on Asian fixed income markets. Finally, the demand for Asian credit from Chinese wealth managers might fall as the wealth management channels through which buyers purchase bonds are being more closely regulated.

While these risks could increase, we believe that much of this is already being priced in. We have been expecting volatility to rise over the course of 2018, and that was certainly the case in the second quarter. Asian credit markets will likely remain volatile in the second half of 2018, but we believe it is imperative that we continue to stay the course and not sell into the volatility. Based on our solvency and liquidity analysis, we do not expect any of the securities in the portfolio will default. As such, the relatively attractive yields in Asia offer a strong base for positive returns. A bond that starts with a 5% to 8% yield and has 25 basis points (0.25%) of credit spread compression, for example, could generate attractive returns for investors over the course of the year.



CURRENCY ALLOCATION (%)^7,8
U.S. Dollar (USD)			67.0
Chinese Renminbi (CNY)			11.4
Hong Kong Dollar (HKD)			3.3
Cash and Other Assets, Less Liabilities			18.2



COUNTRY ALLOCATION (%)^7,8,9
China/Hong Kong			47.9
Indonesia			11.3
Vietnam			8.6
Sri Lanka			6.2
Japan			3.0
Thailand			1.9
Philippines			1.9
United States			1.0
Cash and Other Assets, Less Liabilities			18.2



SECTOR ALLOCATION (%)^7,8
Real Estate			21.9
Financials			14.0
Consumer Discretionary			10.2
Industrials			9.1
Utilities			8.1
Foreign Government Bonds			6.2
Telecommunication Services			6.0
Energy			3.3
Consumer Staples			1.9
Information Technology			0.9
Cash and Other Assets, Less Liabilities			18.2



ASSET TYPE BREAKDOWN (%)^7,8
Non-Convertible Corporate Bonds			53.3
Convertible Corporate Bonds			17.9
Government Bonds			10.5
Cash and Other Assets, Less Liabilities			18.2

7	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

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

9	Not all countries where the Fund may invest are included in the benchmark index.


matthewsasia.com \| 800.789.ASIA			13

Matthews Asia Credit Opportunities Fund

June 30, 2018

Schedule of Investments^a (unaudited)

NON-CONVERTIBLE CORPORATE BONDS: 53.3%


	Face Amount^*		Value
CHINA/HONG KONG: 31.9%
Wanda Properties International Co., Ltd.
7.250%, 01/29/24^b		1,550,000		$1,484,125
Huaneng Power International, Inc., Series A
3.480%, 06/13/21		CNY 10,000,000		1,464,322
Tsinghua Unic, Ltd.
4.750%, 01/31/21^b		1,500,000		1,422,694
KWG Property Holding, Ltd.
6.000%, 09/15/22^b		1,500,000		1,385,756
Standard Chartered PLC
6.500%^c, 04/02/20^b,d		1,300,000		1,290,156
HSBC Holdings PLC
6.375%^c, 03/30/25^d		1,100,000		1,079,375
CIFI Holdings Group Co., Ltd.
6.875%, 04/23/21^b		1,000,000		987,305
Air China, Ltd.
3.080%, 10/20/21		CNY 6,000,000		864,111
KWG Property Holding, Ltd.
8.975%, 01/14/19^b		800,000		816,012
PetroChina Co., Ltd., Series A
3.030%, 01/19/21		CNY 5,000,000		725,017
PetroChina Co., Ltd.
3.150%, 03/03/21		CNY 5,000,000		721,062
China Southern Power Grid Co., Ltd.
3.140%, 03/11/21		CNY 4,000,000		583,613
State Grid Corp. of China, Series B
3.150%, 11/14/21		CNY 4,000,000		575,536
Unigroup International Holdings, Ltd.
6.000%, 12/10/20^b		400,000		393,962

Total China/Hong Kong				13,793,046


INDONESIA: 11.3%
Modernland Overseas Pte, Ltd.
6.950%, 04/13/24^b		1,400,000		1,204,589
Listrindo Capital BV
4.950%, 09/14/26^b		1,000,000		895,000
TBG Global Pte, Ltd.
5.250%, 02/10/22^b		900,000		879,456
Theta Capital Pte, Ltd.
6.750%, 10/31/26^b		1,200,000		844,416
Alam Synergy Pte, Ltd.
6.950%, 03/27/20^b		900,000		814,500
Theta Capital Pte, Ltd.
7.000%, 04/11/22^b		300,000		239,380

Total Indonesia				4,877,341


SRI LANKA: 4.2%
DFCC Bank PLC
9.625%, 10/31/18^b		1,200,000		1,216,212
National Savings Bank
8.875%, 09/18/18^b		600,000		601,740

Total Sri Lanka				1,817,952


JAPAN: 3.0%
SoftBank Group Corp.
6.000%^c, 07/19/23^b,d		1,500,000		1,308,039

Total Japan				1,308,039


	Face Amount^*		Value
PHILIPPINES: 1.9%
ICTSI Treasury BV
5.875%, 09/17/25^b		800,000		$827,601

Total Philippines				827,601


UNITED STATES: 1.0%
Sprint Communications, Inc.
6.000%, 11/15/22		420,000		416,325

Total United States				416,325


TOTAL NON-CONVERTIBLE CORPORATE BONDS				23,040,304

(Cost $24,235,792)

CONVERTIBLE CORPORATE BONDS: 17.9%
CHINA/HONG KONG: 16.0%
Ctrip.com International, Ltd., Cnv.
1.250%, 09/15/22		1,850,000		1,898,599
China Overseas Finance Investment Cayman V, Ltd., Cnv.
0.000%, 01/05/23^b		1,600,000		1,676,000
Vipshop Holdings, Ltd., Cnv.
1.500%, 03/15/19		1,100,000		1,083,610
Harvest International Co., Cnv.
0.000%, 11/21/22^b		HKD 7,000,000		937,946
Johnson Electric Holdings, Ltd., Cnv.
1.000%, 04/02/21^b		750,000		799,688
Zhongsheng Group Holdings, Ltd., Cnv.
0.000%, 05/23/23^b		HKD 4,000,000		507,928

Total China/Hong Kong				6,903,771


THAILAND: 1.9%
CP Foods Holdings, Ltd., Cnv.
0.500%, 09/22/21^b		800,000		842,000

Total Thailand				842,000


TOTAL CONVERTIBLE CORPORATE BONDS				7,745,771

(Cost $7,844,937)

FOREIGN GOVERNMENT OBLIGATIONS: 10.6%
VIETNAM: 8.6%
Debt and Asset Trading Corp.
1.000%, 10/10/25^b		2,700,000		1,883,250
Socialist Republic of Vietnam
5.500%, 03/12/28		1,470,000		1,431,177
Socialist Republic of Vietnam
4.800%, 11/19/24^b		400,000		397,059

Total Vietnam				3,711,486


14		MATTHEWS ASIA FUNDS

Matthews Asia Credit Opportunities Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)

FOREIGN GOVERNMENT OBLIGATIONS (continued)


	Face Amount^*		Value
SRI LANKA: 2.0%
Sri Lanka Government Bond
6.125%, 06/03/25^b		900,000		$840,990

Total Sri Lanka				840,990


TOTAL FOREIGN GOVERNMENT OBLIGATIONS				4,552,476

(Cost $4,586,539)

TOTAL INVESTMENTS: 81.8%				35,338,551
(Cost $36,667,268)

CASH AND OTHER ASSETS, LESS LIABILITIES: 18.2%				7,883,438


NET ASSETS: 100.0%				$43,221,989

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

b	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

c	Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of period end.

d	Perpetual security with no stated maturity date. First call date is disclosed.

*	All Values in USD unless otherwise specified

Cnv.	Convertible

CNY	Chinese Renminbi (Yuan)

HKD	Hong Kong Dollar

USD	U.S. Dollar

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			15

LOGO


PORTFOLIO MANAGERS
Robert J. Horrocks, PhD
Lead Manager
Kenneth Lowe, CFA
Lead Manager

FUND FACTS
	Investor	Institutional
Ticker	MACSX	MICSX
CUSIP	577130206	577130842
Inception	9/12/94	10/29/10
NAV	$16.16	$16.13
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	1.07%	0.93%
Portfolio Statistics
Total # of Positions		61
Net Assets		$2.2 billion
Weighted Average Market Cap		$40.3 billion
Portfolio Turnover²		23.23%
Benchmark
MSCI AC Asia ex Japan Index

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.

Matthews Asian Growth and Income Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Asian Growth and Income Fund returned –6.21% (Investor Class), and –6.12% (Institutional Class), while its benchmark, MSCI All Country Asia ex Japan Index, returned –4.65% over the same period. For the quarter ending June 30, the Fund returned –4.46% (Investor Class) and –4.42% (Institutional Class), while its benchmark returned –5.31%.

Market Environment:

Following the market correction and swift recovery in the first quarter of the year, volatility continued in the second quarter as asset values ended the period lower. The case for globally synchronized growth appears to have weakened amid concerns about European politics, tightening monetary conditions and rising tensions about a U.S. trade war with multiple countries.

President Trump’s belief that trade wars are “good and easy to win” has weighed on sentiment, specifically regarding China as the U.S. is set to enact the first wave of tariffs in July on US$34 billion of goods from the country. This number will rise over time and China has responded in kind, imposing its own tariffs on U.S. goods such as soybeans and beef. A continuation of such moves could result in significant economic damage. The quarter also saw tightening monetary conditions in China amid new rules in the US$15 trillion asset management industry, targeting deleveraging in riskier areas.

All of these factors led market participants to question valuations and earnings growth expectations. Risk assets such as Asian equities, credit and currencies dropped in value, with China and Taiwan holding up marginally better than other countries in the region.

Performance Contributors and Detractors:

As volatility returned, the portfolio had a reasonable second quarter, although it underperformed its benchmark in the first half due to a challenging January. The largest contributors in the first half came from our Australia holdings, including blood plasma derivatives manufacturer CSL. The company’s stock rallied in the second quarter on a guidance upgrade due to a strong flu season and as a competitor had a supply issue with a key product. Fellow health care company Resmed, a maker of sleep apnea devices, rose due to impressive earnings as its connected-care strategy gained traction. Macquarie Group was also strong as the company announced solid earnings and outlook across divisions on the maturation of infrastructure funds, the realization of principal investments and as the rise of volatility helped its markets business.

Elsewhere, a couple of the portfolio’s consumer holdings rose over the quarter. Newer holding Zhejiang Supor Cookware, a leading small-appliance maker in China, delivered 22% earnings growth for the second quarter despite fears of rising competition. Japan’s Kao also delivered steady performance as the company is restructuring its cosmetics division to better suit Chinese demand.

The largest detractor to performance over the half came from Chinese online games developer and platform NetEase. The company has suffered earnings downgrades as it reinvests cash into user acquisition and builds its e-commerce initiatives in private label and luxury goods. A couple of the portfolio’s telecom holdings also sputtered, with the worst of these being Bharti Infratel. Shares of the Indian tower company fell as consolidation in the wireless industry threatened tenancy ratios, a key driver of profitability.

Beyond this, a few of the Fund’s financial holdings struggled. Weak sentiment, foreign outflows and currency weakness hurt Indonesian holding Bank Rakyat,

(continued)

1	Prospectus expense ratios.

2	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


16		MATTHEWS ASIA FUNDS



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		10 Years		Since Inception			Inception Date
Investor Class (MACSX)		-4.46%		-6.21%		-0.51%		2.25%		2.51%		4.99%		9.06%			9/12/94
Institutional Class (MICSX)		-4.42%		-6.12%		-0.40%		2.39%		2.67%		n.a.		4.03%			10/29/10
MSCI AC Asia ex Japan Index³		-5.31%		-4.65%		10.21%		7.32%		8.48%		6.10%		4.70%	⁴
Lipper Pacific Region Funds Category Average⁵		-3.78%		-3.74%		9.59%		7.07%		7.37%		4.62%		4.77%	⁴



INCOME DISTRIBUTION HISTORY
	2018						2017
	June		December		Total		June		December		Total
Investor (MACSX)	$	0.22		n.a.		n.a.	$	0.10	$	0.36	$	0.46
Inst’l (MICSX)	$	0.24		n.a.		n.a.	$	0.12	$	0.37	$	0.49

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:

2.12% (Investor Class) 2.28% (Institutional Class)

Source: BNY Mellon Investment Servicing (US) Inc.

DIVIDEND YIELD: 3.62%

The dividend yield (trailing) for the portfolio is the weighted average sum of the dividends paid by each equity security held by the Fund over the 12 months ended 6/30/18 divided by the current price of each equity as of 6/30/18. 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

LOGO

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 92 for index definition.

Calculated from 8/31/94.

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
	Sector	Country	% of Net Assets
AIA Group, Ltd.	Financials	China/Hong Kong		3.6%
United Overseas Bank, Ltd.	Financials	Singapore		3.0%
Taiwan Semiconductor Manufacturing Co., Ltd.	Information Technology	Taiwan		2.9%
Broadcom, Inc.	Information Technology	United States		2.2%
Jardine Matheson Holdings, Ltd.	Industrials	China/Hong Kong		2.0%
Samsung Electronics Co., Ltd.	Information Technology	South Korea		2.0%
CK Hutchison Holdings, Ltd.	Industrials	China/Hong Kong		1.9%
Advantech Co., Ltd.	Information Technology	Taiwan		1.9%
Johnson Electric Holdings, Ltd., Cnv., 1.000%, 04/02/2021	Industrials	China/Hong Kong		1.9%
CapitaLand, Ltd., Cnv., 1.950%, 10/17/2023	Real Estate	Singapore		1.9%
% OF ASSETS IN TOP TEN				23.3%

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


matthewsasia.com \| 800.789.ASIA			17



COUNTRY ALLOCATION (%)^7,8
China/Hong Kong			38.8
South Korea			12.7
Singapore			10.7
Taiwan			6.3
Japan			4.7
Indonesia			4.4
India			3.4
Australia			3.0
Thailand			2.5
United States			2.2
Vietnam			1.7
Malaysia			1.6
Philippines			1.6
New Zealand			1.6
Norway			1.5
Cash and Other Assets, Less Liabilities			3.2



SECTOR ALLOCATION (%)⁸
Financials			19.3
Consumer Discretionary			18.4
Industrials			12.2
Information Technology			12.1
Telecommunication Services			11.5
Consumer Staples			9.5
Real Estate			8.0
Utilities			3.5
Materials			1.2
Health Care			1.0
Cash and Other Assets, Less Liabilities			3.2



MARKET CAP EXPOSURE (%)⁸
Mega Cap (over $25B)			41.8
Large Cap ($10B–$25B)			15.6
Mid Cap ($3B–10B)			27.0
Small Cap (under $3B)			12.4
Cash and Other Assets, Less Liabilities			3.2



ASSET TYPE BREAKDOWN (%)^8,9
Common Equities and ADRs			83.9
Convertible Corporate Bonds			11.2
Preferred Equities			1.7
Cash and Other Assets, Less Liabilities			3.2

7	Not all countries where the Fund may invest are included in the benchmark index.

8	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

9	Bonds are not included in the MSCI All Country Asia ex Japan Index.

Matthews Asian Growth and Income Fund

Portfolio Manager Commentary (unaudited) (continued)

compounded by rumors that the bank would bail out a faltering Sharia bank. Bank of the Philippine Islands faced similar macroeconomic conditions as well as undergoing a share issuance. ING Life Insurance in Korea struggled despite good earnings growth as private equity owner’s MBK Partners looked to offload its stake.

Notable Portfolio Changes:

The second quarter was active for the portfolio with six new additions. Four of these were convertible bonds, including Qingdao Haier, Zhongsheng Group, China Overseas Land and Investment and LG Chem. The convertible bond market has witnessed some new issuance and terms have become more attractive. The commonality across all of these is that they are solid credits offering flat to positive yields and reasonable conversion premiums. In our view, the prospective risk-adjusted return, given such positive asymmetry in potential outcomes, is attractive amid such volatile markets.

Within equities, we added China’s leading dairy company, Inner Mongolia Yili Industrial Group. The company is an established leader that generates a healthy 20% return on capital, operates with a net cash balance sheet, and was trading at approximately 20x price-to-earnings ratio (P/E) and a 3% dividend yield. We believe that growth looks attractive from a combination of market share gains, growth in lower tier cities and new product launches. Elsewhere in China, we added Minth Group, an auto parts company specializing in structural parts, trims and decorative parts. The company is well-established with major auto brands and has a product set that is likely to benefit from the industry’s movement toward lighter weighting and new technologies. For this leader, we paid around 13x P/E and the stock also has a 3% dividend yield.

These new positions were funded through the sales of our holdings in CSL, British American Tobacco Malaysia, Brambles, Hyundai Motor and Glow Energy Public.

Outlook:

The list of reasons for investors to remain cautious is long and includes: tightening interest rates in the U.S.; the removal of quantitative easing; European political challenges; an ongoing trade war; high levels of leverage across corporates and households globally; tightening monetary conditions in China; and a fairly late cycle equity market.

These concerns, however, do not necessarily result in a significant decline in asset values. Market timing is certainly not our strongest suit and, in our opinion, the same could be said for the vast majority of capital allocators. We believe market timing should be ignored to focus on what is important–protecting and growing our client’s wealth over full market cycles. What these concerns are likely to produce is a sustained increase in volatility. Against that backdrop, the portfolio will look to both weather that volatility and take advantage of it. We will look to add those leaders that are sold off in line with others when they don’t deserve to be, particularly as growth in Asia is still plentiful. This will augment a portfolio that we firmly believe is already well-placed, trading at around 14.5x P/E and a 3.6% dividend yield for high quality companies capable of sustainable growth over the long term.


18		MATTHEWS ASIA FUNDS

Matthews Asian Growth and Income Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 83.9%


	Shares		Value
CHINA/HONG KONG: 32.1%
AIA Group, Ltd.		9,066,200		$78,979,398
Jardine Matheson Holdings, Ltd.		696,200		43,869,811
CK Hutchison Holdings, Ltd.		4,032,672		42,689,958
Guangdong Investment, Ltd.		25,532,000		40,407,849
Techtronic Industries Co., Ltd.		7,072,000		39,277,130
HSBC Holdings PLC ADR		829,133		39,085,330
HKT Trust & HKT, Ltd.		29,965,000		38,223,777
China Mobile, Ltd. ADR		831,500		36,910,285
NetEase, Inc. ADR		146,000		36,889,820
CLP Holdings, Ltd.		3,392,200		36,538,710
Zhejiang Supor Cookware Co., Ltd. A Shares		4,362,370		33,765,565
Inner Mongolia Yili Industrial Group Co., Ltd. A Shares		7,522,575		31,531,453
Hang Lung Properties, Ltd.		15,220,920		31,264,910
VTech Holdings, Ltd.		2,704,000		31,165,875
Minth Group, Ltd.		7,338,000		31,037,623
Jiangsu Expressway Co., Ltd. H Shares		25,502,000		30,367,364
CK Asset Holdings, Ltd.		3,725,172		29,489,626
Pacific Textiles Holdings, Ltd.		33,267,000		28,250,839
Café de Coral Holdings, Ltd.		9,730,000		23,534,826

Total China/Hong Kong				703,280,149


SOUTH KOREA: 9.5%
Samsung Electronics Co., Ltd.		1,029,900		43,142,081
Coway Co., Ltd.		468,779		36,425,537
ING Life Insurance Korea, Ltd.^b,c		946,537		35,535,126
KT&G Corp.		358,010		34,399,364
Macquarie Korea Infrastructure Fund		3,611,141		29,031,694
Kangwon Land, Inc.		952,880		22,360,542
KEPCO Plant Service & Engineering Co., Ltd.		206,351		6,600,243

Total South Korea				207,494,587


SINGAPORE: 8.9%
United Overseas Bank, Ltd.		3,343,300		65,524,445
Singapore Technologies Engineering, Ltd.		16,838,825		40,588,848
Ascendas REIT		20,899,000		40,471,799
Singapore Telecommunications, Ltd.		17,836,400		40,270,978
SIA Engineering Co., Ltd.		3,366,200		7,752,572

Total Singapore				194,608,642


TAIWAN: 6.3%
Taiwan Semiconductor Manufacturing Co., Ltd.		9,049,187		64,258,995
Advantech Co., Ltd.		6,367,000		41,926,113
Taiwan Secom Co., Ltd.		11,131,000		32,706,003

Total Taiwan				138,891,111


JAPAN: 4.7%
Japan Tobacco, Inc.		1,247,700		34,868,745
KDDI Corp.		1,255,800		34,339,740
Kao Corp.		449,500		34,261,600

Total Japan				103,470,085


	Shares		Value
INDONESIA: 4.4%
PT Telekomunikasi Indonesia Persero ADR		1,329,800		$34,588,098
PT Bank Rakyat Indonesia Persero		162,467,600		32,134,619
PT Matahari Department Store		47,646,100		29,181,084

Total Indonesia				95,903,801


INDIA: 3.4%
Housing Development Finance Corp., Ltd.		1,430,009		39,846,603
Bharti Infratel, Ltd.		7,776,743		34,175,281

Total India				74,021,884


AUSTRALIA: 3.0%
Macquarie Group, Ltd.		369,240		33,651,150
Domino’s Pizza Enterprises, Ltd.		832,006		32,132,553

Total Australia				65,783,703


UNITED STATES: 2.2%
Broadcom, Inc.		201,300		48,843,432

Total United States				48,843,432


VIETNAM: 1.6%
Vietnam Dairy Products JSC		4,920,211		36,290,620

Total Vietnam				36,290,620


PHILIPPINES: 1.6%
Bank of the Philippine Islands		21,614,124		35,859,319

Total Philippines				35,859,319


NEW ZEALAND: 1.6%
SKYCITY Entertainment Group, Ltd.		12,980,494		35,488,044

Total New Zealand				35,488,044


MALAYSIA: 1.6%
Genting Malaysia BHD		28,380,000		34,270,274

Total Malaysia				34,270,274


NORWAY: 1.5%
Telenor ASA		1,629,213		33,367,099

Total Norway				33,367,099


THAILAND: 1.5%
Kasikornbank Public Co., Ltd.		5,555,800		32,503,194

Total Thailand				32,503,194


TOTAL COMMON EQUITIES				1,840,075,944

(Cost $1,757,803,941)


matthewsasia.com \| 800.789.ASIA			19

Matthews Asian Growth and Income Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)


CONVERTIBLE CORPORATE BONDS: 11.2%		PREFERRED EQUITIES: 1.7%


	Face Amount*		Value
CHINA/HONG KONG: 6.8%
Johnson Electric Holdings, Ltd., Cnv. 1.000%, 04/02/21^c		38,500,000		$41,050,625
China Overseas Finance Investment Cayman V, Ltd., Cnv.
0.000%, 01/05/23^c		32,600,000		34,148,500
Zhongsheng Group Holdings, Ltd., Cnv.
0.000%, 05/23/23^c		HKD 219,000,000		27,809,059
Harvest International Co., Cnv. 0.000%, 11/21/22^c		HKD 177,000,000		23,716,637
Haitian International Holdings, Ltd., Cnv.
2.000%, 02/13/19^c		21,500,000		21,311,875

Total China/Hong Kong				148,036,696


SINGAPORE: 1.9%
CapitaLand, Ltd., Cnv. 1.950%, 10/17/23^c		SGD 56,000,000		40,741,284

Total Singapore				40,741,284


SOUTH KOREA: 1.5%
LG Chem, Ltd., Series USD, Cnv. 0.000%, 04/16/21^c		27,600,000		27,358,500
Lotte Shopping Co., Ltd., Cnv.
0.000%, 04/04/23^c		KRW 7,200,000		6,613,728

Total South Korea				33,972,228


THAILAND: 1.0%
Bangkok Dusit Medical Services Public Co., Ltd., Cnv.
0.000%, 09/18/19^c		THB 633,000,000		22,736,795

Total Thailand				22,736,795


TOTAL CONVERTIBLE CORPORATE BONDS				245,487,003

(Cost $250,443,520)


	Shares		Value
SOUTH KOREA: 1.7%
LG Household & Health Care, Ltd., Pfd.		55,428		$36,315,895

Total South Korea				36,315,895


TOTAL PREFERRED EQUITIES				36,315,895

(Cost $7,229,493)

TOTAL INVESTMENTS: 96.8%				2,121,878,842
(Cost $2,015,476,954)

CASH AND OTHER ASSETS, LESS LIABILITIES: 3.2%				70,366,159


NET ASSETS: 100.0%				$2,192,245,001

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

c	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

*	All Values in USD unless otherwise specified

ADR	American Depositary Receipt

BHD

Berhad

Cnv.	Convertible

HKD	Hong Kong Dollar

JSC	Joint Stock Co.

KRW	Korean Won

Pfd.

Preferred

REIT	Real Estate Investment Trust

SGD	Singapore Dollar

THB

Thai Baht

USD	U.S. Dollar

See accompanying notes to financial statements.


20		MATTHEWS ASIA FUNDS

LOGO


PORTFOLIO MANAGERS
Yu Zhang, CFA
Lead Manager
Robert Horrocks, PhD		Vivek Tanneeru
Co-Manager		Co-Manager
Sherwood Zhang, CFA
Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MAPIX	MIPIX
CUSIP	577125107	577130750
Inception	10/31/06	10/29/10
NAV	$18.86	$18.85
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	1.03%	0.92%
After Fee Waiver and Reimbursement²	1.02%	0.91%
Portfolio Statistics
Total # of Positions		70
Net Assets		$7.1 billion
Weighted Average Market Cap		$43.5 billion
Portfolio Turnover³		28.11%
Benchmark
MSCI AC Asia Pacific Index

OBJECTIVE

Total return with an emphasis on providing 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 equity securities of companies located in Asia. Asia consists of all countries and markets in Asia, and includes developed, emerging and frontier countries and markets in the Asian region. The Fund may also invest in convertible debt and equity securities.

Matthews Asia Dividend Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Asia Dividend Fund returned –3.44% (Investor Class) and –3.39% (Institutional Class), while its benchmark, the MSCI All Country Asia Pacific Index, returned –3.22% over the same period. For the quarter ending June 30, the Fund returned –2.73% (Investor Class) and –2.69% (Institutional Class) compared to the benchmark return of –3.25%.

Market Environment:

Asian and global emerging markets suffered during the first half of 2018. Negative investor sentiment resulted from several factors including escalating trade tensions between China and the U.S.; seemingly tighter monetary conditions in China and other emerging markets; and the oscillation of North Korean denuclearization talks.

During the second quarter of the year, the specter of a tit-for-tat trade war between the U.S. and China rose significantly and rattled investor confidence. Recent macroeconomic data from China also started pointing to a potential slowdown in its economic growth induced by China’s financial deleveraging policy, another potential warning sign for the region. In addition, a rally in the U.S. dollar, together with a U.S. rate hike cycle and higher oil prices, further constrained the policy options of some Asian central banks, especially for the region’s more emerging economies of Southeast Asia as their growth models tend to be more susceptible to external shocks. Facing all these uncertainties, Asia’s equity markets struggled during the latter part of the year-to-date period.

Performance Contributors and Detractors:

During both the six-month and second-quarter periods, portfolio holdings from South Korea posed a significant drag on Fund returns.

The Fund’s holdings in Crystal International Group, a Hong Kong-based textile manufacturer, were among the top performance detractors. As one of the largest original equipment manufacturers of apparel in China, Crystal International supplies products to diversified global apparel brands, including Fast Retailing (Uniqlo), H&M, Levi’s and Gap Inc. During the second quarter, the company issued a downward revision of its 2018 earnings outlook for the first half of the year, citing unfavorable foreign currency movements and additional ramp-up costs from its newly expanded manufacturing capacity. This downward revision triggered a negative market reaction, and the stock was sold off aggressively. While we were surprised by this latest guidance, we viewed a significant part of this revision to be short-term and cyclical in nature. We felt the company’s long-term, competitive advantages—its manufacturing capability across multiple product categories and its lean supply-chain management—remained intact and believed the firm should support our investment thesis of being well-positioned to grow its business by gaining further market share. We felt the share price was a good value from which to continue adding to our position.

During the second quarter, a top performance contributor to the Fund was Hua Hong Semiconductor, a Chinese semiconductor foundry business. A major player in the mature eight-inch foundry segment, Hua Hong is currently benefiting from an industry-wide supply shortage for foundry capacity, creating an attractive pricing environment for the company. In addition, Hua Hong has consistently improved its product mix over the years, focusing more on higher average selling prices and higher-margin products. The firm’s stock price delivered strong returns

(continued)

1	Prospectus expense ratios.

3	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


matthewsasia.com \| 800.789.ASIA			21



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		10 Years		Since Inception			Inception Date
Investor Class (MAPIX)		-2.73%		-3.44%		9.27%		7.68%		8.22%		9.17%		9.62%			10/31/06
Institutional Class (MIPIX)		-2.69%		-3.39%		9.39%		7.79%		8.35%		n.a.		7.75%			10/29/10
MSCI AC Asia Pacific Index⁴		-3.25%		-3.22%		10.25%		7.12%		7.76%		4.76%		4.69%	⁵
Lipper International Equity Income Funds Category Average⁶		-3.46%		-4.70%		3.28%		3.09%		3.99%		1.84%		2.62%	⁵



INCOME DISTRIBUTION HISTORY
	2018										2017
	Q1		Q2		Q3		Q4		Total		Q1		Q2		Q3		Q4		Total
Investor (MAPIX)	$	0.01	$	0.19		n.a.		n.a.		n.a.	$	0.02	$	0.15	$	0.09	$	0.43	$	0.69
Inst’l (MIPIX)	$	0.02	$	0.20		n.a.		n.a.		n.a.	$	0.03	$	0.15	$	0.10	$	0.43	$	0.71

Totals may differ by $0.01 due to rounding and a return of capital. For distribution history please visit matthewsasia.com.

30-DAY YIELD:

1.69% (Investor Class) 1.84% (Institutional Class)

Source: BNY Mellon Investment Servicing (US) Inc.

DIVIDEND YIELD: 2.89%

The dividend yield (trailing) for the portfolio is the weighted average sum of the dividends paid by each equity security held by the Fund over the 12 months ended 6/30/2018 divided by the current price of each equity as of 6/30/2018. 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

LOGO

Calculated from 10/31/06.

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 HOLDINGS⁷
	Sector	Country	% of Net Assets
Shenzhou International Group Holdings, Ltd.	Consumer Discretionary	China/Hong Kong		4.5%
Minth Group, Ltd.	Consumer Discretionary	China/Hong Kong		3.7%
HSBC Holdings PLC	Financials	China/Hong Kong		3.1%
China Construction Bank Corp.	Financials	China/Hong Kong		3.1%
China Petroleum & Chemical Corp.	Energy	China/Hong Kong		3.0%
Hyundai Mobis Co., Ltd.	Consumer Discretionary	South Korea		2.9%
China Gas Holdings, Ltd.	Utilities	China/Hong Kong		2.5%
Nitori Holdings Co., Ltd.	Consumer Discretionary	Japan		2.5%
LG Chem, Ltd., Pfd.	Materials	South Korea		2.3%
Taiwan Semiconductor Manufacturing Co., Ltd.	Information Technology	Taiwan		2.2%
% OF ASSETS IN TOP TEN				29.8%

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


22		MATTHEWS ASIA FUNDS

Matthews Asia Dividend Fund

Portfolio Manager Commentary (unaudited) (continued)

during the quarter, as the market started to recognize the favorable industry trend and Hua Hong’s ability to deliver additional margin expansion. The company has been paying a modest 30% dividend payout, which we view as a reasonable balance between investing for future growth and returning cash to shareholders.

Notable Portfolio Changes:

One position we initiated during the quarter was Chongqing Brewery, a Chinese beer company listed on China’s domestic A-share market and that is 60%-owned by Carlsberg Group, a leading player in the global beer industry. After a period of significant business restructuring under Carlsberg’s ownership, Chongqing Brewery has re-emerged as a more efficiently run business. The company has been adapting well to the latest premiumization trend occurring among Chinese consumers by leveraging Carlsberg’s product portfolio and introducing more premium products to Chinese consumers. In addition, following years of consolidation, China’s top beer industry players today are shifting strategy from grabbing more market share to growing their profits. We view Chongqing Brewery as well-positioned to deliver on sustainable earnings growth, thanks to its successful product premiumization strategy and a more conducive industry structure. Carlsberg, as Chongqing’s controlling shareholder, has been adopting a high dividend payout policy for the Chinese firm, which we believe is likely to be maintained.

During the second quarter, we exited our position in Ping An Insurance because we felt valuations were no longer attractive. We used proceeds from the sale to purchase some new positions.

Outlook:

Uncertainties surrounding U.S.–China trade war rhetoric and a policy-induced economic slowdown in China, among other things, may continue to dampen investor sentiment toward Asian equities for the remainder of this year. We believe, however, that investors should look beyond the cloudy macro picture and focus instead on individual corporate business fundamentals. As dividend investors, we believe Asian companies are well-positioned to offer attractive dividend yields and sustainable dividend growth.



COUNTRY ALLOCATION (%)^8,9
China/Hong Kong			41.4
Japan			25.4
South Korea			11.8
Singapore			4.5
India			3.8
Taiwan			3.2
Indonesia			2.0
Australia			1.9
Thailand			1.4
Vietnam			1.3
Bangladesh			1.0
Philippines			0.6
Cash and Other Assets, Less Liabilities			1.6


SECTOR ALLOCATION (%)⁹
Consumer Discretionary			22.6
Consumer Staples			17.3
Financials			15.3
Information Technology			9.7
Telecommunication Services			7.5
Utilities			6.0
Industrials			5.7
Materials			4.6
Energy			4.5
Health Care			2.7
Real Estate			2.4
Cash and Other Assets, Less Liabilities			1.6


MARKET CAP EXPOSURE (%)⁹
Mega Cap (over $25B)			30.1
Large Cap ($10B–$25B)			24.1
Mid Cap ($3B–10B)			25.6
Small Cap (under $3B)			18.5
Cash and Other Assets, Less Liabilities			1.6

8	Not all countries where the Fund may invest are included in the benchmark index.

9	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.


matthewsasia.com \| 800.789.ASIA			23

Matthews Asia Dividend Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 94.3%


	Shares		Value
CHINA/HONG KONG: 41.4%
Shenzhou International Group Holdings, Ltd.		25,854,000		$318,143,399
Minth Group, Ltd.^†		62,069,000		262,533,967
China Construction Bank Corp. H Shares		238,266,000		218,023,260
China Petroleum & Chemical Corp. H Shares		215,920,000		193,273,747
HSBC Holdings PLC		18,914,400		176,963,327
China Gas Holdings, Ltd.		43,973,800		176,299,605
Hua Hong Semiconductor, Ltd.^b,c		40,482,000		138,362,467
Postal Savings Bank of China Co., Ltd. H Shares^b,c		199,348,000		129,408,933
Sands China, Ltd.		23,495,600		125,264,161
Sun Art Retail Group, Ltd.		88,093,500		114,924,324
Huaneng Power International, Inc. H Shares		161,530,000		106,739,035
China Resources Power Holdings Co., Ltd.		58,218,000		102,313,430
Chongqing Brewery Co., Ltd. A Shares		21,070,370		87,841,190
China Mobile, Ltd.		9,372,500		83,161,696
Fanhua, Inc. ADR		2,729,200		77,782,200
HKBN, Ltd.		49,263,123		75,779,192
Fuyao Glass Industry Group Co., Ltd. H Shares^b,c		21,248,000		71,798,470
Yuexiu Transport Infrastructure, Ltd.^†		97,328,000		70,854,662
Dairy Farm International Holdings, Ltd.		7,861,300		69,019,761
Shanghai Jin Jiang International Hotels Group Co., Ltd. H Shares^†		166,126,000		67,145,514
Far East Horizon, Ltd.		68,525,000		66,351,871
Crystal International Group, Ltd.^b,c		90,884,500		63,198,553
HSBC Holdings PLC ADR		944,100		44,504,874
Café de Coral Holdings, Ltd.		17,330,000		41,917,629
China Petroleum & Chemical Corp. ADR		235,900		21,193,256
China Mobile, Ltd. ADR		469,900		20,858,861

Total China/Hong Kong				2,923,657,384


JAPAN: 25.5%
Nitori Holdings Co., Ltd.		1,126,600		175,274,419
Pigeon Corp.		3,077,300		149,547,990
NTT DOCOMO, Inc.		5,707,700		145,445,713
Japan Tobacco, Inc.		5,130,600		143,381,889
Rohm Co., Ltd.		1,663,100		138,976,121
Kao Corp.		1,710,900		130,407,501
MISUMI Group, Inc.		4,431,500		128,933,674
Anritsu Corp.^†		9,384,700		128,488,779
Hoya Corp.		2,049,600		116,271,734
Seven & i Holdings Co., Ltd.		2,510,300		109,488,455
Fuji Seal International, Inc.		2,552,700		90,431,042
Eiken Chemical Co., Ltd.^†		3,337,200		70,894,137
Nifco, Inc.		2,220,800		68,630,938
Mitsubishi Pencil Co., Ltd.		2,628,400		54,489,751
Sumitomo Mitsui Financial Group, Inc.		1,043,300		40,694,957
BELLSYSTEM24 Holdings, Inc.		2,219,200		38,631,367
Mitsubishi UFJ Financial Group, Inc.		6,616,800		37,483,407
Sohgo Security Services Co., Ltd.		615,900		28,976,661

Total Japan				1,796,448,535


	Shares		Value
SOUTH KOREA: 7.7%
Hyundai Mobis Co., Ltd.		1,086,117		$206,580,517
BGF Retail Co., Ltd.		816,439		142,849,354
Woori Bank		5,472,430		79,818,938
Samsung Fire & Marine Insurance Co., Ltd.		272,807		64,639,055
S-1 Corp.		557,553		48,426,317

Total South Korea				542,314,181


SINGAPORE: 4.5%
United Overseas Bank, Ltd.		7,406,100		145,150,178
CapitaLand, Ltd.		32,225,000		74,584,780
CapitaLand Retail China Trust REIT^†		49,800,000		55,510,351
Ascendas India Trust^†		57,863,800		42,893,533

Total Singapore				318,138,842


INDIA: 3.8%
Bharti Infratel, Ltd.		20,967,130		92,141,089
ITC, Ltd.		20,701,500		80,446,828
Minda Industries, Ltd.		3,327,962		61,467,966
Gujarat Pipavav Port, Ltd.		21,381,946		32,935,550

Total India				266,991,433


TAIWAN: 3.2%
Taiwan Semiconductor Manufacturing Co., Ltd. ADR		2,642,940		96,625,886
China Steel Chemical Corp.^†		14,747,000		71,984,154
Taiwan Semiconductor Manufacturing Co., Ltd.		8,443,469		59,957,743

Total Taiwan				228,567,783


INDONESIA: 2.0%
PT United Tractors		46,212,800		101,756,581
PT Cikarang Listrindo^b,c		477,480,200		39,317,979

Total Indonesia				141,074,560


AUSTRALIA: 1.9%
Breville Group, Ltd.^†		12,185,538		104,697,395
Greencross, Ltd.^†		9,560,282		31,683,378

Total Australia				136,380,773


THAILAND: 1.4%
Thai Beverage Public Co., Ltd.		189,041,400		99,843,690

Total Thailand				99,843,690


VIETNAM: 1.3%
Vietnam Dairy Products JSC		12,514,488		92,304,686

Total Vietnam				92,304,686


BANGLADESH: 1.0%
GrameenPhone, Ltd.		15,190,235		70,722,541

Total Bangladesh				70,722,541


PHILIPPINES: 0.6%
Globe Telecom, Inc.		1,447,730		41,776,441

Total Philippines				41,776,441


TOTAL COMMON EQUITIES				6,658,220,849

(Cost $5,490,909,149)


24		MATTHEWS ASIA FUNDS

Matthews Asia Dividend Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)

PREFERRED EQUITIES: 4.1%


	Shares		Value
SOUTH KOREA: 4.1%
LG Chem, Ltd., Pfd.		909,328		$164,321,876
Samsung Electronics Co., Ltd., Pfd.		3,718,200		125,559,530

Total South Korea				289,881,406


TOTAL PREFERRED EQUITIES				289,881,406

(Cost $186,686,731)

TOTAL INVESTMENTS: 98.4%				6,948,102,255
(Cost $5,677,595,880)

CASH AND OTHER ASSETS, LESS LIABILITIES: 1.6%				113,024,114


NET ASSETS: 100.0%				$7,061,126,369

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

c	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

†	Affiliated Issuer, as defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of this issuer)

ADR	American Depositary Receipt

JSC	Joint Stock Co.

Pfd.

Preferred

REIT	Real Estate Investment Trust

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			25

LOGO


PORTFOLIO MANAGERS
Sherwood Zhang, CFA
Lead Manager
Yu Zhang, CFA
Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MCDFX	MICDX
CUSIP	577125305	577130735
Inception	11/30/09	10/29/10
NAV	$17.82	$17.82
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	1.19%	1.04%
Portfolio Statistics
Total # of Positions		55
Net Assets		$348.0 million
Weighted Average Market Cap		$53.9 billion
Portfolio Turnover²		69.14%
Benchmark
MSCI China Index

OBJECTIVE

Total return with an emphasis on providing 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 equity securities of companies located in China. China includes its administrative and other districts, such as Hong Kong. The Fund may also invest in convertible debt and equity securities.

Matthews China Dividend Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews China Dividend Fund returned 3.10% (Investor Class) and 3.19% (Institutional Class), outperforming its benchmark, the MSCI China Index, which fell –1.69%. For the quarter ending June 30, the Fund returned 1.14% (Investor Class) and 1.18% (Institutional Class), outperforming its benchmark, which dropped –3.44%.

Market Environment:

For much of the first half of the year, Chinese equity markets were marked by volatility amid some alarming headlines. There was muted response to the 2017 full year earnings reports for many Chinese companies, meanwhile, as the market already expected healthy earnings growth. In May, markets appeared encouraged by a possible deal between U.S. and China to avoid a trade war after a state visit to Washington by China’s Vice Premier Liu He. Global equity markets climbed further in June following the historic summit meeting between President Trump and North Korean leader Kim Jong Un in Singapore. China’s equity markets reversed into panic mode, however, when U.S.–China trade negotiations in Beijing did not bear fruit. With additional U.S. tariffs on US$50 billion of Chinese imports on the horizon, Chinese equities suffered heavy selling. Although China’s domestic A-share market received an initial boost from the inclusion by MSCI indices, it ultimately lagged behind overseas-listed Chinese equities during the second quarter—again highlighting the risks involved in investing in this young market.

Performance Contributors and Detractors:

During the first half of the year, our security selection in the financials and consumer discretionary sectors contributed most to the Fund’s outperformance versus its benchmark. Conversely, we continued to face challenges identifying health care sector firms that fit well with our investment criteria.

Hua Hong Semiconductor, a leading semiconductor foundry in China, was a top contributor to performance for the six month-period, amid sentiment that China would boost efforts to drive the growth of more domestically manufactured semiconductors following rising trade tensions with the U.S. In addition, a main competitor to Hua Hong raised its contract pricing significantly during this period, further exciting the market considering the industry’s tight capacity levels. China Maple Leaf Educational Systems, an operator of private schools in China, was the second-best performance contributor to Fund returns for the year-to-date period. In fact, the entire for-profit education industry has done well year to date as more clarity on newly created industry regulation was introduced.

On the flip side, WH Group, a pork producer with significant operations in both the U.S. and China, became a visible casualty of trade war rhetoric. Although the company does not import U.S. pork to China by any meaningful amount, Mexico is a major destination for its U.S. exports. As Mexico introduced additional tariffs targeting U.S. goods, including pork, U.S. pork prices declined further. This could depress the company’s profit margins for its U.S. business. We are closely monitoring this situation.

Notable Portfolio Changes:

During the second quarter, we initiated a position in SUNeVision, a data center operator based in Hong Kong. We believe demand for data centers will be very strong as businesses increasingly need these to locate their mission critical servers. These servers are used to transmit, store and analyze data that is undergoing explosive growth as consumers become increasingly reliant on smartphones and smart devices. As the largest data center owner in Hong Kong, SUNeVision should

(continued)

1	Prospectus expense ratio.

2	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


26		MATTHEWS ASIA FUNDS



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Year		5 Year		Since Inception			Inception Date
Investor Class (MCDFX)		1.14%		3.10%		21.22%		10.23%		13.52%		11.60%			11/30/09
Institutional Class (MICDX)		1.18%		3.19%		21.40%		10.42%		13.72%		10.61%			10/29/10
MSCI China Index³		-3.44%		-1.69%		21.42%		7.26%		12.32%		6.31%	⁴
Lipper China Region Funds Category Average⁵		-4.74%		-2.58%		15.90%		5.49%		10.32%		6.39%	⁴

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. For the Fund’s most recent month-end performance, visit matthewsasia.com.



INCOME DISTRIBUTION HISTORY
	2018						2017
	June		December		Total		June		December		Total
Investor (MCDFX)	$	0.34		n.a.		n.a.	$	0.20	$	0.29	$	0.49
Inst’l (MICDX)	$	0.36		n.a.		n.a.	$	0.21	$	0.30	$	0.51

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:

1.58% (Investor Class) 1.78% (Institutional Class)

Source: BNY Mellon Investment Servicing (US) Inc.

DIVIDEND YIELD: 3.30%

Source: FactSet Research Systems, Bloomberg, MICM.

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

LOGO

Calculated from 11/30/09.

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
	Sector	% of Net Assets
Tencent Holdings, Ltd.	Information Technology		4.6%
HKBN, Ltd.	Telecom Services		3.6%
China Petroleum & Chemical Corp.	Energy		3.4%
Postal Savings Bank of China Co., Ltd.	Financials		3.2%
HSBC Holdings PLC	Financials		3.1%
Altaba, Inc.	Information Technology		2.9%
Hua Hong Semiconductor, Ltd.	Information Technology		2.6%
Guangdong Provincial Expressway Development Co., Ltd.	Industrials		2.6%
Sun Art Retail Group, Ltd.	Consumer Staples		2.6%
Bank of China, Ltd.	Financials		2.6%
% OF ASSETS IN TOP TEN			31.2%

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


matthewsasia.com \| 800.789.ASIA			27



COUNTRY ALLOCATION (%)^7,8
China/Hong Kong			90.7
Taiwan			3.5
Singapore			2.0
Cash and Other Assets, Less Liabilities			3.8


SECTOR ALLOCATION (%)⁸
Information Technology			16.7
Financials			15.7
Industrials			11.9
Consumer Staples			10.3
Consumer Discretionary			9.4
Telecommunication Services			7.9
Energy			7.7
Health Care			5.7
Real Estate			3.9
Utilities			3.8
Materials			3.2
Cash and Other Assets, Less Liabilities			3.8


MARKET CAP EXPOSURE (%)⁸
Mega Cap (over $25B)			29.9
Large Cap ($10B–$25B)			6.2
Mid Cap ($3B–10B)			10.9
Small Cap (under $3B)			49.1
Cash and Other Assets, Less Liabilities			3.8

7	Not all countries where the Fund may invest are included in the benchmark index.

8	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

Matthews China Dividend Fund

Portfolio Manager Commentary (unaudited) (continued)

enjoy strong pricing power. We believe it benefits from the additional rental revenue from its newly completed data center. We also initiated a position in Sunny Friend Environmental Technology, a leading industrial and medical waste treatment company in Taiwan. We believe the company’s strong safety track record will help it to successfully duplicate its business model in China, where the potential market size is much bigger, and upstream customers such as semiconductor companies also experience strong growth.

During the second quarter, we meaningfully trimmed our exposure to holdings in China’s domestic A-share market. We exited our holdings in Midea Group, Shanghai International Airport and China International Travel Service. Although we like the business models of these companies, the high valuations for their stocks compelled us to take profits and deploy capital elsewhere.

Outlook:

The news flow around the prospects of a U.S.–China trade war is likely to weigh on markets over the near term. As we stated in our first-quarter commentary, this trade tussle could have broader economic and geopolitical implications. At this time, we are still cautiously optimistic about a resolution and have already seen many positive signs. Both Tesla and Ford, for example, have announced new investment commitments into China. In the case of Tesla, it would be the first time China allows a foreign car company to set up a wholly owned manufacturing facility on its mainland. For our strategy, we look for companies that can sustain and grow their earnings and dividends in this environment. Just like the executives making multi-billion dollar investment commitments in China, we also believe the potential return from the growth of a vast Chinese consumer market is too attractive to ignore.


28		MATTHEWS ASIA FUNDS

Matthews China Dividend Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 93.3%


	Shares		Value
FINANCIALS: 15.7%
Banks: 10.2%
Postal Savings Bank of China Co., Ltd. H Shares^b,c		17,072,000		$11,082,475
HSBC Holdings PLC		1,146,400		10,725,731
Bank of China, Ltd. H Shares		17,925,000		8,889,453
Dah Sing Financial Holdings, Ltd.		849,600		4,954,317

				35,651,976


Insurance: 3.6%
Ping An Insurance Group Co. of China, Ltd. H Shares		722,000		6,611,841
Fanhua, Inc. ADR		211,000		6,013,500

				12,625,341


Capital Markets: 1.9%
China International Capital Corp., Ltd. H Shares^b,c		3,646,000		6,463,628

Total Financials				54,740,945


INFORMATION TECHNOLOGY: 13.8%
Internet Software & Services: 8.4%
Tencent Holdings, Ltd.		317,000		15,918,283
NetEase, Inc. ADR		29,100		7,352,697
SUNeVision Holdings, Ltd.		7,712,000		4,556,328
Wise Talent Information Technology Co., Ltd.^d		352,600		1,460,627

				29,287,935


Semiconductors & Semiconductor Equipment: 2.6%
Hua Hong Semiconductor, Ltd.^b,c		2,677,000		9,149,655


Software: 2.1%
Shanghai Baosight Software Co., Ltd. B Shares		3,849,918		7,282,624


IT Services: 0.7%
Huifu Payment, Ltd.^b,c,d		2,737,200		2,368,919

Total Information Technology				48,089,133


INDUSTRIALS: 11.9%
Transportation Infrastructure: 4.5%
Guangdong Provincial Expressway Development Co., Ltd. B Shares		11,565,121		9,130,596
Xiamen International Airport Co., Ltd. A Shares		2,117,010		6,579,593

				15,710,189


Commercial Services & Supplies: 3.1%
A-Living Services Co., Ltd. H Shares^b,c,d		3,010,250		5,501,593
Sunny Friend Environmental Technology Co., Ltd.		758,000		5,339,183

				10,840,776


Marine: 1.4%
SITC International Holdings Co., Ltd.		4,173,000		4,648,921


Machinery: 1.3%
Shanghai Mechanical and Electrical Industry Co., Ltd. B Shares		2,456,659		4,501,857


Road & Rail: 1.1%
Guangshen Railway Co., Ltd. H Shares		6,096,000		3,425,941
Guangshen Railway Co., Ltd. ADR		14,400		404,928

				3,830,869


	Shares		Value
Professional Services: 0.5%
Sporton International, Inc.		364,430		$1,767,284

Total Industrials				41,299,896


CONSUMER STAPLES: 10.3%
Food Products: 3.9%
WH Group, Ltd.^b,c		9,073,000		7,341,750
Nissin Foods Co., Ltd.		10,830,000		6,282,452

				13,624,202


Food & Staples Retailing: 3.9%
Sun Art Retail Group, Ltd.		6,892,000		8,991,111
Shanghai Bailian Group Co., Ltd. B Shares		3,839,821		4,393,431

				13,384,542


Personal Products: 1.4%
Chlitina Holding, Ltd.		516,000		5,017,070


Beverages: 1.1%
Chongqing Brewery Co., Ltd. A Shares		898,018		3,743,787

Total Consumer Staples				35,769,601


CONSUMER DISCRETIONARY: 9.4%
Textiles, Apparel & Luxury Goods: 4.6%
Nan Liu Enterprise Co., Ltd.		887,000		5,033,078
Heilan Home Co., Ltd. A Shares		2,040,888		3,911,823
Crystal International Group, Ltd.^b,c		5,330,500		3,706,681
Heilan Home Co., Ltd. A Shares		1,841,024		3,524,084

				16,175,666


Hotels, Restaurants & Leisure: 3.2%
Shanghai Jin Jiang International Hotels Group Co., Ltd. H Shares		16,990,000		6,867,091
Xiabuxiabu Catering Management China Holdings Co., Ltd.^b,c		1,962,500		4,285,450

				11,152,541


Diversified Consumer Services: 1.6%
China Maple Leaf Educational Systems, Ltd.		3,016,000		5,415,895

Total Consumer Discretionary				32,744,102


TELECOMMUNICATION SERVICES: 7.9%
Diversified Telecommunication Services: 5.6%
HKBN, Ltd.		8,090,457		12,445,177
CITIC Telecom International Holdings, Ltd.		26,581,000		6,965,553

				19,410,730


Wireless Telecommunication Services: 2.3%
China Mobile, Ltd. ADR		181,430		8,053,678

Total Telecommunication Services				27,464,408


ENERGY: 7.7%
Oil, Gas & Consumable Fuels: 7.7%
China Petroleum & Chemical Corp. H Shares		13,328,000		11,930,125
CNOOC, Ltd.		4,048,000		6,936,432
Sinopec Kantons Holdings, Ltd.		9,790,000		4,616,542
China Aviation Oil Singapore Corp., Ltd.		2,938,500		3,186,591

Total Energy				26,669,690


matthewsasia.com \| 800.789.ASIA			29

Matthews China Dividend Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)


COMMON EQUITIES (continued)		CLOSED-END FUNDS: 2.9%


	Shares		Value
HEALTH CARE: 5.7%
Health Care Providers & Services: 2.6%
Universal Medical Financial & Technical Advisory Services Co., Ltd.^b,c		7,541,000		$5,990,781
China National Accord Medicines Corp., Ltd. B Shares		777,833		3,114,069

				9,104,850


Biotechnology: 1.7%
Shanghai Haohai Biological Technology Co., Ltd. H Shares^b,c		491,400		3,066,769
BBI Life Sciences Corp.^c		7,221,000		2,880,587

				5,947,356


Pharmaceuticals: 1.4%
Tianjin ZhongXin Pharmaceutical Group Corp., Ltd. S Shares		4,583,800		4,802,232

Total Health Care				19,854,438


REAL ESTATE: 3.9%
Equity REITs: 2.0%
CapitaLand Retail China Trust REIT		6,223,100		6,936,676


Real Estate Management & Development: 1.9%
Sun Hung Kai Properties, Ltd.		447,000		6,734,474

Total Real Estate				13,671,150


UTILITIES: 3.8%
Independent Power and Renewable Electricity Producers: 2.3%
China Resources Power Holdings Co., Ltd.		4,518,000		7,940,020


Gas Utilities: 1.5%
China Gas Holdings, Ltd.		1,303,000		5,223,983

Total Utilities				13,164,003


MATERIALS: 3.2%
Containers & Packaging: 3.2%
Greatview Aseptic Packaging Co., Ltd.		10,610,000		6,329,000
CPMC Holdings, Ltd.		7,928,000		4,886,642

Total Materials				11,215,642


TOTAL COMMON EQUITIES				324,683,008

(Cost $297,929,920)


	Shares		Value
INFORMATION TECHNOLOGY: 2.9%
Internet Software & Services: 2.9%
Altaba, Inc.^d		135,500		$9,919,955

Total Information Technology				9,919,955


TOTAL CLOSED-END FUNDS				9,919,955

(Cost $7,824,098)

TOTAL INVESTMENTS: 96.2%				334,602,963
(Cost $305,754,018)

CASH AND OTHER ASSETS, LESS LIABILITIES: 3.8%				13,380,079


NET ASSETS: 100.0%				$347,983,042

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

c	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

d	Non-income producing security.

ADR	American Depositary Receipt

REIT	Real Estate Investment Trust

See accompanying notes to financial statements.


30		MATTHEWS ASIA FUNDS

LOGO


PORTFOLIO MANAGERS
Beini Zhou, CFA
Lead Manager
Michael B. Han, CFA
Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MAVRX	MAVAX
CUSIP	577130693	577130685
Inception	11/30/15	11/30/15
NAV	$12.45	$12.37
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	2.32%	2.08%
After Fee Waiver and Reimbursement²	1.50%	1.25%
Portfolio Statistics
Total # of Positions		48
Net Assets		$35.8 million
Weighted Average Market Cap		$18.1 billion
Portfolio Turnover³		31.93%
Benchmark
MSCI AC Asia ex Japan Index

OBJECTIVE

Long-term capital appreciation.

STRATEGY

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in common stock, preferred stock and other equity securities, and convertible securities of companies located in Asia. The Fund seeks to create an investable universe of value companies that it believes trade at market values with discounts to their intrinsic value, have strong financial and market positions, have strong management and are oriented to creating value for their shareholders. Matthews assesses companies within this universe according to each of these factors.

Matthews Asia Value Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Asia Value Fund returned –2.96% (Investor Class) and –2.83% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, fell –4.65% over the same period. For the quarter ending June 30, the Fund returned –3.79% (Investor Class) and –3.74% (Institutional Class), compared to the benchmark return of –5.31%.

Market Environment:

In the first half of the year, trade war rhetoric, rising interest rates, falling emerging market currencies and geopolitical tensions on the Korean peninsula dominated the news. The only apparent bright spot was the June summit between North Korean leader Kim Jong Un and U.S. President Donald Trump in Singapore, although denuclearization of North Korea is far from guaranteed, pending further negotiations. Following a buoyant run-up over the past year or so, the Asia ex Japan market dropped more than 5% in the second quarter, with most of the decline occurring in the second half of June. The Chinese renminbi (RMB) also depreciated sharply against the U.S. dollar in late June, dropping more than 5% in the second quarter.

Performance Contributors and Detractors:

The Fund outperformed its benchmark in both the first and second quarters of the year, due to stock selection and despite its significant exposure to South Korea, which was one of Asia’s worst performers in the first half of the year in U.S. dollar terms. The two biggest contributors to Fund performance in the second quarter were both in the consumer staples sector. Shares of Nissin Foods, the biggest premium instant noodle company in Hong Kong/China, jumped more than 30% in the quarter. It is the newly Hong Kong-listed subsidiary of Japan-based Nissin Foods Group. Its major competitors announced decent earnings in the instant noodle segment in the quarter, partly driven by a pricing increase. We believe this brought positive sentiment change toward Nissin, whose share price had been fairly depressed. We trimmed our position in the company in the quarter as its valuation discount narrowed.

Shares of Anhui Gujing Distillery, a leading local liquor company in China, did well in the second quarter after the company announced a big profit jump. We attended its annual shareholder meeting in the Anhui province in the second quarter (as the only U.S.-based investor). While we were there, we learned first-hand that it continues to upgrade its product mix toward premium products with higher retail selling prices. Along with containing its sales and marketing expenses, the company has managed to improve its formerly low operating margin substantially.

On the other hand, the biggest detractor to performance during the second quarter was China National Accord Medicines. It is a listed subsidiary of state-owned Sinopharm, one of the country’s three biggest pharmaceutical distributors. We initiated this position in Q3 last year. Since then, its share price has continued to decline. China has been implementing a new two-invoice system in the drug distribution industry to eliminate layers of middlemen in the supply chain. This has led to earnings pressure at National Accord in the short term. In the long run, we believe an industry leader like National Accord will benefit from market consolidation triggered by this two-invoice policy. We added to our position in the quarter at a high single-digit price-to-earnings ratio.

(continued)

1	Prospectus expense ratios.

Matthews has contractually agreed (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class to 1.25% first by waiving class specific expenses (i.e., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving non-class specific expenses of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 1.25% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 1.25%. If the operating expenses fall below the expense limitation in a year within three years after Matthews has made a waiver or reimbursement, the Fund may reimburse Matthews up to an amount that does not cause the expenses for that year to exceed the lesser of (i) the expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will remain in place until April 30, 2019 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.

3	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


matthewsasia.com \| 800.789.ASIA			31



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		Since Inception		Inception Date
Investor Class (MAVRX)		-3.79%		-2.96%		8.64%		13.91%		11/30/15
Institutional Class (MAVAX)		-3.74%		-2.83%		8.85%		14.19%		11/30/15
MSCI AC Asia ex Japan Index⁴		-5.31%		-4.65%		10.21%		14.75%
Lipper Pacific Region Funds Category Average⁵		-3.78%		-3.74%		9.59%		11.94%

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

LOGO

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

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
	Sector	Country	% of Net Assets
China National Accord Medicines Corp., Ltd.	Health Care	China/Hong Kong		5.0%
Clear Media, Ltd.	Consumer Discretionary	China/Hong Kong		4.3%
MPHB Capital BHD	Financials	Malaysia		4.2%
CK Hutchison Holdings, Ltd.	Industrials	China/Hong Kong		4.1%
Samsung SDI Co., Ltd., Pfd.	Information Technology	South Korea		4.0%
YAMADA Consulting Group Co., Ltd.	Industrials	Japan		2.9%
Baidu, Inc.	Information Technology	China/Hong Kong		2.6%
Shinyoung Securities Co., Ltd.	Financials	South Korea		2.6%
Haw Par Corp., Ltd.	Health Care	Singapore		2.6%
Kwangju Bank Co., Ltd.	Financials	South Korea		2.5%
% OF ASSETS IN TOP TEN				34.8%

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


32		MATTHEWS ASIA FUNDS

Matthews Asia Value Fund

Portfolio Manager Commentary (unaudited) (continued)

Clear Media was also a big detractor to performance in the quarter. Trading remains suspended for shares of Clear Media, the largest bus shelter advertising company in China, due to a past incident in which some junior-level employees misappropriated company funds. We commented on this company extensively last quarter. During the second quarter, we met with company management twice in Hong Kong and China. Though it is unknown when its shares will resume trading, we came away from our meetings feeling incrementally positive. There seems to be no further damage to the company beyond the misappropriation of approximately US$12 million (77 million RMB) already disclosed. Management is working hard, along with external consultants, to strengthen the company’s internal control processes to avoid any recurrence of such incidents. We believe Clear Media will emerge out of this incident as a better and more tightly managed company.

Notable Portfolio Changes:

We trimmed our positions in a couple of companies, such as Nissin Foods, when they neared our estimated intrinsic value. We also took advantage of the substantial market decline in the second half of June to add to several positions.

During a major market correction, we closely evaluated whether to add to some of our existing positions or to initiate new positions. We do not follow a formula and instead make case-by-case decisions. In general, we like to upgrade the overall quality of the portfolio during a market downturn, while keeping valuations approximately the same or lower.

During the second quarter, we initiated a position in China’s Huangshan Tourism Development. Huangshan, which means Yellow Mountain in Chinese, is also a famous tourist spot in eastern China. The mountain is in the Anhui province and attracts over three million visitors a year. The company is a local state-owned enterprise. Recent weak traffic along with potential government regulation of pricing for admission tickets to certain tourist spots has driven down its share price in the past year. We believe these negative factors have been more than discounted in the price of its B-shares, which we were able to acquire at less than 8x P/E ex cash. One thing to note is that it has not raised its admissions prices since early 2009. Yellow Mountain is poised to receive many more tourists for years to come, despite sometimes volatile tourist traffic from quarter to quarter. We view this investment as akin to buying Yellowstone National Park in the U.S. at a single-digit P/E.

Outlook:

The two biggest concerns for investors currently are the U.S.–China trade war and rising interest rates. On both fronts, we believe our portfolio is well-positioned. On the former, most of our holdings are either domestic in nature or have little exposure to China-U.S. trade. On the latter, all of the companies in our portfolio have strong balance sheets and thus we do not expect a direct negative impact if U.S. interest rates rise faster than expected later this year.

In fact, given our long-term investment horizon and double-digit level of cash in the portfolio, as value investors we welcome negative news resulting in more market dislocation in the near future. This opens opportunities to buy more shares, in either some of our existing positions or new companies, at a cheaper price. In the second quarter, we evaluated companies that will likely be affected by the U.S.–China trade war. We have put some of them on our watch list and established “buy” prices that are lower than their current share prices. We remain patient and ready to take advantage of buying opportunities if investor sentiment turns extremely negative.



COUNTRY ALLOCATION (%)^7,8
China/Hong Kong			31.9
South Korea			28.8
Japan			10.3
Malaysia			5.8
Singapore			4.7
Taiwan			4.2
United States			1.9
Switzerland			1.1
Israel			0.5
Cash and Other Assets, Less Liabilities			10.9



SECTOR ALLOCATION (%)⁸
Consumer Discretionary			22.8
Industrials			15.0
Financials			13.0
Information Technology			12.4
Health Care			11.8
Consumer Staples			7.1
Materials			5.3
Telecommunication Services			1.7
Cash and Other Assets, Less Liabilities			10.9



MARKET CAP EXPOSURE (%)⁸
Mega Cap (over $25B)			14.9
Large Cap ($10B–$25B)			5.5
Mid Cap ($3B–10B)			11.4
Small Cap (under $3B)			57.2
Cash and Other Assets, Less Liabilities			10.9

7	Not all countries where the Fund may invest are included in the benchmark index.

8	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.


matthewsasia.com \| 800.789.ASIA			33

Matthews Asia Value Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 80.0%


	Shares		Value
CHINA/HONG KONG: 31.8%
China National Accord Medicines Corp., Ltd. B Shares		443,400		$1,775,160
Clear Media, Ltd.^b		2,291,000		1,534,488
CK Hutchison Holdings, Ltd.		138,500		1,466,164
Baidu, Inc. ADR^c		3,900		947,700
COSCO SHIPPING International Hong Kong Co., Ltd.		1,764,000		669,367
PW Medtech Group, Ltd.^c		3,366,000		663,506
Anhui Gujing Distillery Co., Ltd. B Shares		103,100		658,334
Qualcomm, Inc.		11,600		650,992
China Mobile, Ltd.		70,500		625,543
Goldlion Holdings, Ltd.		1,443,000		590,398
Huangshan Tourism Development Co., Ltd. B Shares		463,187		549,657
Nissin Foods Co., Ltd.		783,000		454,216
Texwinca Holdings, Ltd.		1,004,000		428,243
Shandong Weigao Group Medical Polymer Co., Ltd. H Shares		324,000		228,751
Jiangling Motors Corp., Ltd. B Shares		127,779		162,053

Total China/Hong Kong				11,404,572


SOUTH KOREA: 19.7%
Shinyoung Securities Co., Ltd.		18,580		946,363
Kwangju Bank Co., Ltd.		92,401		885,946
DGB Financial Group, Inc.		80,420		739,629
Hyundai Greenfood Co., Ltd.		54,192		691,854
Young Poong Corp.		877		630,804
Samho Development Co., Ltd.		126,275		592,569
Nice Information & Telecommunication, Inc.		25,895		584,527
Geumhwa PSC Co., Ltd.		17,460		548,318
Kangnam Jevisco Co., Ltd.		20,282		501,363
CMS Edu Co., Ltd.		63,533		456,225
Grand Korea Leisure Co., Ltd.		12,298		287,170
Hy-Lok Corp.		9,185		210,800

Total South Korea				7,075,568


JAPAN: 10.3%
YAMADA Consulting Group Co., Ltd.		36,300		1,043,281
Ohashi Technica, Inc.		47,000		772,183
Honma Golf, Ltd.^d,e		623,000		638,310
Medikit Co., Ltd.		8,400		453,706
Asante, Inc.		21,800		417,437
San-A Co., Ltd.		7,100		350,679

Total Japan				3,675,596


MALAYSIA: 5.8%
MPHB Capital BHD^c		4,786,400		1,518,751
Genting BHD		267,900		557,331

Total Malaysia				2,076,082


SINGAPORE: 4.7%
Haw Par Corp., Ltd.		93,200		917,977
Straits Trading Co., Ltd.		507,200		754,245

Total Singapore				1,672,222


	Shares		Value
TAIWAN: 4.2%
P-Duke Technology Co., Ltd.		199,000		$460,284
Tehmag Foods Corp.		57,300		392,468
Lumax International Corp., Ltd.		182,900		379,491
Faraday Technology Corp.		143,000		279,745

Total Taiwan				1,511,988


UNITED STATES: 1.9%
News Corp. Class B		42,200		668,870

Total United States				668,870


SWITZERLAND: 1.1%
Cie Financiere Richemont SA		4,722		399,172

Total Switzerland				399,172


ISRAEL: 0.5%
Taro Pharmaceutical Industries, Ltd.^c		1,700		196,673

Total Israel				196,673


TOTAL COMMON EQUITIES				28,680,743

(Cost $29,232,282)

PREFERRED EQUITIES: 9.1%
SOUTH KOREA: 9.1%
Samsung SDI Co., Ltd., Pfd.		17,132		1,426,943
Hyundai Motor Co., Ltd., 2nd Pfd.		8,696		707,807
Samsung Electronics Co., Ltd., Pfd.		16,600		560,564
Samsung Fire & Marine Insurance Co., Ltd., Pfd.		3,409		558,008

Total South Korea				3,253,322


TOTAL PREFERRED EQUITIES				3,253,322

(Cost $3,144,128)

TOTAL INVESTMENTS: 89.1%				31,934,065
(Cost $32,376,410)

CASH AND OTHER ASSETS, LESS LIABILITIES: 10.9%				3,909,261


NET ASSETS: 100.0%				$35,843,326

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

b	Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy.

c	Non-income producing security.

e	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

ADR	American Depositary Receipt

BHD

Berhad

Pfd.

Preferred

See accompanying notes to financial statements.


34		MATTHEWS ASIA FUNDS

LOGO


PORTFOLIO MANAGERS
Kenneth Lowe, CFA
Lead Manager
S. Joyce Li, CFA
Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MAFSX	MIFSX
CUSIP	577125701	577125800
Inception	4/30/13	4/30/13
NAV	$11.29	$11.36
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	2.45%	2.27%
After Fee Waiver and Reimbursement²	1.50%	1.25%
Portfolio Statistics
Total # of Positions		33
Net Assets		$8.4 million
Weighted Average Market Cap		$77.6 billion
Portfolio Turnover³		28.42%
Benchmark
MSCI AC Asia ex Japan Index

OBJECTIVE

Long-term capital appreciation.

STRATEGY

Matthews Asia Focus Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Asia Focus Fund returned –7.31% (Investor Class) and –7.19% (Institutional Class) while its benchmark, the MSCI All Country Asia ex Japan Index, returned –4.65%. For the quarter ending June 30, the Fund returned –4.73% (Investor Class) and –4.70% (Institutional Class) compared to the benchmark return of –5.31% over the same period.

Market Environment:

Following almost two years of extremely low volatility and strong equity market performance in Asia, the first half of the year was far choppier and markets ended lower. This can be attributed to a number of macroeconomic and policy-related factors. Monetary tightening in the U.S. through interest rate rises and a reduction of the U.S. Federal Reserve’s balance sheet has tightened U.S. dollar liquidity, while monetary conditions also tightened in China. Additionally, significant political risks re-emerged within Europe in the first half of the year. But the resumption of President Trump’s trade war rhetoric and planned tariffs swung sentiment into negative territory. This has focused on China in particular, with an initial US$34billion of tariffs to be imposed on imports from China in early July. This number will increase over time. China has responded in equal measure, resulting in an escalated trade war that is economically disruptive for all.

These factors have sparked concern that the globally synchronized growth environment of the past couple of years has passed. Asian equities and currencies have dropped significantly from their peaks in January, with the markets of China and Taiwan holding up marginally better than others.

Performance Contributors and Detractors:

During the first six months of 2018, the largest contributors to returns came from the portfolio’s holdings in Australia. The best performer, Macquarie Group, has diversified its business beyond investment banking to become a vertically integrated asset manager capable of delivering stable growth among Australian financial institutions through business cycles. The stock rallied as the market started to appreciate this business model transformation.

In addition, our holdings in the consumer staples sector contributed positively. Heineken Malaysia, a leader in Malaysia’s premium beer segment, performed strongly as it delivered above-market growth and benefited from the new government’s policies. Meanwhile, shares of Singaporean supermarket chain Sheng Siong Group gained as it offered earnings certainty amid market volatility with its store network optimization and defensive operating cash flow.

The largest detractor to relative returns during the first six months of 2018 came from holdings in the China/Hong Kong markets. Shares of NetEase, a Chinese online game company, declined as investors worried about the lack of new hit game titles and the firm’s investment in e-commerce. We think NetEase’s franchise value—as the second-largest online game platform in China—remains underappreciated. We also like management’s disciplined approach in developing a niche e-commerce strategy. More recently our holdings in Indonesia and the Philippines declined amid global emerging market volatility and foreign fund outflow. For instance, shares of Bank of the Philippine Islands declined to 1.9x price

(continued)

1	Prospectus expense ratios.

Matthews has contractually agreed (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class to 1.25% first by waiving class specific expenses (i.e., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving non-class specific expenses of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 1.25% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 1.25%. If the operating expenses fall below the expense limitation in a year within three years after Matthews has made a waiver or reimbursement, the Fund may reimburse Matthews up to an amount that does not cause the expenses for that year to exceed the lesser of (i) the expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will remain in place until April 30, 2019 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.

3	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


matthewsasia.com \| 800.789.ASIA			35



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		Since Inception		Inception Date
Investor Class (MAFSX)		-4.73%		-7.31%		5.38%		5.70%		4.93%		3.41%		4/30/13
Institutional Class (MIFSX)		-4.70%		-7.19%		5.62%		5.96%		5.20%		3.67%		4/30/13
MSCI AC Asia ex Japan Index⁴		-5.31%		-4.65%		10.21%		7.32%		8.48%		6.71%
Lipper Pacific ex Japan Funds Category Average⁵		-5.15%		-4.63%		9.66%		6.37%		7.52%		5.62%

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

LOGO

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
	Sector	Country	% of Net Assets
AIA Group, Ltd.	Financials	China/Hong Kong		7.2%
Tencent Holdings, Ltd.	Information Technology	China/Hong Kong		5.7%
Broadcom, Inc.	Information Technology	United States		3.5%
Macquarie Group, Ltd.	Financials	Australia		3.5%
United Overseas Bank, Ltd.	Financials	Singapore		3.4%
Jardine Matheson Holdings, Ltd.	Industrials	China/Hong Kong		3.4%
Sheng Siong Group, Ltd.	Consumer Staples	Singapore		3.3%
Coway Co., Ltd.	Consumer Discretionary	South Korea		3.2%
Housing Development Finance Corp., Ltd.	Financials	India		3.1%
Taiwan Semiconductor Manufacturing Co., Ltd.	Information Technology	Taiwan		3.1%
% OF ASSETS IN TOP TEN				39.4%

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


36		MATTHEWS ASIA FUNDS

Matthews Asia Focus Fund

Portfolio Manager Commentary (unaudited) (continued)

to book, their lowest valuation since 2010. We believe this strong franchise is now attractively valued, as its business is holding up well on measures including loan growth, nonperforming loan ratio and capital sufficiency.

Notable Portfolio Changes:

We added three new positions during the second quarter: ING Life Insurance Korea, Johnson Electric Holdings and JNBY Design.

ING Life Insurance Korea is a high-quality life insurance company in South Korea with a strong management team. Its solvency margin is significantly higher than its peers, making it well-positioned to gain market share amid tighter capital rules. The stock is attractively priced at 9x forward price-to-earnings ratio and offers a 6% dividend yield.

Hong Kong-listed Johnson Electric Holdings is a leading micro-motor maker that benefits from demand driven by the global trend of vehicle electrification. Market concerns of trade wars led to broad weakness in automotive parts manufacturers including Johnson Electric, even though the impact to the company is limited. At 5x enterprise value-to-EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and 8x forward price to earnings, Johnson Electric is undervalued for its long-term growth in our view.

Additionally, we initiated a position in JNBY Design, an emerging leader in the designer fashion industry in China. Through its successful social media marketing and customer analytics, JNBY Design rides on the tide of consumption upgrades in China and has built a large number of loyal customers, whose purchases accounted for 63% of its total retail sales in the fiscal year ending in June 2017.

During the second quarter, we exited our holding in Heineken Malaysia. The company operates in a duopolistic industry and benefits from the newly elected government’s plan to remove Malaysia’s goods and services tax (GST). However, after the recent rally, we believed its valuation fully reflected its moderate growth opportunities. In addition, we exited our holding in Tata Motors, which had disappointed investors with its sales performance and investment plans.

Outlook:

The reasons for caution in allocating capital have been increasing and are fairly plentiful at this late stage of the global equity market cycle. The reduction in U.S. dollar liquidity alongside rising autocracy, protectionism, trade wars, reasonably high valuations, significant leverage and the dangers of market dislocations perpetuated by the rise of passive investing are all concerning. Although these may not spark major market declines, particularly against a backdrop of seemingly solid economic growth, these are likely to contribute to a sustained rise in volatility.

For the Matthews Asia Focus Fund, this is an appealing backdrop. Not only is there still solid economic and corporate profit growth in Asia over both the short and long term, but this volatility may provide long-term investors with the ability to purchase shares of high-quality companies at attractive price points. We will look to take advantage of any dislocations to add to our stable of emerging and established leading companies, while the Fund was already trading by June 30 at an appealing 15.0x forward P/E after recent declines.



COUNTRY ALLOCATION (%)⁷^,⁸
China/Hong Kong			41.0
Singapore			12.1
South Korea			7.8
India			6.0
Indonesia			5.3
Taiwan			5.2
United States			3.5
Australia			3.5
Switzerland			3.1
Japan			3.0
Thailand			2.6
Malaysia			2.5
Philippines			2.5
Cash and Other Assets, Less Liabilities			2.0


SECTOR ALLOCATION (%)⁸
Financials			29.4
Consumer Discretionary			20.9
Information Technology			19.6
Industrials			11.2
Telecommunication Services			8.2
Consumer Staples			6.2
Real Estate			2.3
Cash and Other Assets, Less Liabilities			2.0


MARKET CAP EXPOSURE (%)⁸
Mega Cap (over $25B)			55.1
Large Cap ($10B–$25B)			9.6
Mid Cap ($3B–10B)			17.4
Small Cap (under $3B)			15.8
Cash and Other Assets, Less Liabilities			2.0

7	Not all countries where the Fund may invest are included in the benchmark index.

8	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.


matthewsasia.com \| 800.789.ASIA			37

Matthews Asia Focus Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 98.0%


	Shares		Value
CHINA/HONG KONG: 41.0%
AIA Group, Ltd.		69,200		$602,830
Tencent Holdings, Ltd.		9,500		477,046
Jardine Matheson Holdings, Ltd.		4,500		283,559
Xiabuxiabu Catering Management China Holdings Co., Ltd.^b,c		118,500		258,765
CK Hutchison Holdings, Ltd.		23,228		245,892
HSBC Holdings PLC		24,800		232,029
NetEase, Inc. ADR		900		227,403
China Mobile, Ltd.		25,000		221,824
Hang Lung Group, Ltd.		70,000		195,999
JNBY Design, Ltd.^c		84,000		191,911
Johnson Electric Holdings, Ltd.		63,000		183,467
Zhejiang Supor Cookware Co., Ltd. A Shares		21,700		167,962
Techtronic Industries Co., Ltd.		28,500		158,286

Total China/Hong Kong				3,446,973


SINGAPORE: 12.1%
United Overseas Bank, Ltd.		14,500		284,182
Sheng Siong Group, Ltd.		354,100		275,126
Singapore Technologies Engineering, Ltd.		96,000		231,401
Singapore Telecommunications, Ltd.		99,000		223,522

Total Singapore				1,014,231


SOUTH KOREA: 7.8%
Coway Co., Ltd.		3,428		266,366
Samsung Electronics Co., Ltd.		5,200		217,826
ING Life Insurance Korea, Ltd.^b,c		4,472		167,889

Total South Korea				652,081


INDIA: 6.0%
Housing Development Finance Corp., Ltd.		9,446		263,209
Bharti Infratel, Ltd.		55,488		243,845

Total India				507,054


INDONESIA: 5.3%
PT Matahari Department Store		401,000		245,594
PT Bank Rakyat Indonesia Persero		1,004,100		198,602

Total Indonesia				444,196


TAIWAN: 5.2%
Taiwan Semiconductor Manufacturing Co., Ltd.		37,000		262,740
Ennoconn Corp.		12,000		173,837

Total Taiwan				436,577


UNITED STATES: 3.5%
Broadcom, Inc.		1,200		291,168

Total United States				291,168


AUSTRALIA: 3.5%
Macquarie Group, Ltd.		3,189		290,633

Total Australia				290,633


SWITZERLAND: 3.1%
Cie Financiere Richemont SA		3,076		260,028

Total Switzerland				260,028


	Shares		Value
JAPAN: 3.0%
Japan Tobacco, Inc.		8,900		$248,723

Total Japan				248,723


THAILAND: 2.6%
Kasikornbank Public Co., Ltd.		37,700		220,557

Total Thailand				220,557


PHILIPPINES: 2.5%
Bank of the Philippine Islands		128,995		214,011

Total Philippines				214,011


MALAYSIA: 2.4%
Genting Malaysia BHD		171,000		206,491

Total Malaysia				206,491


TOTAL INVESTMENTS: 98.0%				8,232,723
(Cost $7,889,322)

CASH AND OTHER ASSETS, LESS LIABILITIES: 2.0%				170,355


NET ASSETS: 100.0%				$8,403,078

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

c	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

ADR	American Depositary Receipt

BHD

Berhad

See accompanying notes to financial statements.


38		MATTHEWS ASIA FUNDS

LOGO


PORTFOLIO MANAGERS
Taizo Ishida
Lead Manager
Sharat Shroff, CFA
Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MPACX	MIAPX
CUSIP	577130867	577130776
Inception	10/31/03	10/29/10
NAV	$28.06	$28.29
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	1.12%	0.93%
Portfolio Statistics
Total # of Positions		56
Net Assets		$1.2 billion
Weighted Average Market Cap		$28.5 billion
Portfolio Turnover²		23.19%
Benchmark
MSCI AC Asia Pacific Index

OBJECTIVE

Long-term capital appreciation.

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 the common and preferred stocks of companies located in Asia. Asia consists of all countries and markets in Asia, and includes developed, emerging and frontier countries and markets in the Asian region. The Fund may also invest in the convertible securities, of any duration or quality, of Asian companies.

Matthews Asia Growth Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Asia Growth Fund returned 2.97% (Investor Class) and 3.06% (Institutional Class), while its benchmark, the MSCI All Country Asia Pacific Index, fell –3.22% over the same period. For the quarter ending June 30, the Fund returned –2.47% (Investor Class) and –2.45% (Institutional Class), while its benchmark returned –3.25%.

Market Environment:

Asian and global emerging markets suffered during the first half of 2018. Negative investor sentiment arose from the confluence of escalating trade tensions between China and the United States; seemingly tighter monetary conditions in China and other emerging markets; and the oscillation of North Korean denuclearization talks. In addition, the flight to quality, a stronger U.S. dollar and higher energy prices exposed the vulnerabilities of some emerging market economies.

Chinese shares generated negative returns for the six months ending June 30. Trade disputes with the U.S. proved to be too large a risk for investors during the second quarter. However, resilient corporate earnings, a surprisingly stable renminbi and robust exports were positive contributors to China’s economic growth. Elsewhere, India’s equity market posted negative returns for the first half of the year. India faced macro headwinds during the second quarter as its reliance on energy imports and a deteriorating current account pressured the Indian rupee and raised inflation concerns. On a positive note, economic growth remained robust and corporate earnings momentum improved.

Japanese shares experienced a volatile quarter and generated negative returns during the first half of the year. Stock prices increased in April as overseas risks seemed to stabilize temporarily as tensions between the U.S. and North Korea faded and trade tensions with China appeared calmer. However, geopolitical tension picked up in May, causing volatility in global stocks, especially within sectors exposed to global trade. This pattern of volatility continued through June despite notably high return on equity (ROE) figures from Japanese companies.

Performance Contributors and Detractors:

During the first half of the year, the Fund outperformed its benchmark on both an absolute and relative basis. The top contributor to performance for the six-month period was Baozun, a Chinese e-commerce solutions firm that is becoming an essential partner to global brands conducting business online in China. The rising purchasing power of the Chinese consumer has contributed to the demand for Baozun’s services. Shenzhou International Group Holdings, a Chinese apparel manufacturer, was another top performer. In addition to making apparel for several leading global apparel brands, the firm has shrewdly expanded its focus to include the Chinese consumer. We expect the firm’s focus on China’s sizeable domestic apparel market to drive attractive growth rates.

Detractors from performance included Bank Rakyat Indonesia, a large bank in Indonesia specializing in small-scale lending. Its stock price fell on negative investor sentiment driven in part by rising interest rates in Indonesia as well as a broader decline among Indonesian equities. We believe, however, that the bank’s fundamentals remain solid and that its business may offer attractive long-term growth prospects. Another detractor from performance was PC Jeweller, an Indian jewelry manufacturer. Its shares lost close to three quarters of their value over the same period on unsubstantiated rumors that the company manipulated its financial data. We are closely monitoring both positions.

(continued)

1	Prospectus expense ratios.

2	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


matthewsasia.com \| 800.789.ASIA			39



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		10 Years		Since Inception			Inception Date
Investor Class (MPACX)		-2.47%		2.97%		20.61%		11.48%		9.55%		9.34%		10.05%			10/31/03
Institutional Class (MIAPX)		-2.45%		3.06%		20.82%		11.69%		9.77%		n.a.		8.53%			10/29/10
MSCI AC Asia Pacific Index³		-3.25%		-3.22%		10.25%		7.12%		7.76%		4.76%		7.47%	⁴
Lipper Pacific Region Funds Category Average⁵		-3.78%		-3.74%		9.59%		7.07%		7.37%		4.62%		7.87%	⁴

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. For the Fund’s most recent month-end performance, visit matthewsasia.com.

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

LOGO

Calculated from 10/31/03.

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
	Sector	Country	% of Net Assets
Shenzhou International Group Holdings, Ltd.	Consumer Discretionary	China/Hong Kong		4.8%
Wuxi Biologics Cayman, Inc.	Health Care	China/Hong Kong		4.0%
Baozun, Inc.	Information Technology	China/Hong Kong		3.8%
M3, Inc.	Health Care	Japan		3.8%
Start Today Co., Ltd.	Consumer Discretionary	Japan		3.4%
HDFC Bank, Ltd.	Financials	India		3.0%
CSL, Ltd.	Health Care	Australia		2.9%
Sampath Bank PLC	Financials	Sri Lanka		2.7%
PT Bank Rakyat Indonesia Persero	Financials	Indonesia		2.6%
Nidec Corp.	Industrials	Japan		2.6%
% OF ASSETS IN TOP TEN				33.6%

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


40		MATTHEWS ASIA FUNDS

Matthews Asia Growth Fund

Portfolio Manager Commentary (unaudited) (continued)

Notable Portfolio Changes:

During the second quarter, we initiated a position in Terumo, a Japanese medical device company. Valuations looked reasonable and we expect the company to have strong growth prospects over the next five years. In particular, we believe the company’s neurovascular business has a sharp focus and clear drivers of growth. As part of our fundamental research process, we met with the company’s management team during the quarter and were impressed with the quality of the leadership. We exited our position in Habib Bank, a multinational bank in Pakistan. We initiated the position more than three years ago with the aim of diversification and growth. The bank has faced macroeconomic headwinds specific to Pakistan, however, and made a few management missteps. We decided to sell the stock in order to deploy cash from the sale elsewhere.

Outlook:

Going into the third quarter, trade friction could dampen sentiment but there may be positive drivers. In Japan, Prime Minister Shinzo Abe is up for re-election in September and a competitive Japanese yen could support upward earnings revisions. Most importantly, the November midterm elections in the U.S. could incentivize the Trump administration to back off aggressive rhetoric regarding global trade and investment restrictions such that markets can take a breather from volatility.

U.S. and Chinese GDP growth remains robust and supportive of the global economy. Commodity prices are high enough to fund the budgets of cyclical exporters and regional currency valuations support foreign investment. In addition, local interest rates are high enough to compensate investors for risks and corporate earnings remain relatively strong, making current equity valuations attractive in our view. The strongest headwind seems to be uncertainty stemming from escalating trade tensions between the U.S. and China. While investor sentiment is weak, we believe the fundamental reasons for owning Asian equities are still intact. With share prices seeming to diverge from the positive fundamental trends we are seeing at the company level, current volatility may create buying opportunities for long-term investors.



COUNTRY ALLOCATION (%)^7,8
Japan			36.5
China/Hong Kong			27.3
Indonesia			7.8
India			4.7
Australia			4.3
Bangladesh			3.3
Sri Lanka			3.3
Vietnam			1.6
Philippines			1.3
Thailand			1.2
Taiwan			0.8
Cash and Other Assets, Less Liabilities			7.9



SECTOR ALLOCATION (%)⁸
Health Care			28.6
Consumer Discretionary			19.6
Financials			12.9
Consumer Staples			10.0
Information Technology			8.6
Industrials			8.0
Telecommunication Services			1.9
Energy			1.4
Materials			1.2
Cash and Other Assets, Less Liabilities			7.9



MARKET CAP EXPOSURE (%)⁸
Mega Cap (over $25B)			18.7
Large Cap ($10B–$25B)			35.9
Mid Cap ($3B–10B)			16.5
Small Cap (under $3B)			21.1
Cash and Other Assets, Less Liabilities			7.9

7	Not all countries where the Fund may invest are included in the benchmark index.

8	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.


matthewsasia.com \| 800.789.ASIA			41

Matthews Asia Growth Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 92.1%


	Shares		Value
JAPAN: 36.5%
M3, Inc.		1,125,000		$44,739,281
Start Today Co., Ltd.		1,109,000		40,124,264
Nidec Corp.		200,900		30,052,567
ORIX Corp.		1,817,500		28,647,624
Terumo Corp.		496,600		28,429,309
Pigeon Corp.		544,900		26,480,583
Seria Co., Ltd.		482,600		23,128,350
TechnoPro Holdings, Inc.		359,200		22,056,660
SoftBank Group Corp.		306,900		21,915,162
Nitori Holdings Co., Ltd.		133,400		20,754,134
Sysmex Corp.		195,700		18,234,284
PeptiDream, Inc.^b		411,000		17,075,801
Ariake Japan Co., Ltd.		194,800		16,767,763
Harmonic Drive Systems, Inc.		355,400		15,000,282
Nitto Denko Corp.		184,700		13,944,372
FANUC Corp.		63,400		12,566,629
Sosei Group Corp.^b		682,400		10,963,709
CYBERDYNE, Inc.^b		768,500		8,984,812
Komatsu, Ltd.		288,200		8,204,646
Gunosy, Inc.^b		543,400		6,988,790
HEALIOS KK^b		380,100		5,529,566
Mercari, Inc.^b		99,200		4,063,334

Total Japan				424,651,922


CHINA/HONG KONG: 27.3%
Shenzhou International Group Holdings, Ltd.		4,532,000		55,768,000
Wuxi Biologics Cayman, Inc.^b,c,d		4,160,500		46,153,030
Baozun, Inc. ADR^b		818,500		44,771,950
Jiangsu Hengrui Medicine Co., Ltd. A Shares		2,603,187		29,672,764
Alibaba Group Holding, Ltd. ADR^b		123,200		22,857,296
Huazhu Group, Ltd. ADR		534,800		22,456,252
BeiGene, Ltd. ADR^b		117,600		18,078,648
Yunnan Hongxiang Yixintang Pharmaceutical Co., Ltd. A Shares		3,201,296		15,644,214
Shanghai Haohai Biological Technology Co., Ltd. H Shares^c,d		1,947,000		12,150,997
Yunnan Baiyao Group Co., Ltd. A Shares		743,762		11,971,586
Genscript Biotech Corp.		4,302,000		11,763,691
Tongda Group Holdings, Ltd.		54,370,000		10,988,276
Baidu, Inc. ADR^b		44,600		10,837,800
Qudian, Inc. ADR^b		470,300		4,166,858

Total China/Hong Kong				317,281,362


INDONESIA: 7.8%
PT Bank Rakyat Indonesia Persero		155,115,800		30,680,499
PT Astra International		44,275,300		20,384,110
PT Ace Hardware Indonesia		154,466,000		13,689,590
PT Indofood CBP Sukses Makmur		18,774,200		11,599,714
PT Mayora Indah		47,580,700		9,861,016
PT Arwana Citramulia		214,668,400		5,063,358

Total Indonesia				91,278,287


INDIA: 4.7%
HDFC Bank, Ltd.		1,148,086		35,366,405
ITC, Ltd.		2,925,894		11,370,137
PC Jeweller, Ltd.		3,698,554		7,404,113

Total India				54,140,655


	Shares		Value
AUSTRALIA: 4.3%
CSL, Ltd.		240,892		$34,289,326
Oil Search, Ltd.		2,481,915		16,306,062

Total Australia				50,595,388


BANGLADESH: 3.3%
Square Pharmaceuticals, Ltd.		7,198,924		25,210,641
BRAC Bank, Ltd.^b		15,589,353		13,261,986

Total Bangladesh				38,472,627


SRI LANKA: 3.3%
Sampath Bank PLC^†,b		16,126,387		30,877,498
Lanka Orix Leasing Co. PLC^b		12,121,473		7,542,420

Total Sri Lanka				38,419,918


VIETNAM: 1.6%
Vietnam Dairy Products JSC		2,597,160		19,156,200

Total Vietnam				19,156,200


PHILIPPINES: 1.3%
Jollibee Foods Corp.		2,007,890		9,899,806
Emperador, Inc.		37,942,500		5,254,042

Total Philippines				15,153,848


THAILAND: 1.2%
Major Cineplex Group Public Co., Ltd.		18,967,100		14,076,208

Total Thailand				14,076,208


TAIWAN: 0.8%
St. Shine Optical Co., Ltd.		402,000		9,178,238

Total Taiwan				9,178,238


TOTAL INVESTMENTS: 92.1%				1,072,404,653
(Cost $769,283,675)

CASH AND OTHER ASSETS, LESS LIABILITIES: 7.9%				91,422,156


NET ASSETS: 100.0%				$1,163,826,809

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

b	Non-income producing security.

d	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

†	Affiliated Issuer, as defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of this issuer)

ADR	American Depositary Receipt

JSC	Joint Stock Co.

See accompanying notes to financial statements.


42		MATTHEWS ASIA FUNDS

LOGO


PORTFOLIO MANAGERS
Sharat Shroff, CFA
Lead Manager
Rahul Gupta
Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MAPTX	MIPTX
CUSIP	577130107	577130834
Inception	9/12/94	10/29/10
NAV	$29.95	$29.95
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	1.08%	0.91%
After Fee Waiver and Reimbursement²	1.06%	0.89%
Portfolio Statistics
Total # of Positions		66
Net Assets		$9.1 billion
Weighted Average Market Cap		$59.5 billion
Portfolio Turnover³		9.18%
Benchmark
MSCI AC Asia ex Japan Index

OBJECTIVE

Long-term capital appreciation.

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 the common and preferred stocks of companies located in Asia ex Japan, which consists of all countries and markets in Asia excluding Japan, but including all other developed, emerging and frontier countries and markets in the Asian region.

Matthews Pacific Tiger Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Pacific Tiger Fund returned –5.40% (Investor Class) and –5.31% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned –4.65%. For the quarter ending June 30, the Fund returned –4.62% (Investor Class) and –4.56% (Institutional Class), while its benchmark returned –5.31%.

Market Environment:

Asian equities ended the first half of the year on a weak note. Market volatility continued during the second quarter as investors worried about global trade issues. Some markets were also affected by domestic concerns, including local politics and elections. Nonetheless, many Asian currencies proved resilient, especially when compared to other emerging market currencies. Exceptions to this trend included the Indonesian rupiah, Indian rupee and Philippine peso, which depreciated relative to the dollar.

Semiconductors were among the worst-performing sectors during the second quarter, despite being a top performer in the first quarter. Share prices among semiconductor manufacturers dropped amid concerns over decreasing demand for crypto currency and smartphones. This weakness chipped away at the luster that semiconductor stocks enjoyed during the first quarter.

India was one of the region’s better-performing equity markets during the first half of the year, though its currency depreciated. This dichotomy highlights a tussle between macro and micro viewpoints over India’s direction. Some macro factors are turning unfavorable for the Indian economy, while many individual companies remain optimistic about their prospects. Meanwhile, domestic Chinese markets experienced the sharpest drop in equity prices in the region during the first half of the year. The drop stemmed from trade concerns, as well as potential fallout from a government financial de-risking exercise that is being misconstrued as deleveraging. China, however, is no longer an export-oriented economy. Net exports accounted for only 3.4% of China’s GDP in 2017. Domestic consumption and a growing middle class continue to be the key drivers of China’s growth.

Performance Contributors and Detractors:

The Fund outperformed its benchmark on a relative basis during the second quarter, providing a bit of shelter against broader market declines. Stock selection contributed to the Fund’s favorable relative performance during the quarter, offsetting the negative allocation effect that was partly driven by large swings in currency for some south Asian economies. From a sectoral perspective, the strength within a few of the consumer-related holdings across the region was a key driver of returns during the quarter.

Turning to performance detractors, the Fund’s health care holdings faced headwinds during the quarter. Drug distributors in China struggled against a stricter regulatory environment and increasing financial costs as hospitals are extending payment terms to deal with their own inability to charge a markup on drug sales. In spite of some setbacks, we continue to believe in the long-term growth prospects for health care-related spending in China and across the region, but are also mindful of the expectations that are starting to be reflected in certain health care subsectors.

(continued)

1	Prospectus expense ratios.

3	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


matthewsasia.com \| 800.789.ASIA			43



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		10 Years		Since Inception			Inception Date
Investor Class (MAPTX)		-4.62%		-5.40%		10.15%		6.46%		8.99%		8.77%		8.86%			9/12/94
Institutional Class (MIPTX)		-4.56%		-5.31%		10.32%		6.65%		9.19%		n.a.		6.77%			10/29/10
MSCI AC Asia ex Japan Index⁴		-5.31%		-4.65%		10.21%		7.32%		8.48%		6.10%		4.70%	⁵
Lipper Pacific ex Japan Funds Category Average⁶		-5.15%		-4.63%		9.66%		6.37%		7.52%		5.52%		5.48%	⁵

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

LOGO

Calculated from 8/31/94.

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 HOLDINGS⁷
	Sector	Country	% of Net Assets
China Resources Beer Holdings Co., Ltd.	Consumer Staples	China/Hong Kong		3.7%
Kotak Mahindra Bank, Ltd.	Financials	India		3.5%
Ping An Insurance Group Co. of China, Ltd.	Financials	China/Hong Kong		3.2%
Baidu, Inc.	Information Technology	China/Hong Kong		3.1%
Tencent Holdings, Ltd.	Information Technology	China/Hong Kong		2.9%
Sinopharm Group Co., Ltd.	Health Care	China/Hong Kong		2.9%
President Chain Store Corp.	Consumer Staples	Taiwan		2.7%
Central Pattana Public Co., Ltd.	Real Estate	Thailand		2.5%
NAVER Corp.	Information Technology	South Korea		2.5%
Titan Co., Ltd.	Consumer Discretionary	India		2.4%
% OF ASSETS IN TOP TEN				29.4%

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


44		MATTHEWS ASIA FUNDS

Matthews Pacific Tiger Fund

Portfolio Manager Commentary (unaudited) (continued)

Notable Portfolio Changes:

Market volatility created opportunities for rotating capital within the portfolio. We added to our position in Naver, an IT firm operating South Korea’s top search engine. A blip in sentiment around the stock during the second quarter caused a temporary price decline, and created a buying opportunity. Likewise, Inner Mongolia Yili Industrial Group, a producer of dairy products in China, suffered a pullback in its stock price with no real change to its long-term prospects, in our view, providing another attractive buying opportunity. We also exited our position in Astra International, an Indonesian conglomerate with a range of manufacturing operations, to fund the inclusion of two new small-cap holdings during the course of the first half.

Outlook:

In contrast to the robust confidence among consumers and corporations in parts of Asia, the region’s equities finished the first half on a soft note. We believe the health of many Asian economies remains sound. The continued expansion in wages and increasing household wealth is leading to rising aspirations for consumers, most notably in China. Elsewhere in the region, policymakers in India and Indonesia have sacrificed growth over the past few years to deal with longer-term structural issues, including current account deficits, fiscal deficits and persistent inflationary pressures. The more recent attempts at boosting growth are yielding mixed results, although there are some encouraging signs—particularly in India where businesses are finally seeing a more normalized economic environment following policy- and taxation-related changes over the past two years.

An oft-repeated concern within some parts of the investment community is the vulnerability of Asian businesses and economies to rising interest rates in the U.S. We believe Asian businesses, however, may be less affected by rising U.S. rates as sources of capital and liquidity for Asia’s businesses continue to expand and diversify. U.S. and European institutions traditionally may have played a larger role in providing capital and liquidity, but local institutions across Asia are starting to exert their presence more visibly, and policymakers are more amenable to releasing some of the built-up pressures through the exchange rate. The odds of a sharp and sudden shock in the face of rising rates have diminished, although the squeeze in availability of capital may weaken the ensuing recovery in growth.

Furthermore, the potential disruption from trade squabbles may lead to greater uncertainty about the investment outlook, thereby deferring private capital expenditure. Given our emphasis on service-oriented businesses catering to domestic demand, we expect the impact of global factors on our portfolio holdings to be somewhat muted. Worries about the global macro-economy and political developments have led to attractive valuations across many parts of Asia, in our view creating an opportunity to invest in the long-term growth of the region without undue risk.



COUNTRY ALLOCATION (%)^8,9
China/Hong Kong			37.2
India			21.4
South Korea			12.4
Taiwan			5.5
Indonesia			5.5
Thailand			4.7
Malaysia			4.5
Vietnam			2.3
Philippines			2.0
Switzerland			2.0
United States			1.9
Japan			0.1
Cash and Other Assets, Less Liabilities			0.5



SECTOR ALLOCATION (%)⁹
Financials			23.0
Consumer Staples			21.9
Information Technology			18.4
Consumer Discretionary			8.9
Health Care			8.1
Real Estate			5.9
Industrials			4.7
Utilities			4.2
Telecommunication Services			3.3
Materials			1.0
Cash and Other Assets, Less Liabilities			0.5



MARKET CAP EXPOSURE (%)⁹
Mega Cap (over $25B)			36.2
Large Cap ($10B–$25B)			35.5
Mid Cap ($3B–10B)			17.2
Small Cap (under $3B)			10.6
Cash and Other Assets, Less Liabilities			0.5

8	Not all countries where the Fund may invest are included in the benchmark index.

9	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.


matthewsasia.com \| 800.789.ASIA			45

Matthews Pacific Tiger Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 99.5%


	Shares		Value
CHINA/HONG KONG: 37.2%
China Resources Beer Holdings Co., Ltd.		70,257,775		$340,220,240
Ping An Insurance Group Co. of China, Ltd. H Shares		31,734,000		290,609,626
Baidu, Inc. ADR^b		1,174,300		285,354,900
Tencent Holdings, Ltd.		5,336,500		267,974,497
Sinopharm Group Co., Ltd. H Shares^†		66,146,400		265,998,639
AIA Group, Ltd.		24,540,800		213,785,004
Alibaba Group Holding, Ltd. ADR^b		1,088,500		201,949,405
China Resources Land, Ltd.		59,880,000		201,140,268
Dairy Farm International Holdings, Ltd.		22,254,946		195,391,482
Inner Mongolia Yili Industrial Group Co., Ltd. A Shares		43,795,646		183,572,826
China Mobile, Ltd. ADR		3,853,926		171,075,775
Hong Kong Exchanges & Clearing, Ltd.		5,403,000		161,698,536
Hengan International Group Co., Ltd.		13,874,500		133,082,200
Yum China Holdings, Inc.		3,084,410		118,626,409
Fuyao Glass Industry Group Co., Ltd. H Shares^†,c,d		33,726,400		113,963,851
Guotai Junan Securities Co., Ltd. H Shares^c,d		39,600,000		83,919,883
Tasly Pharmaceutical Group Co., Ltd. A Shares		21,587,691		83,879,368
Wise Talent Information Technology Co., Ltd.^b		8,838,800		36,614,281
Guangdong Advertising Group Co., Ltd. A Shares		66,324,441		32,264,433
Fuyao Glass Industry Group Co., Ltd. A Shares		3,589,387		13,890,209
Shandong Weigao Group Medical Polymer Co., Ltd. H Shares		11,300,000		7,978,063

Total China/Hong Kong				3,402,989,895


INDIA: 21.4%
Kotak Mahindra Bank, Ltd.		16,123,409		316,430,985
Titan Co., Ltd.		16,905,877		216,873,450
Tata Power Co., Ltd.^†		180,316,487		192,888,779
HDFC Bank, Ltd.		6,223,409		191,710,031
Sun Pharmaceutical Industries, Ltd.		20,654,758		170,275,052
ITC, Ltd.		39,202,500		152,342,429
GAIL India, Ltd.		30,362,492		150,902,081
Housing Development Finance Corp., Ltd.		4,935,685		137,530,798
Container Corp. of India, Ltd.		13,679,990		130,279,148
Dabur India, Ltd.		21,117,482		120,688,648
Thermax, Ltd.		5,310,034		80,742,959
United Spirits, Ltd.^b		6,778,030		65,852,130
Just Dial, Ltd.^†,b		3,557,718		28,901,385

Total India				1,955,417,875


SOUTH KOREA: 12.4%
NAVER Corp.		332,714		227,677,770
Samsung Electronics Co., Ltd.		4,755,250		199,195,435
DB Insurance Co., Ltd.^†		3,570,463		189,085,119
Orion Holdings Corp.^†		5,666,538		139,866,826
Cheil Worldwide, Inc.^†		7,315,882		135,487,900
Green Cross Corp.^†		620,785		115,059,342
Amorepacific Corp.		175,449		50,787,970
E-MART, Inc.		190,749		43,529,518
S-1 Corp.		396,277		34,418,675

Total South Korea				1,135,108,555


	Shares		Value
TAIWAN: 5.5%
President Chain Store Corp.		21,902,608		$248,187,745
Synnex Technology International Corp.^†		95,449,921		143,929,183
Delta Electronics, Inc.		31,251,182		112,015,055

Total Taiwan				504,131,983


INDONESIA: 5.5%
PT Bank Central Asia		100,580,000		150,209,229
PT Indofood CBP Sukses Makmur		191,522,600		118,332,995
PT Telekomunikasi Indonesia Persero		421,304,300		110,337,413
PT Surya Citra Media		383,592,300		55,008,831
PT Perusahaan Gas Negara Persero		298,485,100		41,427,102
PT Telekomunikasi Indonesia Persero ADR		728,140		18,938,922
PT Mitra Keluarga Karyasehat^d		70,000,000		9,183,531

Total Indonesia				503,438,023


THAILAND: 4.7%
Central Pattana Public Co., Ltd.		108,969,000		229,376,745
Kasikornbank Public Co., Ltd.		18,431,800		107,831,881
The Siam Cement Public Co., Ltd.		7,522,950		93,933,914

Total Thailand				431,142,540


MALAYSIA: 4.5%
Public Bank BHD		32,488,394		187,942,565
Genting BHD		62,634,875		130,303,736
IHH Healthcare BHD		47,676,300		72,062,064
IHH Healthcare BHD		11,543,000		17,439,825

Total Malaysia				407,748,190


VIETNAM: 2.3%
Vietnam Dairy Products JSC		28,634,534		211,203,340

Total Vietnam				211,203,340


SWITZERLAND: 2.0%
DKSH Holding AG		2,638,062		185,465,381

Total Switzerland				185,465,381


PHILIPPINES: 2.0%
SM Prime Holdings, Inc.		164,670,771		110,926,221
GT Capital Holdings, Inc.		4,347,540		74,132,410

Total Philippines				185,058,631


UNITED STATES: 1.9%
Cognizant Technology Solutions Corp. Class A		2,186,600		172,719,534

Total United States				172,719,534


46		MATTHEWS ASIA FUNDS

Matthews Pacific Tiger Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)

COMMON EQUITIES (continued)


	Shares		Value
JAPAN: 0.1%
LINE Corp. ADR^b		195,200		$8,016,864

Total Japan				8,016,864


TOTAL INVESTMENTS: 99.5%				9,102,440,811
(Cost $6,199,508,260)

CASH AND OTHER ASSETS, LESS LIABILITIES: 0.5%				45,552,770


NET ASSETS: 100.0%				$9,147,993,581

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

b	Non-income producing security.

d	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

†	Affiliated Issuer, as defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of this issuer)

ADR	American Depositary Receipt

BHD

Berhad

JSC	Joint Stock Co.

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			47

LOGO


PORTFOLIO MANAGERS
Vivek Tanneeru
Lead Manager
Winnie Chwang
Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MASGX	MISFX
CUSIP	577130727	577130719
Inception	4/30/15	4/30/15
NAV	$11.32	$11.28
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	2.65%	2.46%
After Fee Waiver and Reimbursement²	1.50%	1.25%
Portfolio Statistics
Total # of Positions		62
Net Assets		$21.0 million
Weighted Average Market Cap		$14.4 billion
Portfolio Turnover³		28.82%
Benchmark
MSCI AC Asia ex Japan Index

OBJECTIVE

Long-term capital appreciation.

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 the common and preferred stocks of companies of any market capitalization located in Asia that Matthews believes satisfy one or more of its environmental, social and governance (“ESG”) standards. Asia consists of all countries and markets in Asia and includes developed, emerging, and frontier countries and markets in the Asia region. The Fund may also invest in convertible securities and fixed-income securities, of any duration or quality, including high yield securities of Asian companies.

Matthews Asia ESG Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Asia ESG Fund returned –2.08% (Investor Class) and –1.91% (Institutional Class) while its benchmark, the MSCI All Country Asia ex Japan Index, returned –4.65%. For the quarter ending June 30, the Fund returned –3.82% (Investor Class) and –3.76% (Institutional Class) while its benchmark returned –5.31%.

Market Environment:

Asia’s markets got off to a strong start in 2018, following a very strong 2017, but could not hold onto their gains as investors worried about a faster-than-expected rate-increase cycle by the U.S. Federal Reserve and a potential escalation of the U.S.–China trade war. India was a relative outperformer in the second quarter (down –0.6%) after an adverse first quarter (down about –7%), while Pakistan gave up all its strong gains (up 11%) during the first quarter and was down –20.5% during the second quarter. For the first half of 2018, Taiwan was the best performer (despite being down –0.6%), while the Philippines (down –21.2%) and Indonesia (down –18.4%) were the worst performers.

From a sector standpoint, health care, after two years of underperformance, did well during the first half of the year and was the best-performing sector (up 6.4%), while telecommunication services (down –12.2%) was the worst performer. From a currency perspective, the Japanese yen, a perceived safe haven currency, was the best-performing Asian currency (up 1.7%) for the first half of 2018, while the Indian rupee (down –6.7%) was the worst-performing currency alongside the Philippine peso (down –6.4%).

Performance Contributors and Detractors:

Stock selection in China/Hong Kong and India contributed positively and an overweight allocation to Bangladesh contributed negatively to the Fund’s relative performance during the first half of 2018. From a sector standpoint, the portfolio’s health care allocation and selection contributed positively as did consumer discretionary selection, while financials selection effects contributed negatively to relative performance.

At the stock level, Wuxi Biologics was the biggest contributor to Fund performance during the first half. The company is a vertically integrated Chinese contract development and manufacturing organization (CDMO) that enables cost- and time-efficient drug discovery, development and manufacturing of biologics. Wuxi Biologics plays an important role in speeding up the innovation cycle in the global biotech industry in general and the Chinese biotech industry in particular by helping both global majors as well as Chinese biotech startups through its scaled-up CDMO model. The company announced strong 2017 results and better-than-expected new customer contract acquisition, as well as faster migration of contracts into the higher value clinical trial stage from the pre-clinical trial stage.

Bank Rakyat Indonesia detracted from performance during the first half of the year. The stock sold off alongside the Indonesian equity market, which was the second-worst performing market in the benchmark. The Indonesian central bank raised the benchmark rates by 100 basis points (1%) in 2018 to defend the Indonesian rupiah. The market worried that this would have an adverse impact on

(continued)

1	Prospectus expense ratios.

Matthews has contractually agreed (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class to 1.25% first by waiving class specific expenses (i.e., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving non-class specific expenses of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 1.25% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 1.25%. If the operating expenses fall below the expense limitation in a year within three years after Matthews has made a waiver or reimbursement, the Fund may reimburse Matthews up to an amount that does not cause the expenses for that year to exceed the lesser of (i) the expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will remain in place until April 30, 2019 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.

3	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


48		MATTHEWS ASIA FUNDS



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Year		Since Inception		Inception Date
Investor Class (MASGX)		-3.82%		-2.08%		9.93%		6.76%		5.85%		4/30/15
Institutional Class (MISFX)		-3.76%		-1.91%		10.28%		7.06%		6.13%		4/30/15
MSCI AC Asia ex Japan Index⁴		-5.31%		-4.65%		10.21%		7.32%		4.80%
Lipper Pacific Region Funds Category Average⁵		-3.78%		-3.74%		9.59%		7.07%		5.44%

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

LOGO

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

It is not possible to invest directly in an index. Source: Index data from Morgan Stanley Capital International; total return calculations performed by BNY Mellon Investment Servicing (US) Inc. Please see page 92 for index definition.

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
	Sector	Country	% of Net Assets
Samsung SDI Co., Ltd., Pfd.	Information Technology	South Korea		5.9%
Wuxi Biologics Cayman, Inc.	Health Care	China/Hong Kong		3.7%
Inner Mongolia Yili Industrial Group Co., Ltd.	Consumer Staples	China/Hong Kong		3.4%
PT Bank Rakyat Indonesia Persero	Financials	Indonesia		3.0%
BRAC Bank, Ltd.	Financials	Bangladesh		3.0%
Shriram City Union Finance, Ltd.	Financials	India		3.0%
Mahindra & Mahindra, Ltd.	Consumer Discretionary	India		2.9%
Taiwan Semiconductor Manufacturing Co., Ltd.	Information Technology	Taiwan		2.8%
Tsukui Corp.	Health Care	Japan		2.5%
Fuji Seal International, Inc.	Materials	Japan		2.5%
% OF ASSETS IN TOP TEN				32.7%

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


matthewsasia.com \| 800.789.ASIA			49



COUNTRY ALLOCATION (%)⁷^,8
China/Hong Kong			21.6
India			16.4
Japan			16.1
South Korea			13.1
Taiwan			9.6
Bangladesh			5.7
Indonesia			4.6
Singapore			3.7
Thailand			3.0
Philippines			1.8
Vietnam			1.8
Pakistan			1.7
Luxembourg			0.9
Cash and Other Assets, Less Liabilities			0.2



SECTOR ALLOCATION (%)⁸
Health Care			19.1
Financials			17.2
Industrials			16.8
Information Technology			14.0
Consumer Discretionary			12.0
Consumer Staples			8.7
Telecommunication Services			5.6
Materials			2.5
Utilities			2.1
Real Estate			1.8
Cash and Other Assets, Less Liabilities			0.2



MARKET CAP EXPOSURE (%)⁸
Mega Cap (over $25B)			12.2
Large Cap ($10B–$25B)			24.4
Mid Cap ($3B–10B)			13.0
Small Cap (under $3B)			50.3
Cash and Other Assets, Less Liabilities			0.2

7	Not all countries are included in the benchmark index.

8	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

Matthews Asia ESG Fund

Portfolio Manager Commentary (unaudited) (continued)

the bank’s net interest margins in a potentially slowing loan demand growth environment. During second quarter, the market also worried that Bank Rakyat was interested in acquiring a smaller and less profitable sharia bank, which the bank denied. We remain positive about the company’s ability to continue to maintain its leadership in the profitable micro enterprise lending space over the long term and have used the share price weakness to add to our position.

Notable Portfolio Changes:

During the second quarter the portfolio added a position in Litalico, a Japanese company that specializes in providing support services to people with disabilities. Litalico has two business lines, one that transitions mental health patients into the labor market and a second one that provides assistance and after-school/day services to children with developmental problems. The company is a market leader in its businesses and drives positive outcomes for its clients. The company provides job skills to disabled people in order to prepare them to start work and Litalico also works with employers so that people can fit better within an organization’s work environment and stay employed longer. It has one of the industry’s highest rates of transition to regular employment and also a higher-than-industry-average six-month job retention rate of clients in the job transition business.

We exited some positions during the quarter on account of both profit-taking and also due to changes in the interest rate environment in Asia.

Outlook:

After a strong year of earnings growth in 2017, the prospect for continued earnings growth in Asia remains and stock valuations also remain largely supportive. If the current trade friction between the U.S. and China escalates, however, it might adversely impact this favorable assessment. In addition, we continue to watch for signs of higher volatility, due to factors such as a strong pickup in inflation, which might cause central banks to raise interest rates or reduce liquidity much faster than expected.

We continue to be confident in Asia’s ability to effectively address global ESG challenges through its leadership position in areas including electric vehicles, access to affordable health care and financial inclusion, among others. This leadership provides an encouraging backdrop for pursuing ESG-focused investing in Asia. We also find that investing in companies that are improving quality of life in Asia is a way to address the aspirations of the newly emergent and increasingly sophisticated middle class.

We also continue to employ a fundamental, bottom-up investment process and use any market dislocation in Asia as an opportunity to buy shares of what we consider to be high-quality companies with best-in-class ESG attributes at reasonable prices.


50		MATTHEWS ASIA FUNDS

Matthews Asia ESG Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 93.9%


	Shares		Value
CHINA/HONG KONG: 21.6%
Wuxi Biologics Cayman, Inc.^b,c,d		70,000		$776,520
Inner Mongolia Yili Industrial Group Co., Ltd. A Shares		169,900		712,149
HKBN, Ltd.		301,000		463,015
CSPC Pharmaceutical Group, Ltd.		144,000		432,404
MTR Corp., Ltd.		73,500		405,988
China Conch Venture Holdings, Ltd.		86,500		315,702
Haier Electronics Group Co., Ltd.		74,000		252,467
AIA Group, Ltd.		26,400		229,981
Han’s Laser Technology Industry Group Co., Ltd. A Shares		27,700		221,370
Contemporary Amperex Technology Co., Ltd. A Shares^c		20,200		219,400
Hong Kong Exchanges & Clearing, Ltd.		6,800		203,507
Guangdong Investment, Ltd.		128,000		202,577
Beijing Urban Construction Design & Development Group Co., Ltd. H Shares^b,d		231,000		103,478

Total China/Hong Kong				4,538,558


INDIA: 16.4%
Shriram City Union Finance, Ltd.		21,203		626,563
Mahindra & Mahindra, Ltd.		46,002		602,869
Lupin, Ltd.		37,959		500,864
Bharat Financial Inclusion, Ltd.^c		21,869		369,791
IndusInd Bank, Ltd.		10,492		296,165
TeamLease Services, Ltd.^c		6,831		295,416
Ipca Laboratories, Ltd.		27,668		282,416
Power Grid Corp. of India, Ltd.		90,859		247,898
Syngene International, Ltd.^b,d		24,473		217,953

Total India				3,439,935


JAPAN: 16.1%
Tsukui Corp.		57,600		519,520
Fuji Seal International, Inc.		14,600		517,214
Daikin Industries, Ltd.		3,400		406,344
Sohgo Security Services Co., Ltd.		8,500		399,905
Ain Holdings, Inc.		3,700		272,704
Koa Corp.		10,800		270,427
Sosei Group Corp.^c		16,400		263,489
LITALICO, Inc.^c		13,900		252,537
Bunka Shutter Co., Ltd.		22,500		190,680
Koito Manufacturing Co., Ltd.		2,600		171,738
Hoya Corp.		2,300		130,477

Total Japan				3,395,035


TAIWAN: 9.6%
Taiwan Semiconductor Manufacturing Co., Ltd.		84,000		596,491
Sitronix Technology Corp.		85,000		327,099
Zhen Ding Technology Holding, Ltd.		138,000		304,652
Sporton International, Inc.		43,429		210,607
Tehmag Foods Corp.		29,100		199,316
Merry Electronics Co., Ltd.		45,000		195,444
Merida Industry Co., Ltd.		39,000		194,885

Total Taiwan				2,028,494


	Shares		Value
SOUTH KOREA: 7.2%
Hanon Systems		51,990		$494,543
KT Skylife Co., Ltd.		30,609		376,124
iMarketKorea, Inc.		42,295		262,041
DGB Financial Group, Inc.		22,915		210,751
Samjin Pharmaceutical Co., Ltd.		4,243		171,647

Total South Korea				1,515,106


BANGLADESH: 5.6%
BRAC Bank, Ltd.^c		744,177		633,077
Square Pharmaceuticals, Ltd.		86,843		304,124
GrameenPhone, Ltd.		53,986		251,348

Total Bangladesh				1,188,549


INDONESIA: 4.6%
PT Bank Rakyat Indonesia Persero		3,204,800		633,880
PT Arwana Citramulia		8,739,500		206,138
PT BFI Finance Indonesia		2,528,100		119,966

Total Indonesia				959,984


SINGAPORE: 3.6%
SATS, Ltd.		83,000		304,025
Delfi, Ltd.		299,500		275,582
Raffles Medical Group, Ltd.		255,800		189,341

Total Singapore				768,948


THAILAND: 3.0%
Total Access Communication Public Co., Ltd. NVDR		420,500		465,681
Kasikornbank Public Co., Ltd. NVDR		28,100		164,394

Total Thailand				630,075


VIETNAM: 1.8%
Nam Long Investment Corp.		307,424		372,799

Total Vietnam				372,799


PHILIPPINES: 1.8%
Puregold Price Club, Inc.		425,430		371,409

Total Philippines				371,409


PAKISTAN: 1.7%
Abbott Laboratories Pakistan, Ltd.		40,700		229,555
Bank Alfalah, Ltd.		276,500		119,047

Total Pakistan				348,602


LUXEMBOURG: 0.9%
L’Occitane International SA		110,250		181,839

Total Luxembourg				181,839


TOTAL COMMON EQUITIES				19,739,333

(Cost $17,583,922)


matthewsasia.com \| 800.789.ASIA			51

Matthews Asia ESG Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)

PREFERRED EQUITIES: 5.9%


	Shares		Value
SOUTH KOREA: 5.9%
Samsung SDI Co., Ltd., Pfd.		14,921		$1,242,786

Total South Korea				1,242,786


TOTAL PREFERRED EQUITIES				1,242,786

(Cost $938,210)

TOTAL INVESTMENTS: 99.8%				20,982,119
(Cost $18,522,132)

CASH AND OTHER ASSETS, LESS LIABILITIES: 0.2%				41,745


NET ASSETS: 100.0%				$21,023,864

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

c	Non-income producing security.

d	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

NVDR	Non-voting Depositary Receipt

Pfd.

Preferred

See accompanying notes to financial statements.


52		MATTHEWS ASIA FUNDS

LOGO


PORTFOLIO MANAGERS
Taizo Ishida	Robert Harvey, CFA
Lead Manager	Lead Manager

FUND FACTS
	Investor	Institutional
Ticker	MEASX	MIASX
CUSIP	577125883	577125875
Inception	4/30/13	4/30/13
NAV	$13.82	$13.88
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	1.70%	1.52%
After Fee Waiver and Reimbursement²	1.48%	1.25%
Portfolio Statistics
Total # of Positions		77
Net Assets		$491.5 million
Weighted Average Market Cap		$2.5 billion
Portfolio Turnover³		7.74%
Benchmark
MSCI Emerging Markets Asia Index
Redemption Fee
2% within first 90 calendar days of purchase

OBJECTIVE

Long-term capital appreciation.

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 the common and preferred stocks of companies located in Asia excluding Japan, South Korea, Hong Kong and Singapore. The Fund may also invest in the convertible securities, of any duration or quality of companies located in Asia excluding Japan, South Korea, Hong Kong and Singapore. Under normal market conditions, the Fund is expected to invest a substantial portion of its net assets in the emerging countries and markets in the Asian region, including, but not limited to, Bangladesh, Cambodia, China (including Taiwan, but excluding Hong Kong), India, Indonesia, Laos, Malaysia, Mongolia, Myanmar, Pakistan, Papua New Guinea, Philippines, Sri Lanka, Thailand, and Vietnam.

Matthews Emerging Asia Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Emerging Asia Fund returned –10.90% (Investor Class) and –10.85% (Institutional Class), while its benchmark, the MSCI Emerging Markets Asia Index, returned –4.93% over the same period. For the quarter ending June 30, the Fund returned –10.84% (Investor Class) and –10.80% (Institutional Class), while its benchmark returned –5.75%.

Market Environment:

Asian and global emerging markets (EM) suffered during the first half of 2018. Negative investor sentiment arose from the confluence of escalating U.S.–China trade tensions, seemingly tighter monetary conditions in China and other parts of EM and the oscillation of North Korean denuclearization talks. In addition, a stronger U.S. dollar and higher energy prices exposed the vulnerabilities of some emerging market economies.

Vietnam’s equity markets were down slightly during the first half of 2018, following a significant run-up in 2017. Vietnam’s economy remained stable in our view, however, with positive GDP growth and strong domestic consumption trends. Meanwhile, Pakistan’s equity markets were down sharply in the first half of the year. Worries about rising oil prices adding to Pakistan’s current account imbalance weighed on investor sentiment, as did upcoming election cycles. Indonesia’s equity markets also experienced significant declines during the first half. Indonesia faces both regional and presidential elections in the next 12 months, creating political uncertainty in the region, although we believe Indonesia’s economy remains well-positioned from an economic standpoint.

Elsewhere, India’s equity market was down in the first half of the year. Macro headwinds captured headlines in the second quarter as India’s reliance on energy imports and a deteriorating current account pressured the Indian rupee and brought inflation concerns to investors. On a positive note, economic growth remained robust in India and corporate earnings momentum showed improvement.

Performance Contributors and Detractors:

During the first half of the year, the Fund underperformed its benchmark. Part of the Fund’s underperformance was due to two stocks that experienced sharp sell-offs in the first and second quarters. Shares of Vakrangee, an Indian software company, lost nearly 69% of their value in the first six months of the year, driven down by unsubstantiated rumors of a stock price manipulation scheme. Meanwhile, shares of PC Jeweller, an Indian jewelry manufacturer, previously one of our better performers over the past few years, lost nearly 72% of their value over the same period on unsubstantiated rumors that it manipulated its financial data. We are monitoring both positions closely. Both securities now represent fairly low positions in the portfolio based on their lower share prices, so we will retain our shares until the rumors are clarified and/or we lose confidence in the firms. We believe both businesses offer value at this point and have interesting long-term prospects.

Despite a challenging first half for some of the Fund’s holdings, there were some notable bright spots in the portfolio. Berger Paints Bangladesh, a manufacturer of paints and varnishes, generated an over 31% return in the first six months, versus the broader Bangladesh equity market, which was down by more than –9% in the

(continued)

1	Prospectus expense ratios.

Matthews has contractually agreed (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class to 1.25% first by waiving class specific expenses (i.e., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving non-class specific expenses of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 1.25% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 1.25%. If the operating expenses fall below the expense limitation in a year within three years after Matthews has made a waiver or reimbursement, the Fund may reimburse Matthews up to an amount that does not cause the expenses for that year to exceed the lesser of (i) the expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will remain in place until April 30, 2019 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.

3	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


matthewsasia.com \| 800.789.ASIA			53



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		Since Inception		Inception Date
Investor Class (MEASX)		-10.84%		-10.90%		-5.13%		7.12%		8.67%		7.18%		4/30/13
Institutional Class (MIASX)		-10.80%		-10.85%		-4.91%		7.35%		8.91%		7.41%		4/30/13
MSCI Emerging Markets Asia Index⁴		-5.75%		-4.93%		10.45%		7.67%		8.62%		6.91%
Lipper Emerging Markets Funds Category Average⁵		-8.85%		-7.05%		6.10%		4.68%		4.12%		2.29%

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

LOGO

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
	Sector	Country	% of Net Assets
Sampath Bank PLC	Financials	Sri Lanka		3.4%
Tongda Group Holdings, Ltd.	Information Technology	China/Hong Kong		3.2%
Saigon Beer Alcohol Beverage Corp.	Consumer Staples	Vietnam		2.9%
British American Tobacco Bangladesh Co., Ltd.	Consumer Staples	Bangladesh		2.6%
Cosco Capital, Inc.	Consumer Staples	Philippines		2.6%
BRAC Bank, Ltd.	Financials	Bangladesh		2.5%
Phu Nhuan Jewelry JSC	Consumer Discretionary	Vietnam		2.4%
PT Bank Mandiri Persero	Financials	Indonesia		2.4%
Shenzhou International Group Holdings, Ltd.	Consumer Discretionary	China/Hong Kong		2.4%
PT Gudang Garam	Consumer Staples	Indonesia		2.3%
% OF ASSETS IN TOP TEN				26.7%

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


54		MATTHEWS ASIA FUNDS

Matthews Emerging Asia Fund

Portfolio Manager Commentary (unaudited) (continued)

same period. Berger Paints has a strong management team and solid market position, benefiting from the strength of the local consumer in a fast-growing economy. Shenzhou International Group Holdings, a Chinese-based apparel company with operations in Vietnam, generated more than 30% in returns during the first six months, versus the broader offshore Chinese equity market, which was down –1.69% in the same period. Shenzhou International Group manufactures apparel for leading global brands and has been a strong performer.

Notable Portfolio Changes:

We added to positions selectively in the second quarter as we saw quite large moves in various markets. In Indonesia, we added to Gudang Garam, a leading cigarette manufacturer, and Ramayana Lestari Sentosa after currency concerns pushed the market lower. We also added to our two motor company positions in Pakistan, Indus Motor and PAK Suzuki Motor, as valuations became extremely attractive. We also added to our position in Tongda Group Holdings, a Hong Kong-based manufacturer of electronic components, after a steep correction, retaining the view that the company’s growth prospects remain attractive. During the quarter we also reduced our exposure to select positions as valuations rose materially. These sales included Shenzhou International and Vietnamese conglomerate Masan Group.

Outlook:

Going into the third quarter, we may see trade friction dampen sentiment but other positive factors may remain. U.S. and Chinese GDP growth remains robust and supportive of the global economy. Commodity prices are high enough to fund the budgets of cyclical exporters and regional currency valuations support foreign investment. In addition, local interest rates are probably high enough to compensate investors for risks and corporate earnings remain relatively strong, making current equity valuations attractive. The strongest headwind seems to be uncertainty derived from escalating U.S.–China trade tensions.

While investor sentiment is weak, the fundamental reasons for owning emerging Asian equities are still very much intact. As sentiment and share prices seem to diverge from the positive fundamental trends we are seeing at the company level, we believe the current volatility may create buying opportunities for long-term investors. We expect less-developed markets to shine over the long term as rising domestic demand for consumer goods and services has the potential to drive solid revenue and strong earnings growth.



COUNTRY ALLOCATION (%)^7,8
Vietnam			19.1
Indonesia			15.5
Pakistan			14.3
Bangladesh			11.4
Sri Lanka			9.3
China/Hong Kong			8.4
India			8.3
Philippines			7.3
Australia			0.6
Singapore			0.6
Cash and Other Assets, Less Liabilities			5.2



SECTOR ALLOCATION (%)⁸
Consumer Staples			28.4
Consumer Discretionary			23.1
Financials			17.9
Industrials			6.0
Health Care			5.5
Materials			4.1
Information Technology			3.7
Real Estate			3.4
Energy			1.4
Utilities			1.2
Cash and Other Assets, Less Liabilities			5.2



MARKET CAP EXPOSURE (%)⁸
Mega Cap (over $25B)			0.0
Large Cap ($10B–$25B)			5.4
Mid Cap ($3B–10B)			9.9
Small Cap (under $3B)			79.5
Cash and Other Assets, Less Liabilities			5.2

7	Not all countries where the Fund may invest are included in the benchmark index.

8	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.


matthewsasia.com \| 800.789.ASIA			55

Matthews Emerging Asia Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 94.8%


	Shares		Value
VIETNAM: 19.1%
Saigon Beer Alcohol Beverage Corp.		1,462,000		$14,315,077
Phu Nhuan Jewelry JSC		3,095,524		11,708,553
Vinh Hoan Corp.		4,421,900		11,273,584
Nam Long Investment Corp.		8,711,871		10,564,479
Taisun International Holding Corp.^†		1,900,000		8,693,442
Masan Group Corp.^b		1,758,170		6,040,521
Thien Long Group Corp.		1,320,805		5,660,963
Military Commercial Joint Stock Bank		4,707,780		5,356,102
Mobile World Investment Corp.		1,020,454		5,059,339
National Seed JSC^†		979,585		4,731,841
Tien Phong Plastic JSC		1,861,224		3,729,177
Domesco Medical Import Export JSC		867,970		3,421,447
Lix Detergent JSC		1,254,405		2,278,402
Dinh Vu Port Investment & Development JSC		517,520		1,090,269

Total Vietnam				93,923,196


INDONESIA: 15.5%
PT Bank Mandiri Persero		24,454,000		11,699,483
PT Gudang Garam		2,425,300		11,363,946
PT Ramayana Lestari Sentosa		99,165,900		10,301,691
PT Kino Indonesia		62,128,100		7,624,079
PT Matahari Department Store		11,013,200		6,745,087
PT Adira Dinamika Multi Finance		11,372,900		6,349,142
PT Hexindo Adiperkasa		22,802,000		5,484,070
PT Bank Tabungan Pensiunan Nasional Syariah^b		47,530,100		5,257,167
PT Mayora Indah		24,273,200		5,030,578
PT BFI Finance Indonesia		73,579,500		3,491,560
PT Catur Sentosa Adiprana^b		70,131,000		2,838,519

Total Indonesia				76,185,322


PAKISTAN: 14.3%
Indus Motor Co., Ltd.		882,850		10,332,943
Hascol Petroleum, Ltd.		3,121,700		8,064,962
PAK Suzuki Motor Co., Ltd.		2,288,000		7,410,897
Shifa International Hospitals, Ltd.^†		2,783,351		6,187,771
K-Electric, Ltd.^b		122,221,500		5,716,082
ICI Pakistan, Ltd.		763,850		5,040,970
GlaxoSmithKline Consumer Healthcare Pakistan, Ltd.		1,258,357		4,196,768
The Searle Company, Ltd.		1,452,834		4,061,236
Pakistan Petroleum, Ltd.		2,127,300		3,762,803
United Bank, Ltd.		2,660,200		3,701,281
Akzo Nobel Pakistan, Ltd.		1,975,300		3,037,522
Habib Bank, Ltd.		1,885,000		2,583,280
National Foods, Ltd.		958,500		2,517,513
Meezan Bank, Ltd.		3,472,560		2,336,580
Hum Network, Ltd.		17,939,500		1,193,647

Total Pakistan				70,144,255


	Shares		Value
BANGLADESH: 11.4%
British American Tobacco Bangladesh Co., Ltd.		313,130		$12,932,630
BRAC Bank, Ltd.^b		14,451,350		12,293,878
Square Pharmaceuticals, Ltd.		2,796,774		9,794,306
Berger Paints Bangladesh, Ltd.		557,044		9,073,637
The City Bank, Ltd.		10,442,784		4,192,336
Marico Bangladesh, Ltd.		289,217		4,008,504
Olympic Industries, Ltd.		1,416,833		3,791,988

Total Bangladesh				56,087,279


SRI LANKA: 9.3%
Sampath Bank PLC^b		8,599,412		16,465,457
Ceylon Cold Stores PLC		1,387,119		8,731,316
John Keells Holdings PLC		7,687,955		7,163,445
Lanka Orix Leasing Co. PLC^b		7,511,241		4,673,766
Teejay Lanka PLC		18,872,680		3,695,850
Ceylon Tobacco Co. PLC		379,231		2,687,198
Expolanka Holdings PLC		94,231,424		2,381,085

Total Sri Lanka				45,798,117


CHINA/HONG KONG: 8.4%
Tongda Group Holdings, Ltd.		77,640,000		15,691,185
Shenzhou International Group Holdings, Ltd.		939,000		11,554,756
Luk Fook Holdings International, Ltd.		1,986,000		8,203,736
Red Star Macalline Group Corp., Ltd. H Shares^c,d		2,429,000		3,271,973
Future Bright Holdings, Ltd.		18,612,000		2,562,068

Total China/Hong Kong				41,283,718


INDIA: 8.3%
Balkrishna Industries, Ltd.		531,078		8,084,110
PC Jeweller, Ltd.		3,094,879		6,195,619
Shriram Transport Finance Co., Ltd.		268,352		5,092,472
Shriram City Union Finance, Ltd.		153,789		4,544,568
Praj Industries, Ltd.		3,594,497		4,136,326
Caplin Point Laboratories, Ltd.		489,805		3,052,294
Supreme Industries, Ltd.		178,934		2,951,728
Vakrangee, Ltd.		2,626,038		2,562,222
VST Industries, Ltd.		60,083		2,545,295
Kwality, Ltd.		2,533,204		844,420
Poly Medicure, Ltd.		234,582		726,532

Total India				40,735,586


PHILIPPINES: 7.3%
Cosco Capital, Inc.		112,863,600		12,858,213
San Miguel Food and Beverage, Inc.		7,533,700		8,441,753
STI Education Systems Holdings, Inc.		254,154,000		5,429,064
Emperador, Inc.		33,504,400		4,639,481
Shakey’s Pizza Asia Ventures, Inc.		18,868,100		4,313,315

Total Philippines				35,681,826


AUSTRALIA: 0.6%
Oil Search, Ltd.		467,309		3,070,198

Total Australia				3,070,198


56		MATTHEWS ASIA FUNDS

Matthews Emerging Asia Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)

COMMON EQUITIES (continued)


	Shares		Value
SINGAPORE: 0.6%
Yoma Strategic Holdings, Ltd.		10,610,166		$2,876,729

Total Singapore				2,876,729


TOTAL INVESTMENTS: 94.8%				465,786,226
(Cost $451,018,176)

CASH AND OTHER ASSETS, LESS LIABILITIES: 5.2%				25,707,331


NET ASSETS: 100.0%				$491,493,557

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

b	Non-income producing security.

d	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

†	Affiliated Issuer, as defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of this issuer)

JSC	Joint Stock Co.

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			57

LOGO


PORTFOLIO MANAGERS
Michael J. Oh, CFA
Lead Manager
Sunil Asnani	Tiffany Hsiao, CFA
Co-Manager	Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MATFX	MITEX
CUSIP	577130883	577125859
Inception	12/27/99	4/30/13
NAV	$14.38	$14.46
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	1.24%	1.05%
Portfolio Statistics
Total # of Positions		47
Net Assets		$295.3 million
Weighted Average Market Cap		$85.0 billion
Portfolio Turnover²		66.51%
Benchmark
MSCI AC Asia ex Japan Index

OBJECTIVE

Long-term capital appreciation.

STRATEGY

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in Asia that Matthews believes are innovators in their products, services, processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets. Asia consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region.

Matthews Asia Innovators Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Asia Innovators Fund returned 1.34% (Investor Class) and 1.40% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, fell –4.65% over the same period. For the quarter ending June 30, the Fund returned –2.71% (Investor Class) and –2.69% (Institutional Class), while its benchmark returned –5.31%.

Market Environment:

Asian and global emerging markets suffered during the first half of 2018. Negative investor sentiment arose from the confluence of escalating trade tensions between China and the United States, as well as seemingly tighter monetary conditions in China and other parts of emerging markets. In addition, the flight to quality, strengthening of the U.S. dollar and higher energy prices exposed the vulnerabilities of some emerging market economies.

Chinese shares generated negative returns for the six months ending June 30. Significant headwinds surrounding trade and tariff disputes with the U.S. proved to be too large a risk for many investors during this time. However, resilient corporate earnings, a surprisingly stable Chinese renminbi (RMB) and robust exports were positive contributors to China’s continued economic growth. Elsewhere, India’s equity market posted negative returns for the first half of the year. Macro headwinds captured headlines in the second quarter as India’s reliance on energy imports and a deteriorating current account pressured the Indian rupee and brought inflation concerns to investors. On a positive note, economic growth remained robust and corporate earnings momentum improved.

South Korea’s equities were among the Asia region’s weakest in the first half of the year as investors contemplated how trade talks between the U.S., China and Europe could affect Korean exports and how prospects of a potentially significant hike in the country’s minimum wage could affect corporate earnings. In June, U.S. President Donald Trump met with North Korean leader Kim Jong Un in a historic summit. The meeting reduced military tensions on the Korean peninsula, but had little impact on South Korea’s equity markets or currency exchange rates. South Korea’s domestic economy remains stable despite a rising unemployment rate and the country’s exports continued to support GDP growth.

Performance Contributors and Detractors:

The Fund outperformed its benchmark during the first half of the year. Holdings in the health care and consumer discretionary sectors, particularly in China, made the largest contributions to Fund performance. While China’s broader equity markets were down for the first half of the year, several of our individual holdings in China generated double-digit positive returns.

The China-based health care companies we held were purely domestic, so some investors may have seen them as being potentially less impacted by a trade war. Health care demand in China remains robust and we continue to see the growth of health care companies as part of a long-term, secular trend. The top two performing securities in the portfolio during the first half of the year were Jiangsu Hengrui Medicine and Wuxi Biologics. Jiangsu Hengrui Medicine is a leading drug manufacturer, while Wuxi Biolgogics is a leading provider of outsourcing services for clinical trials.

Within the consumer discretionary sector, China International Travel Service was among the Fund’s top performers during this period, demonstrating an increase in discretionary spending as household wealth rises in China. China International Travel Service offers package tours and operates duty-free shops. The duty-free shop concept is still relatively new in China, representing an attractive growth opportunity.

(continued)

1	Prospectus expense ratios.

2	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


58		MATTHEWS ASIA FUNDS



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		10 Years		Since Inception			Inception Date
Investor Class (MATFX)		-2.71%		1.34%		19.09%		10.61%		15.36%		10.32%		4.23%			12/27/1999
Institutional Class (MITEX)		-2.69%		1.40%		19.23%		10.80%		15.57%		n.a.		14.65%			4/30/2013
MSCI AC Asia ex Japan Index³		-5.31%		-4.65%		10.21%		7.32%		8.48%		6.10%		6.60%	⁴
Lipper Pacific ex Japan Funds Category Average⁵		-5.15%		-4.63%		9.66%		6.37%		7.52%		5.52%		6.04%	⁴

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. For the Fund’s most recent month-end performance, visit matthewsasia.com.

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

LOGO

Calculated from 12/31/99.

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
	Sector	Country	% of Net Assets
Alibaba Group Holding, Ltd.	Information Technology	China/Hong Kong		4.7%
HDFC Bank, Ltd.	Financials	India		4.4%
Tencent Holdings, Ltd.	Information Technology	China/Hong Kong		4.0%
Jiangsu Hengrui Medicine Co., Ltd.	Health Care	China/Hong Kong		4.0%
Ping An Insurance Group Co. of China, Ltd.	Financials	China/Hong Kong		3.5%
Orion Corp.	Consumer Staples	South Korea		3.5%
China International Travel Service Corp., Ltd.	Consumer Discretionary	China/Hong Kong		3.3%
Wuxi Biologics Cayman, Inc.	Health Care	China/Hong Kong		3.0%
AIA Group, Ltd.	Financials	China/Hong Kong		2.9%
LG Household & Health Care, Ltd.	Consumer Staples	South Korea		2.9%
% OF ASSETS IN TOP TEN				36.2%

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


matthewsasia.com \| 800.789.ASIA			59



COUNTRY ALLOCATION (%)^7,8
China/Hong Kong			55.9
South Korea			16.3
India			11.2
Taiwan			2.5
Singapore			2.4
Vietnam			2.3
Indonesia			1.8
Bangladesh			1.8
Thailand			1.7
Philippines			1.1
Japan			0.4
Cash and Other Assets, Less Liabilities			2.5



SECTOR ALLOCATION (%)⁸
Information Technology			28.0
Financials			25.1
Consumer Discretionary			24.2
Health Care			10.6
Consumer Staples			8.5
Industrials			1.0
Cash and Other Assets, Less Liabilities			2.5



MARKET CAP EXPOSURE (%)⁸
Mega Cap (over $25B)			45.3
Large Cap ($10B–$25B)			23.0
Mid Cap ($3B–10B)			13.1
Small Cap (under $3B)			16.2
Cash and Other Assets, Less Liabilities			2.5

Not all countries are included in the benchmark index.

Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

Matthews Asia Innovators Fund

Portfolio Manager Commentary (unaudited) (continued)

Detracting from performance were our holdings in the information technology (IT) sector. Naver, which operates South Korea’s largest search engine, had negative returns during the first half of the year, partly reflecting negative sentiment for South Korean equities in general. NetEase, a Chinese internet and gaming company, also delivered negative returns in the first half of the year due to worries about its ability to sustain market share. While remaining cautiously optimistic about their longer term prospects, we will continue to monitor these holdings carefully.

Notable Portfolio Changes:

There were no major changes to the portfolio during the second quarter. We took advantage of market volatility to rotate capital among our existing portfolio holdings. For example, as stock prices fell, we added to our holdings of a handful of quality companies that we believe have particularly robust business models. We also selectively trimmed from certain existing holdings that we believe may not have been positioned as well to weather additional market volatility.

Outlook:

As we enter the third quarter, we may see trade friction dampen sentiment, but other positive factors may exist. U.S. and Chinese GDP growth remains robust and supportive of the global economy. In addition, local interest rates are high enough to compensate investors for risks; and importantly, corporate earnings remain relatively strong, making current equity valuations relatively attractive. The strongest single headwind seems to be uncertainty derived from escalating U.S.–China trade tensions.

Importantly, we are proactively managing the portfolio to hedge against global trade war concerns, as well as other potentially negative macroeconomic factors. In general, we continue to look for domestically oriented companies that may be slightly less impacted by tariffs or rising oil prices. And we remain cautious about investing in companies that are more exposed to factors that are outside of their control, such as companies that may suffer a significant loss of business due to a rise in interest rates. With share prices seeming to diverge from the positive fundamental trends we are seeing at the company level, we believe current volatility may create opportunities for long-term investors. While investor sentiment remains weak, the fundamental reasons for owning innovative Asian companies serving domestic consumers with rising wealth are still intact.


60		MATTHEWS ASIA FUNDS

Matthews Asia Innovators Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 95.4%


	Shares		Value
CHINA/HONG KONG: 55.9%
Alibaba Group Holding, Ltd. ADR^b		74,600		$13,840,538
Tencent Holdings, Ltd.		237,100		11,906,072
Jiangsu Hengrui Medicine Co., Ltd. A Shares		1,028,413		11,722,499
Ping An Insurance Group Co. of China, Ltd. H Shares		1,132,000		10,366,487
China International Travel Service Corp., Ltd. A Shares		1,002,025		9,706,238
Wuxi Biologics Cayman, Inc.^b,c,d		791,000		8,774,678
AIA Group, Ltd.		996,200		8,678,308
GreenTree Hospitality Group, Ltd. ADR^b		465,505		8,420,986
JD.com, Inc. ADR^b		200,000		7,790,000
Ctrip.com International, Ltd. ADR^b		156,200		7,439,806
TAL Education Group ADR^b		183,200		6,741,760
NetEase, Inc. ADR		25,700		6,493,619
CSPC Pharmaceutical Group, Ltd.		2,112,000		6,341,917
Baozun, Inc. ADR^b		108,800		5,951,360
Midea Group Co., Ltd. A Shares		739,109		5,798,356
Suofeiya Home Collection Co., Ltd. A Shares		1,127,349		5,461,257
China Construction Bank Corp. H Shares		5,874,000		5,374,953
Bilibili, Inc. ADR^b		347,000		4,854,530
Silergy Corp.		178,000		4,325,281
BeiGene, Ltd. ADR^b		21,400		3,289,822
Shenzhen Inovance Technology Co., Ltd. A Shares		599,722		2,960,289
Hangzhou Hikvision Digital Technology Co., Ltd. A Shares		494,938		2,762,609
SUNeVision Holdings, Ltd.		4,385,000		2,590,702
NBTM New Materials Group Co., Ltd. A Shares		1,728,316		2,542,052
Wise Talent Information Technology Co., Ltd.^b		248,800		1,030,641

Total China/Hong Kong				165,164,760


SOUTH KOREA: 14.2%
Orion Corp.		77,013		10,282,356
LG Household & Health Care, Ltd.		6,751		8,459,493
NAVER Corp.		11,485		7,859,240
Hana Tour Service, Inc.		97,399		7,630,283
Hanon Systems		470,842		4,478,773
Cafe24 Corp.^b		19,194		3,086,132

Total South Korea				41,796,277


INDIA: 11.2%
HDFC Bank, Ltd.		422,241		13,006,993
Housing Development Finance Corp., Ltd.		278,430		7,758,335
IndusInd Bank, Ltd.		223,421		6,306,650
Britannia Industries, Ltd.		34,455		3,124,261
Info Edge India, Ltd.		172,029		2,975,277

Total India				33,171,516


TAIWAN: 2.5%
Taiwan Semiconductor Manufacturing Co., Ltd.		1,052,000		7,470,335

Total Taiwan				7,470,335


SINGAPORE: 2.4%
DBS Group Holdings, Ltd.		358,300		6,967,868

Total Singapore				6,967,868


	Shares		Value
VIETNAM: 2.3%
Mobile World Investment Corp.		737,470		$3,656,325
Phu Nhuan Jewelry JSC		458,250		1,733,291
Domesco Medical Import Export JSC		325,220		1,281,983

Total Vietnam				6,671,599


INDONESIA: 1.8%
PT Bank Mandiri Persero		11,322,100		5,416,812

Total Indonesia				5,416,812


BANGLADESH: 1.8%
BRAC Bank, Ltd.^b		6,201,632		5,275,778

Total Bangladesh				5,275,778


THAILAND: 1.7%
Kasikornbank Public Co., Ltd.		871,000		5,095,626

Total Thailand				5,095,626


PHILIPPINES: 1.1%
Puregold Price Club, Inc.		3,869,870		3,378,473

Total Philippines				3,378,473


JAPAN: 0.5%
Mercari, Inc.^b		32,300		1,323,041

Total Japan				1,323,041


TOTAL COMMON EQUITIES				281,732,085

(Cost $232,834,707)

PREFERRED EQUITIES: 2.1%
SOUTH KOREA: 2.1%
Samsung Electronics Co., Ltd., Pfd.		188,450		6,363,749

Total South Korea				6,363,749


TOTAL PREFERRED EQUITIES				6,363,749

(Cost $5,865,429)

TOTAL INVESTMENTS: 97.5%				288,095,834
(Cost $238,700,136)

CASH AND OTHER ASSETS, LESS LIABILITIES: 2.5%				7,243,280


NET ASSETS: 100.0%				$295,339,114

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

b	Non-income producing security.

d	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

ADR	American Depositary Receipt

JSC	Joint Stock Co.

Pfd.

Preferred

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			61

LOGO


PORTFOLIO MANAGERS
Andrew Mattock, CFA
Lead Manager
Henry Zhang, CFA	Winnie Chwang
Co-Manager	Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MCHFX	MICFX
CUSIP	577130701	577130818
Inception	2/19/98	10/29/10
NAV	$22.17	$22.15
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	1.09%	0.93%
Portfolio Statistics
Total # of Positions		50
Net Assets		$1.0 billion
Weighted Average Market Cap		$151.0 billion
Portfolio Turnover²		78.74%
Benchmark
MSCI China Index

OBJECTIVE

Long-term capital appreciation.

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 the common and preferred stocks of companies located in China. China includes its administrative and other districts, such as Hong Kong.

Matthews China Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews China Fund was mostly flat, returning –0.14% (Investor Class) and –0.09% (Institutional Class), while its benchmark, the MSCI China Index, fell –1.69% over the same period. For the quarter ending June 30, the Fund returned –5.94% (Investor Class and Institutional Class), while its benchmark returned –3.44%.

Market Environment:

A global trade war, currency devaluation and rising interest rates have triggered high levels of concern for China investors. As a result, Chinese equity markets returned all the positive performance they experienced in January this year, ending the first half of 2018 in negative territory. Despite lingering global macro concerns, China is moving ahead with its micro agenda, deleveraging its financial system and placing tighter restrictions on its booming property market. This may derail short-term growth but seems to put the country in a better position economically longer term. Even in the face of this challenging environment, we see opportunities for market consolidation across many industries in China. In “old economy” and “new economy” sectors alike, a tougher operating environment enables market leaders to shine and capture profitability that might have once been eroded by intense competition. These factors may bode well for industrial profits.

Performance Contributors and Detractors:

The Fund outperformed its benchmark in the first half of 2018 thanks to both sector allocation and stock selection. During the second quarter, the information technology sector was the main cause for the Fund’s relative underperformance versus its benchmark, while the health care sector made the largest contribution to absolute performance.

Chinese telecommunications equipment producer ZTE was a major detractor to Fund performance during the quarter. The firm settled previous violations of a U.S. export ban by paying fines of US$1.4 billion. It also replaced its board of directors and senior management, reached an agreement with the U.S. Department of Commerce and said it would adopt compliance as the strategic cornerstone of its development. Although the settlement was a positive development, we believe ZTE continues to face uncertainties due to the business disruptions and its significant exposure to foreign suppliers and customers. We decided to exit this holding during the quarter. Software service provider Chinasoft International also declined as investors grew concerned about its business exposure to the telecommunications sector. We continue to hold this position because we believe the firm is a major beneficiary of the secular growth in IT outsourcing and cloud adoption.

Among the top individual contributors to Fund performance were Sino Biopharmaceutical, a leading Chinese pharmaceutical company, and China Gas Holdings, a major natural gas distributor. In addition to its diversified product portfolio and a robust pipeline, Sino Biopharmaceutical recently launched a new hepatitis drug and received approval from the China Food and Drug Administration for a major blockbuster oncology drug. China Gas Holdings delivered strong operational results because of the government’s increasingly stringent environmental control and continuous rural coal-to-gas conversion initiative.

Notable Portfolio Changes:

During the quarter, we initiated a position in Brilliance China Automotive, a joint-venture partner with BMW in China, as the stock valuation became attractive to us. Chinese auto stocks pulled back sharply after China announced some new policies toward foreign investment in the automotive sector and lowered tariffs for

(continued)

1	Prospectus expense ratios.

2	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


62		MATTHEWS ASIA FUNDS



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		10 Years		Since Inception			Inception Date
Investor Class (MCHFX)		-5.94%		-0.14%		22.37%		9.33%		11.72%		7.10%		10.38%			2/19/98
Institutional Class (MICFX)		-5.94%		-0.09%		22.57%		9.48%		11.88%		n.a.		4.74%			10/29/10
MSCI China Index³		-3.44%		-1.69%		21.42%		7.26%		12.32%		6.21%		5.05%	⁴
Lipper China Region Funds Category Average⁵		-4.74%		-2.58%		15.90%		5.49%		10.32%		5.83%		7.93%	⁴

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. For the Fund’s most recent month-end performance, visit matthewsasia.com.

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

LOGO

Calculated from 2/28/98.

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
	Sector	% of Net Assets
Alibaba Group Holding, Ltd.	Information Technology		10.8%
Tencent Holdings, Ltd.	Information Technology		9.3%
China Construction Bank Corp.	Financials		4.0%
Industrial & Commercial Bank of China, Ltd.	Financials		3.8%
Agricultural Bank of China, Ltd.	Financials		3.7%
AIA Group, Ltd.	Financials		3.4%
Ping An Insurance Group Co. of China, Ltd.	Financials		3.3%
Baidu, Inc.	Information Technology		3.1%
China Life Insurance Co., Ltd.	Financials		2.7%
China Petroleum & Chemical Corp.	Energy		2.6%
% OF ASSETS IN TOP TEN			46.7%

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


matthewsasia.com \| 800.789.ASIA			63



COUNTRY ALLOCATION (%)⁷
China/Hong Kong			98.4
Cash and Other Assets, Less Liabilities			1.5



SECTOR ALLOCATION (%)⁷
Information Technology			30.8
Financials			24.9
Consumer Discretionary			10.8
Industrials			5.7
Energy			5.2
Materials			5.1
Consumer Staples			4.9
Real Estate			4.2
Health Care			3.2
Utilities			2.8
Telecommunication Services			1.1
Cash and Other Assets, Less Liabilities			1.5



MARKET CAP EXPOSURE (%)⁷
Mega Cap (over $25B)			58.7
Large Cap ($10B–$25B)			4.5
Mid Cap ($3B–10B)			31.8
Small Cap (under $3B)			3.5
Liabilities in Excess of Cash and Other Assets			1.5

7	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

Matthews China Fund

Portfolio Manager Commentary (unaudited) (continued)

imported cars and car components. We believe Brilliance China’s partnership with BMW continues to be strategic and mutually beneficial for both parties. Brilliance China should benefit from new model launches and achieve above-industry-average growth in the luxury car market. We also initiated a position in China Jushi, the largest global glass fiber producer. The company should benefit from its growing economies of scale, improving average selling prices and lowering unit costs.

Outlook:

At the end of the quarter, Chinese companies that generated more than 15% of their revenues from the U.S. accounted for less than 3% of the portfolio’s total exposure. This means that while trade tariffs imposed on China have dominated headlines and worried investors, our portfolio holdings rely more on the health of China’s domestic consumption and services-led economy. By most metrics, such as income growth and corporate profitability, these areas continue to trend positively. Amid current market uncertainty, we continue to focus on the corporate earnings growth story in China. The MSCI China Index—China’s broad equity market index—is expected to see high single digit earnings per share (EPS) growth this year and EPS growth in the mid-teens next year. Valuations for the index are also attractive at 11x price-to-earnings (P/E) this year, and 9x P/E next year. We remain cautiously optimistic about China’s growth outlook but remain mindful of the potential negative impacts should trade relations continue to deteriorate.


64		MATTHEWS ASIA FUNDS

Matthews China Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 98.5%


	Shares		Value
INFORMATION TECHNOLOGY: 30.8%
Internet Software & Services: 25.8%
Alibaba Group Holding, Ltd. ADR^b		607,500		$112,709,475
Tencent Holdings, Ltd.		1,920,400		96,433,659
Baidu, Inc. ADR^b		133,400		32,416,200
SINA Corp.^b		124,800		10,569,312
YY, Inc. ADR^b		84,900		8,529,903
Baozun, Inc. ADR^b		149,241		8,163,483

				268,822,032


IT Services: 2.4%
Chinasoft International, Ltd.		31,722,000		24,665,161


Electronic Equipment, Instruments & Components: 1.5%
AVIC Jonhon OptronicTechnology Co., Ltd. A Shares		1,961,652		11,510,617
Zhejiang Dahua Technology Co., Ltd. A Shares		1,345,386		4,559,022

				16,069,639


Semiconductors & Semiconductor Equipment: 1.1%
ASM Pacific Technology, Ltd.		882,800		11,126,395

Total Information Technology				320,683,227


FINANCIALS: 24.9%
Banks: 11.6%
China Construction Bank Corp. H Shares		45,608,660		41,733,813
Industrial & Commercial Bank of China, Ltd. H Shares		53,127,000		39,624,253
Agricultural Bank of China, Ltd. H Shares		83,394,000		38,922,409

				120,280,475


Insurance: 9.4%
AIA Group, Ltd.		4,076,600		35,512,940
Ping An Insurance Group Co. of China, Ltd. H Shares		3,745,500		34,300,068
China Life Insurance Co., Ltd. H Shares		10,993,000		28,202,453

				98,015,461


Capital Markets: 3.9%
Hong Kong Exchanges & Clearing, Ltd.		485,600		14,532,817
CITIC Securities Co., Ltd. H Shares		7,072,000		14,060,213
China International Capital Corp., Ltd. H Shares^c,d		6,789,600		12,036,601

				40,629,631

Total Financials				258,925,567


CONSUMER DISCRETIONARY: 10.8%
Hotels, Restaurants & Leisure: 2.6%
SJM Holdings, Ltd.		11,848,000		14,694,261
Shangri-La Asia, Ltd.		6,344,000		11,884,979

				26,579,240


Household Durables: 2.5%
Midea Group Co., Ltd. A Shares		1,688,088		13,243,154
Gree Electric Appliances, Inc. of Zhuhai A Shares		1,857,000		13,170,499

				26,413,653


Specialty Retail: 2.3%
Zhongsheng Group Holdings, Ltd.		8,111,500		24,285,919


	Shares		Value
Automobiles: 2.1%
Brilliance China Automotive Holdings, Ltd.		11,842,000		$21,247,018


Internet & Direct Marketing Retail: 1.3%
JD.com, Inc. ADR^b		348,679		13,581,047

Total Consumer Discretionary				112,106,877


INDUSTRIALS: 5.6%
Commercial Services & Supplies: 2.1%
China Everbright International, Ltd.		16,886,000		21,747,143


Machinery: 1.0%
Han’s Laser Technology Industry Group Co., Ltd. A Shares		1,356,596		10,841,479


Professional Services: 1.0%
51job, Inc. ADR^b		107,100		10,457,244


Building Products: 0.8%
Beijing New Building Materials PLC A Shares		2,886,000		8,034,198


Transportation Infrastructure: 0.7%
Guangzhou Baiyun International Airport Co., Ltd. A Shares		3,973,322		7,819,729

Total Industrials				58,899,793


ENERGY: 5.2%
Oil, Gas & Consumable Fuels: 5.2%
China Petroleum & Chemical Corp. H Shares		29,714,000		26,597,518
Yanzhou Coal Mining Co., Ltd. H Shares		13,348,000		17,381,750
China Shenhua Energy Co., Ltd. H Shares		4,129,000		9,766,104

Total Energy				53,745,372


MATERIALS: 5.1%
Construction Materials: 3.5%
China National Building Material Co., Ltd. H Shares		26,841,300		26,418,745
China Jushi Co., Ltd. A Shares		6,705,477		10,301,979

				36,720,724


Metals & Mining: 1.6%
MMG, Ltd.^b		22,976,000		15,995,424

Total Materials				52,716,148


CONSUMER STAPLES: 4.9%
Food Products: 3.3%
Inner Mongolia Yili Industrial Group Co., Ltd. A Shares		4,310,997		18,069,876
Angel Yeast Co., Ltd. A Shares		3,001,487		16,090,741

				34,160,617


Beverages: 1.6%
Wuliangye Yibin Co., Ltd. A Shares^b		1,465,596		16,719,346

Total Consumer Staples				50,879,963


REAL ESTATE: 4.2%
Real Estate Management & Development: 4.2%
China Resources Land, Ltd.		5,402,000		18,145,620
Times China Holdings, Ltd.		7,780,000		11,484,287
KWG Property Holding, Ltd.		7,357,000		9,189,279
CIFI Holdings Group Co., Ltd.		8,000,000		5,067,619

Total Real Estate				43,886,805


matthewsasia.com \| 800.789.ASIA			65

Matthews China Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)

COMMON EQUITIES (continued)


	Shares		Value
HEALTH CARE: 3.1%
Pharmaceuticals: 2.1%
Sino Biopharmaceutical, Ltd.		14,489,000		$22,127,702


Health Care Technology: 1.0%
Ping An Healthcare and Technology Co., Ltd.^b,c,d		1,690,800		10,775,466

Total Health Care				32,903,168


UTILITIES: 2.8%
Water Utilities: 1.2%
Beijing Enterprises Water Group, Ltd.		23,426,000		12,738,219


Independent Power and Renewable Electricity Producers: 1.0%
China Longyuan Power Group Corp., Ltd. H Shares		12,470,000		10,017,295


Gas Utilities: 0.6%
China Gas Holdings, Ltd.		1,618,800		6,490,087

Total Utilities				29,245,601


TELECOMMUNICATION SERVICES: 1.1%
Wireless Telecommunication Services: 1.1%
China Mobile, Ltd.		1,270,500		11,273,079

Total Telecommunication Services				11,273,079


TOTAL INVESTMENTS: 98.5%				1,025,265,600
(Cost $958,185,330)

CASH AND OTHER ASSETS, LESS LIABILITIES: 1.5%				16,033,922


NET ASSETS: 100.0%				$1,041,299,522

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

b	Non-income producing security.

d	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

ADR	American Depositary Receipt

See accompanying notes to financial statements.


66		MATTHEWS ASIA FUNDS

LOGO


PORTFOLIO MANAGERS
Sunil Asnani
Lead Manager
Sharat Shroff, CFA	Peeyush Mittal
Co-Manager	Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MINDX	MIDNX
CUSIP	577130859	577130768
Inception	10/31/05	10/29/10
NAV	$32.62	$32.84
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	1.09%	0.89%
Portfolio Statistics
Total # of Positions		53
Net Assets		$2.1 billion
Weighted Average Market Cap		$20.1 billion
Portfolio Turnover²		16.81%
Benchmark
S&P Bombay Stock Exchange 100 Index

OBJECTIVE

Long-term capital appreciation.

STRATEGY

Matthews India Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews India Fund returned –4.93% (Investor Class) and –4.84% (Institutional Class) while its benchmark, the S&P Bombay Stock Exchange 100 Index, returned –6.44%. For the quarter ending June 30, the Fund returned –2.37% (Investor Class) and –2.32% (Institutional Class) while its benchmark returned –0.12%.

Market Environment:

During the first half of the year, India’s equity markets were less volatile in the second quarter compared to the first quarter. We continued to see investors shun small- and mid-cap stocks, however, in favor of larger-cap stocks.

Monetary policy tightening started in the second quarter with the Reserve Bank of India (RBI) increasing repo rates by 25 basis points (0.25%) at its June policy meeting. Rising oil prices and hardening inflation trends likely forced the RBI to act. An RBI inflation survey suggested that household expectations on future price increases have risen meaningfully over the past three months.

The Indian rupee depreciated by –5.05% against the U.S. dollar in the second quarter. Rising oil prices heightened fears around fiscal slippage. Investors also were wary that the government led by Prime Minister Narendra Modi would be forced to increase fiscal spending in rural India in order to woo voters as this is the last year of his five-year term. Recent announcements around sharp increases in minimum support prices for paddy (unmilled rice) confirmed those fears. Collections of the Goods and Services Tax (GST) continue to lag expectations, which has fueled further fiscal concerns.

Investors also were jittery about the Modi-wave losing steam. Modi’s party performance in the elections for the large southern state of Karnataka was behind expectations, creating speculation that Modi may not get a majority coalition in the next general elections in 2019.

Performance Contributors and Detractors:

For the six-month period, the portfolio’s higher allocation to small caps hurt performance, though this was partially mitigated by stock-specific factors within our mid- to large-cap holdings. For both the second quarter and year-to-date periods, the portfolio’s lower allocation to macro- and policy-driven sectors such as energy, utilities, telecom and metals also helped performance, though this was offset by relative underperformance by our consumer staples stocks and some small-cap health care stocks.

Our small-cap health care stocks held up well relative to peers in the benchmark in the first quarter of 2018, but the market was less discerning in the second quarter when it came to small-cap stocks. Given the relatively high valuations among small caps, we have been trimming our exposure to relatively expensive small caps over the years, except in the health care and information technology sectors, where we felt valuations still provided some upside.

Similar undercurrents within our consumer staples holdings hurt our portfolio performance in the second quarter, though stock-specific factors also were responsible for our relative underperformance. After the implementation of demonetization and GST in India, many domestic consumer companies’ underinvestments in their distribution systems—be it usage of technology and data analytics, or expanding direct retail reach—have come to light. One such holding has been Emami, whose excessive reliance on wholesalers to distribute its products did not augur well for its performance. The company seems to have learned its lesson and has tried to correct its mistakes. In the medium term, we expect that its performance could revert to normal.

(continued)

1	Prospectus expense ratios.

2	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


matthewsasia.com \| 800.789.ASIA			67



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		10 Years		Since Inception			Inception Date
Investor Class (MINDX)		-2.37%		-4.93%		5.66%		6.52%		17.06%		10.05%		11.87%			10/31/05
Institutional Class (MIDNX)		-2.32%		-4.84%		5.84%		6.74%		17.28%		n.a.		6.71%			10/29/10
S&P Bombay Stock Exchange 100 Index³		-0.12%		-6.44%		6.58%		7.90%		12.08%		6.92%		10.56%	⁴
Lipper India Region Funds Category Average⁵		-3.55%		-10.23%		2.42%		6.27%		12.59%		6.40%		8.91%	⁴

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. For the Fund’s most recent month-end performance, visit matthewsasia.com.

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

LOGO

It is not possible to invest directly in an index. Source: Index data from S&P BSE 100 Index and Bloomberg; total return calculations performed by BNY Mellon Investment Servicing (US) Inc. Please see page 92 for index definition.

Calculated from 10/31/05.

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
	Sector	% of Net Assets
HDFC Bank, Ltd.	Financials		6.4%
Suzuki Motor Corp.	Consumer Discretionary		6.4%
Kotak Mahindra Bank, Ltd.	Financials		6.0%
IndusInd Bank, Ltd.	Financials		5.9%
Eicher Motors, Ltd.	Industrials		5.3%
ITC, Ltd.	Consumer Staples		5.1%
Housing Development Finance Corp., Ltd.	Financials		3.3%
Dabur India, Ltd.	Consumer Staples		3.1%
Shriram City Union Finance, Ltd.	Financials		2.6%
Mphasis, Ltd.	Information Technology		2.5%
% OF ASSETS IN TOP TEN			46.6%

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


68		MATTHEWS ASIA FUNDS

Matthews India Fund

Portfolio Manager Commentary (unaudited) (continued)

Notable Portfolio Changes:

During the second quarter, we exited Bharat Financial Inclusion, a microfinance lender recently acquired by another of our holdings, IndusInd Bank. We also exited a couple of relatively smaller positions across the financials and technology sectors, where our conviction levels diminished over the years. We also added Natco Pharma, a pharmaceuticals company primarily focused on complex generic drugs for the U.S. market but that has recently turned its attention to India. The company’s share price has been generally expensive due to its performance but has corrected, in line with the shares of most health care companies. The near-term outlook on its earnings has also been a concern, given the lumpiness in its business. But we also view that as an opportunity for long-term investors like us to buy shares of a well-managed company.

Outlook:

India’s domestic economy is likely to strengthen in 2019. Disruptions related to demonetization, GST and real-estate reforms are largely over and demand for services and goods continues to recover gradually. Gross capital formation is also likely to pick up amid the government’s heightened focus on employment creation ahead of elections via infrastructure spending. Management teams have indicated that there are signs of private capital expenditure beginning to pick up.

We believe corporate earnings also should continue to recover in 2019, led by normalization in the consumer-related, pharmaceutical and financial sectors. However, consensus expectations for earnings growth seem highly optimistic. Valuations seem to be close to historical averages, though growth expectations remain high.

Oil prices can be a spoilsport. Oil constitutes a large part of India’s import basket and directly feeds into its current account balance. A sharp increase in oil prices beyond US$80 a barrel most likely would have an adverse impact on India’s currency and could lead to a sharp pick-up in inflation and cost of capital (in general). In the past, such an environment has not been kind to equity investors. Amid all this volatility and noise, we remain committed to our long-term and bottom-up investment approach.



COUNTRY ALLOCATION (%)⁷
India			90.3
Japan			6.4
United States			2.2
Israel			0.8
Cash and Other Assets, Less Liabilities			0.4



SECTOR ALLOCATION (%)⁷
Financials			35.7
Consumer Staples			18.0
Industrials			12.1
Information Technology			10.8
Consumer Discretionary			9.2
Health Care			9.1
Materials			4.7
Cash and Other Assets, Less Liabilities			0.4



MARKET CAP EXPOSURE (%)⁷
Mega Cap (over $25B)			30.9
Large Cap ($10B–$25B)			22.0
Mid Cap ($3B–10B)			16.0
Small Cap (under $3B)			30.7
Cash and Other Assets, Less Liabilities			0.4

7	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.


matthewsasia.com \| 800.789.ASIA			69

Matthews India Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 99.6%


	Shares		Value
FINANCIALS: 35.7%
Banks: 22.4%
HDFC Bank, Ltd.		4,345,349		$133,857,022
Kotak Mahindra Bank, Ltd.		6,443,654		126,460,340
IndusInd Bank, Ltd.		4,431,794		125,099,142
Yes Bank, Ltd.		8,888,026		44,164,900
DCB Bank, Ltd.		12,604,257		30,425,027
Axis Bank, Ltd.		1,457,547		10,881,888
HDFC Bank, Ltd. ADR		8,422		884,478

				471,772,797


Consumer Finance: 7.9%
Shriram City Union Finance, Ltd.		1,873,192		55,354,073
Cholamandalam Investment and Finance Co., Ltd.		2,316,964		51,163,868
Bajaj Finance, Ltd.		1,311,582		44,054,775
Sundaram Finance, Ltd.		695,531		16,237,823

				166,810,539


Thrifts & Mortgage Finance: 3.8%
Housing Development Finance Corp., Ltd.		2,458,810		68,513,713
GRUH Finance, Ltd.		2,756,737		12,250,188

				80,763,901


Capital Markets: 1.6%
CRISIL, Ltd.		1,271,030		33,418,428

Total Financials				752,765,665


CONSUMER STAPLES: 18.0%
Personal Products: 7.9%
Dabur India, Ltd.		11,252,176		64,307,379
Bajaj Corp., Ltd.		6,253,908		36,963,529
Emami, Ltd.		4,500,244		34,794,588
Marico, Ltd.		6,222,328		30,128,593

				166,194,089


Tobacco: 7.4%
ITC, Ltd.		27,471,965		106,757,117
VST Industries, Ltd.^†		1,167,175		49,445,018

				156,202,135


Food Products: 2.7%
Zydus Wellness, Ltd.^b		1,533,557		29,991,822
Nestle India, Ltd.		181,400		25,966,340

				55,958,162

Total Consumer Staples				378,354,386


INDUSTRIALS: 12.1%
Machinery: 9.1%
Eicher Motors, Ltd.		266,539		111,145,702
AIA Engineering, Ltd.		2,078,145		45,581,008
Ashok Leyland, Ltd.		18,445,155		33,913,943

				190,640,653


Airlines: 1.8%
InterGlobe Aviation, Ltd.^c,d		2,346,137		37,306,916


Air Freight & Logistics: 1.0%
Blue Dart Express, Ltd.		396,508		21,164,596


Road & Rail: 0.2%
Container Corp. of India, Ltd.		493,937		4,703,928

Total Industrials				253,816,093


	Shares		Value
INFORMATION TECHNOLOGY: 10.8%
IT Services: 8.6%
Mphasis, Ltd.		3,374,039		$53,389,036
eClerx Services, Ltd.^†		2,547,368		48,337,344
Cognizant Technology Solutions Corp. Class A		573,500		45,300,765
Tata Consultancy Services, Ltd.		1,293,639		34,889,675

				181,916,820


Internet Software & Services: 2.2%
Info Edge India, Ltd.		2,614,054		45,210,599

Total Information Technology				227,127,419


CONSUMER DISCRETIONARY: 9.2%
Automobiles: 6.3%
Suzuki Motor Corp.		2,427,000		133,747,405


Household Durables: 2.6%
Symphony, Ltd.		1,927,475		39,905,545
LA Opala RG, Ltd.		2,937,800		10,177,740
Dixon Technologies India, Ltd.^b,d		95,000		4,065,771

				54,149,056


Textiles, Apparel & Luxury Goods: 0.3%
Page Industries, Ltd.		9,355		3,794,854
Titan Co., Ltd.		218,364		2,801,236

				6,596,090

Total Consumer Discretionary				194,492,551


HEALTH CARE: 9.1%
Pharmaceuticals: 8.6%
Ajanta Pharma, Ltd.^b		2,992,070		42,951,260
Alembic Pharmaceuticals, Ltd.		4,147,557		30,476,968
Natco Pharma, Ltd.		2,096,417		24,681,024
Sun Pharmaceutical Industries, Ltd.		2,959,885		24,400,895
Caplin Point Laboratories, Ltd.		3,697,744		23,043,054
Eris Lifesciences, Ltd.^b,c,d		1,950,176		19,490,833
Taro Pharmaceutical Industries, Ltd.^b		137,412		15,897,194

				180,941,228


Health Care Equipment & Supplies: 0.5%
Poly Medicure, Ltd.		3,594,824		11,133,645

Total Health Care				192,074,873


MATERIALS: 4.7%
Chemicals: 4.5%
Pidilite Industries, Ltd.		1,800,000		27,944,930
UPL, Ltd.		3,050,052		27,574,349
Castrol India, Ltd.		6,307,813		15,077,730
Supreme Industries, Ltd.		773,420		12,758,477
Asian Paints, Ltd.		568,430		10,492,252

				93,847,738


Metals & Mining: 0.2%
NMDC, Ltd.		2,713,195		4,279,223

Total Materials				98,126,961


70		MATTHEWS ASIA FUNDS

Matthews India Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)

COMMON EQUITIES (continued)


	Value
TOTAL INVESTMENTS: 99.6%		$2,096,757,948
(Cost $1,568,680,971)

CASH AND OTHER ASSETS, LESS LIABILITIES: 0.4%		9,020,308


NET ASSETS: 100.0%		$2,105,778,256

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

b	Non-income producing security.

d	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

†	Affiliated Issuer, as defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of this issuer)

ADR	American Depositary Receipt

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			71

LOGO


PORTFOLIO MANAGERS
Kenichi Amaki
Lead Manager
Taizo Ishida
Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MJFOX	MIJFX
CUSIP	577130800	577130792
Inception	12/31/98	10/29/10
NAV	$24.14	$24.19
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	0.95%	0.87%
After Fee Waiver and Reimbursement²	0.94%	0.86%
Portfolio Statistics
Total # of Positions		60
Net Assets		$4.7 billion
Weighted Average Market Cap		$19.8 billion
Portfolio Turnover³		44.34%
Benchmark
MSCI Japan Index

OBJECTIVE

Long-term capital appreciation.

STRATEGY

Matthews Japan Fund*

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Japan Fund returned 0.08% (Investor Class) and 0.13% (Institutional Class), while its benchmark, the MSCI Japan Index, returned –1.85%. For the quarter ending June 30, the Fund returned –4.89% (Investor Class) and –4.91% (Institutional Class), underperforming its benchmark, which returned –2.80%.

Market Environment:

Following a somewhat euphoric rise in January and quick correction in February, Japan’s equity markets traded in a tight range before retreating toward the end of the second quarter. Tariff measures by the Trump administration signaled an escalation in trade war rhetoric and heightened uncertainty, resulting in a compression of valuations across global markets, including Japan. Foreign investors remained net sellers of Japanese equities, likely related to fund flows out of non-U.S. equities.

Japan’s first-quarter GDP figures, meanwhile, showed the economy shrank for the first time in two years on a quarter-on-quarter basis due to weak private residential investment, inventory drawdown and a slight decline in consumer spending. We expected this contraction and believe it is reasonable after the longest spate of growth in almost three decades.

Performance Contributors and Detractors:

For the year-to-date period, the Fund’s information technology and health care holdings did well, while our lack of exposure to utilities and telecommunication services posed a drag on performance. However, during the second quarter, the Fund’s underperformance versus its benchmark was largely due to stock selection, particularly in the industrials and health care sectors. Within industrials, shares of human resource solutions provider Persol Holdings corrected after the company announced weaker-than-expected guidance for the March 2019 fiscal year. Shares of automation-related companies such as CKD and Harmonic Drive also weakened as concerns have emerged about a cyclical peak in orders. In health care, shares of biopharmaceutical company PeptiDream declined after particularly strong performance in the previous quarter despite positive business developments for the company.

On the other hand, our positioning in the materials and financials sectors contributed positively to performance. Our lack of exposure to large-cap chemical and steel companies helped as tariff actions and rising oil prices compressed valuations in the materials sector. In financials, our core holding Tokio Marine, Japan’s leading non-life insurer, outperformed on the back of an improved earnings outlook combined with higher scope for shareholder returns in the form of dividends and share buybacks.

On an individual basis, fashion e-commerce company Start Today was the top performer as it announced its long-awaited entry into private label apparel. The company aims to deliver custom-made apparel using body size measurement data collected through their proprietary app. Conversely, shares of Ferrotec, a manufacturer of silicon wafers and components for semiconductor production equipment, corrected sharply as production at its Shanghai silicon wafer fab was temporarily halted to comply with environmental regulations.

(continued)

*	The Matthews Japan Fund closed to most new investors effective after market closing on July 29, 2016, but will continue to accept investments from existing shareholders.

1	Prospectus expense ratios.

3	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


72		MATTHEWS ASIA FUNDS



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		10 Years		Since Inception			Inception Date
Investor Class (MJFOX)		-4.89%		0.08%		16.27%		9.74%		11.73%		7.93%		6.69%			12/31/98
Institutional Class (MIJFX)		-4.91%		0.13%		16.36%		9.85%		11.85%		n.a.		11.87%			10/29/10
MSCI Japan Index⁴		-2.80%		-1.85%		10.88%		6.60%		7.70%		3.78%		3.75%	⁵
Lipper Japanese Funds Category Average⁶		-2.50%		-2.40%		10.89%		8.00%		9.88%		6.59%		5.10%	⁵

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. For the Fund’s most recent month-end performance, visit matthewsasia.com.

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

LOGO

Calculated from 12/31/98.

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 HOLDINGS⁷
	Sector	% of Net Assets
Keyence Corp.	Information Technology		2.7%
Nitori Holdings Co., Ltd.	Consumer Discretionary		2.7%
Murata Manufacturing Co., Ltd.	Information Technology		2.7%
Suzuki Motor Corp.	Consumer Discretionary		2.6%
Mitsubishi UFJ Financial Group, Inc.	Financials		2.6%
Nidec Corp.	Industrials		2.5%
Asahi Intecc Co., Ltd.	Health Care		2.4%
Tokio Marine Holdings, Inc.	Financials		2.4%
Start Today Co., Ltd.	Consumer Discretionary		2.4%
Kao Corp.	Consumer Staples		2.4%
% OF ASSETS IN TOP TEN			25.4%

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


matthewsasia.com \| 800.789.ASIA			73



COUNTRY ALLOCATION (%)⁸
Japan			98.0
Cash and Other Assets, Less Liabilities			2.0



SECTOR ALLOCATION (%)⁸
Industrials			25.5
Information Technology			18.8
Consumer Discretionary			13.6
Consumer Staples			12.0
Health Care			11.1
Financials			6.7
Real Estate			4.3
Materials			3.9
Telecommunication Services			2.1
Cash and Other Assets, Less Liabilities			2.0



MARKET CAP EXPOSURE (%)⁸
Mega Cap (over $25B)			31.4
Large Cap ($10B–$25B)			17.5
Mid Cap ($3B–10B)			32.3
Small Cap (under $3B)			16.8
Cash and Other Assets, Less Liabilities			2.0

8	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

Matthews Japan Fund

Portfolio Manager Commentary (unaudited) (continued)

Notable Portfolio Changes:

During the quarter, we initiated a position in Terumo, a leading Japanese medical equipment company. Terumo saw growth accelerate for its neurovascular and access devices, which carry higher margins relative to corporate averages. The field of neurovascular treatments is an exciting area with new devices and procedures being developed to treat brain aneurysms and strokes. Terumo’s U.S. subsidiary Microvention, acquired back in 2006, is a major player in the neurovascular market. We also initiated a position in real estate technology company Tateru. Tateru’s main business is to plan and construct apartment buildings in urban areas for individual investors. Most of the sales and servicing is conducted through its app, allowing it to be more cost-efficient than brick-and-mortar competitors. Recently, it has expanded into room share-type properties that could benefit from the influx of foreign tourists.

To fund these positions, we exited our positions in Japan Tobacco, Sumitomo Mitsui Financial Group and Dai-ichi Life Holdings. Japan Tobacco lost market share in the domestic Japanese market as reduced-risk products, also known as heat-not-burn products, from Philip Morris International gained significant market share over the past several years. Japan Tobacco has released its own reduced-risk product but we deemed that it faced a significant hurdle to regain pricing power in the market. Sumitomo Mitsui Financial Group and Dai-ichi Life Holdings are two financials that we expected to benefit from rising interest rates in the U.S. Broader concerns about growth prospects, however, kept a lid on their stock prices and we decided that the funds could be better deployed elsewhere in companies with more attractive growth prospects.

Outlook:

We remain cautious about the outlook for Japanese equities. The biggest risk is with the Trump administration’s continued actions on trade. We believe a trade war is bad for all global market participants, including U.S. consumers and Japanese businesses. The most recent Bank of Japan quarterly Tankan survey results showed a downward revision in corporate earnings forecasts compared to the previous quarter, likely reflecting a heightened level of uncertainty among corporate managers. In addition, rising fixed costs and higher fuel costs also are expected to weigh on earnings.

However, the same survey results also showed an upward revision on capital expenditures as the near-term demand environment remains robust. The recent acceleration in wage growth amid record levels of employment gives us some encouragement regarding the outlook for the domestic economy. Wage growth combined with continued strength in business spending may drive an improvement in domestic growth. While we retain a generally cautious tone, we believe valuations in Japan have compressed to levels where equities are modestly attractive and reasonably priced.


74		MATTHEWS ASIA FUNDS

Matthews Japan Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 98.0%


	Shares		Value
INDUSTRIALS: 25.5%
Professional Services: 8.4%
Recruit Holdings Co., Ltd.		3,647,900		$100,750,111
Persol Holdings Co., Ltd.		3,724,100		82,937,180
TechnoPro Holdings, Inc.		1,322,500		81,208,052
Nihon M&A Center, Inc.		2,427,600		70,333,508
Outsourcing, Inc.		2,981,000		55,144,210

				390,373,061


Machinery: 5.2%
MINEBEA MITSUMI, Inc.		3,248,000		54,734,538
MISUMI Group, Inc.		1,767,700		51,430,905
Komatsu, Ltd.		1,429,300		40,690,147
CKD Corp.		2,199,400		36,067,770
SMC Corp.		91,800		33,607,137
Harmonic Drive Systems, Inc.		657,200		27,738,282

				244,268,779


Building Products: 4.2%
Daikin Industries, Ltd.		833,100		99,566,361
Aica Kogyo Co., Ltd.		1,458,000		51,115,653
Sanwa Holdings Corp.		4,497,900		47,531,608

				198,213,622


Electrical Equipment: 4.0%
Nidec Corp.		777,900		116,365,814
Mabuchi Motor Co., Ltd.		1,451,200		68,878,024

				185,243,838


Trading Companies & Distributors: 2.0%
Mitsui & Co., Ltd.		5,573,400		92,809,883


Construction & Engineering: 1.7%
Kyowa Exeo Corp.		3,034,400		79,407,717

Total Industrials				1,190,316,900


INFORMATION TECHNOLOGY: 18.8%
Electronic Equipment, Instruments & Components: 8.6%
Keyence Corp.		226,100		127,523,690
Murata Manufacturing Co., Ltd.		749,500		125,823,374
Shimadzu Corp.		2,993,700		90,322,856
Hitachi, Ltd.		8,082,000		56,937,558

				400,607,478


Semiconductors & Semiconductor Equipment: 3.5%
Rohm Co., Ltd.		787,900		65,840,470
Lasertec Corp.		2,123,300		59,494,025
Ferrotec Holdings Corp.^†		2,533,500		38,934,436

				164,268,931


IT Services: 3.3%
Otsuka Corp.		2,073,200		81,160,292
ITOCHU Techno-Solutions Corp.		4,071,100		70,225,337

				151,385,629


Internet Software & Services: 1.9%
Infomart Corp.		5,808,700		77,015,348
Mercari, Inc.^b		327,200		13,402,448

				90,417,796


	Shares		Value
Software: 1.5%
Square Enix Holdings Co., Ltd.		1,462,100		$71,689,849

Total Information Technology				878,369,683


CONSUMER DISCRETIONARY: 13.6%
Auto Components: 3.0%
Nifco, Inc.		2,348,400		72,574,250
Denso Corp.		1,337,800		65,276,925

				137,851,175


Multiline Retail: 2.9%
Ryohin Keikaku Co., Ltd.		211,600		74,340,040
Seria Co., Ltd.		1,236,000		59,234,647

				133,574,687


Specialty Retail: 2.7%
Nitori Holdings Co., Ltd.		812,100		126,345,070


Automobiles: 2.6%
Suzuki Motor Corp.		2,243,300		123,624,044


Internet & Direct Marketing Retail: 2.4%
Start Today Co., Ltd.		3,081,100		111,475,987

Total Consumer Discretionary				632,870,963


CONSUMER STAPLES: 12.0%
Personal Products: 4.7%
Kao Corp.		1,458,900		111,199,662
Kose Corp.		504,500		108,515,152

				219,714,814


Food & Staples Retailing: 2.9%
Tsuruha Holdings, Inc.		569,300		71,306,968
San-A Co., Ltd.		1,314,900		64,944,810

				136,251,778


Food Products: 1.7%
Ariake Japan Co., Ltd.		937,200		80,671,190


Household Products: 1.6%
Pigeon Corp.		1,512,700		73,512,899


Beverages: 1.1%
Coca-Cola Bottlers Japan Holdings, Inc.		1,277,100		51,096,125

Total Consumer Staples				561,246,806


HEALTH CARE: 11.1%
Health Care Equipment & Supplies: 6.6%
Asahi Intecc Co., Ltd.		3,025,400		114,227,256
Sysmex Corp.		1,181,300		110,067,246
Terumo Corp.		1,502,200		85,997,801

				310,292,303


Health Care Technology: 2.1%
M3, Inc.		2,496,300		99,273,481


Biotechnology: 1.2%
PeptiDream, Inc.^b		1,336,900		55,544,133


Health Care Providers & Services: 1.2%
Japan Lifeline Co., Ltd.		2,203,500		54,021,324

Total Health Care				519,131,241


matthewsasia.com \| 800.789.ASIA			75

Matthews Japan Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)

COMMON EQUITIES (continued)


	Shares		Value
FINANCIALS: 6.7%
Banks: 2.6%
Mitsubishi UFJ Financial Group, Inc.		21,514,600		$121,877,723


Insurance: 2.4%
Tokio Marine Holdings, Inc.		2,433,100		113,828,320


Diversified Financial Services: 1.7%
ORIX Corp.		4,940,900		77,878,979

Total Financials				313,585,022


REAL ESTATE: 4.3%
Real Estate Management & Development: 4.3%
Relo Group, Inc.		4,139,600		109,062,128
TATERU, Inc.		2,887,800		47,533,867
KATITAS Co., Ltd.		1,187,400		42,088,509

Total Real Estate				198,684,504


MATERIALS: 3.9%
Chemicals: 3.9%
Shin-Etsu Chemical Co., Ltd.		809,500		71,939,010
Nitto Denko Corp.		812,800		61,364,297
Fuso Chemical Co., Ltd.^†		1,924,400		49,542,667

Total Materials				182,845,974


	Shares		Value
TELECOMMUNICATION SERVICES: 2.1%
Wireless Telecommunication Services: 2.1%
SoftBank Group Corp.		1,360,900		$97,179,353

Total Telecommunication Services				97,179,353


TOTAL INVESTMENTS: 98.0%				4,574,230,446
(Cost $3,745,244,411)

CASH AND OTHER ASSETS, LESS LIABILITIES: 2.0%				91,365,329


NET ASSETS: 100.0%				$4,665,595,775

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

b	Non-income producing security.

†	Affiliated Issuer, as defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of this issuer)

See accompanying notes to financial statements.


76		MATTHEWS ASIA FUNDS

LOGO


PORTFOLIO MANAGERS
Michael J. Oh, CFA
Lead Manager
Michael B. Han, CFA
Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MAKOX	MIKOX
CUSIP	577130305	577130826
Inception	1/3/95	10/29/10
NAV	$6.10	$6.14
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	1.15%	1.01%
Portfolio Statistics
Total # of Positions		41
Net Assets		$206.0 million
Weighted Average Market Cap		$49.8 billion
Portfolio Turnover²		25.37%
Benchmark
Korea Composite Stock Price Index

OBJECTIVE

Long-term capital appreciation.

STRATEGY

Matthews Korea Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Korea Fund returned –11.72% (Investor Class) and –11.66% (Institutional Class), while its benchmark, the Korea Composite Stock Price Index, returned –9.13% over the same period. For the quarter ending June 30, the Fund returned –9.90% (Investor Class) and –9.84% (Institutional Class), while its benchmark returned –9.37%.

Market Environment:

South Korean equities underperformed other Asian equity markets during the first half of the year due to fears of increased regulatory risk and as investors contemplated how trade talks between the U.S., China and Europe could affect Korean exports. In early June, South Korea held regional elections for congress. The elections gave President Moon Jae In’s left-of-center political party, the Democratic Party of Korea, a clear majority in congress. The party is focused on increasing the minimum wage, improving corporate governance standards and regulating industries that may have monopolies. With control of both the executive and legislative branches, the party now has fairly wide latitude to pursue its legislative agenda. Investor sentiment darkened as fears of higher labor costs and forced break-ups of larger conglomerates clouded the landscape. Improved corporate governance standards will continue to benefit South Korea’s markets over the long term, but there could be some market disruptions in the short term as standards continue to be defined and implemented.

In June, U.S. President Donald Trump met with North Korean leader Kim Jong Un in a historic summit. The meeting reduced military tensions on the Korean peninsula, but had little impact on South Korea’s equity markets or currency exchange rates. The summit may have impacted South Korea’s regional elections, however, by reflecting favorably on President Moon’s party and giving him a clear congressional majority. In the meantime, South Korea’s domestic economy remains stable despite a rising unemployment rate and exports continue to support overall GDP growth.

Performance Contributors and Detractors:

The Fund underperformed its benchmark during the first half of the year. Against a backdrop of increased business regulation in South Korea, three of our bank holdings generated double-digit losses for the six-month period ending June 30. KB Financial Group, Hana Financial Group and Shinhan Financial Group all suffered from negative investor sentiment. Investors may expect mortgage lending to become subject to new regulations. Property prices have risen significantly in many housing markets and the government may try to enact stricter lending standards to help curb price appreciation and housing costs. Another security that underperformed during the first half of the year was Modetour Network. Tourism and travel outside the country was slow in the first half.

On the positive side, Kiwoom Securities generated double-digit positive returns in the first half. Kiwoom is South Korea’s top online brokerage company. The company’s innovative business model led to strong stock price gains over the first and second quarters. South Korea’s equity markets tend to be primarily driven by domestic investors, creating opportunities for Kiwoom, which has the largest market share of brokerage activities.

Notable Portfolio Changes:

During the second quarter, we exited our position in Innocean, the advertising arm of Hyundai Motor, on concerns of rising regulatory risks that the company may face. We also initiated a position in Cafe24, an innovative e-commerce platform provider. Cafe24 helps small and midsize merchandisers sell their products

(continued)

1	Prospectus expense ratios.

2	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


matthewsasia.com \| 800.789.ASIA			77



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		10 Years		Since Inception			Inception Date
Investor Class (MAKOX)		-9.90%		-11.72%		0.00%		5.74%		10.46%		7.95%		6.39%			01/03/95
Institutional Class (MIKOX)		-9.84%		-11.66%		0.14%		5.88%		10.63%		n.a.		8.77%			10/29/10
Korea Composite Stock Price Index³		-9.37%		-9.13%		1.61%		5.88%		6.73%		4.25%		3.59%	⁴
Lipper Pacific ex Japan Funds Category Average⁵		-5.15%		-4.63%		9.66%		6.37%		7.52%		5.52%		6.31%	⁴

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. For the Fund’s most recent month-end performance, visit matthewsasia.com.

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

LOGO

Korea Composite Stock Price Index performance data may be readjusted periodically by the Korea Exchange due to certain factors, including the declaration of dividends. It is not possible to invest directly in an index. Source: Index data from Korea Composite Stock Price Index and Bloomberg; total return calculations performed by BNY Mellon Investment Servicing (US) Inc. Please see page 92 for index definition.

Calculated from 1/3/95.

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
	Sector	% of Net Assets
Samsung Electronics Co., Ltd., Pfd.	Information Technology		8.8%
Samsung Electronics Co., Ltd.	Information Technology		4.4%
Hyundai Motor Co., Ltd., 2nd Pfd.	Consumer Discretionary		4.2%
POSCO	Materials		3.8%
BGF Retail Co., Ltd.	Consumer Staples		3.8%
Samsung Fire & Marine Insurance Co., Ltd., Pfd.	Financials		3.8%
NAVER Corp.	Information Technology		3.7%
LG Household & Health Care, Ltd., Pfd.	Consumer Staples		3.5%
Hyundai Mobis Co., Ltd.	Consumer Discretionary		3.5%
Modetour Network, Inc.	Consumer Discretionary		3.4%
% OF ASSETS IN TOP TEN			42.9%

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


78		MATTHEWS ASIA FUNDS

Matthews Korea Fund

Portfolio Manager Commentary (unaudited) (continued)

on major platforms such as Naver, South Korea’s top search engine. Cafe24 provides its clients with payment systems and advertising support. With existing operations in Japan and China, Cafe24 can leverage its insights and tools globally and may be well-positioned to capture continued growth in the e-commerce space.

Outlook:

We remain cautious in our outlook for South Korean equities. Rising regulatory risks domestically and escalating trade conflicts globally may continue to weigh on investor sentiment. South Korea is a net exporter, so we will keep an eye on holdings that may be impacted by trade worries. On a positive note, stock price valuations have come down quite a bit in the first half because of regulatory risk. If the regulatory environment turns out to be less restrictive than the market expects, there may be some buying opportunities. In addition, corporate governance and minority shareholder return policies are both areas where we continue to see improvement. Among our portfolio companies, awareness of corporate governance issues tends to be very high within management teams.



COUNTRY ALLOCATION (%)⁷
South Korea			99.4
Cash and Other Assets, Less Liabilities			0.6



SECTOR ALLOCATION (%)⁷
Information Technology			23.2
Financials			19.1
Consumer Discretionary			18.1
Consumer Staples			14.7
Materials			9.8
Health Care			5.8
Energy			3.9
Industrials			2.9
Telecommunication Services			1.9
Cash and Other Assets, Less Liabilities			0.6



MARKET CAP EXPOSURE (%)⁷
Mega Cap (over $25B)			22.6
Large Cap ($10B-$25B)			34.4
Mid Cap ($3B-10B)			15.0
Small Cap (under $3B)			27.4
Cash and Other Assets, Less Liabilities			0.6

7	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.


matthewsasia.com \| 800.789.ASIA			79

Matthews Korea Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 73.6%


	Shares		Value
FINANCIALS: 15.3%
Banks: 9.4%
Hana Financial Group, Inc.		174,901		$6,716,330
KB Financial Group, Inc.		141,911		6,680,003
Shinhan Financial Group Co., Ltd.		157,263		6,088,932

				19,485,265


Capital Markets: 4.1%
KIWOOM Securities Co., Ltd.		55,513		5,400,011
Shinyoung Securities Co., Ltd.		58,604		2,984,965

				8,384,976


Insurance: 1.8%
DB Insurance Co., Ltd.		70,346		3,725,394

Total Financials				31,595,635


INFORMATION TECHNOLOGY: 14.5%
Internet Software & Services: 4.7%
NAVER Corp.		11,007		7,532,142
Cafe24 Corp.^b		13,537		2,176,564

				9,708,706


Technology Hardware, Storage & Peripherals: 4.4%
Samsung Electronics Co., Ltd.		216,950		9,087,945


Semiconductors & Semiconductor Equipment: 3.0%
Koh Young Technology, Inc.		34,602		3,163,304
SK Hynix, Inc.		38,180		2,930,668

				6,093,972


Electronic Equipment, Instruments & Components: 2.4%
Samsung SDI Co., Ltd.		25,592		4,908,761

Total Information Technology				29,799,384


CONSUMER DISCRETIONARY: 13.9%
Auto Components: 5.5%
Hyundai Mobis Co., Ltd.		37,560		7,143,949
Hankook Tire Co., Ltd.		108,711		4,107,587

				11,251,536


Specialty Retail: 3.8%
LOTTE Himart Co., Ltd.		71,382		5,051,260
Cuckoo Homesys Co., Ltd.^b		13,757		2,736,598

				7,787,858


Hotels, Restaurants & Leisure: 3.3%
Modetour Network, Inc.		282,982		6,901,679


Media: 1.3%
Kakao M Corp.		33,475		2,701,818

Total Consumer Discretionary				28,642,891


CONSUMER STAPLES: 9.6%
Food & Staples Retailing: 6.5%
BGF Retail Co., Ltd.		45,152		7,900,081
E-MART, Inc.		24,250		5,533,926

				13,434,007


Food Products: 3.1%
Orion Holdings Corp.		234,003		5,775,882
Orion Corp.		4,171		556,889

				6,332,771

Total Consumer Staples				19,766,778


	Shares		Value
MATERIALS: 7.4%
Metals & Mining: 5.0%
POSCO		26,841		$7,919,704
Korea Zinc Co., Ltd.		6,924		2,398,247

				10,317,951


Containers & Packaging: 2.4%
Lock&Lock Co., Ltd.		252,306		5,026,228

Total Materials				15,344,179


HEALTH CARE: 5.8%
Pharmaceuticals: 2.5%
Yuhan Corp.		14,241		2,778,568
DongKook Pharmaceutical Co., Ltd.		41,758		2,406,310

				5,184,878


Health Care Equipment & Supplies: 1.9%
Interojo Co., Ltd.		123,685		3,847,303


Biotechnology: 1.4%
Hugel, Inc.^b		6,511		2,815,760

Total Health Care				11,847,941


INDUSTRIALS: 2.9%
Commercial Services & Supplies: 1.6%
S-1 Corp.		38,951		3,383,092


Machinery: 1.3%
Hyundai Construction Equipment Co., Ltd.^b		20,464		2,592,732

Total Industrials				5,975,824


ENERGY: 2.3%
Oil, Gas & Consumable Fuels: 2.3%
SK Innovation Co., Ltd.		18,540		3,358,120
S-Oil Corp.		14,915		1,464,682

Total Energy				4,822,802


TELECOMMUNICATION SERVICES: 1.9%
Wireless Telecommunication Services: 1.9%
SK Telecom Co., Ltd. ADR		163,600		3,815,152

Total Telecommunication Services				3,815,152


TOTAL COMMON EQUITIES				151,610,586

(Cost $119,520,729)

PREFERRED EQUITIES: 25.8%
INFORMATION TECHNOLOGY: 8.8%
Technology Hardware, Storage & Peripherals: 8.8%
Samsung Electronics Co., Ltd., Pfd.		534,600		18,052,855

Total Information Technology				18,052,855


CONSUMER STAPLES: 5.1%
Personal Products: 5.1%
LG Household & Health Care, Ltd., Pfd.		11,018		7,218,888
AMOREPACIFIC Group, Pfd.		68,932		3,368,342

Total Consumer Staples				10,587,230


80		MATTHEWS ASIA FUNDS

Matthews Korea Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)

PREFERRED EQUITIES (continued)


	Shares		Value
CONSUMER DISCRETIONARY: 4.2%
Automobiles: 4.2%
Hyundai Motor Co., Ltd., 2nd Pfd.		105,899		$8,619,600

Total Consumer Discretionary				8,619,600


FINANCIALS: 3.8%
Insurance: 3.8%
Samsung Fire & Marine Insurance Co., Ltd., Pfd.		47,588		7,789,522

Total Financials				7,789,522


MATERIALS: 2.4%
Chemicals: 2.4%
LG Chem, Ltd., Pfd.		27,091		4,895,532

Total Materials				4,895,532


ENERGY: 1.5%
Oil, Gas & Consumable Fuels: 1.5%
S-Oil Corp., Pfd.		37,562		3,175,416

Total Energy				3,175,416


TOTAL PREFERRED EQUITIES				53,120,155

(Cost $36,081,589)

TOTAL INVESTMENTS: 99.4%				204,730,741
(Cost $155,602,318)

CASH AND OTHER ASSETS, LESS LIABILITIES: 0.6%				1,266,329


NET ASSETS: 100.0%				$205,997,070

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

b	Non-income producing security.

ADR	American Depositary Receipt

Pfd.

Preferred

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			81

LOGO


PORTFOLIO MANAGERS
Lydia So, CFA
Lead Manager
Beini Zhou, CFA	Tiffany Hsiao, CFA
Co-Manager	Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MSMLX	MISMX
CUSIP	577125206	577125867
Inception	9/15/08	4/30/13
NAV	$22.65	$22.65
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	1.49%	1.35%
After Fee Waiver and Reimbursement²	1.46%	1.25%
Portfolio Statistics
Total # of Positions		80
Net Assets		$402.9 million
Weighted Average Market Cap		$1.3 billion
Portfolio Turnover³		67.13%
Benchmark
MSCI AC Asia ex Japan Small Cap Index
Redemption Fee
2% within first 90 calendar days of purchase

OBJECTIVE

Long-term capital appreciation.

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 the common and preferred stocks of Small Companies located in Asia ex Japan, which consists of all countries and markets in Asia excluding Japan, but including all other developed, emerging and frontier countries and markets in the Asian region.

Matthews Asia Small Companies Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews Asia Small Companies Fund returned –1.05% (Investor Class) and –0.92% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Small Cap Index, returned –7.14%. For the quarter ending June 30, the Fund returned –2.92% (Investor Class) and –2.87% (Institutional Class), compared to the benchmark return of –6.73% over the same period.

Market Environment:

Asian markets were volatile early in the year and became relatively steady by April and May. Investor sentiment turned fragile, however, late in the second quarter due to several events. As anticipated, the U.S. Federal Reserve raised interest rates by 25 basis points (0.25%) in mid-June. Amid this rising rate environment, the strong U.S. dollar coupled with higher oil prices further pressured broader emerging market equities. Within Asia, Indonesia, India and the Philippines tend to be more vulnerable due to their relative dependence on foreign currencies that can affect trade deficits. Meanwhile, trade war rhetoric between the U.S. and China also caused further volatility for Chinese equities as concerns spread over the potential negative economic impact to global corporations. Lastly, after months of back and forth regarding bilateral U.S.-North Korea talks, the leaders of both countries held a summit meeting in June and signed an agreement to work toward nuclear denuclearization of the Korean Peninsula.

Performance Contributors and Detractors:

Our holdings from China and South Korea were broadly positive performance contributors for the first half of the year. During the second quarter, the portfolio’s Chinese and Indian holdings performed considerably better than holdings from elsewhere in the region, which suffered due to the challenging environment. Our stock selection in China and India also significantly contributed to both the portfolio’s absolute and relative performance for the second quarter. Indian pharmaceutical and chemical company Merck, for example, performed strongly due to improving fundamentals and asset divestment news at the parent company level.

By sector, several portfolio holdings in health care and information technology were bright spots due to company-specific factors during the uneasy second quarter. Chilisin Electronics, a Taiwan-based manufacturer and distributor of inductors and coils, performed robustly thanks to the company’s bold industry consolidation moves that may pave the way for future growth.

Some consumer discretionary and financials holdings were among the weakest performers within the portfolio for the second quarter. The stock prices of Hong Kong’s Guotai Junan International and Ho Chi Minh City Securities in Vietnam—both brokerage businesses—experienced sharp declines due to a high correlation between their profitability and the performance of capital markets. In addition, two of our largest detractors to performance for the second quarter were Valuetronics Holdings, a Hong Kong-based electronics manufacturing service provider, and Japan’s CKD, a manufacturer of factory automation equipment. Shares of both firms experienced sharp price corrections following pullbacks in revenue momentum in some segments of their businesses.

(continued)

1	Prospectus expense ratios.

Matthews has contractually agreed (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class to 1.25% first by waiving class specific expenses (i.e., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving non-class specific expenses of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 1.25% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 1.25%. If the operating expenses fall below the expense limitation in a year within three years after Matthews has made a waiver or reimbursement, the Fund may reimburse Matthews up to an amount that does not cause the expenses for that year to exceed the lesser of (i) the expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will remain in place until April 30, 2019 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.

3	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


82		MATTHEWS ASIA FUNDS



PERFORMANCE AS OF JUNE 30, 2018
					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		Since Inception			Inception Date
Investor Class (MSMLX)		-2.92%		-1.05%		12.87%		2.87%		5.90%		11.74%			09/15/08
Institutional Class (MISMX)		-2.87%		-0.92%		13.07%		3.10%		6.13%		5.20%			04/30/13
MSCI AC Asia ex Japan Small Cap Index⁴		-6.73%		-7.14%		6.91%		1.87%		5.19%		8.01%	⁵
Lipper Pacific ex Japan Funds Category Average⁶		-5.15%		-4.63%		9.66%		6.37%		7.52%		8.47%	⁷

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

LOGO

Calculated from 9/15/08.

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.

Calculated from 9/30/08.



TOP TEN HOLDINGS⁸
	Sector	Country	% of Net Assets
Silergy Corp.	Information Technology	China/Hong Kong		2.5%
Vitasoy International Holdings, Ltd.	Consumer Staples	China/Hong Kong		2.3%
Shanghai Haohai Biological Technology Co., Ltd.	Health Care	China/Hong Kong		2.0%
A-Living Services Co., Ltd.	Industrials	China/Hong Kong		2.0%
Sunny Friend Environmental Technology Co., Ltd.	Industrials	Taiwan		1.9%
Times China Holdings, Ltd.	Real Estate	China/Hong Kong		1.8%
PT Bank Tabungan Pensiunan Nasional	Financials	Indonesia		1.8%
GRUH Finance, Ltd.	Financials	India		1.8%
Yeah1 Group Corp.	Information Technology	Vietnam		1.8%
BBI Life Sciences Corp.	Health Care	China/Hong Kong		1.7%
% OF ASSETS IN TOP TEN				19.6%

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


matthewsasia.com \| 800.789.ASIA			83



COUNTRY ALLOCATION (%)^9,10
China/Hong Kong			36.0
Taiwan			13.4
India			12.3
South Korea			11.6
Thailand			4.9
Indonesia			4.1
Vietnam			3.9
Japan			3.3
Malaysia			3.0
Philippines			1.3
Australia			1.3
United States			1.1
Singapore			0.9
Cash and Other Assets, Less Liabilities			2.9



SECTOR ALLOCATION (%)¹⁰
Information Technology			23.0
Industrials			15.4
Consumer Discretionary			12.5
Health Care			11.4
Consumer Staples			10.1
Financials			10.0
Materials			6.3
Real Estate			5.0
Energy			3.3
Cash and Other Assets, Less Liabilities			2.9



MARKET CAP EXPOSURE (%)^10,11
Mega Cap (over $25B)			0.0
Large Cap ($10B–$25B)			0.0
Mid Cap ($3B–10B)			8.4
Small Cap (under $3B)			88.7
Cash and Other Assets, Less Liabilities			2.9

9	Not all countries where the Fund may invest are included in the benchmark index.

10	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

11	The Fund defines Small Companies as companies with market capitalization generally between $100 million and $3 billion or the largest company included in the Fund’s primary benchmark, the MSCI All Country Asia ex Japan Small Cap Index.

Matthews Asia Small Companies Fund

Portfolio Manager Commentary (unaudited) (continued)

Notable Portfolio Changes:

During the second quarter, we exited several China positions for a variety of reasons. We shed our entire position in GDS Holdings, an independent data center operator, due to its robust share price run-up. As this company’s market capitalization reached mid-cap status, we opted to invest proceeds in other less richly priced companies. We also exited Lifetech Scientific as its share price rose sharply due to a recent change among its major shareholders. We believe that such large and sudden increases in valuations were not supported by fundamentals and chose to sell our stake and lock in profits. Unfortunately, not all of our holdings performed up to our expectations. We exited Beijing Urban Construction, a mass transit design and engineering company, due to our concerns over capital allocation decisions that we felt could compromise the company’s cash flow and profitability.

Additionally, we took profits by trimming other holdings in Taiwan and South Korea that had appreciated significantly in price. We exited our long-term holdings in Ultrajaya, an Indonesian UHT milk producer. Although we deem Ultrajaya as a reasonably well-run company, we are concerned that competition will intensify, which could lead to margin contraction.

We introduced over a dozen new companies to the portfolio as we find their long-term growth trajectories attractive and supported by favorable industry tailwinds. Saigon Cargo Service Corporation is one of Vietnam’s leading air cargo service providers. We believe the company is well-positioned to meet the growing air cargo handling throughputs in the country as trade volume grows. Similarly, we initiated a position in SUNeVision, one of Hong Kong’s leading independent data center operators. The company is well-positioned to capture the burgeoning data traffic in the region. After the recent correction of the share price, the risk-reward profile turned more favorable in our opinion.

Outlook:

Similar to what we observed during the first quarter, concerns over rising interest rates and dynamic geopolitical factors appear to have heightened market volatility. Such sentiment could persist for the remainder of 2018. Over the medium term, many Asian countries are poised to hold elections in the next 12 to 18 months, which can add to market uncertainty. While we are mindful of these challenges, we are encouraged by the earnings recovery thus far among many Asian corporations. We remain constructive on businesses that are well-positioned to address the needs of Asia’s evolving domestic demand from services to infrastructure to technologies. As we meet with corporate managers across Asia on our research trips, we find that many small-cap companies are at the forefront of delivering innovative products and solutions to households and businesses. Such a dynamic and expansive investment landscape is a reminder of how Asia’s entrepreneurialism has strived and progressed in the past decade. We look to continue uncovering attractive investment candidates that possess the attributes to grow and compound in size in a sustainable manner for the long run.


84		MATTHEWS ASIA FUNDS

Matthews Asia Small Companies Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 97.1%


	Shares		Value
CHINA/HONG KONG: 36.0%
Silergy Corp.		413,000		$10,035,623
Vitasoy International Holdings, Ltd.		2,942,000		9,400,306
Shanghai Haohai Biological Technology Co., Ltd. H Shares^b,c		1,271,200		7,933,409
A-Living Services Co., Ltd. H Shares^b,c,d		4,307,000		7,871,559
Times China Holdings, Ltd.		4,977,000		7,346,696
BBI Life Sciences Corp.^c		17,482,500		6,974,084
China BlueChemical, Ltd. H Shares		18,124,000		6,654,511
Sinopec Kantons Holdings, Ltd.		14,048,000		6,624,432
Precision Tsugami China Corp., Ltd.^c,d		5,523,000		6,527,271
China Aviation Oil Singapore Corp., Ltd.		6,004,100		6,511,014
SITC International Holdings Co., Ltd.		5,728,000		6,381,265
China Meidong Auto Holdings, Ltd.		13,262,000		5,990,521
SUNeVision Holdings, Ltd.		9,211,000		5,441,952
Yuzhou Properties Co., Ltd.		9,136,000		5,368,929
Valuetronics Holdings, Ltd.		10,056,500		4,888,920
Genscript Biotech Corp.		1,708,000		4,670,475
Xin Point Holdings, Ltd.^c		6,965,000		4,591,200
Yihai International Holding, Ltd.		2,391,000		4,543,644
China Youzan, Ltd.^d		36,424,000		4,353,837
Truly International Holdings, Ltd.		21,980,000		4,186,249
Kingdee International Software Group Co., Ltd.		3,928,000		4,000,781
Guotai Junan International Holdings, Ltd.		18,178,000		3,917,980
Huifu Payment, Ltd.^b,c,d		4,498,800		3,893,501
TK Group Holdings, Ltd.		3,536,000		3,010,278
AK Medical Holdings, Ltd.^b,c		4,148,000		2,782,582
Wise Talent Information Technology Co., Ltd.^d		281,000		1,164,028

Total China/Hong Kong				145,065,047


TAIWAN: 13.4%
Sunny Friend Environmental Technology Co., Ltd.		1,071,000		7,543,886
ITEQ Corp.		2,722,000		6,340,882
Taimide Tech, Inc.		2,017,000		5,514,011
KS Terminals, Inc.		3,225,000		5,465,958
Global PMX Co., Ltd.		1,077,000		5,343,810
Great Tree Pharmacy Co., Ltd.^†		1,611,600		4,550,373
Chilisin Electronics Corp.		749,000		4,376,919
Taiwan Paiho, Ltd.		2,018,000		4,244,452
Advanced Ceramic X Corp.		508,000		4,210,943
Tong Hsing Electronic Industries, Ltd.		1,086,000		3,762,804
Kinik Co.		1,112,000		2,571,998

Total Taiwan				53,926,036


INDIA: 12.3%
GRUH Finance, Ltd.		1,597,731		7,099,881
Merck, Ltd.		191,018		6,642,467
AIA Engineering, Ltd.		288,085		6,318,714
Gabriel India, Ltd.		2,703,670		5,390,578
Shriram City Union Finance, Ltd.		177,315		5,239,777
Page Industries, Ltd.		11,855		4,808,978
Cholamandalam Investment and Finance Co., Ltd.		181,888		4,016,503
Syngene International, Ltd.^b,c		419,978		3,740,269
NIIT Technologies, Ltd.		223,551		3,582,956
Natco Pharma, Ltd.		224,026		2,637,448

Total India				49,477,571


	Shares		Value
SOUTH KOREA: 11.6%
Douzone Bizon Co., Ltd.		117,418		$6,525,286
Value Added Technology Co., Ltd.		208,063		6,252,808
Incross Co., Ltd.^d		256,761		6,202,768
CLIO Cosmetics Co., Ltd.		227,330		5,794,118
Cosmecca Korea Co., Ltd.		164,975		5,277,347
Cafe24 Corp.^d		28,649		4,606,366
Enzychem Lifesciences Corp.^d		56,294		4,283,976
Hy-Lok Corp.		179,393		4,117,164
Tongyang pile, Inc.		879,667		3,590,123

Total South Korea				46,649,956


THAILAND: 4.9%
Plan B Media Public Co., Ltd. F Shares		30,458,900		5,601,585
TOA Paint Thailand Public Co., Ltd.		4,043,500		4,639,223
AP Thailand Public Co., Ltd.		18,663,500		4,585,476
Rich Sport Public Co., Ltd.		26,388,400		3,954,644
KGI Securities Thailand Public Co., Ltd.		7,830,000		901,386

Total Thailand				19,682,314


INDONESIA: 4.1%
PT Bank Tabungan Pensiunan Nasional		26,131,200		7,290,460
PT BFI Finance Indonesia		88,195,000		4,185,108
PT Arwana Citramulia		134,190,800		3,165,142
PT Puradelta Lestari^c		207,935,300		1,854,938

Total Indonesia				16,495,648


VIETNAM: 3.9%
Yeah1 Group Corp.^d		510,000		7,086,264
Saigon Cargo Service Corp.		524,930		4,216,177
Ho Chi Minh City Securities Corp.		1,434,300		3,546,218
Nam Long Investment Corp.		870,634		1,055,777

Total Vietnam				15,904,436


JAPAN: 3.3%
CKD Corp.		305,300		5,006,588
Honma Golf, Ltd.^b,c		4,125,000		4,226,369
Tri Chemical Laboratories, Inc.		100,100		3,970,838

Total Japan				13,203,795


MALAYSIA: 3.0%
D&O Green Technologies BHD		32,253,000		5,662,739
Bursa Malaysia BHD		2,333,800		4,246,793
Karex BHD		10,820,825		2,193,468

Total Malaysia				12,103,000


PHILIPPINES: 1.3%
Philippine Seven Corp.		2,008,531		5,436,428

Total Philippines				5,436,428


AUSTRALIA: 1.3%
OZ Minerals, Ltd.		733,498		5,114,775

Total Australia				5,114,775


UNITED STATES: 1.1%
Knowles Corp.^d		300,700		4,600,710

Total United States				4,600,710


matthewsasia.com \| 800.789.ASIA			85

Matthews Asia Small Companies Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)

COMMON EQUITIES (continued)


	Shares		Value
SINGAPORE: 0.9%
Delfi, Ltd.		3,736,300		$3,437,925

Total Singapore				3,437,925


TOTAL COMMON EQUITIES				391,097,641

(Cost $369,288,746)

RIGHTS: 0.0%
TAIWAN: 0.0%
Great Tree Pharmacy Co., Ltd., Rights, expires 07/16/18^†,d		118,883		93,913

Total Taiwan				93,913


TOTAL RIGHTS				93,913

(Cost $0)

TOTAL INVESTMENTS: 97.1%				391,191,554
(Cost $369,288,746)

CASH AND OTHER ASSETS, LESS LIABILITIES: 2.9%				11,688,548


NET ASSETS: 100.0%				$402,880,102

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

c	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

d	Non-income producing security.

†	Affiliated Issuer, as defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of this issuer)

BHD

Berhad

See accompanying notes to financial statements.


86		MATTHEWS ASIA FUNDS

LOGO


PORTFOLIO MANAGERS
Tiffany Hsiao, CFA
Lead Manager
Kenichi Amaki
Co-Manager

FUND FACTS
	Investor	Institutional
Ticker	MCSMX	MICHX
CUSIP	577125404	577125842
Inception	5/31/11	11/30/17
NAV	$12.96	$12.95
Initial Investment	$2,500	$100,000
Gross Expense Ratio¹	2.34%	2.09%
After Fee Waiver and Reimbursement²	1.50%	1.25%
Portfolio Statistics
Total # of Positions		51
Net Assets		$70.8 million
Weighted Average Market Cap		$1.9 billion
Portfolio Turnover³		67.22%
Benchmark
MSCI China Small Cap Index
Redemption Fee
2% within first 90 calendar days of purchase

OBJECTIVE

Long-term capital appreciation.

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 the common and preferred stocks of Small Companies located in China. China includes its administrative and other districts, such as Hong Kong.

Matthews China Small Companies Fund

Portfolio Manager Commentary (unaudited)

For the first half of 2018, the Matthews China Small Companies Fund returned 9.00% (Investor Class) and 9.10% (Institutional Class), outperforming its benchmark, the MSCI China Small Cap Index, which returned 0.91% over the same period. For the quarter ending June 30, the Fund returned 2.37% (Investor Class) and 2.37% (Institutional Class) while its benchmark fell –1.90%.

Market Environment:

Trade war tensions and geopolitical risks dominated headlines during the first half of the year, particularly in the second quarter. This negatively impacted Chinese equity markets in both performance and volatility. Fundamentally, however, China’s domestic consumption economy remains relatively unaffected. Home sales through the end of May 2018 increased more than 12% since last year, following an already high base in 2017. Retail sales and industrial production figures also continued to meet expectations in the second quarter. China’s central bank, the People’s Bank of China, also continued to be accommodative, tightening controls on riskier parts of the nation’s lending system.

From both a top-down and bottom-up perspective, we continue to anticipate sustainable growth in the Chinese economy and in corporate earnings. The market’s concerns over the rising cost of funding and escalating trade tensions should, in our view, have little impact on China’s smaller companies given their domestic focus and lower dependence on financial leverage.

Performance Contributors and Detractors:

For both the first half of the year and the second quarter, our strong stock selection in the information technology, materials and industrials sectors contributed most to the Fund’s outperformance versus the benchmark. The consumer discretionary sector was a laggard during both periods and our health care sector holdings were the top detractors to Fund performance in the second quarter.

Hua Hong Semiconductor, China’s second-largest foundry, and China Maple Leaf Education Systems, China’s largest international school operator, were among the top individual contributors to Fund performance in the second quarter. Hua Hong Semiconductor benefited from China’s accelerated plan to become self-sufficient in semiconductor production and also from favorable supply and demand dynamics. China Maple Leaf continued to execute well in the high-demand segment of consumer discretionary services. We believe both companies will continue to do well in China’s structural change toward intellectual property development and consumption upgrades.

Among the top detractors to Fund performance during the second quarter were Joy City Property, a leading mall developer in China that targets millennial consumers, and Precision Tsugami (China), a leading industrial automation tool maker. Joy City was impacted by negative sentiment toward the real estate sector, which has relatively higher financial leverage. Precision Tsugami was negatively impacted by fears of a factory automation slowdown related to escalating trade tensions. We believe both companies will continue to grow as Chinese consumers upgrade their consumption patterns and Chinese industrial firms seek higher productivity. We have not been fazed by the short-term volatility in the share prices for these two holdings.

(continued)

1	Prospectus expense ratios.

Matthews has contractually agreed (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class to 1.25% first by waiving class specific expenses (i.e., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving non-class specific expenses of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 1.25% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 1.25%. If the operating expenses fall below the expense limitation in a year within three years after Matthews has made a waiver or reimbursement, the Fund may reimburse Matthews up to an amount that does not cause the expenses for that year to exceed the lesser of (i) the expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will remain in place until April 30, 2019 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.

3	The lesser of fiscal year 2017 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.


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PERFORMANCE AS OF JUNE 30, 2018
Institutional Class Shares were first offered on November 30, 2017. Performance since that date was 15.85%. Performance for the Institutional Class Shares prior to its inception represents the performance of the Investor Class. Performance differences between the Institutional Class and the Investor Class may arise due to differences in fees charged to each class.

					Average Annual Total Returns
	3 Months		YTD		1 Year		3 Years		5 Years		Since Inception			Inception date
Investor Class (MCSMX)		2.37%		9.00%		36.21%		13.52%		14.78%		7.36%			05/31/11
Institutional Class (MICHX)		2.37%		9.10%		36.36%		13.57%		14.81%		7.38%			11/30/17
MSCI China Small Cap Index⁴		-1.90%		0.91%		15.64%		-1.56%		7.22%		2.08%	⁵
Lipper China Region Funds Category Average⁶		-4.74%		-2.58%		15.90%		5.49%		10.32%		5.05%	⁵

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

LOGO

Calculated from 5/31/11

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 HOLDINGS⁷
	Sector	% of Net Assets
Silergy Corp.	Information Technology		8.4%
TK Group Holdings, Ltd.	Industrials		4.9%
Sunny Friend Environmental Technology Co., Ltd.	Industrials		4.7%
SITC International Holdings Co., Ltd.	Industrials		3.4%
Shanghai Haohai Biological Technology Co., Ltd.	Health Care		2.9%
Hua Hong Semiconductor, Ltd.	Information Technology		2.7%
China Aviation Oil Singapore Corp., Ltd.	Energy		2.7%
A-Living Services Co., Ltd.	Industrials		2.6%
Baozun, Inc.	Information Technology		2.3%
Joy City Property, Ltd.	Real Estate		2.3%
% OF ASSETS IN TOP TEN			36.9%

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


88		MATTHEWS ASIA FUNDS

Matthews China Small Companies Fund

Portfolio Manager Commentary (unaudited) (continued)

Notable Portfolio Changes:

During the second quarter we shed some “graduates” of our portfolio—stocks that did well during our holding period and saw their market capitalization exceed our typical small-cap range. China Resources Cement and KWG Property are two such examples of stocks that appreciated nicely due to strong earnings growth and valuations re-ratings. We continue to selectively add innovative companies to our portfolio, especially in the technology and consumer-related sectors. China’s small-cap universe continues to be a fertile hunting ground for finding cash flow-rich growth stocks at reasonable valuations, and we have been able to easily replace our “graduates” with attractive new holdings.

During the quarter, we initiated a position in Yihai International Holding, a leading hot pot soup base and condiments brand for both restaurants and retail consumers. We believe the company has strong growth visibility given the popularity of its associated hot pot restaurant chain and its rapidly growing new business in restaurant supplies.

Outlook:

We are still cautiously optimistic about China’s small-cap market despite heightened market volatility as we focus rigorously on the sound fundamentals of our portfolio companies. From a macro perspective, we continue to believe China has the ability to stabilize its economy through fiscal spending, interest rate adjustments and currency management. In addition, steps taken to correct China’s structural issues are continuing on the right track, despite the recent changes in presidential term limits. We are focused on seeking innovative and capital-efficient small companies that are relatively insulated from macroeconomic uncertainties. We will continue to seek companies with sustainable, quality earnings streams, strong cash flows and good balance sheets that can weather uncertain economic conditions. We believe sectors such as industrial automation, health care and technology are among the most attractive from a secular growth perspective.



COUNTRY ALLOCATION (%)⁸
China/Hong Kong			87.7
Taiwan			6.0
Japan			2.1
Cash and Other Assets, Less Liabilities			4.3



SECTOR ALLOCATION (%)⁸
Information Technology			24.0
Consumer Discretionary			19.7
Industrials			19.2
Health Care			9.0
Materials			8.2
Real Estate			5.7
Energy			4.6
Consumer Staples			4.0
Financials			1.3
Cash and Other Assets, Less Liabilities			4.3



MARKET CAP EXPOSURE (%)^8,9
Mega Cap (over $25B)			0.0
Large Cap ($10B–$25B)			0.0
Mid Cap ($3B–10B)			13.9
Small Cap (under $3B)			81.8
Cash and Other Assets, Less Liabilities			4.3

8	Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

9	The Fund defines Small Companies as companies with market capitalization generally between $100 million and $3 billion or the largest company included in the Fund’s primary benchmark, the MSCI China Small Cap Index.


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Matthews China Small Companies Fund

June 30, 2018

Schedule of Investments^a (unaudited)

COMMON EQUITIES: 95.7%


	Shares		Value
INFORMATION TECHNOLOGY: 24.0%
Semiconductors & Semiconductor Equipment: 12.4%
Silergy Corp.		245,000		$5,953,336
Hua Hong Semiconductor, Ltd.^b,c		557,000		1,903,757
SG Micro Corp. A Shares^d		50,497		934,724

				8,791,817


Internet Software & Services: 4.5%
Baozun, Inc. ADR^d		30,300		1,657,410
SUNeVision Holdings, Ltd.		1,963,000		1,159,760
Wise Talent Information Technology Co., Ltd.^d		89,400		370,335

				3,187,505


Electronic Equipment, Instruments & Components: 3.7%
China Youzan, Ltd.^d		10,300,000		1,231,181
Merry Electronics Co., Ltd.		204,000		886,013
Truly International Holdings, Ltd.		2,724,000		518,805
China High Precision Automation Group, Ltd.^d,e		195,000		248

				2,636,247


Software: 2.1%
Kingdee International Software Group Co., Ltd.		1,452,000		1,478,904


IT Services: 1.3%
Huifu Payment, Ltd.^b,c,d		1,074,800		930,189

Total Information Technology				17,024,662


CONSUMER DISCRETIONARY: 19.7%
Diversified Consumer Services: 3.9%
China Maple Leaf Educational Systems, Ltd.		818,000		1,468,900
China Yuhua Education Corp., Ltd.^b,c		1,876,000		1,327,239

				2,796,139


Hotels, Restaurants & Leisure: 3.7%
Xiabuxiabu Catering Management China Holdings Co., Ltd.^b,c		632,000		1,380,079
Future Bright Holdings, Ltd.		5,832,000		802,814
Huangshan Tourism Development Co., Ltd. B Shares		345,158		409,594

				2,592,487


Specialty Retail: 3.5%
China Meidong Auto Holdings, Ltd.		3,334,000		1,505,987
China ZhengTong Auto Services Holdings, Ltd.		1,516,000		1,006,393
			��
				2,512,380


Auto Components: 3.2%
Xin Point Holdings, Ltd.^c		2,070,000		1,364,506
NBTM New Materials Group Co., Ltd. A Shares		616,918		907,379

				2,271,885


Leisure Products: 2.1%
Honma Golf, Ltd.^b,c		1,441,000		1,476,412


Textiles, Apparel & Luxury Goods: 1.8%
JNBY Design, Ltd.^c		543,000		1,240,569


Household Durables: 1.5%
Vatti Corp., Ltd. A Shares		168,914		621,662
Vatti Corp., Ltd. A Shares		118,100		434,076

				1,055,738

Total Consumer Discretionary				13,945,610


	Shares		Value
INDUSTRIALS: 19.2%
Commercial Services & Supplies: 8.9%
Sunny Friend Environmental Technology Co., Ltd.		473,000		$3,331,707
A-Living Services Co., Ltd. H Shares^b,c,d		1,017,750		1,860,060
Greentown Service Group Co., Ltd.^c		1,224,000		1,107,968

				6,299,735


Machinery: 6.9%
TK Group Holdings, Ltd.		4,084,000		3,476,803
Precision Tsugami China Corp., Ltd.^c,d		1,180,000		1,394,565

				4,871,368


Marine: 3.4%
SITC International Holdings Co., Ltd.		2,149,000		2,394,088

Total Industrials				13,565,191


HEALTH CARE: 9.0%
Biotechnology: 7.2%
Shanghai Haohai Biological Technology Co., Ltd. H Shares^b,c		328,300		2,048,881
BBI Life Sciences Corp.^c		3,286,500		1,311,044
BeiGene, Ltd. ADR^d		6,500		999,245
Amoy Diagnostics Co., Ltd. A Shares		86,760		729,109

				5,088,279


Health Care Providers & Services: 1.0%
C-MER Eye Care Holdings, Ltd.^c,d		680,000		705,177


Life Sciences Tools & Services: 0.8%
Genscript Biotech Corp.		214,000		585,177

Total Health Care				6,378,633


MATERIALS: 8.2%
Chemicals: 3.1%
China BlueChemical, Ltd. H Shares		4,318,000		1,585,421
Shanghai Putailai New Energy Technology Co., Ltd. A Shares		67,200		648,032

				2,233,453


Containers & Packaging: 1.8%
CPMC Holdings, Ltd.		2,089,000		1,287,613


Metals & Mining: 1.7%
MMG, Ltd.^d		1,696,000		1,180,721


Construction Materials: 1.6%
Huaxin Cement Co., Ltd. B Shares		835,586		1,127,756

Total Materials				5,829,543


REAL ESTATE: 5.7%
Real Estate Management & Development: 5.7%
Joy City Property, Ltd.		12,784,000		1,607,935
Times China Holdings, Ltd.		976,000		1,440,702
Yuzhou Properties Co., Ltd.		1,700,000		999,035

Total Real Estate				4,047,672


ENERGY: 4.6%
Oil, Gas & Consumable Fuels: 4.6%
China Aviation Oil Singapore Corp., Ltd.		1,732,700		1,878,988
Sinopec Kantons Holdings, Ltd.		2,892,000		1,363,743

Total Energy				3,242,731


90		MATTHEWS ASIA FUNDS

Matthews China Small Companies Fund

June 30, 2018

Schedule of Investments^a (unaudited) (continued)

COMMON EQUITIES (continued)


	Shares		Value
CONSUMER STAPLES: 4.0%
Food Products: 4.0%
Yihai International Holding, Ltd.		740,000		$1,406,230
Jonjee Hi-Tech Industrial And Commercial Holding Co., Ltd. A Shares		239,524		1,009,298
Jonjee Hi-Tech Industrial And Commercial Holding Co., Ltd. A Shares		94,800		399,992

Total Consumer Staples				2,815,520


FINANCIALS: 1.3%
Banks: 1.3%
Dah Sing Banking Group, Ltd.		448,400		938,253

Total Financials				938,253


TOTAL INVESTMENTS: 95.7%				67,787,815
(Cost $64,082,744)

CASH AND OTHER ASSETS, LESS LIABILITIES: 4.3%				3,027,439


NET ASSETS: 100.0%				$70,815,254

a	Certain securities were fair valued under the valuation policies approved by the Board of Trustees (Note 2-A).

c	The securities may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933.

d	Non-income producing security.

e	Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy.

ADR	American Depositary Receipt

See accompanying notes to financial statements.


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Index Definitions

The Markit iBoxx Asian Local Bond Index (ALBI) tracks the total return performance of a bond portfolio consisting of local-currency denominated, high quality and liquid bonds in Asia ex-Japan. The ALBI includes bonds from the following countries: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.

The J.P. Morgan Asia Credit Index (JACI) tracks the total return performance of the Asia fixed-rate dollar bond market. JACI is a market cap-weighted index comprising sovereign, quasi-sovereign and corporate bonds and is partitioned by country, sector and credit rating. JACI includes bonds from the following countries: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand.

The MSCI All Country Asia ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.

The MSCI All Country Asia Pacific Index is a free float–adjusted market capitalization–weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan and Thailand.

The MSCI Emerging Markets (EM) Asia Index is a free float-adjusted market capitalization weighted index of the stock markets of China, India, Indonesia, Malaysia, Philippines, South Korea, Taiwan and Thailand.

The MSCI China Index is a free float–adjusted market capitalization–weighted index of Chinese equities that includes China-affiliated corporations and H shares listed on the Hong Kong

exchange, and B shares listed on the Shanghai and Shenzhen exchanges.

The S&P Bombay Stock Exchange (BSE) 100 Index is a free float–adjusted market capitalization–weighted index of the 100 stocks listed on the Bombay Stock Exchange.

The MSCI Japan Index is a free float–adjusted market capitalization–weighted index of Japanese equities listed in Japan.

The Korea Composite Stock Price Index (KOSPI) is a market capitalization–weighted index of all common stocks listed on the Korea Stock Exchange.

The MSCI All Country Asia ex Japan Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.

The MSCI China Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the Chinese equity securities markets, including H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges, and Hong Kong-listed securities known as Red Chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China).

The MSCI All Country Asia Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, India, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.


92		MATTHEWS ASIA FUNDS

Disclosures

Fund Holdings: The Fund holdings shown in this report are as of June 30, 2018. Holdings are subject to change at any time, so holdings shown in this report may not reflect current Fund holdings. The Funds file complete schedules of portfolio holdings with the U.S. Securities and Exchange Commission (the “SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Q is filed with the SEC within 60 days of the end of the quarter to which it relates, and is available on the SEC’s website at www.sec.gov. It may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800.SEC.0330. Complete schedules of investments are also available without charge, upon request, from the Funds by calling us at 800.789.ASIA (2742).

Proxy Voting Record: The Funds’ Statement of Additional Information containing a description of the policies and procedures that the Funds have used to vote proxies relating to portfolio securities, along with each Fund’s proxy voting record relating to portfolio securities held during the most recent 12-month period ended June 30, is available upon request, at no charge, at the Funds’ website at matthewsasia.com or by calling 800.789.ASIA (2742), or on the SEC’s website at www.sec.gov.

Shareholder Reports and Prospectuses: To reduce the Funds’ expenses, we try to identify related shareholders in a household and send only one copy of the Funds’ prospectus and financial reports to that address. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. At any time you may view the Funds’ current prospectus, summary prospectus and financial reports on our website. If you prefer to receive individual copies of the Funds’ prospectus or financial reports, please call us at 800.789.ASIA (2742).

Redemption Fee Policy: Through June 30, 2018, a 2.00% redemption fee was assessed on the sale or exchange of shares of the Matthews Emerging Asia Fund, Matthews Asia Small Companies Fund and Matthews China Small Companies Fund

(collectively, the “Covered Funds”) within 90 days after the date an investor purchases shares of the Covered Funds. The imposition of redemption fees pursuant to the Funds’ Short-Term Trading Redemption Fee Policy for the Covered Funds may assist the Covered Funds in discouraging market timing activity.

The redemption fee is also imposed to discourage short-term buying and selling of shares of the Covered Funds, which can disrupt the management of the Covered Funds’ investment portfolios and may have detrimental effects on the Covered Funds and other shareholders, and to allocate the costs the Covered Funds incur as a result of short-term trading and market timing. This fee is payable directly to the Covered Funds.

To determine whether the redemption fee applies, the Covered Funds do not count the day that shares were purchased, and first redeem the shares that have been held the longest.

The Covered Funds may grant exemptions from the redemption fee in certain circumstances. For more information on this policy, please see the Funds’ prospectus.

The Funds (or their agents) attempt to contact shareholders whom the Funds (or their agents) believe have violated the Funds’ policies and procedures related to short-term trading and market-timing activity, and notify them that they will no longer be permitted to buy (or exchange) shares of the Funds. When a shareholder has purchased shares of the Funds through an intermediary, the Funds may not be able to notify the shareholder of a violation of the Funds’ policies or that the Funds have taken steps to address the situation (for example, the Funds may be unable to notify a shareholder that his or her privileges to purchase or exchange shares of the Funds have been terminated). Nonetheless, additional purchase and exchange orders for such investors will not be accepted by the Funds.

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


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Disclosure of Fund Expenses (unaudited)

We believe it is important for you to understand the impact of fees regarding your investment. All mutual funds have operating expenses. As a shareholder of a mutual fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund. A fund’s operating expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing fees (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

This table illustrates your fund’s costs in two ways:

Actual Fund Return: This section helps you to estimate the actual operating expenses, after any applicable fee waivers, that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return for the past six month period, the “Expense Ratio” column shows the period’s annualized expense ratio, and the “Operating Expenses Paid During Period” column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund at the beginning of the period. You may use the information here, together with your account value, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an

$8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund in the first line under the heading entitled “Operating Expenses Paid During Period.”

Hypothetical 5% Return: This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had an annual return of 5% before operating expenses, but that the expense ratio is unchanged. In this case, because the return used is not the fund’s actual return, the results do not apply to your investment. This example is useful in making comparisons to other mutual funds because the U.S. Securities and Exchange Commission requires all mutual funds to calculate expenses based on an assumed 5% annual return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

Please note that the operating expenses shown in the table are meant to highlight and help you compare your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), redemption fees, or exchange fees.

Matthews Asia Funds does not charge any sales loads, exchange fees, or 12b-1 fees, but these may be present in other funds to which you compare this data. Therefore, the hypothetical portions of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.


94		MATTHEWS ASIA FUNDS

June 30, 2018

Disclosure of Fund Expenses (unaudited) (continued)


	INVESTOR CLASS								INSTITUTIONAL CLASS
	Beginning Account Value 1/1/18		Ending Account Value 6/30/18		Expense Ratio¹		Operating Expenses Paid During Period 1/1/18– 6/30/18²		Beginning Account Value 1/1/18		Ending Account Value 6/30/18		Expense Ratio¹		Operating Expenses Paid During Period 1/1/18– 6/30/18²
ASIA FIXED INCOME STRATEGIES
Matthews Asia Strategic Income Fund
Actual Fund Return		$1,000.00		$965.10		1.15%		$5.60		$1,000.00		$967.20		0.90%		$4.39
Hypothetical 5% Returns		$1,000.00		$1,030.50		1.15%		$5.79		$1,000.00		$1,029.26		0.90%		$4.53
Matthews Asia Credit Opportunities Fund
Actual Fund Return		$1,000.00		$972.30		1.15%		$5.62		$1,000.00		$972.50		0.90%		$4.40
Hypothetical 5% Returns		$1,000.00		$1,030.50		1.15%		$5.79		$1,000.00		$1,029.26		0.90%		$4.53

ASIA GROWTH AND INCOME STRATEGIES
Matthews Asian Growth and Income Fund
Actual Fund Return		$1,000.00		$937.90		1.10%		$5.29		$1,000.00		$938.80		0.93%		$4.47
Hypothetical 5% Returns		$1,000.00		$1,030.25		1.10%		$5.54		$1,000.00		$1,029.41		0.93%		$4.68
Matthews Asia Dividend Fund
Actual Fund Return		$1,000.00		$965.60		0.99%		$4.82		$1,000.00		$966.10		0.89%		$4.34
Hypothetical 5% Returns		$1,000.00		$1,029.70		0.99%		$4.98		$1,000.00		$1,029.21		0.89%		$4.48
Matthews China Dividend Fund
Actual Fund Return		$1,000.00		$1,031.00		1.11%		$5.59		$1,000.00		$1,031.90		0.97%		$4.89
Hypothetical 5% Returns		$1,000.00		$1,030.30		1.11%		$5.59		$1,000.00		$1,029.60		0.97%		$4.88

ASIA VALUE STRATEGY
Matthews Asia Value Fund
Actual Fund Return		$1,000.00		$970.40		1.50%		$7.33		$1,000.00		$971.70		1.25%		$6.11
Hypothetical 5% Returns		$1,000.00		$1,032.23		1.50%		$7.56		$1,000.00		$1,030.99		1.25%		$6.29

ASIA GROWTH STRATEGIES
Matthews Asia Focus Fund
Actual Fund Return		$1,000.00		$926.90		1.50%		$7.17		$1,000.00		$928.10		1.25%		$5.98
Hypothetical 5% Returns		$1,000.00		$1,032.23		1.50%		$7.56		$1,000.00		$1,030.99		1.25%		$6.29
Matthews Asia Growth Fund
Actual Fund Return		$1,000.00		$1,029.70		1.07%		$5.38		$1,000.00		$1,030.60		0.90%		$4.53
Hypothetical 5% Returns		$1,000.00		$1,030.10		1.07%		$5.39		$1,000.00		$1,029.26		0.90%		$4.53
Matthews Pacific Tiger Fund
Actual Fund Return		$1,000.00		$946.00		1.04%		$5.02		$1,000.00		$946.90		0.87%		$4.20
Hypothetical 5% Returns		$1,000.00		$1,029.95		1.04%		$5.23		$1,000.00		$1,029.11		0.87%		$4.38
Matthews Asia ESG Fund
Actual Fund Return		$1,000.00		$979.20		1.50%		$7.36		$1,000.00		$980.90		1.25%		$6.14
Hypothetical 5% Returns		$1,000.00		$1,032.23		1.50%		$7.56		$1,000.00		$1,030.99		1.25%		$6.29
Matthews Emerging Asia Fund
Actual Fund Return		$1,000.00		$891.00		1.49%		$6.99		$1,000.00		$891.50		1.25%		$5.86
Hypothetical 5% Returns		$1,000.00		$1,032.18		1.49%		$7.51		$1,000.00		$1,030.99		1.25%		$6.29
Matthews Asia Innovators Fund
Actual Fund Return		$1,000.00		$1,013.40		1.12%		$5.59		$1,000.00		$1,014.00		0.96%		$4.79
Hypothetical 5% Returns		$1,000.00		$1,030.35		1.12%		$5.64		$1,000.00		$1,029.56		0.96%		$4.83
Matthews China Fund
Actual Fund Return		$1,000.00		$998.60		1.05%		$5.20		$1,000.00		$999.10		0.88%		$4.36
Hypothetical 5% Returns		$1,000.00		$1,030.00		1.05%		$5.28		$1,000.00		$1,029.16		0.88%		$4.43
Matthews India Fund
Actual Fund Return		$1,000.00		$950.70		1.07%		$5.18		$1,000.00		$951.60		0.88%		$4.26
Hypothetical 5% Returns		$1,000.00		$1,030.10		1.07%		$5.39		$1,000.00		$1,029.16		0.88%		$4.43

1	Annualized, based on the Fund’s most recent fiscal half-year expenses.

2	Operating expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 181 days, then divided by 365.


matthewsasia.com \| 800.789.ASIA			95

Disclosure of Fund Expenses (unaudited) (continued)


	INVESTOR CLASS								INSTITUTIONAL CLASS
	Beginning Account Value 1/1/18		Ending Account Value 6/30/18		Expense Ratio¹		Operating Expenses Paid During Period 1/1/18– 6/30/18²		Beginning Account Value 1/1/18		Ending Account Value 6/30/18		Expense Ratio¹		Operating Expenses Paid During Period 1/1/18– 6/30/18²
ASIA GROWTH STRATEGIES (continued)
Matthews Japan Fund
Actual Fund Return		$1,000.00		$1,000.80		0.90%		$4.46		$1,000.00		$1,001.30		0.83%		$4.12
Hypothetical 5% Returns		$1,000.00		$1,029.26		0.90%		$4.53		$1,000.00		$1,028.91		0.83%		$4.18
Matthews Korea Fund
Actual Fund Return		$1,000.00		$882.80		1.12%		$5.23		$1,000.00		$883.40		0.98%		$4.58
Hypothetical 5% Returns		$1,000.00		$1,030.35		1.12%		$5.64		$1,000.00		$1,029.65		0.98%		$4.93

ASIA SMALL COMPANY STRATEGIES
Matthews Asia Small Companies Fund
Actual Fund Return		$1,000.00		$989.50		1.47%		$7.25		$1,000.00		$990.80		1.25%		$6.17
Hypothetical 5% Returns		$1,000.00		$1,032.08		1.47%		$7.41		$1,000.00		$1,030.99		1.25%		$6.29
Matthews China Small Companies Fund
Actual Fund Return		$1,000.00		$1,090.00		1.50%		$7.77		$1,000.00		$1,091.00		1.25%		$6.48
Hypothetical 5% Returns		$1,000.00		$1,032.23		1.50%		$7.56		$1,000.00		$1,030.99		1.25%		$6.29

1	Annualized, based on the Fund’s most recent fiscal half-year expenses.

2	Operating expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 181 days, then divided by 365.


96		MATTHEWS ASIA FUNDS

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Statements of Assets and Liabilities (unaudited)


	Matthews Asia Strategic Income Fund		Matthews Asia Credit Opportunities Fund		Matthews Asian Growth and Income Fund
ASSETS:
Investments at value (A) (Note 2-A and 7):
Unaffiliated issuers		$106,722,329		$35,338,551		$2,121,878,842
Affiliated issuers		—		—		—
Cash		5,643,951		6,156,151		29,338,418
Cash pledged collateral for forward foreign currency exchange contracts		1,170,000		—		—
Segregated foreign currency at value		21,946		7,751		—
Foreign currency at value (B)		158		72		663,785
Dividends, interest and other receivable		1,904,072		590,984		10,201,652
Receivable for securities sold		2,806,749		1,053,305		54,937,801
Receivable for capital shares sold		75,510		135,883		2,984,326
Due from Advisor (Note 5)		—		—		—
Unrealized appreciation on forward foreign currency exchange contracts		165,468		—		—
Prepaid expenses and other assets		20,276		22,203		17,119
TOTAL ASSETS		118,530,459		43,304,900		2,220,021,943
LIABILITIES:
Payable for securities purchased		—		—		16,910,283
Payable for capital shares redeemed		214,975		27,690		8,496,164
Unrealized depreciation on forward foreign currency exchange contracts		1,473,456		—		—
Deferred foreign capital gains tax liability (Note 2-F)		52		—		—
Due to Advisor (Note 5)		52,895		12,422		1,240,424
Administration and accounting fees payable (Note 5)		1,550		529		31,068
Administration and shareholder servicing fees payable (Note 5)		12,366		4,233		242,234
Custodian fees payable		6,578		203		120,777
Intermediary service fees payable (Note 5)		26,902		4,202		572,138
Professional fees payable		31,800		29,467		54,335
Transfer agent fees payable		479		100		13,181
Accrued other expenses payable		7,719		4,065		96,338
TOTAL LIABILITIES		1,828,772		82,911		27,776,942
NET ASSETS		$116,701,687		$43,221,989		$2,192,245,001
NET ASSETS:
Investor Class		$53,509,630		$10,550,402		$1,105,975,459
Institutional Class		63,192,057		32,671,587		1,086,269,542
TOTAL		$116,701,687		$43,221,989		$2,192,245,001

See accompanying notes to financial statements.


98		MATTHEWS ASIA FUNDS

June 30, 2018


Matthews Asia Dividend Fund		Matthews China Dividend Fund		Matthews Asia Value Fund		Matthews Asia Focus Fund		Matthews Asia Growth Fund		Matthews Pacific Tiger Fund


	$6,041,416,385		$334,602,963		$31,934,065		$8,232,723		$1,041,527,155		$7,777,259,787
	906,685,870		—		—		—		30,877,498		1,325,181,024
	94,254,484		11,448,456		4,021,821		182,983		90,020,705		26,000,466
	—		—		—		—		—		—
	79,809		15,100		—		—		—		152,617
	14,835,057		1,709,534		31,015		2,117		241,656		3,284,515
	24,583,059		1,957,550		94,613		35,459		991,614		33,058,239
	—		—		—		—		—		6,724,243
	8,664,348		470,494		19,514		20,000		3,043,947		28,216,568
	—		—		—		6,812		—		—
	—		—		—		—		—		—
	91,438		6,020		14,914		19,214		12,588		70,218
	7,090,610,450		350,210,117		36,115,942		8,499,308		1,166,715,163		9,199,947,677

	8,319,988		1,152,436		174,817		2		48		16,938,858
	12,050,454		738,651		18,962		49,238		766,660		16,248,505
	—		—		—		—		—		—
	2,992,553		—		—		—		1,156,653		11,084,867
	3,933,392		195,309		18,046		—		641,816		5,001,709
	98,331		4,759		501		119		15,350		126,285
	727,030		38,142		3,936		933		125,357		899,063
	219,688		9,870		7,018		6,255		35,101		490,817
	836,261		36,375		9,715		—		67,427		945,177
	62,335		32,379		28,929		31,123		48,395		90,488
	111,576		1,303		98		290		2,978		29,487
	132,473		17,851		10,594		8,270		28,569		98,840
	29,484,081		2,227,075		272,616		96,230		2,888,354		51,954,096
	$7,061,126,369		$347,983,042		$35,843,326		$8,403,078		$1,163,826,809		$9,147,993,581

	$3,440,767,214		$253,628,814		$32,175,686		$3,438,499		$642,683,138		$2,978,917,577
	3,620,359,155		94,354,228		3,667,640		4,964,579		521,143,671		6,169,076,004
	$7,061,126,369		$347,983,042		$35,843,326		$8,403,078		$1,163,826,809		$9,147,993,581


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Statements of Assets and Liabilities (unaudited) (continued)


	Matthews Asia Strategic Income Fund				Matthews Asia Credit Opportunities Fund			Matthews Asian Growth and Income Fund
SHARES OUTSTANDING:				��
(shares of beneficial interest issued and outstanding, respectively, unlimited number of shares authorized with a $0.001 par value)
Investor Class		5,153,699				1,062,812			68,443,095
Institutional Class		6,089,607				3,292,217			67,325,482
TOTAL		11,243,306				4,355,029			135,768,577
NET ASSET VALUE:
Investor Class, offering price and redemption price		$10.38				$9.93			$16.16
Institutional Class, offering price and redemption price		$10.38				$9.92			$16.13
NET ASSETS CONSISTS OF:
Capital paid-in		$122,110,202				$44,600,535			$1,888,074,669
Undistributed (distribution in excess of) net investment income (loss)		(83,465	)			(8,876	)		(15,705,198	)
Undistributed/accumulated net realized gain (loss) on investments, and foreign currency related transactions		(978,203	)			(39,075	)		213,499,441
Net unrealized appreciation (depreciation) on investments, foreign currency translations and foreign capital gains taxes		(4,346,847	)			(1,330,595	)		106,376,089
NET ASSETS		$116,701,687				$43,221,989			$2,192,245,001
(A) Investments at cost:
Unaffiliated Issuers		$109,732,199				$36,667,268			$2,015,476,954
Affiliated Issuers		—				—			—
(B) Foreign Currency at Cost		$161				$73			$663,773

See accompanying notes to financial statements.


100		MATTHEWS ASIA FUNDS

June 30, 2018


Matthews Asia Dividend Fund			Matthews China Dividend Fund			Matthews Asia Value Fund			Matthews Asia Focus Fund		Matthews Asia Growth Fund			Matthews Pacific Tiger Fund


	182,472,869			14,229,432			2,584,925			304,483		22,903,019			99,458,460
	192,044,995			5,293,546			296,504			436,852		18,421,361			205,950,720
	374,517,864			19,522,978			2,881,429			741,335		41,324,380			305,409,180

	$18.86			$17.82			$12.45			$11.29		$28.06			$29.95
	$18.85			$17.82			$12.37			$11.36		$28.29			$29.95

	$5,544,651,289			$292,001,342			$35,326,948			$7,217,442		$854,820,251			$5,866,009,553
	(34,508,547	)		(4,761,903	)		(337,264	)		124,561		(4,644,254	)		34,183,032
	283,553,875			31,947,729			1,296,124			718,061		11,703,305			356,158,565
	1,267,429,752			28,795,874			(442,482	)		343,014		301,947,507			2,891,642,431
	$7,061,126,369			$347,983,042			$35,843,326			$8,403,078		$1,163,826,809			$9,147,993,581

	$5,009,267,511			$305,754,018			$32,376,410			$7,889,322		$744,378,686			$4,859,385,868
	668,328,369			—			—			—		24,904,989			1,340,122,392
	$14,868,952			$1,762,301			$31,013			$2,122		$242,241			$3,314,402


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Statements of Assets and Liabilities (unaudited) (continued)


	Matthews Asia ESG Fund		Matthews Emerging Asia Fund		Matthews Asia Innovators Fund
ASSETS:
Investments at value (A) (Note 2-A and 7):
Unaffiliated issuers		$20,982,119		$446,173,172		$288,095,834
Affiliated issuers		—		19,613,054		—
Cash		125,752		24,802,587		7,728,972
Segregated foreign currency at value		21		—		—
Foreign currency at value (B)		107,536		2,771,064		317,177
Dividends, interest and other receivable		48,147		973,179		580,171
Receivable for securities sold		—		—		1,442,930
Receivable for capital shares sold		72,464		2,229,578		1,678,806
Prepaid expenses and other assets		20,013		30,561		30,450
TOTAL ASSETS		21,356,052		496,593,195		299,874,340
LIABILITIES:
Payable for securities purchased		142,325		510,577		2,952,445
Payable for capital shares redeemed		53,437		796,934		620,043
Deferred foreign capital gains tax liability (Note 2-F)		69,684		3,185,666		695,066
Due to Advisor (Note 5)		1,141		325,421		167,791
Administration and accounting fees payable (Note 5)		282		6,846		3,981
Administration and shareholder servicing fees payable (Note 5)		2,260		53,958		32,768
Custodian fees payable		11,116		110,970		20,129
Intermediary service fees payable (Note 5)		5,273		49,446		—
Professional fees payable		30,390		36,695		30,896
Transfer agent fees payable		78		1,473		1,086
Accrued other expenses payable		16,202		21,652		11,021
TOTAL LIABILITIES		332,188		5,099,638		4,535,226
NET ASSETS		$21,023,864		$491,493,557		$295,339,114
NET ASSETS:
Investor Class		$12,505,956		$168,975,325		$213,593,185
Institutional Class		8,517,908		322,518,232		81,745,929
TOTAL		$21,023,864		$491,493,557		$295,339,114

See accompanying notes to financial statements.


102		MATTHEWS ASIA FUNDS

June 30, 2018


Matthews China Fund		Matthews India Fund		Matthews Japan Fund		Matthews Korea Fund		Matthews Asia Small Companies Fund		Matthews China Small Companies Fund


	$1,025,265,600		$1,998,975,586		$4,485,753,343		$204,730,741		$386,547,268		$67,787,815
	—		97,782,362		88,477,103		—		4,644,286		—
	16,221,687		5,729,670		72,152,490		2,434,232		6,402,681		3,033,445
	37,267		—		—		—		—		3,970
	604,693		8,154,969		8,515,732		—		3,306,613		3,828
	5,398,691		3,605,004		4,292,400		297,868		1,134,525		307,179
	—		12,425,494		38,966,562		—		2,540,262		—
	1,845,170		2,357,451		12,295,964		108,537		91,983		388,980
	43,943		38,389		30,318		17,322		15,049		27,166
	1,049,417,051		2,129,068,925		4,710,483,912		207,588,700		404,682,667		71,552,383

	282		5,132,402		6,096,659		1,287,975		290,260		40,442
	7,044,521		3,535,005		35,075,248		71,704		200,301		594,930
	—		12,664,204		—		—		757,631		—
	614,427		1,190,190		2,616,764		117,395		319,657		35,290
	14,924		29,879		64,767		2,959		5,637		858
	119,969		232,454		498,777		22,925		44,721		7,406
	15,643		160,595		43,177		8,307		50,921		11,671
	81,078		231,420		270,221		31,612		61,384		20,452
	30,115		42,180		46,400		26,790		37,613		19,684
	8,756		9,682		15,004		2,613		2,102		364
	187,814		62,658		161,120		19,350		32,338		6,032
	8,117,529		23,290,669		44,888,137		1,591,630		1,802,565		737,129
	$1,041,299,522		$2,105,778,256		$4,665,595,775		$205,997,070		$402,880,102		$70,815,254

	$899,849,049		$1,413,745,572		$2,496,898,638		$166,532,502		$191,005,776		$62,709,017
	141,450,473		692,032,684		2,168,697,137		39,464,568		211,874,326		8,106,237
	$1,041,299,522		$2,105,778,256		$4,665,595,775		$205,997,070		$402,880,102		$70,815,254


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Statements of Assets and Liabilities (unaudited) (continued)


	Matthews Asia ESG Fund			Matthews Emerging Asia Fund		Matthews Asia Innovators Fund
SHARES OUTSTANDING:
(shares of beneficial interest issued and outstanding, respectively, unlimited number of shares authorized with a $0.001 par value)
Investor Class		1,104,550			12,228,000		14,856,364
Institutional Class		755,367			23,232,379		5,652,051
TOTAL		1,859,917			35,460,379		20,508,415
NET ASSET VALUE:
Investor Class, offering price and redemption price		$11.32			$13.82		$14.38
Institutional Class, offering price and redemption price		$11.28			$13.88		$14.46
NET ASSETS CONSISTS OF:
Capital paid-in		$18,622,527			$471,048,016		$229,505,380
Undistributed (distribution in excess of) net investment income (loss)		(337,894	)		2,241,063		1,484,437
Undistributed/accumulated net realized gain (loss) on investments, and foreign currency related transactions		350,176			6,649,184		15,659,857
Net unrealized appreciation (depreciation) on investments, foreign currency translations and foreign capital gains taxes		2,389,055			11,555,294		48,689,440
NET ASSETS		$21,023,864			$491,493,557		$295,339,114
(A) Investments at cost:
Unaffiliated Issuers		$18,522,132			$430,558,206		$238,700,136
Affiliated Issuers		—			20,459,970		—
(B) Foreign Currency at Cost		$108,358			$2,771,152		$317,177

See accompanying notes to financial statements.


104		MATTHEWS ASIA FUNDS

June 30, 2018


Matthews China Fund		Matthews India Fund			Matthews Japan Fund			Matthews Korea Fund			Matthews Asia Small Companies Fund		Matthews China Small Companies Fund


	40,595,177		43,341,312			103,439,224			27,322,402			8,432,819		4,838,708
	6,384,748		21,072,877			89,649,374			6,431,780			9,354,059		625,885
	46,979,925		64,414,189			193,088,598			33,754,182			17,786,878		5,464,593

	$22.17		$32.62			$24.14			$6.10			$22.65		$12.96
	$22.15		$32.84			$24.19			$6.14			$22.65		$12.95

	$844,972,396		$1,447,162,050			$3,703,480,381			$138,288,707			$321,834,052		$60,355,466
	1,051,956		(2,457,387	)		(14,492,812	)		(4,311,765	)		646,323		241,694
	128,193,869		145,795,804			147,624,281			22,899,857			59,270,038		6,513,386
	67,081,301		515,277,789			828,983,925			49,120,271			21,129,689		3,704,708
	$1,041,299,522		$2,105,778,256			$4,665,595,775			$205,997,070			$402,880,102		$70,815,254

	$958,185,330		$1,496,110,566			$3,625,315,555			$155,602,318			$365,051,040		$64,082,744
	—		72,570,405			119,928,856			—			4,237,706		—
	$604,614		$8,149,850			$8,522,866			$—			$3,306,713		$3,907


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Statements of Operations (unaudited)


	Matthews Asia Strategic Income Fund			Matthews Asia Credit Opportunities Fund			Matthews Asian Growth and Income Fund
INVESTMENT INCOME:
Dividends—Unaffiliated Issuers		$19,870			$14,040			$38,516,033
Dividends—Affiliated Issuers (Note 7)		—			—			—
Interest—Unaffiliated Issuers		2,803,621			876,719			1,817,350
Foreign withholding tax		(71,860	)		(13,564	)		(2,958,742	)
TOTAL INVESTMENT INCOME		2,751,631			877,195			37,374,641
EXPENSES:
Investment advisory fees (Note 5)		358,838			120,616			8,290,629
Administration and accounting fees (Note 5)		4,416			1,485			100,714
Administration and shareholder servicing fees (Note 5)		70,842			23,813			1,614,940
Accounting out-of-pocket fees		11,349			7,845			21,077
Custodian fees		30,362			16,586			460,043
Printing fees		6,308			3,249			103,593
Intermediary service fees (Note 5)		92,104			18,001			2,063,812
Professional fees		25,042			21,764			49,032
Registration fees		21,454			16,692			44,414
Transfer agent fees		2,159			482			39,166
Trustees fees		1,985			633			56,665
Other expenses		3,173			1,457			51,902
TOTAL EXPENSES		628,032			232,623			12,895,987
Advisory fees waived and expenses waived or reimbursed (Note 5)		(46,533	)		(50,658	)		—
Administration fees waived (Note 5)		—			—			—
NET EXPENSES		581,499			181,965			12,895,987
NET INVESTMENT INCOME (LOSS)		2,170,132			695,230			24,478,654
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS, FOREIGN CURRENCY RELATED TRANSACTIONS, AND FOREIGN CAPITAL GAINS TAXES:
Net realized gain (loss) on investments—Unaffiliated Issuers		120,663			(52,012	)		139,719,772
Net realized gain (loss) on investments—Affiliated Issuers		—			—			—
Net realized gain (loss) on forward foreign currency exchange contracts		533,613			—			—
Net realized foreign capital gains tax		(31,941	)		—			—
Net realized gain (loss) on foreign currency related transactions		132,746			12,629			9,618
Net change in unrealized appreciation/depreciation on investments—Unaffiliated Issuers		(5,851,822	)		(1,818,409	)		(314,627,011	)
Net change in unrealized appreciation/depreciation on investments—Affiliated Issuers		—			—			—
Net change in unrealized appreciation/depreciation forward foreign currency exchange contracts		(1,634,417	)		—			—
Net change in deferred foreign capital gains taxes on unrealized appreciation		72,903			—			136,584
Net change in unrealized appreciation/depreciation on foreign currency related translations		(36,406	)		(2,418	)		(76,625	)
Net realized and unrealized gain (loss) on investments, forward foreign currency exchange contracts, foreign currency related transactions, and foreign capital gains taxes		(6,694,661	)		(1,860,210	)		(174,837,662	)

NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS		($4,524,529	)		($1,164,980	)		($150,359,008	)

See accompanying notes to financial statements.


106		MATTHEWS ASIA FUNDS

Six-Month Period Ended June 30, 2018


Matthews Asia Dividend Fund			Matthews China Dividend Fund			Matthews Asia Value Fund			Matthews Asia Focus Fund			Matthews Asia Growth Fund			Matthews Pacific Tiger Fund

	$100,980,386			$7,081,595			$434,807			$140,903			$7,475,493			$72,324,490
	16,089,111			—			—			—			—			13,757,555
	—			1,093			—			—			—			—
	(7,782,753	)		(368,146	)		(29,499	)		(9,665	)		(706,859	)		(6,131,510	)
	109,286,744			6,714,542			405,308			131,238			6,768,634			79,950,535

	23,802,726			1,120,828			114,854			36,110			3,492,709			31,871,278
	289,149			13,616			1,395			439			42,428			387,166
	4,637,377			218,375			22,379			7,032			680,575			6,208,953
	22,921			17,381			16,768			14,788			19,704			22,969
	963,619			86,579			29,287			23,665			242,238			1,995,500
	172,018			15,650			2,358			2,234			25,783			165,867
	4,178,983			306,703			38,973			8,073			681,825			4,899,124
	78,784			25,824			22,354			24,328			38,413			104,638
	118,397			24,973			22,264			17,104			33,085			95,546
	191,679			5,778			860			1,206			12,832			78,831
	139,661			6,293			557			277			18,562			192,651
	71,581			5,262			2,455			2,580			10,422			88,665
	34,666,895			1,847,262			274,504			137,836			5,298,576			46,111,188
	(301,367	)		—			(17,742	)		(64,062	)		—			(633,657	)
	(301,367	)		—			—			—			—			(633,657	)
	34,064,161			1,847,262			256,762			73,774			5,298,576			44,843,874
	75,222,583			4,867,280			148,546			57,464			1,470,058			35,106,661

	371,310,434			27,130,965			904,307			1,395,853			(35,772	)		199,345,515
	3,145,410			—			—			—			—			61,286
	—			—			—			—			—			—
	—			—			—			—			—			—
	(1,260,050	)		253,889			(4,135	)		(340	)		(302,058	)		(436,575	)
	(565,031,778	)		(22,785,999	)		(2,306,092	)		(2,147,516	)		16,680,237			(576,983,203	)
	(141,039,868	)		—			—			—			301,436			(173,612,415	)
	—			—			—			—			—			—
	1,657,608			—			—			7,514			695,399			(8,126,701	)
	(477,978	)		(202,060	)		(1,029	)		(526	)		(11,747	)		(473,814	)
	(331,696,222	)		4,396,795			(1,406,949	)		(745,015	)		17,327,495			(560,225,907	)

	($256,473,639	)		$9,264,075			($1,258,403	)		($687,551	)		$18,797,553			($525,119,246	)


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Statements of Operations (unaudited) (continued)


	Matthews Asia ESG Fund			Matthews Emerging Asia Fund			Matthews Asia Innovators Fund
INVESTMENT INCOME:
Dividends—Unaffiliated Issuers		$168,593			$6,269,477			$2,061,190
Dividends—Affiliated Issuers (Note 7)		—			64,703			—
Foreign withholding tax		(18,303	)		(646,333	)		(199,782	)
TOTAL INVESTMENT INCOME		150,290			5,687,847			1,861,408
EXPENSES:
Investment advisory fees (Note 5)		66,100			2,562,890			884,748
Administration and accounting fees (Note 5)		803			20,503			10,748
Administration and shareholder servicing fees (Note 5)		12,879			328,824			172,402
Accounting out-of-pocket fees		20,490			23,277			17,320
Custodian fees		38,108			531,304			88,983
Printing fees		2,249			17,401			9,876
Intermediary service fees (Note 5)		17,107			319,529			210,182
Professional fees		25,926			30,755			28,063
Registration fees		16,717			42,903			27,256
Transfer agent fees		492			6,425			10,164
Trustees fees		361			9,521			4,480
Other expenses		2,740			6,088			4,715
TOTAL EXPENSES		203,972			3,899,420			1,468,937
Advisory fees waived and expenses waived or reimbursed (Note 5)		(63,683	)		(452,636	)		—
Administration fees waived (Note 5)		—			—			—
NET EXPENSES		140,289			3,446,784			1,468,937
NET INVESTMENT INCOME (LOSS)		10,001			2,241,063			392,471
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY RELATED TRANSACTIONS, AND FOREIGN CAPITAL GAINS TAXES:
Net realized gain (loss) on investments—Unaffiliated Issuers		75,958			6,830,544			10,272,177
Net realized gain (loss) on investments—Affiliated Issuers		—			—			—
Net realized foreign capital gains tax		(4,758	)		(12,142	)		—
Net realized gain (loss) on foreign currency related transactions		(7,784	)		(176,806	)		(41,853	)
Net change in unrealized appreciation/depreciation on investments—Unaffiliated Issuers		(566,851	)		(68,169,153	)		(9,630,147	)
Net change in unrealized appreciation/depreciation on investments—Affiliated Issuers		—			(1,162,517	)		—
Net change in deferred foreign capital gains taxes on unrealized appreciation		(2,419	)		1,190,241			(279,432	)
Net change in unrealized appreciation/depreciation on foreign currency related translations		(1,458	)		(24,062	)		(13,690	)
Net realized and unrealized gain (loss) on investments, foreign currency related transactions, and foreign capital gains taxes		(507,312	)		(61,523,895	)		307,055

NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS		($497,311	)		($59,282,832	)		$699,526

See accompanying notes to financial statements.


108		MATTHEWS ASIA FUNDS

Six-Month Period Ended June 30, 2018


Matthews China Fund			Matthews India Fund			Matthews Japan Fund			Matthews Korea Fund			Matthews Asia Small Companies Fund			Matthews China Small Companies Fund

	$13,988,011			$9,101,490			$35,217,292			$1,214,235			$3,777,482			$716,263
	—			—			485,030			—			—			—
	(1,016,562	)		(99,825	)		(3,466,953	)		(195,409	)		(230,966	)		(33,012	)
	12,971,449			9,001,665			32,235,369			1,018,826			3,546,516			683,251

	3,539,833			7,476,206			15,403,570			721,469			2,141,547			255,813
	43,001			90,819			187,118			8,764			17,132			2,046
	689,665			1,456,516			3,001,218			140,557			274,750			32,837
	16,781			19,698			21,335			17,481			23,539			25,138
	118,639			521,226			231,181			40,016			167,725			62,902
	44,258			67,220			164,485			8,448			15,564			6,407
	990,809			1,585,741			1,159,841			196,588			296,929			60,732
	28,856			52,767			57,507			25,858			33,816			30,414
	46,058			43,983			35,364			20,440			26,433			18,539
	36,098			38,919			59,743			10,404			8,152			2,383
	19,183			45,551			86,604			4,502			9,018			748
	10,802			24,213			42,032			7,503			7,849			2,032
	5,583,983			11,422,859			20,449,998			1,202,030			3,022,454			499,991
	—			—			(85,130	)		—			(123,849	)		(119,560	)
	—			—			(85,130	)		—			—			—
	5,583,983			11,422,859			20,279,738			1,202,030			2,898,605			380,431
	7,387,466			(2,421,194	)		11,955,631			(183,204	)		647,911			302,820

	126,551,667			95,391,555			121,189,758			15,522,411			49,533,096			5,874,227
	—			577,674			—			—			—			—
	—			(603,750	)		—			—			(677,116	)		—
	(68,468	)		(838,638	)		(1,964,115	)		(35,702	)		(122,239	)		(1,965	)

	(151,939,391	)		(178,128,166	)		(130,478,674	)		(42,652,652	)		(52,672,697	)		(3,197,056	)

	—			(24,470,616	)		(24,613,368	)		—			28,459			—

	—			(3,205,296	)		—			—			(295,891	)		—

	(46,090	)		(28,900	)		8,932			(21,958	)		(1,163	)		(366	)

	(25,502,282	)		(111,306,137	)		(35,857,467	)		(27,187,901	)		(4,207,551	)		2,674,840

	($18,114,816	)		($113,727,331	)		($23,901,836	)		($27,371,105	)		($3,559,640	)		$2,977,660


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Statements of Changes in Net Assets


MATTHEWS ASIA STRATEGIC INCOME FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$2,170,132			$3,781,069
Net realized gain (loss) on investments and foreign currency related transactions		755,081			443,332
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(7,522,645	)		2,824,795
Net change on foreign capital gains taxes on unrealized appreciation		72,903			(56,325	)
Net change in unrealized appreciation/depreciation on swaps		—			30,907
Net increase (decrease) in net assets resulting from operations		(4,524,529	)		7,023,778
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		(1,356,704	)		(2,199,871	)
Institutional Class		(1,097,624	)		(1,075,141	)
Net decrease in net assets resulting from distributions		(2,454,328	)		(3,275,012	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		29,088,389			22,036,526
Total increase (decrease) in net assets		22,109,532			25,785,292
NET ASSETS:
Beginning of period		94,592,155			68,806,863
End of period (including undistributed/(distributions in excess of) net investment income of ($83,465) and $200,731, respectively)		$116,701,687			$94,592,155

MATTHEWS ASIA CREDIT OPPORTUNITIES FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$695,230			$902,332
Net realized gain (loss) on investments and foreign currency related transactions		(39,383	)		233,717
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(1,820,827	)		353,676
Net change in unrealized appreciation/depreciation on swaps		—			7,727
Net increase (decrease) in net assets resulting from operations		(1,164,980	)		1,497,452
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		(204,910	)		(340,862	)
Institutional Class		(499,196	)		(596,265	)
Realized gains on investments:
Investor Class		—			(84,471	)
Institutional Class		—			(189,650	)
Net decrease in net assets resulting from distributions		(704,106	)		(1,211,248	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		13,399,334			15,081,567
Total increase (decrease) in net assets		11,530,248			15,367,771
NET ASSETS:
Beginning of period		31,691,741			16,323,970
End of period (including undistributed/(distributions in excess of) net investment income of ($8,876) and $0, respectively)		$43,221,989			$31,691,741

See accompanying notes to financial statements.


110		MATTHEWS ASIA FUNDS


MATTHEWS ASIAN GROWTH AND INCOME FUND		Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)			$24,478,654			$57,127,376
Net realized gain (loss) on investments and foreign currency related transactions			139,729,390			118,819,624
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations			(314,703,636	)		368,131,814
Net change on foreign capital gains taxes on unrealized appreciation			136,584			(136,584	)
Net increase (decrease) in net assets resulting from operations			(150,359,008	)		543,942,230
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class			(15,027,965	)		(41,460,084	)
Institutional Class			(16,015,531	)		(35,174,360	)
Realized gains on investments:
Investor Class	��		—			(23,124,973	)
Institutional Class			—			(19,515,513	)
Net decrease in net assets resulting from distributions			(31,043,496	)		(119,274,930	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)			(472,265,952	)		(72,995,282	)
REDEMPTION FEES			—			7
Total increase (decrease) in net assets			(653,668,456	)		351,672,025
NET ASSETS:
Beginning of period			2,845,913,457			2,494,241,432
End of period (including distributions in excess of net investment income of ($15,705,198) and ($9,140,356), respectively)			$2,192,245,001			$2,845,913,457

MATTHEWS ASIA DIVIDEND FUND		Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)			$75,222,583			$102,427,133
Net realized gain (loss) on investments and foreign currency related transactions			373,195,794			179,902,338
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations			(706,549,624	)		1,439,899,346
Net change on foreign capital gains taxes on unrealized appreciation			1,657,608			(4,650,161	)
Net increase (decrease) in net assets resulting from operations			(256,473,639	)		1,717,578,656
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class			(37,426,519	)		(123,635,282	)
Institutional Class			(41,235,407	)		(113,776,897	)
Realized gains on investments:
Investor Class			—			(75,762,388	)
Institutional Class			—			(68,303,579	)
Net decrease in net assets resulting from distributions			(78,661,926	)		(381,478,146	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)			398,915,853			976,358,238
REDEMPTION FEES			—			374
Total increase (decrease) in net assets			63,780,288			2,312,459,122
NET ASSETS:
Beginning of period			6,997,346,081			4,684,886,959
End of period (including distributions in excess of net investment income of ($34,508,547) and ($31,069,204), respectively)			$7,061,126,369			$6,997,346,081

See accompanying notes to financial statements.


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Statements of Changes in Net Assets (continued)


MATTHEWS CHINA DIVIDEND FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$4,867,280			$5,225,463
Net realized gain (loss) on investments and foreign currency related transactions		27,384,854			23,957,987
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(22,988,059	)		48,354,739
Net increase (decrease) in net assets resulting from operations		9,264,075			77,538,189
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		(4,793,159	)		(6,366,143	)
Institutional Class		(1,858,858	)		(1,342,316	)
Realized gains on investments:
Investor Class		—			(16,273,463	)
Institutional Class		—			(3,383,594	)
Net decrease in net assets resulting from distributions		(6,652,017	)		(27,365,516	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		30,630,898			76,410,254
Total increase (decrease) in net assets		33,242,956			126,582,927
NET ASSETS:
Beginning of period		314,740,086	��		188,157,159
End of period (including distributions in excess of net investment income of ($4,761,903) and ($2,977,166), respectively)		$347,983,042			$314,740,086

MATTHEWS ASIA VALUE FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$148,546			$168,044
Net realized gain (loss) on investments and foreign currency related transactions		900,172			1,381,014
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(2,307,121	)		1,774,677
Net increase (decrease) in net assets resulting from operations		(1,258,403	)		3,323,735
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		—			(565,960	)
Institutional Class		—			(61,206	)
Realized gains on investments:
Investor Class		—			(856,844	)
Institutional Class		—			(102,341	)
Net decrease in net assets resulting from distributions		—			(1,586,351	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		6,367,749			26,293,036
Total increase (decrease) in net assets		5,109,346			28,030,420
NET ASSETS:
Beginning of period		30,733,980			2,703,560
End of period (including distributions in excess of net investment income of ($337,264) and ($485,810), respectively)		$35,843,326			$30,733,980

See accompanying notes to financial statements.


112		MATTHEWS ASIA FUNDS


MATTHEWS ASIA FOCUS FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$57,464			$140,651
Net realized gain (loss) on investments and foreign currency related transactions		1,395,513			262,782
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(2,148,042	)		3,355,299
Net change on foreign capital gains taxes on unrealized appreciation		7,514			(7,514	)
Net increase (decrease) in net assets resulting from operations		(687,551	)		3,751,218
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		—			(47,315	)
Institutional Class		—			(89,956	)
Net decrease in net assets resulting from distributions		—			(137,271	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		(6,455,512	)		1,823,093
Total increase (decrease) in net assets		(7,143,063	)		5,437,040
NET ASSETS:
Beginning of period		15,546,141			10,109,101
End of period (including undistributed net investment income of $124,561 and $67,097, respectively)		$8,403,078			$15,546,141

MATTHEWS ASIA GROWTH FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$1,470,058			$1,602,747
Net realized gain (loss) on investments and foreign currency related transactions		(337,830	)		64,866,788
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		16,969,926			172,387,587
Net change on foreign capital gains taxes on unrealized appreciation		695,399			(1,318,787	)
Net increase (decrease) in net assets resulting from operations		18,797,553			237,538,335
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		—			(3,030,603	)
Institutional Class		—			(2,036,373	)
Realized gains on investments:
Investor Class		—			(34,198,017	)
Institutional Class		—			(17,869,896	)
Net decrease in net assets resulting from distributions		—			(57,134,889	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		294,467,312			54,693,413
Total increase (decrease) in net assets		313,264,865			235,096,859
NET ASSETS:
Beginning of period		850,561,944			615,465,085
End of period (including distributions in excess of net investment income of ($4,644,254) and ($6,114,312), respectively)		$1,163,826,809			$850,561,944

See accompanying notes to financial statements.


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Statements of Changes in Net Assets (continued)


MATTHEWS PACIFIC TIGER FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$35,106,661			$60,409,177
Net realized gain (loss) on investments and foreign currency related transactions		198,970,226			222,239,704
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(751,069,432	)		2,432,709,872
Net change on foreign capital gains taxes on unrealized appreciation		(8,126,701	)		(2,958,166	)
Net increase (decrease) in net assets resulting from operations		(525,119,246	)		2,712,400,587
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		—			(18,058,687	)
Institutional Class		—			(43,981,805	)
Realized gains on investments:
Investor Class		—			(22,999,068	)
Institutional Class		—			(44,087,593	)
Net decrease in net assets resulting from distributions		—			(129,127,153	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		(51,924,058	)		489,072,525
REDEMPTION FEES		—			55
Total increase (decrease) in net assets		(577,043,304	)		3,072,346,014
NET ASSETS:
Beginning of period		9,725,036,885			6,652,690,871
End of period (including undistributed/(distributions in excess of) net investment income of $34,183,032 and ($923,629), respectively)		$9,147,993,581			$9,725,036,885

MATTHEWS ASIA ESG FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$10,001			$73,969
Net realized gain (loss) on investments and foreign currency related transactions		63,416			589,052
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(568,309	)		3,092,492
Net change on foreign capital gains taxes on unrealized appreciation		(2,419	)		(47,151	)
Net increase (decrease) in net assets resulting from operations		(497,311	)		3,708,362
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		—			(237,703	)
Institutional Class		—			(177,118	)
Realized gains on investments:
Investor Class		—			(135,639	)
Institutional Class		—			(93,846	)
Net decrease in net assets resulting from distributions		—			(644,306	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		3,466,080			6,232,396
REDEMPTION FEES		1,216			—
Total increase (decrease) in net assets		2,969,985			9,296,452
NET ASSETS:
Beginning of period		18,053,879			8,757,427
End of period (undistributed net investment loss/(distributions in excess of) net investment income ($337,894) and ($347,895), respectively)		$21,023,864			$18,053,879

See accompanying notes to financial statements.


114		MATTHEWS ASIA FUNDS


MATTHEWS EMERGING ASIA FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$2,241,063			$2,115,876
Net realized gain (loss) on investments and foreign currency related transactions		6,641,596			1,465,495
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(69,355,732	)		56,666,449
Net change on foreign capital gains taxes on unrealized appreciation		1,190,241			(1,432,546	)
Net increase (decrease) in net assets resulting from operations		(59,282,832	)		58,815,274
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		—			(586,858	)
Institutional Class		—			(1,117,042	)
Realized gains on investments:
Investor Class		—			(742,351	)
Institutional Class		—			(913,243	)
Net decrease in net assets resulting from distributions		—			(3,359,494	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		55,903,665			198,378,112
REDEMPTION FEES		43,707			107,142
Total increase (decrease) in net assets		(3,335,460	)		253,941,034
NET ASSETS:
Beginning of period		494,829,017			240,887,983
End of period (including undistributed net investment income of $2,241,063 and $0, respectively)		$491,493,557			$494,829,017

MATTHEWS ASIA INNOVATORS FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$392,471			($207,551	)
Net realized gain (loss) on investments and foreign currency related transactions		10,230,324			14,409,121
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(9,643,837	)		43,969,452
Net change on foreign capital gains taxes on unrealized appreciation		(279,432	)		(397,832	)
Net increase (decrease) in net assets resulting from operations		699,526			57,773,190
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		—			(2,843,003	)
Institutional Class		—			(527,368	)
Realized gains on investments:
Investor Class		—			(11,092,511	)
Institutional Class		—			(1,826,087	)
Net decrease in net assets resulting from distributions		—			(16,288,969	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		88,351,133			64,333,280
Total increase (decrease) in net assets		89,050,659			105,817,501
NET ASSETS:
Beginning of period		206,288,455			100,470,954
End of period (including undistributed net investment income of $1,484,437 and $1,091,966, respectively)		$295,339,114			$206,288,455

See accompanying notes to financial statements.


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Statements of Changes in Net Assets (continued)


MATTHEWS CHINA FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$7,387,466			$5,476,621
Net realized gain (loss) on investments and foreign currency related transactions		126,483,199			93,812,220
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(151,985,481	)		206,141,171
Net increase (decrease) in net assets resulting from operations		(18,114,816	)		305,430,012
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		—			(12,781,233	)
Institutional Class		—			(857,930	)
Realized gains on investments:
Investor Class		—			(66,198,560	)
Institutional Class		—			(4,097,682	)
Net decrease in net assets resulting from distributions		—			(83,935,405	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		153,931,333			172,214,277
REDEMPTION FEES		16			—
Total increase (decrease) in net assets		135,816,533			393,708,884
NET ASSETS:
Beginning of period		905,482,989			511,774,105
End of period (including undistributed/(distributions in excess of) net investment income of $1,051,956 and ($6,335,510), respectively)		$1,041,299,522			$905,482,989

MATTHEWS INDIA FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		($2,421,194	)		($4,427,103	)
Net realized gain (loss) on investments and foreign currency related transactions		94,526,841			69,824,307
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(202,627,682	)		538,480,031
Net change on foreign capital gains taxes on unrealized appreciation		(3,205,296	)		(9,458,908	)
Net increase (decrease) in net assets resulting from operations		(113,727,331	)		594,418,327
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Institutional Class		—			(624,793	)
Realized gains on investments:
Investor Class		—			(20,884,465	)
Institutional Class		—			(11,544,040	)
Net decrease in net assets resulting from distributions		—			(33,053,298	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		(52,927,629	)		192,857,560
Total increase (decrease) in net assets		(166,654,960	)		754,222,589
NET ASSETS:
Beginning of period		2,272,433,216			1,518,210,627
End of period (including distributions in excess of net investment income of ($2,457,387) and ($36,193), respectively)		$2,105,778,256			$2,272,433,216

See accompanying notes to financial statements.


116		MATTHEWS ASIA FUNDS


MATTHEWS JAPAN FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$11,955,631			$15,025,592
Net realized gain (loss) on investments and foreign currency related transactions		119,225,643			89,972,198
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(155,083,110	)		898,130,312
Net increase (decrease) in net assets resulting from operations		(23,901,836	)		1,003,128,102
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		—			(17,075,382	)
Institutional Class		—			(17,097,356	)
Realized gains on investments:
Investor Class		—			(63,332,483	)
Institutional Class		—			(58,184,089	)
Net decrease in net assets resulting from distributions		—			(155,689,310	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		577,003,268			276,866,712
REDEMPTION FEES		218			—
Total increase (decrease) in net assets		553,101,650			1,124,305,504
NET ASSETS:
Beginning of period		4,112,494,125			2,988,188,621
End of period (including distributions in excess of net investment income of ($14,492,812) and ($26,448,443), respectively)		$4,665,595,775			$4,112,494,125

MATTHEWS KOREA FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		($183,204	)		$1,893,845
Net realized gain (loss) on investments and foreign currency related transactions		15,486,709			13,644,251
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(42,674,610	)		53,260,081
Net increase (decrease) in net assets resulting from operations		(27,371,105	)		68,798,177
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		—			(7,705,028	)
Institutional Class		—			(1,296,962	)
Realized gains on investments:
Investor Class		—			(8,595,183	)
Institutional Class		—			(1,380,384	)
Net decrease in net assets resulting from distributions		—			(18,977,557	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		8,349,957			25,009,807
Total increase (decrease) in net assets		(19,021,148	)		74,830,427
NET ASSETS:
Beginning of period		225,018,218			150,187,791
End of period (including distributions in excess of net investment income of ($4,311,765) and ($4,128,561), respectively)		$205,997,070			$225,018,218

See accompanying notes to financial statements.


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Statements of Changes in Net Assets (continued)


MATTHEWS ASIA SMALL COMPANIES FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$647,911			$877,973
Net realized gain (loss) on investments and foreign currency related transactions		48,733,741			46,927,254
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(52,645,401	)		63,650,293
Net change on foreign capital gains taxes on unrealized appreciation		(295,891	)		(461,740	)
Net increase (decrease) in net assets resulting from operations		(3,559,640	)		110,993,780
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		—			(842,375	)
Institutional Class		—			(1,420,106	)
Realized gains on investments:
Investor Class		—			(14,961,651	)
Institutional Class		—			(16,856,653	)
Net decrease in net assets resulting from distributions		—			(34,080,785	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		(34,875,291	)		(64,823,384	)
REDEMPTION FEES		22,023			16,089
Total increase (decrease) in net assets		(38,412,908	)		12,105,700
NET ASSETS:
Beginning of period		441,293,010			429,187,310
End of period (including undistributed/(distributions in excess of) net investment income of $646,323 and ($1,588), respectively)		$402,880,102			$441,293,010

MATTHEWS CHINA SMALL COMPANIES FUND	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended December 31, 2017
OPERATIONS:
Net investment income (loss)		$302,820			$144,568
Net realized gain (loss) on investments and foreign currency related transactions		5,872,262			2,217,853
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations		(3,197,422	)		7,138,457
Net increase (decrease) in net assets resulting from operations		2,977,660			9,500,878
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Investor Class		—			(303,637	)
Institutional Class		—			(1,629	)
Realized gains on investments:
Investor Class		—			(1,491,793	)
Institutional Class		—			(6,780	)
Net decrease in net assets resulting from distributions		—			(1,803,839	)
CAPITAL SHARE TRANSACTIONS (net) (Note 4)		32,131,651			11,870,931
REDEMPTION FEES		20,820			15,930
Total increase (decrease) in net assets		35,130,131			19,583,900
NET ASSETS:
Beginning of period		35,685,123			16,101,223
End of period (including undistributed/(distributions in excess of) net investment income of $241,694 and ($61,126), respectively)		$70,815,254			$35,685,123

See accompanying notes to financial statements.


118		MATTHEWS ASIA FUNDS

Financial Highlights

Matthews Asia Strategic Income Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$10.98			$10.43			$9.96			$10.31			$10.42			$10.84
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.21			0.51			0.50			0.47			0.46			0.40
Net realized gain (loss) and unrealized appreciation/depreciation on investments, forward foreign currency exchange contracts, foreign currency related transactions, and foreign capital gains taxes	(0.59	)		0.46			0.38			(0.53	)		(0.19	)		(0.48	)
Total from investment operations	(0.38	)		0.97			0.88			(0.06	)		0.27			(0.08	)
LESS DISTRIBUTIONS FROM:
Net investment income	(0.22	)		(0.42	)		(0.41	)		(0.29	)		(0.38	)		(0.35	)
Net realized gains on investments	—			—			—			—			—			(0.01	)
Total distributions	(0.22	)		(0.42	)		(0.41	)		(0.29	)		(0.38	)		(0.36	)
Paid-in capital from redemption fees (Note 4)	—			—			—			—	²		—	²		0.02
Net Asset Value, end of period	$10.38			$10.98			$10.43			$9.96			$10.31			$10.42
TOTAL RETURN	(3.49%	)³		9.40%			8.85%			(0.58%	)		2.54%			(0.50%	)

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$53,510			$63,437			$55,409			$51,130			$58,594			$38,051
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.22%	⁴		1.29%			1.33%			1.28%			1.27%			1.28%
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.15%	⁴		1.15%			1.15%			1.12%			1.13%			1.20%
Ratio of net investment income (loss) to average net assets	3.82%	⁴		4.70%			4.85%			4.57%			4.36%			3.75%
Portfolio turnover⁵	25.49%	³		36.58%			71.50%			50.09%			34.28%			48.71%

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$10.97			$10.42			$9.96			$10.30			$10.42			$10.83
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.22			0.53			0.53			0.49			0.48			0.42
Net realized gain (loss) and unrealized appreciation/depreciation on investments, forward foreign currency exchange contracts, foreign currency related transactions, and foreign capital gains taxes	(0.57	)		0.47			0.36			(0.52	)		(0.20	)		(0.46	)
Total from investment operations	(0.35	)		1.00			0.89			(0.03	)		0.28			(0.04	)
LESS DISTRIBUTIONS FROM:
Net investment income	(0.24	)		(0.45	)		(0.43	)		(0.31	)		(0.40	)		(0.38	)
Net realized gains on investments	—			—			—			—			—			(0.01	)
Total distributions	(0.24	)		(0.45	)		(0.43	)		(0.31	)		(0.40	)		(0.39	)
Paid-in capital from redemption fees (Note 4)	—			—			—			—	²		—	²		0.02
Net Asset Value, end of period	$10.38			$10.97			$10.42			$9.96			$10.30			$10.42
TOTAL RETURN	(3.28%	)³		9.67%			9.02%			(0.27%	)		2.64%			(0.20%	)

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$63,192			$31,155			$13,398			$11,001			$7,840			$7,662
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.01%	⁴		1.08%			1.12%			1.09%			1.07%			1.09%
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	0.90%	⁴		0.90%			0.90%			0.90%			0.93%			1.00%
Ratio of net investment income (loss) to average net assets	4.11%	⁴		4.93%			5.13%			4.81%			4.55%			3.99%
Portfolio turnover⁵	25.49%	³		36.58%			71.50%			50.09%			34.28%			48.71%

1	Calculated using the average daily shares method.

2	Less than $0.01 per share.

3	Not annualized.

4	Annualized.

5	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


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Financial Highlights (continued)

Matthews Asia Credit Opportunities Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31, 2017			Period Ended Dec. 31, 2016¹
Net Asset Value, beginning of period		$10.39			$10.13			$10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²		0.18			0.44			0.29
Net realized gain (loss) and unrealized appreciation/depreciation on investments, swaps, and foreign currency related transactions		(0.46	)		0.35			0.18
Total from investment operations		(0.28	)		0.79			0.47
LESS DISTRIBUTIONS FROM:
Net investment income		(0.18	)		(0.43	)		(0.32	)
Net realized gains on investments		—			(0.10	)		(0.02	)
Total distributions		(0.18	)		(0.53	)		(0.34	)
Net Asset Value, end of period		$9.93			$10.39			$10.13
TOTAL RETURN		(2.77%	)³		7.86%			4.66%	³

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)		$10,550			$10,201			$10,119
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)		1.41%	⁴		1.86%			2.24%	⁴
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator		1.15%	⁴		1.15%			1.15%	⁴
Ratio of net investment income (loss) to average net assets		3.58%	⁴		4.17%			4.12%	⁴
Portfolio turnover⁵		15.02%	³		27.86%			18.80%	³

INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31, 2017			Period Ended Dec. 31, 2016¹
Net Asset Value, beginning of period		$10.39			$10.13			$10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²		0.20			0.46			0.30
Net realized gain (loss) and unrealized appreciation/depreciation on investments, swaps, and foreign currency related transactions		(0.48	)		0.36			0.18
Total from investment operations		(0.28	)		0.82			0.48
LESS DISTRIBUTIONS FROM:
Net investment income		(0.19	)		(0.46	)		(0.33	)
Net realized gains on investments		—			(0.10	)		(0.02	)
Total distributions		(0.19	)		(0.56	)		(0.35	)
Net Asset Value, end of period		$9.92			$10.39			$10.13
TOTAL RETURN		(2.75%	)³		8.13%			4.82%	³

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)		$32,672			$21,491			$6,205
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)		1.18%	⁴		1.62%			1.99%	⁴
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator		0.90%	⁴		0.90%			0.90%	⁴
Ratio of net investment income (loss) to average net assets		3.83%	⁴		4.45%			4.28%	⁴
Portfolio turnover⁵		15.02%	³		27.86%			18.80%	³

1	Commenced operations on April, 29 2016.

2	Calculated using the average daily shares method.

3	Not annualized.

4	Annualized.

5	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


120		MATTHEWS ASIA FUNDS

Matthews Asian Growth And Income Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$17.46			$14.94			$16.03			$18.01			$18.91			$18.61
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.15			0.33			0.32			0.39			0.39			0.41
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(1.23	)		2.92			(0.06	)		(1.19	)		(0.50	)		0.47
Total from investment operations	(1.08	)		3.25			0.26			(0.80	)		(0.11	)		0.88
LESS DISTRIBUTIONS FROM:
Net investment income	(0.22	)		(0.46	)		(0.48	)		(0.42	)		(0.35	)		(0.46	)
Net realized gains on investments	—			(0.27	)		(0.87	)		(0.76	)		(0.44	)		(0.12	)
Total distributions	(0.22	)		(0.73	)		(1.35	)		(1.18	)		(0.79	)		(0.58	)
Paid-in capital from redemption fees (Note 4)	—			—	²		—			—	²		—	²		—	²
Net Asset Value, end of period	$16.16			$17.46			$14.94			$16.03			$18.01			$18.91
TOTAL RETURN	(6.21%	)³		21.85%			1.34%			(4.50%	)		(0.65%	)		4.83%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$1,105,975			$1,535,746			$1,684,987			$2,045,435			$3,052,565			$3,278,586
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.10%	⁴		1.07%			1.09%			1.09%			1.08%			1.08%
Ratio of net investment income (loss) to average net assets	1.80%	⁴		1.95%			1.90%			2.17%			2.03%			2.14%
Portfolio turnover⁵	15.70%	³		23.23%			15.64%			16.48%			16.79%			15.27%

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$17.43			$14.92			$16.02			$18.00			$18.90			$18.60
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.18			0.36			0.34			0.42			0.42			0.44
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(1.24	)		2.91			(0.07	)		(1.19	)		(0.50	)		0.48
Total from investment operations	(1.06	)		3.27			0.27			(0.77	)		(0.08	)		0.92
LESS DISTRIBUTIONS FROM:
Net investment income	(0.24	)		(0.49	)		(0.50	)		(0.45	)		(0.38	)		(0.50	)
Net realized gains on investments	—			(0.27	)		(0.87	)		(0.76	)		(0.44	)		(0.12	)
Total distributions	(0.24	)		(0.76	)		(1.37	)		(1.21	)		(0.82	)		(0.62	)
Paid-in capital from redemption fees (Note 4)	—			—	²		—			—	²		—	²		—	²
Net Asset Value, end of period	$16.13			$17.43			$14.92			$16.02			$18.00			$18.90
TOTAL RETURN	(6.12%	)³		22.00%			1.44%			(4.33%	)		(0.48%	)		5.04%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$1,086,270			$1,310,168			$809,254			$823,619			$1,182,690			$1,120,218
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	0.93%	⁴		0.93%			0.94%			0.92%			0.92%			0.93%
Ratio of net investment income (loss) to average net assets	2.11%	⁴		2.16%			2.06%			2.34%			2.19%			2.30%
Portfolio turnover⁵	15.70%	³		23.23%			15.64%			16.48%			16.79%			15.27%

1	Calculated using the average daily shares method.

2	Less than $0.01 per share.

3	Not annualized.

4	Annualized.

5	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			121

Financial Highlights (continued)

Matthews Asia Dividend Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016¹			2015¹			2014¹			2013
Net Asset Value, beginning of period	$19.74			$15.52			$15.36			$15.26			$15.60			$14.58
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²	0.20			0.31			0.28			0.29			0.30			0.32
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.88	)		5.02			0.37			0.31			(0.34	)		1.30
Total from investment operations	(0.68	)		5.33			0.65			0.60			(0.04	)		1.62
LESS DISTRIBUTIONS FROM:
Net investment income	(0.20	)		(0.69	)		(0.29	)		(0.27	)		(0.23	)		(0.60	)
Net realized gains on investments	—			(0.42	)		(0.11	)		(0.23	)		—			—
Return of capital	—			—			(0.09	)		—			(0.07	)		—
Total distributions	(0.20	)		(1.11	)		(0.49	)		(0.50	)		(0.30	)		(0.60	)
Paid-in capital from redemption fees (Note 4)	—			—	³		—			—	³		—	³		—	³
Net Asset Value, end of period	$18.86			$19.74			$15.52			$15.36			$15.26			$15.60
TOTAL RETURN	(3.44%	)⁴		34.69%			4.13%			3.86%			(0.32%	)		11.27%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$3,440,767			$3,713,276			$2,650,611			$2,757,910			$2,918,228			$3,669,690
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.01%	⁵		1.03%			1.06%			1.06%			1.06%			1.06%
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	0.99%	⁵		1.02%			1.06%			1.05%			1.05%			1.06%
Ratio of net investment income (loss) to average net assets	2.01%	⁵		1.67%			1.79%			1.82%			1.89%			2.04%
Portfolio turnover⁶	18.03%	⁴		28.11%			39.76%			35.98%			20.06%			14.06%

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016¹			2015¹			2014¹			2013
Net Asset Value, beginning of period	$19.73			$15.52			$15.35			$15.26			$15.59			$14.57
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²	0.21			0.33			0.30			0.32			0.32			0.34
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.87	)		5.01			0.38			0.29			(0.33	)		1.30
Total from investment operations	(0.66	)		5.34			0.68			0.61			(0.01	)		1.64
LESS DISTRIBUTIONS FROM:
Net investment income	(0.22	)		(0.71	)		(0.31	)		(0.29	)		(0.25	)		(0.62	)
Net realized gains on investments	—			(0.42	)		(0.11	)		(0.23	)		—			—
Return of capital	—			—			(0.09	)		—			(0.07	)		—
Total distributions	(0.22	)		(1.13	)		(0.51	)		(0.52	)		(0.32	)		(0.62	)
Paid-in capital from redemption fees (Note 4)	—			—	³		—			—	³		—	³		—	³
Net Asset Value, end of period	$18.85			$19.73			$15.52			$15.35			$15.26			$15.59
TOTAL RETURN	(3.39%	)⁴		34.77%			4.33%			3.93%			(0.18%	)		11.43%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$3,620,359			$3,284,070			$2,034,276			$2,045,713			$2,107,371			$2,124,214
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	0.90%	⁵		0.92%			0.94%			0.93%			0.93%			0.93%
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	0.89%	⁵		0.91%			0.93%			0.92%			0.93%			0.93%
Ratio of net investment income (loss) to average net assets	2.16%	⁵		1.81%			1.91%			1.98%			2.02%			2.17%
Portfolio turnover⁶	18.03%	⁴		28.11%			39.76%			35.98%			20.06%			14.06%

1	Consolidated Financial Highlights. See Note 2-C.

2	Calculated using the average daily shares method.

3	Less than $0.01 per share.

4	Not annualized.

5	Annualized.

6	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


122		MATTHEWS ASIA FUNDS

Matthews China Dividend Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$17.61			$14.09			$13.79			$13.37			$13.74			$12.35
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.25			0.35			0.31			0.29			0.25			0.25
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	0.30			4.85			0.47			1.01			(0.12	)		1.35
Total from investment operations	0.55			5.20			0.78			1.30			0.13			1.60
LESS DISTRIBUTIONS FROM:
Net investment income	(0.34	)		(0.49	)		(0.28	)		(0.28	)		(0.36	)		(0.23	)
Net realized gains on investments	—			(1.19	)		(0.20	)		(0.60	)		(0.14	)		—
Total distributions	(0.34	)		(1.68	)		(0.48	)		(0.88	)		(0.50	)		(0.23	)
Paid-in capital from redemption fees (Note 4)	—			—			—			—	²		—	²		0.02
Net Asset Value, end of period	$17.82			$17.61			$14.09			$13.79			$13.37			$13.74
TOTAL RETURN	3.10%	³		37.69%			5.70%			9.54%			0.93%			13.35%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$253,629			$260,593			$160,400			$165,514			$116,954			$125,965
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.11%	⁴		1.19%			1.22%			1.19%			1.19%			1.24%
Ratio of net investment income (loss) to average net assets	2.79%	⁴		2.12%			2.28%			1.97%			1.88%			1.94%
Portfolio turnover⁵	32.64%	³		69.14%			72.96%			79.91%			25.43%			20.52%

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$17.61			$14.09			$13.79			$13.37			$13.74			$12.34
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.29			0.37			0.29			0.28			0.28			0.33
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	0.28			4.85			0.51			1.04			(0.13	)		1.32
Total from investment operations	0.57			5.22			0.80			1.32			0.15			1.65
LESS DISTRIBUTIONS FROM:
Net investment income	(0.36	)		(0.51	)		(0.30	)		(0.30	)		(0.38	)		(0.26	)
Net realized gains on investments	—			(1.19	)		(0.20	)		(0.60	)		(0.14	)		—
Total distributions	(0.36	)		(1.70	)		(0.50	)		(0.90	)		(0.52	)		(0.26	)
Paid-in capital from redemption fees (Note 4)	—			—			—			—	²		—	²		0.01
Net Asset Value, end of period	$17.82			$17.61			$14.09			$13.79			$13.37			$13.74
TOTAL RETURN	3.19%	³		37.88%			5.90%			9.71%			1.11%			13.72%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$94,354			$54,147			$27,758			$15,406			$30,662			$24,790
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	0.97%	⁴		1.04%			1.06%			1.00%			1.01%			1.08%
Ratio of net investment income (loss) to average net assets	3.18%	⁴		2.25%			2.09%			1.89%			2.06%			2.54%
Portfolio turnover⁵	32.64%	³		69.14%			72.96%			79.91%			25.43%			20.52%

1	Calculated using the average daily shares method.

2	Less than $0.01 per share.

3	Not annualized.

4	Annualized.

5	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			123

Financial Highlights (continued)

Matthews Asia Value Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31					Period Ended Dec. 31, 2015¹
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			Period Ended Dec. 31, 2015¹
Net Asset Value, beginning of period	$12.83			$9.96			$9.85		$10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²	0.05			0.14			0.09		0.02
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.43	)		3.45			0.65		(0.16	)
Total from investment operations	(0.38	)		3.59			0.74		(0.14	)
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.29	)		(0.59	)	(0.01	)
Net realized gains on investments	—			(0.43	)		(0.04	)	—
Total distributions	—			(0.72	)		(0.63	)	(0.01	)
Net Asset Value, end of period	$12.45			$12.83			$9.96		$9.85
TOTAL RETURN	(2.96%	)³		36.12%			7.43%		(1.35%	)³

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$32,176			$27,346			$2,548		$1,589
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.60%	⁴		2.32%			11.48%		36.42%	⁴
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.50%	⁴		1.50%			1.50%		1.50%	⁴
Ratio of net investment income (loss) to average net assets	0.83%	⁴		1.10%			0.84%		2.70%	⁴
Portfolio turnover⁵	7.19%	³		31.93%			19.60%		10.80%	³

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31					Period Ended Dec. 31, 2015¹
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			Period Ended Dec. 31, 2015¹
Net Asset Value, beginning of period	$12.73			$9.85			$9.83		$10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²	0.07			0.32			0.10		0.02
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.43	)		3.25			0.67		(0.15	)
Total from investment operations	(0.36	)		3.57			0.77		(0.13	)
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.26	)		(0.71	)	(0.04	)
Net realized gains on investments	—			(0.43	)		(0.04	)	—
Total distributions	—			(0.69	)		(0.75	)	(0.04	)
Net Asset Value, end of period	$12.37			$12.73			$9.85		$9.83
TOTAL RETURN	(2.83%	)³		36.35%			7.72%		(1.30%	)³

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$3,668			$3,388			$155		$143
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.36%	⁴		2.08%			11.26%		36.17%	⁴
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.25%	⁴		1.25%			1.25%		1.25%	⁴
Ratio of net investment income (loss) to average net assets	1.05%	⁴		2.59%			1.01%		2.41%	⁴
Portfolio turnover⁵	7.19%	³		31.93%			19.60%		10.80%	³

1	Commenced operations on November 30, 2015.

2	Calculated using the average daily shares method.

3	Not annualized.

4	Annualized.

5	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


124		MATTHEWS ASIA FUNDS

Matthews Asia Focus Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31											Period Ended Dec. 31, 2013¹
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			Period Ended Dec. 31, 2013¹
Net Asset Value, beginning of period	$12.18			$8.98			$8.69			$10.01			$9.66		$10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²	0.07			0.11			0.10			0.11			0.09		0.04
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.96	)		3.21			0.32			(1.31	)		0.33		(0.30	)
Total from investment operations	(0.89	)		3.32			0.42			(1.20	)		0.42		(0.26	)
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.12	)		(0.13	)		(0.07	)		(0.07	)	(0.08	)
Net realized gains on investments	—			—			—			(0.05	)		—		—
Total distributions	—			(0.12	)		(0.13	)		(0.12	)		(0.07	)	(0.08	)
Paid-in capital from redemption fees (Note 4)	—			—			—			—	³		—	³	—	³
Net Asset Value, end of period	$11.29			$12.18			$8.98			$8.69			$10.01		$9.66
TOTAL RETURN	(7.31%	)⁴		36.98%			4.82%			(12.07%	)		4.38%		(2.63%	)⁴

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$3,438			$4,838			$4,713			$5,474			$7,839		$6,258
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	2.62%	⁵		2.45%			2.47%			2.07%			2.16%		3.50%	⁵
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.50%	⁵		1.50%			1.50%			1.50%			1.57%		1.71%	⁵
Ratio of net investment income (loss) to average net assets	1.22%	⁵		1.01%			1.14%			1.08%			0.87%		0.64%	⁵
Portfolio turnover⁶	14.84%	⁴		28.42%			21.10%			23.60%			24.12%		16.23%	⁴

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31											Period Ended Dec. 31, 2013¹
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			Period Ended Dec. 31, 2013¹
Net Asset Value, beginning of period	$12.24			$8.99			$8.69			$10.04			$9.66		$10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²	0.06			0.14			0.13			0.13			0.10		0.05
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.94	)		3.21			0.31			(1.33	)		0.36		(0.30	)
Total from investment operations	(0.88	)		3.35			0.44			(1.20	)		0.46		(0.25	)
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.10	)		(0.14	)		(0.10	)		(0.08	)	(0.09	)
Net realized gains on investments	—			—			—			(0.05	)		—		—
Total distributions	—			(0.10	)		(0.14	)		(0.15	)		(0.08	)	(0.09	)
Paid-in capital from redemption fees (Note 4)	—			—			—			—	³		—	³	—	³
Net Asset Value, end of period	$11.36			$12.24			$8.99			$8.69			$10.04		$9.66
TOTAL RETURN	(7.19%	)⁴		37.35%			5.05%			(11.96%	)		4.77%		(2.48%	)⁴

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$4,965			$10,708			$5,397			$5,700			$7,148		$2,118
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	2.45%	⁵		2.27%			2.29%			1.91%			1.94%		3.32%	⁵
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.25%	⁵		1.25%			1.25%			1.25%			1.31%		1.50%	⁵
Ratio of net investment income (loss) to average net assets	0.94%	⁵		1.28%			1.37%			1.30%			0.96%		0.79%	⁵
Portfolio turnover⁶	14.84%	⁴		28.42%			21.10%			23.60%			24.12%		16.23%	⁴

1	Commenced operations on April 30, 2013.

2	Calculated using the average daily shares method.

3	Less than $0.01 per share.

4	Not annualized.

5	Annualized.

6	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			125

Financial Highlights (continued)

Matthews Asia Growth Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$27.25			$21.05			$21.09			$21.10			$21.17			$18.02
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.03			0.04			0.06			0.11			0.12			0.11
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	0.78			8.14			0.13			(0.12	)		0.19			3.37
Total from investment operations	0.81			8.18			0.19			(0.01	)		0.31			3.48
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.16	)		(0.23	)		—			(0.38	)		(0.33	)
Net realized gains on investments	—			(1.82	)		—			—			—			—
Total distributions	—			(1.98	)		(0.23	)		—			(0.38	)		(0.33	)
Paid-in capital from redemption fees (Note 4)	—			—			—			—	²		—	²		—	²
Net Asset Value, end of period	$28.06			$27.25			$21.05			$21.09			$21.10			$21.17
TOTAL RETURN	2.97%	³		39.39%			0.92%			(0.05%	)		1.49%			19.35%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$642,683			$554,309			$419,516			$526,969			$561,922			$558,407
Ratio of expenses to average net assets	1.07%	⁴		1.12%			1.14%			1.11%			1.11%			1.12%
Ratio of net investment income (loss) to average net assets	0.19%	⁴		0.16%			0.30%			0.49%			0.55%			0.55%
Portfolio turnover⁵	2.72%	³		23.19%			13.61%			29.51%			22.24%			10.77%

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$27.45			$21.19			$21.24			$21.19			$21.26			$18.08
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.06			0.09			0.10			0.16			0.16			0.15
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	0.78			8.20			0.13			(0.11	)		0.19			3.39
Total from investment operations	0.84			8.29			0.23			0.05			0.35			3.54
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.21	)		(0.28	)		—			(0.42	)		(0.36	)
Net realized gains on investments	—			(1.82	)		—			—			—			—
Total distributions	—			(2.03	)		(0.28	)		—			(0.42	)		(0.36	)
Paid-in capital from redemption fees (Note 4)	—			—			—			—	²		—	²		—	²
Net Asset Value, end of period	$28.29			$27.45			$21.19			$21.24			$21.19			$21.26
TOTAL RETURN	3.06%	³		39.64%			1.06%			0.24%			1.63%			19.63%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$521,144			$296,253			$195,949			$249,886			$287,262			$227,852
Ratio of expenses to average net assets	0.90%	⁴		0.93%			0.96%			0.91%			0.91%			0.93%
Ratio of net investment income (loss) to average net assets	0.40%	⁴		0.35%			0.47%			0.72%			0.74%			0.73%
Portfolio turnover⁵	2.72%	³		23.19%			13.61%			29.51%			22.24%			10.77%

1	Calculated using the average daily shares method.

2	Less than $0.01 per share.

3	Not annualized.

4	Annualized.

5	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


126		MATTHEWS ASIA FUNDS

Matthews Pacific Tiger Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$31.66			$22.92			$23.54			$26.57			$24.99			$24.42
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.10			0.17			0.11			0.42			0.14			0.17
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(1.81	)		8.96			(0.13	)		(0.82	)		2.80			0.72
Total from investment operations	(1.71	)		9.13			(0.02	)		(0.40	)		2.94			0.89
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.17	)		(0.13	)		(0.42	)		(0.13	)		(0.16	)
Net realized gains on investments	—			(0.22	)		(0.47	)		(2.21	)		(1.23	)		(0.16	)
Total distributions	—			(0.39	)		(0.60	)		(2.63	)		(1.36	)		(0.32	)
Paid-in capital from redemption fees (Note 4)	—			—	²		—			—	²		—	²		—	²
Net Asset Value, end of period	$29.95			$31.66			$22.92			$23.54			$26.57			$24.99
TOTAL RETURN	(5.40%	)³		39.96%			(0.16%	)		(1.30%	)		11.79%			3.63%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$2,978,918			$3,335,795			$2,445,183			$2,720,869			$3,047,077			$2,954,108
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.06%	⁴		1.08%			1.09%			1.09%			1.09%			1.09%
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.04%	⁴		1.06%			1.08%			1.07%			1.08%			1.09%
Ratio of net investment income (loss) to average net assets	0.63%	⁴		0.63%			0.47%			1.53%			0.52%			0.67%
Portfolio turnover⁵	4.47%	³		9.18%			5.73%			12.56%			11.38%			7.73%

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$31.63			$22.90			$23.52			$26.56			$24.97			$24.41
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.12			0.22			0.16			0.44			0.18			0.21
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(1.80	)		8.95			(0.14	)		(0.80	)		2.82			0.71
Total from investment operations	(1.68	)		9.17			0.02			(0.36	)		3.00			0.92
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.22	)		(0.17	)		(0.47	)		(0.18	)		(0.20	)
Net realized gains on investments	—			(0.22	)		(0.47	)		(2.21	)		(1.23	)		(0.16	)
Total distributions	—			(0.44	)		(0.64	)		(2.68	)		(1.41	)		(0.36	)
Paid-in capital from redemption fees (Note 4)	—			—	²		—			—	²		—	²		—	²
Net Asset Value, end of period	$29.95			$31.63			$22.90			$23.52			$26.56			$24.97
TOTAL RETURN	(5.31%	)³		40.17%			0.03%			(1.15%	)		12.03%			3.78%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$6,169,076			$6,389,242			$4,207,508			$3,964,547			$5,049,643			$4,679,039
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	0.89%	⁴		0.91%			0.91%			0.91%			0.92%			0.92%
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	0.87%	⁴		0.89%			0.90%			0.89%			0.91%			0.92%
Ratio of net investment income (loss) to average net assets	0.78%	⁴		0.80%			0.65%			1.61%			0.68%			0.83%
Portfolio turnover⁵	4.47%	³		9.18%			5.73%			12.56%			11.38%			7.73%

1	Calculated using the average daily shares method.

2	Less than $0.01 per share.

3	Not annualized.

4	Annualized.

5	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			127

Financial Highlights (continued)

Matthews Asia ESG Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31					Period Ended Dec. 31, 2015¹
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			Period Ended Dec. 31, 2015¹
Net Asset Value, beginning of period	$11.56			$8.97			$9.23		$10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²	—	³		0.05			0.07		0.02
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.24	)		2.97			(0.20	)	(0.75	)
Total from investment operations	(0.24	)		3.02			(0.13	)	(0.73	)
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.27	)		(0.13	)	(0.04	)
Net realized gains on investments	—			(0.16	)		—		—
Total distributions	—			(0.43	)		(0.13	)	(0.04	)
Paid-in capital from redemption fees (Note 4)	—	³		—			—		—
Net Asset Value, end of period	$11.32			$11.56			$8.97		$9.23
TOTAL RETURN	(2.08%	)⁴		33.79%			(1.40%	)	(7.30%	)⁴

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$12,506			$10,695			$5,376		$3,248
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	2.11%	⁵		2.65%			3.54%		9.09%	⁵
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.50%	⁵		1.50%			1.48%		1.44%	⁵
Ratio of net investment income (loss) to average net assets	—%	^5,6		0.45%			0.77%		0.25%	⁵
Portfolio turnover⁷	7.22%	⁴		28.82%			16.10%		21.72%	⁴

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31					Period Ended Dec. 31, 2015¹
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			Period Ended Dec. 31, 2015¹
Net Asset Value, beginning of period	$11.50			$8.92			$9.17		$10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²	0.01			0.08			0.09		0.05
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.23	)		2.95			(0.19	)	(0.77	)
Total from investment operations	(0.22	)		3.03			(0.10	)	(0.72	)
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.29	)		(0.15	)	(0.11	)
Net realized gains on investments	—			(0.16	)		—		—
Total distributions	—			(0.45	)		(0.15	)	(0.11	)
Paid-in capital from redemption fees (Note 4)	—	³		—			—		—
Net Asset Value, end of period	$11.28			$11.50			$8.92		$9.17
TOTAL RETURN	(1.91%	)⁴		34.11%			(1.16%	)	(7.14%	)⁴

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$8,518			$7,359			$3,382		$1,686
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.92%	⁵		2.46%			3.36%		8.90%	⁵
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.25%	⁵		1.25%			1.25%		1.25%	⁵
Ratio of net investment income (loss) to average net assets	0.24%	⁵		0.71%			0.97%		0.75%	⁵
Portfolio turnover⁷	7.22%	⁴		28.82%			16.10%		21.72%	⁴

1	Commenced operations on April 30, 2015.

2	Calculated using the average daily shares method.

3	Less than $0.01 per share.

4	Not annualized.

5	Annualized.

6	Less than 0.01%.

7	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


128		MATTHEWS ASIA FUNDS

Matthews Emerging Asia Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31												Period Ended Dec. 31, 2013¹
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015				2014			Period Ended Dec. 31, 2013¹
Net Asset Value, beginning of period	$15.51			$13.18			$11.27			$11.60				$9.93		$10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²	0.05			0.07			0.15			0.04				0.04		(0.01	)
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(1.74	)		2.35			2.01			(0.34	)			1.69		(0.05	)
Total from investment operations	(1.69	)		2.42			2.16			(0.30	)			1.73		(0.06	)
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.04	)		(0.13	)		—	³			(0.06	)	—	³
Net realized gains on investments	—			(0.05	)		(0.13	)		(0.03	)			—		—
Return of capital	—			—			—			—				—		(0.01	)
Total distributions	—			(0.09	)		(0.26	)		(0.03	)			(0.06	)	(0.01	)
Paid-in capital from redemption fees (Note 4)	—	³		—	³		0.01			—	³			—	³	—	³
Net Asset Value, end of period	$13.82			$15.51			$13.18			$11.27				$11.60		$9.93
TOTAL RETURN	(10.90%	)⁴		18.42%			19.25%			(2.56%	)			17.39%		(0.61%	)⁴

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$168,975			$219,596			$145,164			$114,590				$110,363		$38,022
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.63%	⁵		1.70%			1.77%			1.75%				1.78%		2.39%	⁵
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.49%	⁵		1.48%			1.47%			1.50%		��		1.58%		1.98%	⁵
Ratio of net investment income (loss) to average net assets	0.70%	⁵		0.49%			1.26%			0.33%				0.34%		(0.08%	)⁵
Portfolio turnover⁶	6.34%	⁴		7.74%			34.90%			12.14%				8.21%		1.66%	⁴

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31												Period Ended Dec. 31, 2013¹
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015				2014			Period Ended Dec. 31, 2013¹
Net Asset Value, beginning of period	$15.57			$13.22			$11.29			$11.60				$9.92		$10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²	0.07			0.10			0.21			0.07				0.06		0.01
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(1.76	)		2.37			1.99			(0.34	)			1.69		(0.07	)
Total from investment operations	(1.69	)		2.47			2.20			(0.27	)			1.75		(0.06	)
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.07	)		(0.15	)		(0.01	)			(0.07	)	—	³
Net realized gains on investments	—			(0.05	)		(0.13	)		(0.03	)			—		—
Return of capital	—			—			—			—				—		(0.02	)
Total distributions	—			(0.12	)		(0.28	)		(0.04	)			(0.07	)	(0.02	)
Paid-in capital from redemption fees (Note 4)	—	³		—	³		0.01			—	³			—	³	—	³
Net Asset Value, end of period	$13.88			$15.57			$13.22			$11.29				$11.60		$9.92
TOTAL RETURN	(10.85%	)⁴		18.70%			19.61%			(2.33%	)			17.68%		(0.55%	)⁴

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$322,518			$275,233			$95,724			$55,278				$21,350		$2,017
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.45%	⁵		1.52%			1.62%			1.57%				1.59%		2.21%	⁵
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.25%	⁵		1.25%			1.25%			1.25%				1.33%		1.75%	⁵
Ratio of net investment income (loss) to average net assets	0.99%	⁵		0.70%			1.72%			0.65%				0.55%		0.19%	⁵
Portfolio turnover⁶	6.34%	⁴		7.74%			34.90%			12.14%				8.21%		1.66%	⁴

1	Commenced operations on April 30, 2013.

2	Calculated using the average daily shares method.

3	Less than $0.01 per share.

4	Not annualized.

5	Annualized.

6	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			129

Financial Highlights (continued)

Matthews Asia Innovators Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$14.19			$10.10			$12.32			$13.61			$12.59			$9.29
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.02			(0.02	)		(0.02	)		(0.05	)		—	²		0.01
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	0.17			5.31			(1.07	)		0.64			1.16			3.30
Total from investment operations	0.19			5.29			(1.09	)		0.59			1.16			3.31
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.24	)		—			—			(0.06	)		(0.01	)
Net realized gains on investments	—			(0.96	)		(1.13	)		(1.88	)		(0.08	)		—
Total distributions	—			(1.20	)		(1.13	)		(1.88	)		(0.14	)		(0.01	)
Net Asset Value, end of period	$14.38			$14.19			$10.10			$12.32			$13.61			$12.59
TOTAL RETURN	1.34%	³		52.88%			(9.10%	)		4.48%			9.24%			35.61%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$213,593			$175,331			$83,926			$129,763			$125,612			$111,751
Ratio of expenses to average net assets	1.12%	⁴		1.24%			1.24%			1.18%			1.16%			1.18%
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.12%	⁴		1.24%			1.24%			1.18%			1.16%			1.18%
Ratio of net investment income (loss) to average net assets	0.23%	⁴		(0.18%	)		(0.19%	)		(0.33%	)		(0.02%	)		0.07%
Portfolio turnover⁵	34.57%	³		66.51%			92.25%			72.85%			62.99%			62.04%

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31												Period Ended Dec. 31, 2013⁶
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014				Period Ended Dec. 31, 2013⁶
Net Asset Value, beginning of period	$14.26			$10.14			$12.34			$13.61			$12.58			$10.09
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.04			0.01			0.01			(0.02	)		0.03			0.04
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	0.16			5.33			(1.08	)		0.63			1.17			2.48
Total from investment operations	0.20			5.34			(1.07	)		0.61			1.20			2.52
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.26	)		—			—			(0.09	)		(0.03	)
Net realized gains on investments	—			(0.96	)		(1.13	)		(1.88	)		(0.08	)		—
Total distributions	—			(1.22	)		(1.13	)		(1.88	)		(0.17	)		(0.03	)
Net Asset Value, end of period	$14.46			$14.26			$10.14			$12.34			$13.61			$12.58
TOTAL RETURN	1.40%	³		53.18%			(8.92%	)		4.63%			9.54%			24.99%	³

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$81,746			$30,957			$16,545			$36,770			$61,088			$49,236
Ratio of expenses to average net assets	0.96%	⁴		1.05%			1.01%			0.97%			0.95%			1.00%	⁴
Ratio of net investment income (loss) to average net assets	0.60%	⁴		0.06%			0.06%			(0.16%	)		0.21%			0.56%	⁴
Portfolio turnover⁵	34.57%	³		66.51%			92.25%			72.85%			62.99%			62.04%	³

1	Calculated using the average daily shares method.

2	Less than $0.01 per share.

3	Not annualized.

4	Annualized.

5	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

6	Commenced operations on April 30, 2013.

See accompanying notes to financial statements.


130		MATTHEWS ASIA FUNDS

Matthews China Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016¹			2015¹			2014¹			2013
Net Asset Value, beginning of period	$22.20			$15.47			$18.42			$21.46			$22.84			$23.47
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²	0.15			0.16			0.21			0.20			0.24			0.25
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.18	)		8.86			(1.04	)		0.30			(1.25	)		1.33
Total from investment operations	(0.03	)		9.02			(0.83	)		0.50			(1.01	)		1.58
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.37	)		(0.26	)		(0.21	)		(0.27	)		(0.26	)
Net realized gains on investments	—			(1.92	)		(1.29	)		(3.33	)		(0.10	)		(1.95	)
Return of capital	—			—			(0.57	)		—			—			—
Total distributions	—			(2.29	)		(2.12	)		(3.54	)		(0.37	)		(2.21	)
Paid-in capital from redemption fees (Note 4)	—	³		—			—	³		—	³		—	³		—	³
Net Asset Value, end of period	$22.17			$22.20			$15.47			$18.42			$21.46			$22.84
TOTAL RETURN	(0.14%	)⁴		59.37%			(5.18%	)		2.41%			(4.42%	)		6.84%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$899,849			$843,508			$495,900			$709,767			$947,740			$1,286,309
Ratio of expenses to average net assets	1.05%	⁵		1.09%			1.18%			1.14%			1.11%			1.08%
Ratio of net investment income (loss) to average net assets	1.30%	⁵		0.78%			1.24%			0.89%			1.09%			1.06%
Portfolio turnover⁶	48.00%	⁴		78.74%			83.82%			66.22%			10.23%			6.29%

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016¹			2015¹			2014¹			2013
Net Asset Value, beginning of period	$22.17			$15.44			$18.39			$21.44			$22.81			$23.45
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)²	0.25			0.21			0.22			0.25			0.28			0.26
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.27	)		8.84			(1.03	)		0.27			(1.25	)		1.36
Total from investment operations	(0.02	)		9.05			(0.81	)		0.52			(0.97	)		1.62
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.40	)		(0.28	)		(0.24	)		(0.30	)		(0.31	)
Net realized gains on investments	—			(1.92	)		(1.29	)		(3.33	)		(0.10	)		(1.95	)
Return of capital	—			—			(0.57	)		—			—			—
Total distributions	—			(2.32	)		(2.14	)		(3.57	)		(0.40	)		(2.26	)
Paid-in capital from redemption fees (Note 4)	—	³		—			—	³		—	³		—	³		—	³
Net Asset Value, end of period	$22.15			$22.17			$15.44			$18.39			$21.44			$22.81
TOTAL RETURN	(0.09%	)⁴		59.71%			(5.06%	)		2.50%			(4.22%	)		6.97%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$141,450			$61,975			$15,874			$24,276			$52,478			$117,678
Ratio of expenses to average net assets	0.88%	⁵		0.93%			1.03%			0.99%			0.95%			0.91%
Ratio of net investment income (loss) to average net assets	2.13%	⁵		0.99%			1.32%			1.09%			1.27%			1.13%
Portfolio turnover⁶	48.00%	⁴		78.74%			83.82%			66.22%			10.23%			6.29%

1	Consolidated Financial Highlights. See Note 2-C.

2	Calculated using the average daily shares method.

3	Less than $0.01 per share.

4	Not annualized.

5	Annualized.

6	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			131

Financial Highlights (continued)

Matthews India Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$34.31			$25.65			$26.43			$26.46			$16.28			$17.51
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	(0.05	)		(0.09	)		0.01			(0.05	)		0.07			0.08
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(1.64	)		9.24			(0.33	)		0.26			10.29			(1.13	)
Total from investment operations	(1.69	)		9.15			(0.32	)		0.21			10.36			(1.05	)
LESS DISTRIBUTIONS FROM:
Net investment income	—			—			—			(0.03	)		(0.05	)		(0.18	)
Net realized gains on investments	—			(0.49	)		(0.46	)		(0.23	)		(0.14	)		(0.01	)
Total distributions	—			(0.49	)		(0.46	)		(0.26	)		(0.19	)		(0.19	)
Paid-in capital from redemption fees (Note 4)	—			—			—			0.02			0.01			0.01
Net Asset Value, end of period	$32.62			$34.31			$25.65			$26.43			$26.46			$16.28
TOTAL RETURN	(4.93%	)²		35.79%			(1.23%	)		0.90%			63.71%			(5.90%	)

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$1,413,746			$1,484,045			$967,009			$1,151,948			$974,838			$427,861
Ratio of expenses to average net assets	1.07%	³		1.09%			1.12%			1.11%			1.12%			1.13%
Ratio of net investment income (loss) to average net assets	(0.28%	)³		(0.30%	)		0.02%			(0.17%	)		0.32%			0.48%
Portfolio turnover⁴	11.93%	²		16.81%			15.76%			9.51%			14.86%			8.70%

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$34.51			$25.77			$26.49			$26.49			$16.31			$17.53
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	(0.02	)		(0.03	)		0.04			0.01			0.09			0.10
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(1.65	)		9.29			(0.30	)		0.26			10.29			(1.11	)
Total from investment operations	(1.67	)		9.26			(0.26	)		0.27			10.38			(1.01	)
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.03	)		—			(0.06	)		(0.08	)		(0.21	)
Net realized gains on investments	—			(0.49	)		(0.46	)		(0.23	)		(0.14	)		(0.01	)
Total distributions	—			(0.52	)		(0.46	)		(0.29	)		(0.22	)		(0.22	)
Paid-in capital from redemption fees (Note 4)	—			—			—			0.02			0.02			0.01
Net Asset Value, end of period	$32.84			$34.51			$25.77			$26.49			$26.49			$16.31
TOTAL RETURN	(4.84%	)²		36.05%			(1.00%	)		1.12%			63.80%			(5.67%	)

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$692,033			$788,388			$551,202			$353,879			$109,331			$3,234
Ratio of expenses to average net assets	0.88%	³		0.89%			0.91%			0.90%			0.94%			0.95%
Ratio of net investment income (loss) to average net assets	(0.09%	)³		(0.08%	)		0.16%			0.02%			0.38%			0.61%
Portfolio turnover⁴	11.93%	²		16.81%			15.76%			9.51%			14.86%			8.70%

1	Calculated using the average daily shares method.

2	Not annualized.

3	Annualized.

4	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


132		MATTHEWS ASIA FUNDS

Matthews Japan Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$24.12			$18.83			$18.97			$15.70			$16.20			$12.27
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.06			0.09			0.08			0.04			0.05			0.03
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.04	)		6.13			(0.01	)		3.23			(0.48	)		4.12
Total from investment operations	0.02			6.22			0.07			3.27			(0.43	)		4.15
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.20	)		(0.16	)		—			(0.08	)		(0.24	)
Net realized gains on investments	—			(0.73	)		(0.05	)		—			—			—
Total distributions	—			(0.93	)		(0.21	)		—			(0.08	)		(0.24	)
Paid-in capital from redemption fees (Note 4)	—	²		—			—			—	²		0.01			0.02
Net Asset Value, end of period	$24.14			$24.12			$18.83			$18.97			$15.70			$16.20
TOTAL RETURN	0.08%	³		33.14%			0.40%			20.83%			(2.60%	)		34.03%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$2,496,899			$2,155,280			$1,685,872			$1,330,743			$467,854			$312,988
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	0.90%	⁴		0.95%			0.98%			0.99%			1.03%			1.10%
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	0.90%	⁴		0.94%			0.98%			0.99%			1.03%			1.10%
Ratio of net investment income (loss) to average net assets	0.49%	⁴		0.40%			0.43%			0.22%			0.32%			0.19%
Portfolio turnover⁵	17.49%	³		44.34%			55.15%			24.19%			42.52%			22.72%

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$24.16			$18.86			$19.00			$15.71			$16.20			$12.26
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.07			0.10			0.10			0.05			0.09			0.06
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.04	)		6.14			—	²		3.24			(0.50	)		4.12
Total from investment operations	0.03			6.24			0.10			3.29			(0.41	)		4.18
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.21	)		(0.19	)		—			(0.09	)		(0.26	)
Net realized gains on investments	—			(0.73	)		(0.05	)		—			—			—
Total distributions	—			(0.94	)		(0.24	)		—			(0.09	)		(0.26	)
Paid-in capital from redemption fees (Note 4)	—	²		—			—			—	²		0.01			0.02
Net Asset Value, end of period	$24.19			$24.16			$18.86			$19.00			$15.71			$16.20
TOTAL RETURN	0.13%	³		33.23%			0.51%			20.94%			(2.47%	)		34.27%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$2,168,697			$1,957,214			$1,302,317			$618,583			$154,750			$59,702
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	0.84%	⁴		0.87%			0.88%			0.87%			0.90%			0.96%
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	0.83%	⁴		0.86%			0.88%			0.87%			0.90%			0.96%
Ratio of net investment income (loss) to average net assets	0.54%	⁴		0.46%			0.54%			0.28%			0.58%			0.41%
Portfolio turnover⁵	17.49%	³		44.34%			55.15%			24.19%			42.52%			22.72%

1	Calculated using the average daily shares method.

2	Less than $0.01 per share.

3	Not annualized.

4	Annualized.

5	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			133

Financial Highlights (continued)

Matthews Korea Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$6.91			$5.25			$6.15			$5.65			$5.95			$5.64
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	(0.01	)		0.06			0.02			0.01			—	²		—	²
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.80	)		2.22			(0.41	)		0.83			(0.05	)		0.57
Total from investment operations	(0.81	)		2.28			(0.39	)		0.84			(0.05	)		0.57
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.29	)		(0.08	)		(0.01	)		—			(0.02	)
Net realized gains on investments	—			(0.33	)		(0.43	)		(0.33	)		(0.25	)		(0.24	)
Total distributions	—			(0.62	)		(0.51	)		(0.34	)		(0.25	)		(0.26	)
Paid-in capital from redemption fees (Note 4)	—			—			—			—	²		—	²		—	²
Net Asset Value, end of period	$6.10			$6.91			$5.25			$6.15			$5.65			$5.95
TOTAL RETURN	(11.72%	)³		43.70%			(6.32%	)		15.16%			(0.73%	)		10.11%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$166,533			$192,431			$142,726			$147,685			$127,774			$138,830
Ratio of expenses to average net assets	1.12%	⁴		1.15%			1.15%			1.10%			1.11%			1.13%
Ratio of net investment income (loss) to average net assets	(0.20%	)⁴		0.90%			0.41%			0.18%			0.04%			0.02%
Portfolio turnover⁵	16.85%	³		25.37%			34.73%			20.36%			17.37%			46.20%

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$6.95			$5.27			$6.18			$5.68			$5.96			$5.67
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	—	²		0.10			(0.02	)		0.02			0.05			—	²
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.81	)		2.21			(0.37	)		0.83			(0.08	)		0.56
Total from investment operations	(0.81	)		2.31			(0.39	)		0.85			(0.03	)		0.56
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.30	)		(0.09	)		(0.02	)		—			(0.03	)
Net realized gains on investments	—			(0.33	)		(0.43	)		(0.33	)		(0.25	)		(0.24	)
Total distributions	—			(0.63	)		(0.52	)		(0.35	)		(0.25	)		(0.27	)
Paid-in capital from redemption fees (Note 4)	—			—			—			—	²		—	²		—	²
Net Asset Value, end of period	$6.14			$6.95			$5.27			$6.18			$5.68			$5.96
TOTAL RETURN	(11.66%	)³		44.11%			(6.31%	)		15.27%			(0.39%	)		9.87%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$39,465			$32,587			$7,462			$59,982			$91,431			$12,283
Ratio of expenses to average net assets	0.98%	⁴		1.01%			0.97%			0.93%			0.93%			0.97%
Ratio of net investment income (loss) to average net assets	(0.01%	)⁴		1.51%			(0.31%	)		0.28%			0.87%			(0.03%	)
Portfolio turnover⁵	16.85%	³		25.37%			34.73%			20.36%			17.37%			46.20%

1	Calculated using the average daily shares method.

2	Less than $0.01 per share.

3	Not annualized.

4	Annualized.

5	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

See accompanying notes to financial statements.


134		MATTHEWS ASIA FUNDS

Matthews Asia Small Companies Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$22.89			$19.05			$19.41			$21.46			$19.34			$18.13
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.02			0.02			0.09			0.02			0.09			0.11
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.26	)		5.68			(0.37	)		(2.05	)		2.11			1.19
Total from investment operations	(0.24	)		5.70			(0.28	)		(2.03	)		2.20			1.30
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.10	)		(0.08	)		(0.03	)		(0.08	)		(0.09	)
Net realized gains on investments	—			(1.76	)		—			—			—			—
Total distributions	—			(1.86	)		(0.08	)		(0.03	)		(0.08	)		(0.09	)
Paid-in capital from redemption fees (Note 4)	—	²		—	²		—	²		0.01			—	²		—	²
Net Asset Value, end of period	$22.65			$22.89			$19.05			$19.41			$21.46			$19.34
TOTAL RETURN	(1.05%	)³		30.59%			(1.44%	)		(9.43%	)		11.39%			7.19%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$191,006			$208,339			$254,226			$387,747			$599,082			$407,352
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.49%	⁴		1.49%			1.49%			1.48%			1.47%			1.47%
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.47%	⁴		1.46%			1.47%			1.47%			1.47%			1.47%
Ratio of net investment income (loss) to average net assets	0.20%	⁴		0.09%			0.45%			0.08%			0.44%			0.58%
Portfolio turnover⁵	43.17%	³		67.13%			44.44%			48.29%			21.70%			37.01%

	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31												Period Ended Dec. 31, 2013⁶
INSTITUTIONAL CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014				Period Ended Dec. 31, 2013⁶
Net Asset Value, beginning of period	$22.86			$19.03			$19.40			$21.46			$19.33			$19.44
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.05			0.07			0.12			0.11			0.15			0.18
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	(0.26	)		5.67			(0.36	)		(2.10	)		2.10			(0.16	)
Total from investment operations	(0.21	)		5.74			(0.24	)		(1.99	)		2.25			0.02
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.15	)		(0.13	)		(0.08	)		(0.12	)		(0.13	)
Net realized gains on investments	—			(1.76	)		—			—			—			—
Total distributions	—			(1.91	)		(0.13	)		(0.08	)		(0.12	)		(0.13	)
Paid-in capital from redemption fees (Note 4)	—	²		—	²		—	²		0.01			—	²		—	²
Net Asset Value, end of period	$22.65			$22.86			$19.03			$19.40			$21.46			$19.33
TOTAL RETURN	(0.92%	)³		30.85%			(1.24%	)		(9.23%	)		11.65%			0.13%	³

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$211,874			$232,954			$174,962			$222,168			$77,168			$44,769
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.34%	⁴		1.35%			1.34%			1.30%			1.27%			1.25%	⁴
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.25%	⁴		1.25%			1.25%			1.25%			1.26%			1.25%	⁴
Ratio of net investment income (loss) to average net assets	0.40%	⁴		0.34%			0.64%			0.53%			0.70%			1.39%	⁴
Portfolio turnover⁵	43.17%	³		67.13%			44.44%			48.29%			21.70%			37.01%	³

1	Calculated using the average daily shares method.

2	Less than $0.01 per share.

3	Not annualized.

4	Annualized.

5	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

6	Commenced operations on April 30, 2013.

See accompanying notes to financial statements.


matthewsasia.com \| 800.789.ASIA			135

Financial Highlights (continued)

Matthews China Small Companies Fund

The tables below set forth financial data for a share of beneficial interest outstanding throughout each period presented.


	Six-Month Period Ended June 30, 2018 (unaudited)			Year Ended Dec. 31
INVESTOR CLASS	Six-Month Period Ended June 30, 2018 (unaudited)		2017			2016			2015			2014			2013
Net Asset Value, beginning of period	$11.89			$8.21			$8.79			$9.21			$9.89			$7.76
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹	0.07			0.07			0.10			0.08			0.01			0.02
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions	0.99			4.27			(0.28	)		0.27			(0.33	)		2.22
Total from investment operations	1.06			4.34			(0.18	)		0.35			(0.32	)		2.24
LESS DISTRIBUTIONS FROM:
Net investment income	—			(0.11	)		(0.03	)		(0.06	)		(0.02	)		(0.11	)
Net realized gains on investments	—			(0.56	)		(0.37	)		(0.72	)		—			—
Return of capital	—			—			—			—			(0.34	)		—
Total distributions	—			(0.67	)		(0.40	)		(0.78	)		(0.36	)		(0.11	)
Paid-in capital from redemption fees (Note 4)	0.01			0.01			—	²		0.01			—	²		—	²
Net Asset Value, end of period	$12.96			$11.89			$8.21			$8.79			$9.21			$9.89
TOTAL RETURN	9.00%	³		53.88%			(2.35%	)		4.07%			(3.33%	)		28.85%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$62,709			$35,209			$16,101			$21,546			$22,068			$26,674
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)	1.97%	⁴		2.34%			2.24%			2.10%			1.90%			2.04%
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator	1.50%	⁴		1.50%			1.50%			1.50%			1.67%			2.00%
Ratio of net investment income (loss) to average net assets	1.10%	⁴		0.66%			1.17%			0.80%			0.14%			0.17%
Portfolio turnover⁵	49.94%	³		67.22%			63.15%			72.49%			32.42%			10.28%

INSTITUTIONAL CLASS												Six-Month Period Ended June 30, 2018 (unaudited)			Period Ended Dec. 31, 2017⁶
Net Asset Value, beginning of period													$11.87			$11.90
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)¹													0.17			(0.01	)
Net realized gain (loss) and unrealized appreciation/depreciation on investments and foreign currency related transactions													0.90			0.67
Total from investment operations													1.07			0.66
LESS DISTRIBUTIONS FROM:
Net investment income													—			(0.13	)
Net realized gains on investments													—			(0.56	)
Total distributions													—			(0.69	)
Paid-in capital from redemption fees (Note 4)													0.01			—
Net Asset Value, end of period													$12.95			$11.87
TOTAL RETURN													9.10%	³		6.19%	³

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)													$8,106			$476
Ratio of expenses to average net assets before any reimbursement, waiver or recapture of expenses by Advisor and Administrator (Note 5)													1.73%	⁴		2.09%	⁴
Ratio of expenses to average net assets after any reimbursement, waiver or recapture of expenses by Advisor and Administrator													1.25%	⁴		1.25%	⁴
Ratio of net investment income (loss) to average net assets													2.71%	⁴		(1.20%	)⁴
Portfolio turnover⁵													49.94%	³		67.22%	³

1	Calculated using the average daily shares method.

2	Less than $0.01 per share.

3	Not annualized.

4	Annualized.

5	The portfolio turnover rate is calculated on the Fund as a whole without distinguishing between classes of shares issued.

6	Commenced operations on November 30, 2017.

See accompanying notes to financial statements.


136		MATTHEWS ASIA FUNDS

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Notes to Financial Statements (unaudited)

1.	ORGANIZATION

Matthews Asia Funds (the “Trust”) is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust currently issues eighteen separate series of shares (each a “Fund”, and collectively, the “Funds”): Matthews Asia Strategic Income Fund, Matthews Asia Credit Opportunities Fund, Matthews Asian Growth and Income Fund, Matthews Asia Dividend Fund, Matthews China Dividend Fund, Matthews Asia Value Fund, Matthews Asia Focus Fund, Matthews Asia Growth Fund, Matthews Pacific Tiger Fund, Matthews Asia ESG Fund, Matthews Emerging Asia Fund, Matthews Asia Innovators Fund, Matthews China Fund, Matthews India Fund, Matthews Japan Fund, Matthews Korea Fund, Matthews Asia Small Companies Fund, and Matthews China Small Companies Fund. Each Fund currently offers two classes of shares: Investor Class and Institutional Class. Each class of shares has identical voting, dividend, liquidation and other rights and the same terms and conditions, except each class may be subject to different class expenses as outlined in the relevant prospectus and each class has exclusive voting rights with respect to matters solely affecting such class.

The Matthews Japan Fund closed to most new investors effective after market closing on July 29, 2016, but will continue to accept investments from existing shareholders.

2.	SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Funds in preparation of their financial statements.

SECURITY VALUATION: The value of the Matthews Asia Funds’ (each a “Fund”, and collectively the “Funds” or the “Trust”) securities is based on market quotations for those securities, or on their fair value determined by the valuation policies approved by the Funds’ Board of Trustees (the “Board”). Market quotations and valuation information are provided by commercial pricing services or securities dealers that are independent of the Funds and Matthews International Capital Management, LLC (“Matthews”), in accordance with procedures established by the Funds’ Board. Foreign exchange-traded securities are valued as of the close of trading on the primary exchange on which they trade. Securities that trade in over-the-counter markets, including most debt securities (bonds), may be valued by other third-party vendors or by using indicative bid quotations from dealers or market makers, or other available market information. Market values for securities are determined based on quotations, market data or other information from the principal (or most advantageous) market on which the security is traded. Market quotations for equity securities used by the Funds include last reported sale prices, or, if such prices are not reported or available, bid and ask prices. Swap agreements are valued utilizing quotes received daily by the Funds’ pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments. Foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined at the close of business on the New York Stock Exchange (“NYSE”). Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. The Funds may also utilize independent pricing services to assist them in determining a current market value for each security based on sources believed to be reliable.

The Board has delegated to the Board’s Valuation Committee the responsibility for oversight of the fair valuation process under the Trust’s Valuation and Pricing Policy. The Board’s Valuation Committee, in turn, has delegated the determination of fair value prices under Matthews’ Valuation and Pricing Procedures to Matthews’ Valuation Committee (the “Valuation Committee”). The Board’s Valuation Committee will review and approve fair value determinations by Matthews’ Valuation Committee in accordance with the Valuation and Pricing Policy. When fair value pricing is employed, the prices of securities used by a Fund to calculate its Net Asset Value (“NAV”) may differ from any quoted or published prices for the same securities for that day. All fair value determinations are made subject to the Board’s oversight. Events affecting the value of foreign investments may occur between the time at which they are determined and when the Funds calculate their NAV, which is normally the close of trading on the NYSE. If such events render market quotations unreliable, and the impact of such events can be reasonably determined, the investments will be valued at their fair value in accordance with pricing policies. The fair value of a security held by the Funds may be determined using the services of third-party pricing services to assist in this process.

The books and records of the Funds are maintained in U.S. dollars. Transactions, portfolio securities, and assets and liabilities denominated in a foreign currency are translated and recorded in U.S. dollars at the prevailing exchange rate as of the close of trading on the NYSE. Translation gains or losses resulting from changes in the exchange rate during the reporting period and realized gains and losses on the settlement of foreign currency transactions are reported in the results of operations for the current period. The Funds isolate that portion of gains and losses on investments in fixed income securities that is due to changes in foreign exchange rate from that which is due to changes in market prices of securities.

Foreign securities held by the Funds may be traded on days and at times when the NYSE is closed. Accordingly, the value of the Funds may be significantly affected on days when shareholders have no access to the Funds.

FAIR VALUE MEASUREMENTS: In accordance with the guidance on fair value measurements and disclosures under generally accepted accounting principles in the United States (“U.S. GAAP”), the Funds disclose the fair value of their investments and derivative financial instruments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). Various inputs are used in determining the fair value of investments and derivative financial instruments, which are as follows:

Level 1: Quoted prices in active markets for identical securities.

Level 2: Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, foreign exchange, etc.).

Level 3: Significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments and derivative financial instruments).


138		MATTHEWS ASIA FUNDS

The summary of inputs used to determine the fair valuation of the Funds’ investments and derivative financial instruments as of June 30, 2018 is as follows:


	Matthews Asia Strategic Income Fund		Matthews Asia Credit Opportunities Fund		Matthews Asian Growth and Income Fund		Matthews Asia Dividend Fund		Matthews Asia Value Fund		Matthews Asia Focus Fund		Matthews Asia Growth Fund
Assets:
Investments:
Level 1: Quoted Prices
Bangladesh		$—		$—		$—		$—		$—		$—		$38,472,627
China/Hong Kong		—		—		112,885,435		164,339,191		4,126,303		227,403		123,168,804
Indonesia		—		—		34,588,098		39,317,979		—		—		18,752,948
Israel		—		—		—		—		196,673		—		—
Japan		—		—		—		—		453,706		—		4,063,334
Philippines		—		—		—		41,776,441		—		—		5,254,042
Singapore		—		—		—		42,893,533		917,977		—		—
South Korea		—		—		65,457,231		191,275,671		1,642,250		266,366		—
Sri Lanka		—		—		—		—		—		—		38,419,918
Taiwan		—		—		—		96,625,886		—		—		—
United States		—		—		48,843,432		—		668,870		291,168		—
Level 2: Other Significant Observable Inputs
Foreign Government Obligations^a		22,708,854		4,552,476		—		—		—		—		—
Non-Convertible Corporate Bonds^a		62,184,015		23,040,304		—		—		—		—		—
Convertible Corporate Bonds^a		21,829,460		7,745,771		245,487,003		—		—		—		—
Common Equities:
Australia		—		—		65,783,703		136,380,773		—		290,633		50,595,388
Bangladesh		—		—		—		70,722,541		—		—		—
China/Hong Kong		—		—		590,394,714		2,759,318,193		5,743,781		3,219,570		194,112,558
India		—		—		74,021,884		266,991,433		—		507,054		54,140,655
Indonesia		—		—		61,315,703		101,756,581		—		444,196		72,525,339
Japan		—		—		103,470,085		1,796,448,535		3,221,890		248,723		420,588,588
Malaysia		—		—		34,270,274		—		2,076,082		206,491		—
New Zealand		—		—		35,488,044		—		—		—		—
Norway		—		—		33,367,099		—		—		—		—
Philippines		—		—		35,859,319		—		—		214,011		9,899,806
Singapore		—		—		194,608,642		275,245,309		754,245		1,014,231		—
South Korea		—		—		142,037,356		351,038,510		5,433,318		385,715		—
Switzerland		—		—		—		—		399,172		260,028		—
Taiwan		—		—		138,891,111		131,941,897		1,511,988		436,577		9,178,238
Thailand		—		—		32,503,194		99,843,690		—		220,557		14,076,208
Vietnam		—		—		36,290,620		92,304,686		—		—		19,156,200
Preferred Equities:
South Korea		—		—		36,315,895		289,881,406		3,253,322		—		—
Level 3: Significant Unobservable Inputs
Common Equities:
China/Hong Kong		—		—		—		—		1,534,488		—		—
Total Market Value of Investments		$106,722,329		$35,338,551		$2,121,878,842		$6,948,102,255		$31,934,065		$8,232,723		$1,072,404,653

a	Industry, countries, or security types are disclosed on the Schedule of Investments.


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Notes to Financial Statements (unaudited) (continued)

Matthews Asia
Strategic
Income Fund

Derivative Financial Instruments¹

Assets

Level 2: Other Significant Observable Inputs

Forward Foreign Currency Exchange Contracts

$165,468

Liabilities

Level 2: Other Significant Observable Inputs

Forward Foreign Currency Exchange Contracts

($1,473,456

)

1	Derivative financial instruments are forward foreign currency exchange contracts. Forward foreign currency exchange contracts are valued at the unrealized appreciation/depreciation on the instrument.


	Matthews China Dividend Fund		Matthews China Fund		Matthews India Fund		Matthews Japan Fund		Matthews Korea Fund		Matthews China Small Companies Fund
Assets:
Investments:
Level 1: Quoted Prices
Common Equities:
Consumer Discretionary		$5,033,078		$13,581,047		$—		$—		$—		$802,814
Consumer Staples		—		—		79,436,840		—		7,900,081		—
Financials		6,013,500		—		884,478		—		—		—
Health Care		3,114,069		10,775,466		27,030,839		—		—		999,245
Industrials		404,928		10,457,244		—		—		3,383,092		—
Information Technology		11,182,243		172,388,373		93,638,109		13,402,448		—		2,957,934
Materials		6,329,000		—		—		—		—		648,032
Telecommunication Services		8,053,678		—		—		—		3,815,152		—
Closed-End Fund:
Information Technology		9,919,955		—		—		—		—		—
Level 2: Other Significant Observable Inputs
Common Equities:
Consumer Discretionary		27,711,024		98,525,830		194,492,551		632,870,963		28,642,891		13,142,796
Consumer Staples		35,769,601		50,879,963		298,917,546		561,246,806		11,866,697		2,815,520
Energy		26,669,690		53,745,372		—		—		4,822,802		3,242,731
Financials		48,727,445		258,925,567		751,881,187		313,585,022		31,595,635		938,253
Health Care		16,740,369		22,127,702		165,044,034		519,131,241		11,847,941		5,379,388
Industrials		40,894,968		48,442,549		253,816,093		1,190,316,900		2,592,732		13,565,191
Information Technology		36,906,890		148,294,854		133,489,310		864,967,235		29,799,384		14,066,480
Materials		4,886,642		52,716,148		98,126,961		182,845,974		15,344,179		5,181,511
Real Estate		13,671,150		43,886,805		—		198,684,504		—		4,047,672
Telecommunication Services		19,410,730		11,273,079		—		97,179,353		—		—
Utilities		13,164,003		29,245,601		—		—		—		—
Preferred Equities:
Consumer Discretionary		—		—		—		—		8,619,600		—
Consumer Staples		—		—		—		—		10,587,230		—
Energy		—		—		—		—		3,175,416		—
Financials		—		—		—		—		7,789,522		—
Information Technology		—		—		—		—		18,052,855		—
Materials		—		—		—		—		4,895,532		—
Level 3: Significant Unobservable Inputs
Common Equities:
Information Technology		—		—		—		—		—		248
Total Market Value of Investments		$334,602,963		$1,025,265,600		$2,096,757,948		$4,574,230,446		$204,730,741		$67,787,815


140		MATTHEWS ASIA FUNDS


	Matthews Pacific Tiger Fund		Matthews Asia ESG Fund		Matthews Emerging Asia Fund		Matthews Asia Innovators Fund		Matthews Asia Small Companies Fund
Assets:
Investments:
Level 1: Quoted Prices
Common Equities:
Bangladesh		$—		$937,201.00		$52,295,291		$5,275,778.00		$—
China/Hong Kong		1,079,619,409		219,400		2,562,068		65,853,062		5,057,529
India		—		—		5,834,049		—		—
Indonesia		28,122,453		326,104		17,936,388		—		7,350,250
Japan		8,016,864		—		—		1,323,041		—
Luxembourg		—		181,839		—		—		—
Pakistan		—		348,602		57,122,843		—		—
Philippines		74,132,410		—		35,681,826		—		—
South Korea		34,418,675		—		—		—		—
Sri Lanka		—		—		37,066,801		—		—
United States		172,719,534		—		—		—		4,600,710
Vietnam		—		—		28,515,272		1,281,983		11,302,441
Level 2: Other Significant Observable Inputs
Common Equities:
Australia		—		—		3,070,198		—		5,114,775
Bangladesh		—		251,348		3,791,988		—		—
China/Hong Kong		2,323,370,486		4,319,158		38,721,650		99,311,698		140,007,518
India		1,955,417,875		3,439,935		34,901,537		33,171,516		49,477,571
Indonesia		475,315,570		633,880		58,248,934		5,416,812		9,145,398
Japan		—		3,395,035		—		—		13,203,795
Malaysia		407,748,190		—		—		—		12,103,000
Pakistan		—		—		13,021,412		—		—
Philippines		110,926,221		371,409		—		3,378,473		5,436,428
Singapore		—		768,948		2,876,729		6,967,868		3,437,925
South Korea		1,100,689,880		1,515,106		—		41,796,277		46,649,956
Sri Lanka		—		—		8,731,316		—		—
Switzerland		185,465,381		—		—		—		—
Taiwan		504,131,983		2,028,494		—		7,470,335		53,926,036
Thailand		431,142,540		630,075		—		5,095,626		19,682,314
Vietnam		211,203,340		372,799		65,407,924		5,389,616		4,601,995
Preferred Equities:
South Korea		—		1,242,786		—		6,363,749		—
Rights:
Taiwan		—		—		—		—		93,913
Total Market Value of Investments		$9,102,440,811		$20,982,119		$465,786,226		$288,095,834		$391,191,554

Foreign securities that are valued based on market quotations are categorized as Level 1 in the fair value hierarchy. Certain foreign securities may be fair valued by external pricing services when the Funds determine that events affecting the value of foreign securities which occur between the time at which they are determined and the close of trading on the NYSE render market quotations unreliable. Such fair valuations are typically categorized as Level 2 in the fair value hierarchy. The Funds’ policy is to recognize transfers in and transfers out as of the beginning of the reporting period. At June 30, 2018, the Funds utilized third-party pricing services to fair value certain securities, some of which were different than the securities which had been valued by third-party pricing services at December 31, 2017. As a result, certain securities held by the Funds were transferred from Level 2 to Level 1 and certain securities held by the Funds were transferred from Level 1 to Level 2 with beginning of period values as follows:


	Transfer to Level 1 from Level 2		Transfer to Level 2 from Level 1
Matthews Asian Growth and Income Fund		$41,014,908		$311,009,955
Matthews Asia Dividend Fund		—		811,075,390
Matthews China Dividend Fund		—		47,554,158
Matthews Asia Value Fund		981,429		6,112,107
Matthews Asia Focus Fund		427,670		1,275,305
Matthews Asia Growth Fund		28,436,378		66,004,128
Matthews Pacific Tiger Fund		263,376,635		1,622,397,034
Matthews Asia ESG Fund		766,147		3,708,730
Matthews Emerging Asia Fund		63,516,914		82,249,942
Matthews Asia Innovators Fund		7,554,488		19,531,426
Matthews China Fund		—		23,974,927
Matthews India Fund		152,120,649		512,950,575
Matthews Korea Fund		—		66,126,044
Matthews Asia Small Companies Fund		2,935,268		97,239,927
Matthews China Small Companies Fund		—		6,371,999


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Notes to Financial Statements (unaudited) (continued)

Level 3 securities consisted of equities that, as of June 30, 2018, were suspended from trading. As described in Note 2-A, these securities are valued based on their fair value as determined under the direction of the Board. The significant unobservable inputs, the methodology used for valuing such securities, and the characterization of such securities as Level 3 securities are not necessarily an indication of liquidity, or the risk associated with investing in these securities. A significant change in the unobservable inputs could result in a significantly lower or higher value in such Level 3 securities and could impact overall Fund performance.

A reconciliation of Level 3 investments for which significant unobservable inputs were used to determine value are as follows:


	Matthews Asia Value Fund			Matthews Korea Fund			Matthews Asia Small Companies Fund			Matthews China Small Companies Fund
	Common Equities — China/ Hong Kong			Common Equities — Consumer Discretionary			Common Equities — South Korea			Common Equities — Information Technology
Balance as of 12/31/17 (market value)		$—			$2,158,539			$3,491,660			$250

Accrued discounts/premiums		—			—			—			—

Realized gain/(loss)		—			—			1,368,937			—

Change in unrealized appreciation/(depreciation)		(539,731	)		(407,564	)		1,012,653			(2	)

Purchases		1,058,819			—			—			—

Sales		—			(1,750,975	)		(5,873,250	)		—

Transfers in to Level 3*		1,015,400			—			—			—

Transfer out of Level 3*		—			—			—			—
Balance as of 6/30/18 (market value)		$1,534,488			$—			$—			$248
Net change in unrealized appreciation/depreciation on Level 3 investments held as of 6/30/18**		($539,731	)		$—			$—			($2	)

*	The Funds’ policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

**	Included in the related amounts on the Statements of Operations.

Certain foreign securities, for which market quotations are not readily available, may be fair valued and classified as either Level 2 or Level 3. When the underlying inputs include significant observable inputs obtained from sources independent of the Funds, the securities are classified as Level 2. These inputs include evaluated prices from the Funds’ pricing vendors, day-on-day price changes, primary and ancillary pricing sources, and other available independent market indicators of value. When the underlying inputs include significant unobservable inputs and reflect assumptions of market participants, the securities are classified as Level 3. As of June 30, 2018, the Funds that previously used quoted prices or observable inputs now also utilize significant unobservable inputs for certain securities that were suspended from trading. As a result, certain securities held by the Funds that were previously classified as Level 1 or Level 2 were transferred to Level 3. Certain securities held by the Funds that were suspended from trading and classified as Level 3 on December 31, 2017 subsequently resumed trading and were transferred from Level 3 to Level 1, Level 2 or were sold.

The following table summarizes the valuation techniques used and unobservable inputs developed by the Valuation Committee to determine the fair value of certain, material Level 3 investments:

Value

Valuation
Technique

Unobservable
Input¹

Unobservable
Input — Proxy
Factor Price
Movement

Matthews Asia Value Fund:

��

Common Equity

$1,534,488

Last Price²Adjusted by Proxy factor³

Proxy factor³/Assessment of Company Specific Events

-9.86%

1	Increase in unobservable input may result in a significant increase to value, while a decrease in unobservable input may result in a significant decrease to value.

2	Last Price could include closing price, last reported sales price, or last fair valued price as described in Note 2-A.

3	Proxy factor considers movement of The Hong Kong Hang Seng Index.

BASIS OF CONSOLIDATION: The accompanying consolidated financial statements of Matthews China Fund and Matthews Asia Dividend Fund (the “Investing Funds”) for the 2014-2016 period include the accounts of the Matthews CF-U Series and Matthews ADF-U Series (the “U Series Funds”), respectively. The U Series Funds were series of Matthews A Share Selections Fund, LLC, a Delaware limited liability company registered under the 1940 Act. All of the interests offered by U Series Funds were exclusively owned by the Investing Funds. The U Series Funds primarily invested in the stocks of Chinese companies listed on Mainland China Stock Exchanges, and traded and denominated in the currency of China, the Renminbi. To allow U Series Funds to invest in China A Shares Matthews applied for and received a license from the China Securities Regulatory Commission as a Qualified Foreign Institutional Investor (“QFII”) and had been allocated by the State Administration of Foreign Exchange of China an initial quota of $100 million in June 2014, and an additional quota of $440 million in July 2015, representing the equivalent value in Renminbi of China A Shares that the Funds could purchase. Access to the quota was subject to Matthews’ trade allocation procedures and access allocation procedures. The U Series Funds were subject to the same investment policies and restrictions that apply to Investing Funds. Intercompany accounts and transactions, if any, have been eliminated in the consolidation process. The U Series Funds were intended to be disregarded entities for tax purposes. Therefore, no federal tax provision was required. Consolidated financial statements include expenses that are accrued for and paid by the Investing Funds. These include on-going operational costs as well as costs in connection with the launching of the U Series Funds.

In September 2016, the Board of Directors of the Matthews A Share Selections Fund, LLC adopted resolutions authorizing the termination and liquidation of the Matthews A Share Selections Fund, LLC. Consequently, as of September 30, 2016, the U Series Funds sold their securities and effectively


142		MATTHEWS ASIA FUNDS

ceased investment operations. The outstanding interests of each U Series Fund were redeemed by its respective Investing Fund. The Matthews A Share Selections Fund, LLC filed an initial application for deregistration as a registered investment company with the U.S. Securities and Exchange Commission in October 2016, which was subsequently granted in February 2017.

RISKS ASSOCIATED WITH NON-U.S. COMPANIES: Investments by the Funds in the securities of non-U.S. companies may involve investment risks not typically associated with investments in U.S. issuers. These risks include possible political, economic, social and religious instability, inadequate investor protection; changes in laws or regulations of countries within the Asia Pacific region (including in countries where the Funds may invest, as well as in the broader region); international relations with other nations; natural disasters; corruption; and military activity. Foreign securities may be subject to greater fluctuations in price than securities of domestic corporations or the U.S. government. Foreign investing may also include the risk of expropriation or confiscatory taxation, limitation on the removal of funds or other assets, currency crises and exchange controls, the imposition of foreign withholding tax on the interest income payable on such instruments, 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. Additionally, Asia Pacific countries may utilize formal or informal currency exchange controls or “capital controls” that may limit the ability to repatriate investments or income or adversely affect the value of portfolio investments. The economies of many Asia Pacific countries differ from the economies of more developed countries in many respects, such as their rate of growth, inflation, capital reinvestment, resource self-sufficiency and dependence on other economies, financial system stability, the national balance of payments position and sensitivity to changes in global trade.

Certain Asia Pacific countries are highly dependent upon and may be affected by developments in the economies of other countries. Non-U.S. companies are subject to different accounting, auditing, and financial reporting standards, practices, and requirements than U.S. companies. There is generally less government regulation of stock exchanges, brokers, and listed companies abroad than in the United States, which may result in less transparency with respect to a company’s operations, and make obtaining information about them more difficult (or such information may be unavailable).

Foreign stock markets may not be as developed or efficient as those in the United States, and the absence of negotiated brokerage commissions in certain countries may result in higher brokerage fees. The time between the trade and settlement dates of securities transactions on foreign exchanges ranges from one day to four weeks or longer and may result in higher custody charges. Custodial arrangements may be less well developed than in the United States. Foreign securities are generally denominated and pay distributions in foreign currencies, exposing the Funds to changes in foreign currency exchange rates. Investing in any country in the Asia Pacific region will also entail risks specific and unique to that country, and these risks can be significant and change rapidly.

Changes in interest rates in each of the countries in which the Funds may invest, as well as interest rates in more-developed countries, may cause a decline in the market value of an investment. Generally, fixed income securities will decrease in value when interest rates rise and can be expected to rise in value when interest rates decline. As interest rates decline, debt issuers may repay or refinance their loans or obligations earlier than anticipated. The issuers of fixed income securities may, therefore, repay principal in advance. This would force the Funds to reinvest the proceeds from the principal prepayments at lower rates, which reduces the Funds’ income.

DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of Matthews Asian Growth and Income Fund and Matthews China Dividend Fund to distribute net investment income on a semi-annual basis and capital gains, if any, annually. It is the policy of Matthews Asia Dividend Fund, Matthews Asia Strategic Income Fund and Matthews Asia Credit Opportunities Fund to distribute net investment income on a quarterly basis and capital gains, if any, annually. Each of the other Funds distributes a net investment income and capital gains, if any, annually. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from U.S. GAAP.

The tax character of distributions paid for the fiscal year ended December 31, 2017 was as follows:


YEAR ENDED DECEMBER 31, 2017	Ordinary Income		Net Long-Term Capital Gains		Total Taxable Distributions
Matthews Asia Strategic Income Fund		$3,275,012		$—		$3,275,012
Matthews Asia Credit Opportunities Fund		1,099,964		111,284		1,211,248
Matthews Asian Growth and Income Fund		76,634,444		42,640,486		119,274,930
Matthews Asia Dividend Fund		237,413,324		144,064,822		381,478,146
Matthews China Dividend Fund		17,609,713		12,048,945		29,658,658
Matthews Asia Value Fund		1,364,007		265,211		1,629,218
Matthews Asia Focus Fund		137,271		—		137,271
Matthews Asia Growth Fund		13,817,623		45,847,848		59,665,471
Matthews Pacific Tiger Fund		74,772,355		54,354,798		129,127,153
Matthews Asia ESG Fund		502,242		142,064		644,306
Matthews Emerging Asia Fund		2,448,800		910,694		3,359,494
Matthews Asia Innovators Fund		3,439,895		13,051,975		16,491,870
Matthews China Fund		58,708,744		33,489,520		92,198,264
Matthews India Fund		624,624		32,428,674		33,053,298
Matthews Japan Fund		37,593,412		118,095,898		155,689,310
Matthews Korea Fund		9,264,412		10,189,013		19,453,425
Matthews Asia Small Companies Fund		15,911,087		20,779,556		36,690,643
Matthews China Small Companies Fund		1,230,339		842,837		2,073,176


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Notes to Financial Statements (unaudited) (continued)

INVESTMENT TRANSACTIONS AND INCOME: Securities transactions are accounted for on the date the securities are purchased or sold or on the following business day. Financial statements reflect security transactions on trade date. Gains or losses on the sale of securities are determined on the identified cost basis. Interest income is recorded on the accrual basis. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized daily on an accrual basis. Dividend income is generally recorded on the ex-dividend date net of any foreign taxes withheld at the source. Dividend income for certain issuers headquartered in countries which the Funds invest may not be recorded until approved by the shareholders (which may occur after the ex-dividend date) if, in the judgment of management, such dividends are not reasonably determined as of the ex-dividend date. Income and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.

The Funds may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which they invest. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Funds invest. When a capital gain tax is determined to apply, the Funds record an estimated deferred tax liability in an amount that may be payable if the securities were disposed of on the valuation date.

FUND EXPENSE ALLOCATIONS: The Funds account separately for the assets, liabilities and operations of each Fund. Estimated expenses are accrued daily. Direct expenses of each Fund or class are charged to that Fund or class while general expenses are allocated pro-rata among the Funds based on net assets or other appropriate methods.

CASH, CASH OVERDRAFTS, AND FOREIGN CURRENCY: QFII accounts (i.e., the accounts through which the QFII quota is accessed) are required by the local market to maintain a cash reserve. The cash reserve is based upon a fixed ratio of the QFII’s approved investment quota, which is defined as the amount remitted into its special Renminbi (RMB) cash account. These amounts, if any, are included in “Segregated foreign currency at value” on the Statements of Assets and Liabilities. The fixed ratio is set at 0.08 percent for the Shanghai and 0.06 percent for the Shenzhen market. When any of the Funds’ cash balances are overdrawn, a Fund is charged an overdraft fee by the custodian of 1.00% above the 30-day LIBOR rate on outstanding balances. These amounts, if any, are included in “Other expenses” on the Statements of Operations.

I.	USE OF ESTIMATES: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

RECENT ACCOUNTING GUIDANCE: In March 2017, the Financial Accounting Standards Board issued amended guidance to shorten the amortization period for certain callable debt securities, held at premium. The guidance is effective for fiscal years and interim periods beginning after December 15, 2018. Adoption will have no effect on the funds’ net assets. Management is evaluating the impact, if any, of this guidance on the Funds’ results of operations and financial disclosures.

3.	DERIVATIVE FINANCIAL INSTRUMENTS

Each of the Matthews Asia Strategic Income Fund and the Matthews Asia Credit Opportunities Fund engages in derivative transactions for a variety of purposes, including managing interest rate, currency and credit exposure. Derivative transactions in which each Fund may engage include financial futures contracts, swaps and/or forward foreign currency exchange contracts.

Certain derivative transactions may result in each Fund’s exposure to a currency to exceed the value of the Fund’s assets and the Fund could be exposed to currency risk whether or not it holds a bond or other instrument denominated in that currency. The gross notional value of derivative financial instruments and transactions could exceed the value of the Fund’s net assets, although the net market value of these instruments and transactions, on a marked-to-market basis, at most times, is expected to be substantially lower.

The primary risks associated with the use of derivative financial instruments are: (i) Matthews may not correctly predict the direction of currency exchange rates, interest rates, security prices, or other economic factors; (ii) Matthews may not correctly predict changes in the value of derivative financial instruments and related underlying instruments or assets, which may result in disproportionately increased losses and/or reduced opportunities for gains; (iii) imperfect correlation between the change in market value of the securities held by a Fund and the price of financial futures contracts and credit default swaps contracts; (iv) the lack of, or a reduction in the liquidity of, any secondary market for the instrument, and the resulting inability to close the position (or exit the position) when desired; (v) losses, which are potentially unlimited, due to unanticipated market movements; (vi) the value of the instrument may change unfavorably due to movements in the value of the referenced foreign currencies; (vii) a Fund may suffer disproportionately heavy losses relative to the amount invested; (viii) changes in the value of the derivatives may not match or fully offset changes in the value of hedged or related portfolio securities, thereby failing to achieve the hedging or investment purpose for the derivative transaction; and (ix) the other party to the instrument may fail to fulfill its obligation.

Forward Foreign Currency Exchange Contracts: The Matthews Asia Strategic Income Fund enters into forward foreign currency exchange contracts to gain or reduce exposure to foreign currency exchange rate risk. A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. The contract is marked-to-market daily and the change in market value is recorded by the Fund as an unrealized gain or loss. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The Matthews Asia Strategic Income Fund does not offset financial assets and financial liabilities on forward foreign currency contacts in the Statements of Assets and Liabilities as they are not subject to netting arrangements. At June 30, 2018, the Matthews Asia Strategic Income Fund had $1,170,000 as cash collateral pledged for open forward foreign currency exchange contracts.

Swaps: The Matthews Asia Strategic Income Fund and the Matthews Asia Credit Opportunities Fund enter into swap contracts to manage exposure to issuers, markets and securities to reduce their risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which they are not otherwise exposed (credit risk). Such contracts are agreements between the Funds and a counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC Swaps”) or centrally cleared (“centrally cleared swaps”).

For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and swap premiums received, respectively, in the Statements of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Statements of Assets and Liabilities. Payments received or paid are recorded in the Statements of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the proceeds from (or cost of) the closing transaction and the Funds’ basis in the contract, if any. Generally, the basis of the contract is the amortized premium received or paid.

The Funds may buy credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a promise from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation acceleration, repudiation, moratorium or restructuring). As a buyer, if an underlying credit event occurs, the Funds will either (i) receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.


144		MATTHEWS ASIA FUNDS

Counterparty Credit Risk: A derivative contract may suffer a mark to market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

A Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by such Fund.

With exchange traded futures and centrally cleared swaps, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.

In order to better define its contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, a Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between each Fund and a counterparty that governs OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/ or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event a Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA Master Agreements, which would cause the Fund to accelerate payment of any net liability owed to the counterparty.

Collateral requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark to market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by a Fund and the counterparty. Cash collateral that has been pledged to cover obligations of a Fund, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral. Non-cash collateral pledged by a Fund, if any, is noted in the Schedules of Investments. No swaps were held by any Funds on June 30, 2018.

For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.

Derivative Financial Instruments Categorized by Risk Exposure:

As of June 30, 2018, the fair values of derivative financial instruments were as follows:


	Statements of Assets and Liabilities Location	Matthews Asia Strategic Income Fund
	Asset Derivatives
	Unrealized appreciation on forward foreign
Forward foreign currency exchange contracts	currency exchange contracts		$165,468


	Liability Derivatives
	Unrealized depreciation on forward foreign
	currency exchange contracts		($1,473,456	)

For the six-month period ended June 30, 2018, the effects of derivative financial instruments on the Statements of Operations were as follows:


Derivative type	Statements of Operations Location	Matthews Asia Strategic Income Fund
Net Realized Gain (Loss)
Foreign currency contracts:
Forward foreign currency exchange contracts	Net realized gain (loss) on forward foreign currency exchange contracts		$533,613


Net Change In Unrealized Appreciation (Depreciation)
Foreign currency contracts:
Forward foreign currency exchange contracts	Net change in unrealized appreciation/ depreciation on forward foreign currency exchange contracts		($1,634,417	)

In regards to the forward foreign currency exchange contracts entered into by the Matthews Asia Strategic Income Fund, the average notional ending quarterly amounts purchased in USD were $9,436,661 and the average notional ending quarterly amounts sold in USD were $32,225,000.


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Notes to Financial Statements (unaudited) (continued)

4.	CAPITAL SHARE TRANSACTIONS

Each Fund is authorized to issue an unlimited number of shares of beneficial interest with a par value of $0.001 per share.


	Six-Month Period Ended June 30, 2018 (Unaudited)						Year Ended December 31, 2017
	Shares			Amount			Shares			Amount
MATTHEWS ASIA STRATEGIC INCOME FUND
Investor Class
Shares sold		2,254,002			$24,990,680			2,471,612			$26,893,366
Shares issued through reinvestment of distributions		124,128			1,347,302			201,006			2,186,689
Shares redeemed		(3,002,108	)		(32,580,147	)		(2,206,966	)		(23,732,650	)
Net increase (decrease)		(623,978	)		($6,242,165	)		465,652			$5,347,405
Institutional Class
Shares sold		3,634,570			$39,524,843			1,614,574			$17,337,778
Shares issued through reinvestment of distributions		75,428			809,519			53,679			584,224
Shares redeemed		(459,137	)		(5,003,808	)		(114,814	)		(1,232,881	)
Net increase		3,250,861			$35,330,554			1,553,439			$16,689,121
MATTHEWS ASIA CREDIT OPPORTUNITIES FUND
Investor Class
Shares sold		442,255			$4,609,301			752,191			$7,854,221
Shares issued through reinvestment of distributions		19,969			204,618			40,940			425,058
Shares redeemed		(380,926	)		(3,917,966	)		(810,572	)		(8,398,269	)
Net increase (decrease)		81,298			$895,953			(17,441	)		($118,990	)
Institutional Class
Shares sold		1,345,313			$13,767,336			1,540,693			$16,092,601
Shares issued through reinvestment of distributions		30,013			306,417			27,293			283,653
Shares redeemed		(151,775	)		(1,570,372	)		(111,862	)		(1,175,697	)
Net increase		1,223,551			$12,503,381			1,456,124			$15,200,557
MATTHEWS ASIAN GROWTH AND INCOME FUND
Investor Class
Shares sold		4,296,363			$74,395,278			14,640,738			$241,575,990
Shares issued through reinvestment of distributions		868,991			14,268,804			3,602,819			61,730,211
Shares redeemed		(24,700,745	)		(424,582,292	)		(43,082,130	)		(721,414,206	)
Net (decrease)		(19,535,391	)		($335,918,210	)		(24,838,573	)		($418,108,005	)
Institutional Class
Shares sold		13,198,595			$227,660,235			36,133,398			$604,837,817
Shares issued through reinvestment of distributions		953,909			15,634,574			3,077,228			52,660,292
Shares redeemed		(21,978,464	)		(379,642,551	)		(18,309,223	)		(312,385,386	)
Net increase (decrease)		(7,825,960	)		($136,347,742	)		20,901,403			$345,112,723
MATTHEWS ASIA DIVIDEND FUND
Investor Class
Shares sold		25,717,121			$513,558,060			46,067,788			$837,987,289
Shares issued through reinvestment of distributions		1,800,573			34,856,019			9,772,567			187,636,316
Shares redeemed		(33,182,750	)		(657,629,927	)		(38,470,520	)		(679,700,431	)
Net increase (decrease)		(5,665,056	)		($109,215,848	)		17,369,835			$345,923,174
Institutional Class
Shares sold		37,200,595			$738,892,909			48,661,134			$863,508,784
Shares issued through reinvestment of distributions		1,932,439			37,410,756			7,450,686			142,974,481
Shares redeemed		(13,513,602	)		(268,171,964	)		(20,774,459	)		(376,048,201	)
Net increase		25,619,432			$508,131,701			35,337,361			$630,435,064


146		MATTHEWS ASIA FUNDS


	Six-Month Period Ended June 30, 2018 (Unaudited)						Year Ended December 31, 2017
	Shares			Amount			Shares			Amount
MATTHEWS CHINA DIVIDEND FUND
Investor Class
Shares sold		3,093,474			$57,010,780			5,731,788			$94,790,959
Shares issued through reinvestment of distributions		260,381			4,699,883			1,334,478			22,238,460
Shares redeemed		(3,925,510	)		(72,662,656	)		(3,649,309	)		(58,975,597	)
Net increase (decrease)		(571,655	)		($10,951,993	)		3,416,957			$58,053,822
Institutional Class
Shares sold		2,474,773			$46,216,101			1,139,266			$19,168,584
Shares issued through reinvestment of distributions		102,860			1,856,619			283,364			4,723,368
Shares redeemed		(358,823	)		(6,489,829	)		(317,830	)		(5,535,520	)
Net increase		2,218,810			$41,582,891			1,104,800			$18,356,432
MATTHEWS ASIA VALUE FUND
Investor Class
Shares sold		641,782			$8,427,183			1,946,342			$23,869,389
Shares issued through reinvestment of distributions		—			—			111,073			1,409,511
Shares redeemed		(188,905	)		(2,467,366	)		(181,234	)		(2,270,540	)
Net increase		452,877			$5,959,817			1,876,181			$23,008,360
Institutional Class
Shares sold		87,192			$1,147,217			247,950			$3,257,066
Shares issued through reinvestment of distributions		—			—			12,396			156,066
Shares redeemed		(56,847	)		(739,285	)		(9,941	)		(128,456	)
Net increase		30,345			$407,932			250,405			$3,284,676
MATTHEWS ASIA FOCUS FUND
Investor Class
Shares sold		41,381			$507,467			64,321			$704,275
Shares issued through reinvestment of distributions		—			—			3,983			46,882
Shares redeemed		(134,052	)		(1,604,063	)		(196,120	)		(2,150,907	)
Net (decrease)		(92,671	)		($1,096,596	)		(127,816	)		($1,399,750	)
Institutional Class
Shares sold		73,466			$880,000			279,502			$3,274,793
Shares issued through reinvestment of distributions		—			—			7,611			89,956
Shares redeemed		(511,221	)		(6,238,916	)		(12,872	)		(141,906	)
Net increase (decrease)		(437,755	)		($5,358,916	)		274,241			$3,222,843
MATTHEWS ASIA GROWTH FUND
Investor Class
Shares sold		6,850,740			$196,673,703			4,079,531			$102,687,689
Shares issued through reinvestment of distributions		—			—			1,217,730			31,490,493
Shares redeemed		(4,292,271	)		(123,318,375	)		(4,883,819	)		(118,388,884	)
Net increase		2,558,469			$73,355,328			413,442			$15,789,298
Institutional Class
Shares sold		8,314,044			$240,878,005			3,002,726			$76,546,224
Shares issued through reinvestment of distributions		—			—			471,874			12,287,614
Shares redeemed		(686,897	)		(19,766,021	)		(1,929,007	)		(49,929,723	)
Net increase		7,627,147			$221,111,984			1,545,593			$38,904,115
MATTHEWS PACIFIC TIGER FUND
Investor Class
Shares sold		12,916,714			$411,771,976			21,730,132			$599,219,782
Shares issued through reinvestment of distributions		—			—			1,299,802			38,957,121
Shares redeemed		(18,825,711	)		(589,482,359	)		(24,341,900	)		(662,177,549	)
Net (decrease)		(5,908,997	)		($177,710,383	)		(1,311,966	)		($24,000,646	)
Institutional Class
Shares sold		38,408,574			$1,211,515,570			56,008,953			$1,551,287,735
Shares issued through reinvestment of distributions		—			—			1,955,641			58,557,191
Shares redeemed		(34,426,246	)		(1,085,729,245	)		(39,727,419	)		(1,096,771,755	)
Net increase		3,982,328			$125,786,325			18,237,175			$513,073,171


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Notes to Financial Statements (unaudited) (continued)


	Six-Month Period Ended June 30, 2018 (Unaudited)						Year Ended December 31, 2017
	Shares			Amount			Shares			Amount
MATTHEWS ASIA ESG FUND
Investor Class
Shares sold		218,594			$2,561,583			429,011			$4,551,575
Shares issued through reinvestment of distributions		—			—			33,239			372,274
Shares redeemed		(39,180	)		(458,460	)		(136,139	)		(1,448,047	)
Net increase		179,414			$2,103,123			326,111			$3,475,802
Institutional Class
Shares sold		128,151			$1,508,344			369,352			$3,869,597
Shares issued through reinvestment of distributions		—			—			23,910			266,353
Shares redeemed		(12,734	)		(145,387	)		(132,288	)		(1,379,356	)
Net increase		115,417			$1,362,957			260,974			$2,756,594
MATTHEWS EMERGING ASIA FUND
Investor Class
Shares sold		2,765,559			$41,797,156			8,666,298			$123,504,046
Shares issued through reinvestment of distributions		—			—			85,107			1,320,905
Shares redeemed		(4,692,812	)		(70,522,640	)		(5,606,324	)		(80,014,289	)
Net increase (decrease)		(1,927,253	)		($28,725,484	)		3,145,081			$44,810,662
Institutional Class
Shares sold		7,508,510			$114,277,629			11,622,115			$170,654,093
Shares issued through reinvestment of distributions		—			—			118,430			1,843,997
Shares redeemed		(1,957,085	)		(29,648,480	)		(1,300,786	)		(18,930,640	)
Net increase		5,551,425			$84,629,149			10,439,759			$153,567,450
MATTHEWS ASIA INNOVATORS FUND
Investor Class
Shares sold		8,280,359			$122,026,633			8,154,384			$110,598,339
Shares issued through reinvestment of distributions		—			—			986,202			13,510,372
Shares redeemed		(5,780,969	)		(85,836,997	)		(5,092,537	)		(66,640,478	)
Net increase		2,499,390			$36,189,636			4,048,049			$57,468,233
Institutional Class
Shares sold		3,973,066			$59,430,105			1,210,987			$16,535,812
Shares issued through reinvestment of distributions		—			—			145,969			2,009,294
Shares redeemed		(491,516	)		(7,268,608	)		(817,521	)		(11,680,059	)
Net increase		3,481,550			$52,161,497			539,435			$6,865,047
MATTHEWS CHINA FUND
Investor Class
Shares sold		10,668,429			$257,887,316			10,522,294			$228,825,245
Shares issued through reinvestment of distributions		—			—			3,700,905			76,608,446
Shares redeemed		(8,067,083	)		(190,711,327	)		(8,287,540	)		(168,142,345	)
Net increase		2,601,346			$67,175,989			5,935,659			$137,291,346
Institutional Class
Shares sold		4,941,401			$118,096,767			2,708,363			$55,763,860
Shares issued through reinvestment of distributions		—			—			200,924			4,151,093
Shares redeemed		(1,352,252	)		(31,341,423	)		(1,141,616	)		(24,992,022	)
Net increase		3,589,149			$86,755,344			1,767,671			$34,922,931
MATTHEWS INDIA FUND
Investor Class
Shares sold		6,382,526			$217,760,480			14,535,681			$444,075,766
Shares issued through reinvestment of distributions		—			—			578,888			18,854,400
Shares redeemed		(6,292,247	)		(212,435,140	)		(9,557,043	)		(292,422,842	)
Net increase		90,279			$5,325,340			5,557,526			$170,507,324
Institutional Class
Shares sold		4,556,932			$156,589,601			10,938,379			$326,819,057
Shares issued through reinvestment of distributions		—			—			94,003			3,078,591
Shares redeemed		(6,327,828	)		(214,842,570	)		(9,578,020	)		(307,547,412	)
Net increase (decrease)		(1,770,896	)		($58,252,969	)		1,454,362			$22,350,236


148		MATTHEWS ASIA FUNDS


	Six-Month Period Ended June 30, 2018 (Unaudited)						Year Ended December 31, 2017
	Shares			Amount			Shares			Amount
MATTHEWS JAPAN FUND
Investor Class
Shares sold		22,896,500			$575,589,979			27,038,482			$577,083,165
Shares issued through reinvestment of distributions		—			—			3,303,132			77,557,315
Shares redeemed		(8,821,207	)		(220,497,732	)		(30,502,087	)		(650,099,638	)
Net increase (decrease)		14,075,293			$355,092,247			(160,473	)		$4,540,842
Institutional Class
Shares sold		19,046,821			$480,954,033			27,236,482			$598,412,144
Shares issued through reinvestment of distributions		—			—			731,710			17,217,127
Shares redeemed		(10,398,303	)		(259,043,012	)		(16,017,190	)		(343,303,401	)
Net increase		8,648,518			$221,911,021			11,951,002			$272,325,870
MATTHEWS KOREA FUND
Investor Class
Shares sold		2,388,848			$16,154,213			5,564,488			$34,796,556
Shares issued through reinvestment of distributions		13			85			2,324,365			15,751,872
Shares redeemed		(2,910,054	)		(19,754,634	)		(7,247,886	)		(46,248,343	)
Net increase (decrease)		(521,193	)		($3,600,336	)		640,967			$4,300,085
Institutional Class
Shares sold		2,364,570			$16,015,802			3,283,807			$20,683,708
Shares issued through reinvestment of distributions		—			—			384,519			2,621,405
Shares redeemed		(620,109	)		(4,065,509	)		(395,768	)		(2,595,391	)
Net increase		1,744,461			$11,950,293			3,272,558			$20,709,722
MATTHEWS ASIA SMALL COMPANIES FUND
Investor Class
Shares sold		785,796			$18,298,397			1,344,836			$29,213,685
Shares issued through reinvestment of distributions		—			—			693,887			14,856,114
Shares redeemed		(1,456,227	)		(33,985,632	)		(6,279,829	)		(130,940,312	)
Net (decrease)		(670,431	)		($15,687,235	)		(4,241,106	)		($86,870,513	)
Institutional Class
Shares sold		610,879			$14,298,222			2,953,870			$62,967,705
Shares issued through reinvestment of distributions		—			—			833,944			17,829,734
Shares redeemed		(1,446,603	)		(33,486,278	)		(2,791,566	)		(58,750,310	)
Net increase (decrease)		(835,724	)		($19,188,056	)		996,248			$22,047,129
MATTHEWS CHINA SMALL COMPANIES FUND
Investor Class
Shares sold		2,606,763			$33,728,341			1,951,872			$21,481,987
Shares issued through reinvestment of distributions		—			—			165,109			1,778,217
Shares redeemed		(728,828	)		(9,278,169	)		(1,116,609	)		(11,848,256	)
Net increase		1,877,935			$24,450,172			1,000,372			$11,411,948
Institutional Class*
Shares sold		587,990			$7,710,064			39,317			$450,574
Shares issued through reinvestment of distributions		—			—			782			8,409
Shares redeemed		(2,204	)		(28,585	)		—			—
Net increase		585,786			$7,681,479			40,099			$458,983

*	Institutional class commenced operations on November 30, 2017.

Through June 30, 2018, a 2.00% redemption fee was assessed on the sale or exchange of shares of the Matthews Emerging Asia Fund, Matthews Asia Small Companies Fund and Matthews China Small Companies Fund (collectively, the “Covered Funds”) within 90 days after the date an investor purchases shares of the Covered Funds. The imposition of redemption fees pursuant to the Funds’ Short-Term Trading Redemption Fee Policy for the Covered Funds may assist the Covered Funds in discouraging market timing activity.

The redemption fee is imposed to discourage market timing and short-term buying and selling of shares of the Covered Funds, which can disrupt the management of the Covered Funds’ investment portfolios and may have detrimental effects on the Covered Funds and other shareholders, and to allocate the costs the Covered Funds incur as a result of short-term trading and market timing. This fee is payable directly to the Covered Funds.

To determine whether the redemption fee applies, the Covered Funds do not count the day that shares were purchased, and first redeem the shares that have been held the longest.


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Notes to Financial Statements (unaudited) (continued)

The Covered Funds may grant an exemption from the redemption fee when the Covered Funds have previously received assurances that transactions do not involve a substantial risk of the type of harm that the policy is designed to avoid. The Covered Funds may also waive the imposition of redemption fees in certain circumstances. For more information on this policy, please see the Funds’ prospectuses. The redemption fees returned to the assets of the Funds are stated in the Statements of Changes in Net Assets.

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

5.	INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES

Matthews, a registered investment advisor under the 1940 Act, provides the Funds with investment management services. Pursuant to the prior Investment Advisory Agreement dated August 13, 2004, as amended (the “Prior Advisory Agreement”) and the current Investment Advisory Agreement dated February 1, 2016, as amended (the “Current Advisory Agreement,” and together with the Prior Advisory Agreement, the “Advisory Agreement”), the Funds pay Matthews (i) for management and advisory services; and (ii) for certain administrative services, an annual fee as a percentage of average daily net assets. Under the Advisory Agreement each of the Funds, other than Matthews Asia Strategic Income Fund, Matthews Asia Credit Opportunities Fund, Matthews Emerging Asia Fund, Matthews Asia Small Companies Fund, and Matthews China Small Companies Fund (the “Family-Priced Funds”), pays Matthews 0.75% of their aggregate average daily net assets up to $2 billion, 0.6834% of their aggregate average daily net assets over $2 billion up to $5 billion, 0.65% of their aggregate average daily net assets over $5 billion up to $25 billion, 0.64% of their aggregate average daily net assets over $25 billion up to $30 billion, 0.63% of their aggregate average daily net assets over $30 billion up to $35 billion, 0.62% of their aggregate average daily net assets over $35 billion up to $40 billion, 0.61% of their aggregate average daily net assets over $40 billion up to $45 billion, and 0.60% of their aggregate average daily net assets over $45 billion. Each of the Matthews Asia Strategic Income Fund and Matthews Asia Credit Opportunities Fund pays Matthews an annual fee of 0.65% of such Fund’s annual average daily net assets pursuant to the Advisory Agreement. Each of the Matthews Emerging Asia Fund, Matthews Asia Small Companies Fund, and the Matthews China Small Companies Fund pays Matthews an annual fee of 1.00% of the average daily net assets of such Fund up to $1 billion and 0.95% of the average daily net assets of such Fund over $1 billion pursuant to the Advisory Agreement. Each Fund pays Matthews a monthly fee at the annual rate using the applicable management fee calculated based on the actual number of days of that month and based on the Fund’s average daily net asset value for the month.

Pursuant to a fee waiver letter agreement, effective as of September 1, 2014, between the Trust, on behalf of the Family-Priced Funds, and Matthews (as amended from time to time, the “Fee Waiver Agreement”), for each Family-Priced Fund, Matthews has agreed to waive a portion of the fee payable under the Advisory Agreement and a portion of the fee payable under the Administration and Shareholder Services Agreement, if any Family-Priced Fund’s average daily net assets are over $3 billion, as follows: for every $2.5 billion average daily net assets of a Family-Priced Fund that are over $3 billion, the fee rates that otherwise would be applied for calculating fees payable under the Advisory Agreement and the Administration and Shareholder Services Agreement for such Family-Priced Fund with respect to such excess average daily net assets will be each reduced by 0.01%, in each case without reducing such fee rate below 0.00%.

Under a written agreement between the Funds and Matthews (the “Operating Expense Agreement”), Matthews agrees to waive fees and reimburse expenses to a Fund if its expense ratio exceeds a certain percentage level. Effective November 30, 2017 for all Funds, except Matthews Asia Strategic Income Fund and the Matthews Asia Credit Opportunities Fund, this level is 1.25% for the Institutional Class. Matthews agrees to reduce the expense ratio by waiving an equal amount of non-class specific expenses for the Investor Class. Because certain expenses of the Investor Class may be higher than those of the Institutional Class and because class specific expenses may be waived solely for the Institutional Class, total annual Fund expenses for the Investor Class may exceed 1.25%. For Matthews Asia Strategic Income Fund and Matthews Asia Credit Opportunities Fund this level is 0.90% for the Institutional Class. Matthews agrees to reduce the expense ratio by waiving an equal amount of non-class specific expenses for the Investor Class. Because certain expenses of the Investor Class may be higher than those of the Institutional Class and because class specific expenses may be waived solely for the Institutional Class, total annual Fund expenses for the Investor Class may exceed 0.90%. In turn, if a Fund’s expenses fall below the level noted within three years after Matthews has made such a reimbursement, the Fund may reimburse Matthews up to an amount of the recoupment available not to exceed the lesser of (i) the expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will continue through April 30, 2019, may be extended for additional periods not exceeding one year, and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.

On June 30, 2018, the amounts subject to possible future recoupment under the expense limitation agreement are as follows:


	Expiring December 31,
	2018		2019		2020		2021
Matthews Asia Strategic Income Fund		$113,621		$123,474		$121,164		$46,533
Matthews Asia Credit Opportunities Fund		—		110,447		149,157		50,658
Matthews Asia Value Fund		41,279		211,035		119,683		17,742
Matthews Asia Focus Fund		87,252		111,801		119,705		64,062
Matthews Asia ESG Fund		183,986		163,853		156,429		63,683
Matthews Emerging Asia Fund		452,048		553,167		878,171		452,636
Matthews Asia Small Companies Fund		113,037		252,008		272,597		123,849
Matthews China Small Companies Fund		133,327		142,295		184,162		119,560


150		MATTHEWS ASIA FUNDS

Investment advisory fees charged, waived fees and reimbursed additional expenses for the six-month period ended June 30, 2018, were as follows:


	Gross Advisory Fees		Advisory Fees Waived and Reimbursed in Excess of the Expense Limitation			Net Advisory Fee/ Reimbursement
Matthews Asia Strategic Income Fund		$358,838		($46,533	)		$312,305
Matthews Asia Credit Opportunities Fund		120,616		(50,658	)		69,958
Matthews Asian Growth and Income Fund		8,290,629		—			8,290,629
Matthews Asia Dividend Fund		23,802,726		(301,367	)		23,501,359
Matthews China Dividend Fund		1,120,828		—			1,120,828
Matthews Asia Value Fund		114,854		(17,742	)		97,112
Matthews Asia Focus Fund		36,110		(64,062	)		(27,952	)
Matthews Asia Growth Fund		3,492,709		—			3,492,709
Matthews Pacific Tiger Fund		31,871,278		(633,657	)		31,237,621
Matthews Asia ESG Fund		66,100		(63,683	)		2,417
Matthews Emerging Asia Fund		2,562,890		(452,636	)		2,110,254
Matthews Asia Innovators Fund		884,748		—			884,748
Matthews China Fund		3,539,833		—			3,539,833
Matthews India Fund		7,476,206		—			7,476,206
Matthews Japan Fund		15,403,570		(85,130	)		15,318,440
Matthews Korea Fund		721,469		—			721,469
Matthews Asia Small Companies Fund		2,141,547		(123,849	)		2,017,698
Matthews China Small Companies Fund		255,813		(119,560	)		136,253

The Funds have an Administration and Shareholder Services Agreement dated August 13, 2004, as amended (the “Shareholder Services Agreement” or “Services Agreement”), in which the Funds pay an annual administration and shareholder servicing fee to Matthews, as a percentage of the average daily net assets of each Fund in aggregate, computed and prorated on a daily basis. Under the Shareholder Services Agreement, the Funds in the aggregate pay Matthews 0.25% of their aggregate average daily net assets up to $2 billion, 0.1834% of their aggregate average daily net assets over $2 billion up to $5 billion, 0.15% of their aggregate average daily net assets over $5 billion up to $7.5 billion, 0.125% of their aggregate average daily net assets over $7.5 billion up to $15 billion, 0.11% of their aggregate average daily net assets over $15 billion up to $22.5 billion, 0.10% of their aggregate average daily net assets over $22.5 billion up to $25 billion, 0.09% of their aggregate average daily net assets over $25 billion up to $30 billion, 0.08% of their aggregate average daily net assets over $30 billion up to $35 billion, 0.07% of their aggregate average daily net assets over $35 billion up to $40 billion, 0.06% of their aggregate average daily net assets over $40 billion up to $45 billion, and 0.05% of their aggregate average daily net assets over $45 billion.

Administration and shareholder servicing fees charged, for the six-month period ended June 30, 2018, were as follows:


	Gross Administration and Shareholder Servicing Fees		Administration and Shareholder Servicing Fees Waived in Excess of Expense Limitation			Net Administration and Shareholder Servicing Fees
Matthews Asia Strategic Income Fund		$70,842		$—			$70,842
Matthews Asia Credit Opportunities Fund		23,813		—			23,813
Matthews Asian Growth and Income Fund		1,614,940		—			1,614,940
Matthews Asia Dividend Fund		4,637,377		(301,367	)		4,336,010
Matthews China Dividend Fund		218,375		—			218,375
Matthews Asia Value Fund		22,379		—			22,379
Matthews Asia Focus Fund		7,032		—			7,032
Matthews Asia Growth Fund		680,575		—			680,575
Matthews Pacific Tiger Fund		6,208,953		(633,657	)		5,575,296
Matthews Asia ESG Fund		12,879		—			12,879
Matthews Emerging Asia Fund		328,824		—			328,824
Matthews Asia Innovators Fund		172,402		—			172,402
Matthews China Fund		689,665		—			689,665
Matthews India Fund		1,456,516		—			1,456,516


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Notes to Financial Statements (unaudited) (continued)


	Gross Administration and Shareholder Servicing Fees		Administration and Shareholder Servicing Fees Waived in Excess of Expense Limitation			Net Administration and Shareholder Servicing Fees
Matthews Japan Fund		$3,001,218		($85,130	)		$2,916,088
Matthews Korea Fund		140,557		—			140,557
Matthews Asia Small Companies Fund		274,750		—			274,750
Matthews China Small Companies Fund		32,837		—			32,837

In addition to the fees paid to the Funds’ transfer agent, the Funds bear the cost of fees paid to certain service providers or intermediaries, including supermarkets, which provide transfer agency, record-keeping and shareholder servicing to certain shareholders. These fees are referred to as intermediary service fees on the Statements of Assets and Liabilities as well as the Statements of Operations. Additional information concerning these services and fees is contained in the Funds’ prospectuses.

BNY Mellon Investment Servicing (US) Inc. (“BNY Mellon”), an indirect wholly owned subsidiary of The Bank of New York Mellon Corporation, serves as the Funds’ administrator, and in that capacity, performs various administrative and accounting services for each Fund. BNY Mellon also serves as the Funds’ transfer agent, dividend disbursing agent and registrar. An officer of BNY Mellon serves as Assistant Treasurer to the Funds. Total fees accrued by the Funds for administration and accounting services for the six-month period ended June 30, 2018 were as follows:


	Administration and Accounting fees
Matthews Asia Strategic Income Fund		$4,416
Matthews Asia Credit Opportunities Fund		1,485
Matthews Asian Growth and Income Fund		100,714
Matthews Asia Dividend Fund		289,149
Matthews China Dividend Fund		13,616
Matthews Asia Value Fund		1,395
Matthews Asia Focus Fund		439
Matthews Asia Growth Fund		42,428
Matthews Pacific Tiger Fund		387,166
Matthews Asia ESG Fund		803
Matthews Emerging Asia Fund		20,503
Matthews Asia Innovators Fund		10,748
Matthews China Fund		43,001
Matthews India Fund		90,819
Matthews Japan Fund		187,118
Matthews Korea Fund		8,764
Matthews Asia Small Companies Fund		17,132
Matthews China Small Companies Fund		2,046

Brown Brothers Harriman & Co. serves as the Funds’ custodian. Foreside Funds Distributors LLC, serves as the Funds’ distributor in the United States pursuant to an Underwriting Agreement. Matthews Asia Funds are distributed in Latin America by HMC Partners.

Cross trades for the six-months ended June 30, 2018, were executed by the Funds pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds to which Matthews International Capital Management, LLC serves as investment advisor. At its regularly scheduled quarterly meetings, the Board reviews such transactions as of the most recent calendar quarter for compliance with the requirements and restrictions set forth by Rule 17a-7. For the six-month period ended June 30, 2018, the purchase and sale transactions with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:


	Purchases		Sales
Matthews Asia Dividend Fund		$506,605		$—
Matthews China Dividend Fund		—		506,605

As of June 30, 2018, Matthews and its affiliates held significant shares in the Funds as follows:


	Shares held by Matthews and its Affiliates		Percentage of Outstanding Shares
Matthews Asia Strategic Income Fund		1,288,645		11%
Matthews Asia Credit Opportunities Fund		1,110,128		25%
Matthews Asia Focus Fund		70,384		9%

Certain officers and Trustees of the Funds are also officers and directors of Matthews. All officers serve without compensation from the Funds. The Funds paid the Independent Trustees $808,763 in aggregate for regular compensation during the six-month period ended June 30, 2018.


152		MATTHEWS ASIA FUNDS

6.	INVESTMENTS

The value of investment transactions made for affiliated and unaffiliated holdings for the six-month period ended June 30, 2018 were as follows:


	Affiliated Purchases		Proceeds from Affiliated Sales		Unaffiliated Purchases		Proceeds from Unaffiliated Sales
Matthews Asia Strategic Income Fund		$—		$—		$48,653,960		$25,911,197
Matthews Asia Credit Opportunities Fund		—		—		14,056,904		4,924,833
Matthews Asian Growth and Income Fund		—		—		390,115,260		855,164,760
Matthews Asia Dividend Fund		215,969,155		4,037,979		1,356,988,782		1,264,364,552
Matthews China Dividend Fund		—		—		132,100,610		106,586,670
Matthews Asia Value Fund		—		—		8,455,250		2,201,565
Matthews Asia Focus Fund		—		—		1,612,056		7,825,354
Matthews Asia Growth Fund		5,480,091		—		266,066,723		27,026,286
Matthews Pacific Tiger Fund		62,291,729		243,448		514,927,217		428,055,143
Matthews Asia ESG Fund		—		—		5,002,223		1,441,064
Matthews Emerging Asia Fund		6,420,597		—		81,665,110		31,011,651
Matthews Asia Innovators Fund		—		—		177,653,463		89,036,421
Matthews China Fund		—		—		660,080,302		501,140,278
Matthews India Fund		—		3,219,397		269,613,807		315,920,968
Matthews Japan Fund		72,512,637		—		1,321,955,626		791,966,186
Matthews Korea Fund		—		—		48,825,130		36,301,643
Matthews Asia Small Companies Fund		299,496		—		177,571,142		202,478,718
Matthews China Small Companies Fund		—		—		55,431,965		24,529,701

7.	HOLDINGS OF 5% VOTING SHARES OF PORTFOLIO COMPANIES

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting shares. During the six-month period ended June 30, 2018, the Funds below held 5% or more of the outstanding voting shares of the noted portfolio companies. During this period, other Funds in the Trust may also have held voting shares of the issuers at levels below 5%.

Investments in affiliates:

A summary of transactions in securities of issuers affiliated with a Fund for the six-month period ended June 30, 2018 is as follows:


	Shares Held at Dec. 31, 2017		Shares Purchased			Shares Sold		Shares Held at June 30, 2018		Value at June 30, 2018			Dividend Income Jan. 1, 2018– June 30, 2018		Net Realized Gain (Loss) Jan. 1, 2018– June 30, 2018		Change in Unrealized Appreciation (Depreciation)

MATTHEWS ASIA DIVIDEND FUND
Name of Issuer:
Anritsu Corp.		9,384,700		—			—		9,384,700		$128,488,779			$600,899		$—		$22,839,379
Ascendas India Trust		53,470,700		4,393,100			—		57,863,800		42,893,533			1,428,289		—		(6,518,909	)
Breville Group, Ltd.		10,644,019		1,541,519			—		12,185,538		104,697,395			1,291,815		—		(12,750,328	)
CapitaLand Retail China Trust REIT		49,800,000		—			—		49,800,000		55,510,351			312,864		—		(4,810,409	)
China Steel Chemical Corp.		—		14,747,000			—		14,747,000		71,984,154			—		—		(2,041,414	)
Eiken Chemical Co., Ltd.		1,033,500		2,303,700	†		—		3,337,200		70,894,137			356,133		—		(8,780,663	)
Greencross, Ltd.		3,825,449		5,734,833			—		9,560,282		31,683,378			750,627		—		(15,923,770	)
Minth Group, Ltd.		60,675,000		2,048,000			654,000		62,069,000		262,533,967	��		6,726,674		3,145,410		(111,878,781	)
Shanghai Jin Jiang International Hotels Group Co., Ltd. H Shares		44,450,000		121,676,000			—		166,126,000		67,145,514			1,824,110		—		(399,728	)
Yuexiu Transport Infrastructure, Ltd.		92,646,000		4,682,000			—		97,328,000		70,854,662			2,797,700		—		(775,245	)

Total Affiliates											$906,685,870			$16,089,111		$3,145,410		($141,039,868	)


MATTHEWS ASIA GROWTH FUND
Name of Issuer:
Sampath Bank PLC		9,955,478		6,170,909	†		—		16,126,387		$30,877,498			$—		$—		$301,436


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Notes to Financial Statements (unaudited) (continued)


	Shares Held at Dec. 31, 2017		Shares Purchased		Shares Sold		Shares Held at June 30, 2018		Value at June 30, 2018		Dividend Income Jan. 1, 2018– June 30, 2018		Net Realized Gain (Loss) Jan. 1, 2018– June 30, 2018		Change in Unrealized Appreciation (Depreciation)

MATTHEWS PACIFIC TIGER FUND
Name of Issuer:
Cheil Worldwide, Inc.		6,554,297		761,585		—		7,315,882		$135,487,900		$3,891,615		$—		($8,232,306	)
DB Insurance Co., Ltd.		3,499,380		71,086		—		3,570,463		189,085,119		6,287,950		—		(47,507,859	)
Fuyao Glass Industry Group Co., Ltd. H Shares		32,976,400		750,000		—		33,726,400		113,963,851		3,577,990		—		(27,774,293	)
Green Cross Corp.		620,785		—		—		620,785		115,059,342		—		—		(15,878,669	)
Just Dial, Ltd.		3,557,718		—		—		3,557,718		28,901,385		—		—		(205,823	)
Orion Holdings Corp.		5,666,538		—		—		5,666,538		139,866,826		—		—		(1,194,534	)
Sinopharm Group Co., Ltd. H Shares		61,139,600		5,006,800		—		66,146,400		265,998,639		—		—		(19,158,019	)
Synnex Technology International Corp.		95,600,921		—		151,000		95,449,921		143,929,183		—		61,286		14,079,880
Tata Power Co., Ltd.		164,620,436		15,696,051		—		180,316,487		192,888,779		—		—		(67,740,792	)

Total Affiliates										$1,325,181,024		$13,757,555		$61,286		($173,612,415	)


MATTHEWS EMERGING ASIA FUND
Name of Issuer:
National Seed JSC		979,585		—		—		979,585		$4,731,841		$64,703		$—		$60,167
Shifa International
Hospitals, Ltd.		2,519,051		264,300		—		2,783,351		6,187,771		—		—		(1,435,594	)
Taisun International
Holding Corp.		654,000		1,246,000		—		1,900,000		8,693,442		—		—		212,910

Total Affiliates										$19,613,054		$64,703		$—		($1,162,517)


MATTHEWS INDIA FUND
Name of Issuer:
eClerx Services, Ltd.		2,701,931		—		154,563		2,547,368		$48,337,344		$—		$577,674		($15,313,238	)
VST Industries, Ltd.		1,167,175		—		—		1,167,175		49,445,018		—		—		(9,157,378	)

Total Affiliates										$97,782,362		$—		$577,674		($24,470,616	)


MATTHEWS JAPAN FUND
Name of Issuer:
Ferrotec Holdings Corp.		—		2,533,500		—		2,533,500		$38,934,436		$143,623		$—		($21,916,699	)
Fuso Chemical Co., Ltd.		1,496,900		427,500		—		1,924,400		49,542,667		341,407		—		(2,696,669	)
Infomart Corp.††		7,697,300		—		1,888,600		5,808,700		—		—		—		—
TechnoPro Holdings, Inc.††		1,719,500		—		397,000		1,322,500		—		—		—		—
W-Scope Corp.††		2,047,600		—		2,047,600		—		—		—		—		—

Total Affiliates										$88,477,103		$485,030		$—		($24,613,368	)


MATTHEWS ASIA SMALL COMPANIES FUND
Name of Issuer:
Great Tree Pharmacy Co., Ltd.		1,507,600		104,000		—		1,611,600		$4,550,373		$—		$—		($65,454	)
Great Tree Pharmacy Co., Ltd., Rights		—		118,883		—		118,883		93,913		—		—		93,913

Total Affiliates										$4,644,286		$—		$—		$28,459

†	Includes stock spin-off and stock dividend during the period.

††	Issuer was not an affiliated company as of June 30, 2018.

8.	INCOME TAX INFORMATION

It is the policy of the Funds to comply with all requirements of the Internal Revenue Code of 1986, as amended (“the Code”), applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the six-month period ended June 30, 2018. Therefore, no federal income tax provision is required.

Management has analyzed the Funds’ tax positions taken on federal income tax returns for all open tax years (current and prior three tax years), and has concluded that no provision for federal income tax is required in the Funds’ financial statements. The Funds’ federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.


154		MATTHEWS ASIA FUNDS

Under current tax law, the Funds have elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2017:


	Late Year Losses*
Matthews Asia Dividend Fund		$82,668,298
Matthews India Fund		29,724

*	As permitted by the Internal Revenue Service, the Funds have elected to defer certain qualified late-year losses and recognize such losses in the next fiscal year.

As of December 31, 2017, the Funds have capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:


	Amount With No Expiration*
	Short-term Losses		Long-term Losses		Total
Matthews Asia Strategic Income Fund		$1,593,006		$53,342		$1,646,348
Matthews Asia Focus Fund		110,658		530,797		641,455

*	Post-Enactment Losses: Must be utilized prior to losses subject to expiration.

Under the Regulated Investment Company Modernization Act of 2010, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to any losses incurred in pre-enactment taxable years, which generally expire after eight years from when they are incurred. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.

As of June 30, 2018, the tax cost of investments, including derivatives, and the related net unrealized appreciation and depreciation were as follows:


	Tax Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation			Net Unrealized Appreciation (Depreciation)
Matthews Asia Strategic Income Fund		$109,732,199		$1,603,045		($4,612,915	)		($3,009,870	)
Matthews Asia Credit Opportunities Fund		36,667,268		197,933		(1,526,650	)		(1,328,717	)
Matthews Asian Growth and Income Fund		2,015,476,954		272,683,705		(166,281,817	)		106,401,888
Matthews Asia Dividend Fund		5,682,544,397		1,554,903,829		(289,345,971	)		1,265,557,858
Matthews China Dividend Fund		305,836,216		47,733,227		(18,966,480	)		28,766,747
Matthews Asia Value Fund		32,378,319		2,265,676		(2,709,930	)		(444,254	)
Matthews Asia Focus Fund		7,897,909		1,025,151		(690,337	)		334,814
Matthews Asia Growth Fund		769,283,675		377,394,260		(74,273,282	)		303,120,978
Matthews Pacific Tiger Fund		6,201,244,787		3,373,171,084		(471,975,060	)		2,901,196,024
Matthews Asia ESG Fund		18,536,471		3,624,412		(1,178,764	)		2,445,648
Matthews Emerging Asia Fund		451,018,177		75,009,138		(60,241,089	)		14,768,049
Matthews Asia Innovators Fund		238,793,636		53,992,890		(4,690,692	)		49,302,198
Matthews China Fund		964,353,280		126,054,711		(65,142,391	)		60,912,320
Matthews India Fund		1,568,680,971		590,822,979		(62,746,002	)		528,076,977
Matthews Japan Fund		3,748,305,135		988,458,706		(162,533,395	)		825,925,311
Matthews Korea Fund		156,127,629		52,715,206		(4,112,094	)		48,603,112
Matthews Asia Small Companies Fund		369,486,256		68,727,284		(47,021,986	)		21,705,298
Matthews China Small Companies Fund		64,084,710		7,789,891		(4,086,786	)		3,703,105

9.	SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there were no subsequent events that require recognition or disclosure in the financial statements.


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Matthews Asia Funds

INVESTMENT ADVISOR Matthews International Capital Management, LLC Four Embarcadero Center, Suite 550 San Francisco, CA 94111 800.789.ASIA CUSTODIAN Brown Brothers Harriman & Co. 50 Milk Street Boston, MA 02109		ACCOUNT SERVICES Matthews Asia Funds P.O. Box 9791 Providence, RI 02940 800.789.ASIA LEGAL COUNSEL Paul Hastings LLP 101 California Street, 48th Floor San Francisco, CA 94111

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P.O. Box 9791 | Providence, RI 02940 | matthewsasia.com | 800.789.ASIA (2742)

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

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SAR-0618-235M

Item 2. Code of Ethics.

Not applicable.

Item 3. Audit Committee Financial Expert.

Not applicable.

Item 4. Principal Accountant Fees and Services.

Not applicable.

Item 5. Audit Committee of Listed Registrants.

Not applicable.

Item 6. Investments.

(a)	Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form.

(b)	Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.

Item 11. Controls and Procedures.

(a)

The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).

(b)

There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

Not applicable.

Item 13. Exhibits.

(a)(1)

Not applicable.

(a)(2)

Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.

(a)(3)

Not applicable.

(a)(4)

Not applicable.

(b)

Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) Matthews International Funds

By (Signature and Title)* /s/ William J. Hackett

William J. Hackett, President

(principal executive officer)

Date September 5, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)* /s/ William J. Hackett

William J. Hackett, President

(principal executive officer)

Date September 5, 2018

By (Signature and Title)* /s/ Shai Malka

Shai Malka, Treasurer

(principal financial officer)

Date September 5, 2018

^*	Print the name and title of each signing officer under his or her signature.

Matthews Asia Growth Fund (MPACX) N-CSRSCertified semi-annual shareholder report (management investment company)