Dear Shareholder,

As part of the Emergency Economic Stabilization Act of 2008, Matthews Asia Funds will be responsible for tracking and reporting cost basis information to the IRS on the sale or exchange of shares you acquire on or after January 1, 2012 (“covered” shares). Cost basis is the cost of the shares you purchased, including reinvested dividends and capital gains distributions. Where applicable, the cost is adjusted for sales charges or transaction fees. When you sell covered shares (shares acquired on or after January 1, 2012) in a taxable account, the cost basis accounting method you choose determines how your gain or loss is calculated.

Matthews’ default cost basis accounting method is Average Cost. You may select a different method from the options below.

Please consult your tax professional to determine which method should be considered for your individual tax situation.

• Average Cost: Calculates your gains or losses on shares sold based on the average purchase price of all the covered shares you own.
• FIFO (First In, First Out): The shares purchased first are sold first.
• LIFO (Last In, First Out): The shares purchased last are sold first.
• HIFO (Highest Cost, First Out): The highest-cost shares are sold first.
• Specific Lot Identification: You specify the share lots in your account to be redeemed or exchanged, each time shares are sold.

If you do not designate the cost basis method to be used prior to or at the time of a redemption of covered shares, your trade will be processed using our default method of Average Cost. To select your cost basis method:

• BY MAIL: Complete the Election Form and return it to:

Matthews Asia Funds

P.O. Box 9791

Providence, RI 02940-9791

• BY PHONE: Call us at 800.789.2742, Monday through Friday, 9 a.m. to 7 p.m. Eastern Time.
• ONLINE: Log onto your account online

The below documents Cost Basis Reporting: What you need to know and Understanding Form 1099-B contain additional information regarding the changes outlined. If you have any additional questions, please call our shareholder representatives at 800.789.2742, Monday through Friday, 9 a.m. to 7 p.m. ET.

Regards,

Matthews Asia Funds