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<PAGE> PAGE 2
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 6
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SIGNATURE THOMAS F. MCDONOUGH
TITLE ASSISTANT SECRETARY
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from The
Japan Fund, Inc. Annual Report for the fiscal year ended December 31, 1994
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<NAME> THE JAPAN FUND, INC.
<CIK> 053192
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 587,816,848
<INVESTMENTS-AT-VALUE> 629,118,020
<RECEIVABLES> 9,182,926
<ASSETS-OTHER> 2,010,911
<OTHER-ITEMS-ASSETS> 158,928,395
<TOTAL-ASSETS> 799,240,252
<PAYABLE-FOR-SECURITIES> 4,084,082
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 209,448,917
<TOTAL-LIABILITIES> 213,532,999
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 559,389,300
<SHARES-COMMON-STOCK> 55,779,456
<SHARES-COMMON-PRIOR> 45,596,062
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (11,758,799)
<ACCUMULATED-NET-GAINS> 5,671,452
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 32,405,300
<NET-ASSETS> 585,707,253
<DIVIDEND-INCOME> 3,134,824
<INTEREST-INCOME> 1,326,307
<OTHER-INCOME> 0
<EXPENSES-NET> 7,060,927
<NET-INVESTMENT-INCOME> (2,599,796)
<REALIZED-GAINS-CURRENT> 42,025,485
<APPREC-INCREASE-CURRENT> (2,264,434)
<NET-CHANGE-FROM-OPS> 41,690,123
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (44,381,365)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 44,011,661
<NUMBER-OF-SHARES-REDEEMED> 37,430,304
<SHARES-REINVESTED> 3,602,037
<NET-CHANGE-IN-ASSETS> 114,808,767
<ACCUMULATED-NII-PRIOR> (10,656,633)
<ACCUMULATED-GAINS-PRIOR> (5,023)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,773,356
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,060,927
<AVERAGE-NET-ASSETS> 651,042,335
<PER-SHARE-NAV-BEGIN> 10.33
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> 1.07
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .85
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.50
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Price Waterhouse LLP
February 1, 1995
To the Board of Directors of The Japan Fund, Inc.
In planning and performing our audit of the financial statements of The
Japan Fund, Inc. (the "Fund") for the year ended December 31, 1994, we
considered its internal control structure, including procedures for
safeguarding securities, in order to determine our auditing procedures for
the purpose of expressing our opinion on the financial statements and to
comply with the requirements of Form N-SAR, and not to provide assurance on
the internal control structure.
The Fund's management is responsible for establishing and maintaining an
internal control structure. In fulfilling this responsibility, estimates
and judgments by management are required to assess the expected benefits
and related costs of internal control structure policies and procedures.
Two of the objectives of an internal control structure are to provide
management with reasonable, but not absolute, assurance that assets are
appropriately safeguarded against loss from unauthorized use or disposition
and that transactions are executed in accordance with management's
authorization and recorded properly to permit preparation of financial
statements in conformity with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors
or irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that
it may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be
material weaknesses under standards established by the American Institute
of Certified Public Accountants. A material weakness is a condition in
which the design or operation of the specific internal control structure
elements does not reduce to a relatively low level the risk that errors or
irregularities in amounts that would be material in relation to the
financial statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving the internal
control structure, including procedures for safeguarding securities, that
we consider to be material weaknesses as defined above as of December 31,
1994.
This report is intended solely for the information and use of management
and the Securities and Exchange Commission.
/s/Price Waterhouse LLP
Price Waterhouse LLP
The Japan Fund, Inc.
345 Park Avenue
New York, NY 10154
1-800-535-2726
May 25, 1994
To the Shareholders:
At a special meeting held on December 21, 1993, shareholders of The
Japan Fund, Inc. voted in favor of new Investment Management and Research
Agreements that reduce the overall fees paid by the Fund. More than 90% of
the votes cast were in favor of the new agreements.
The original proxy statement included complete and accurate copies of
the Investment Management and Research Agreements, as well as accurate
summaries of their terms. But in a numerical table that was meant to
illustrate the effect of the new fee schedule by showing what fees would
have been in 1992 had the new schedule been in place, certain data was
inadvertently stated inaccurately. Specifically, the number showing what
fees would have been in 1992 was understated, and the fee reduction was
consequently overstated. This was the result of a clerical error that was
recently discovered by the Fund's adviser, Scudder, Stevens & Clark, Inc.
The Fund has benefited under the new agreements from a reduction in
expenses which has, due to growth of the Fund, approximated the dollar
savings figure indicated in the original proxy statement. However, the
Board of Directors and Scudder have determined to call this Special Meeting
to give the shareholders an opportunity to ratify and reconfirm the new
agreements based on the corrected and updated information that appears
herein. (A corrected and updated table appears on page 4.) The Special
Meeting at which shareholders will be asked to ratify these actions will be
held at no expense to the Fund. We apologize for any inconvenience this
Special Meeting may cause.
The Special Meeting will be held at 9:00 a.m., eastern time, on July
22, 1994, at the offices of Scudder, Stevens & Clark, Inc., 25th Floor, 345
Park Avenue (at 51st Street), New York, New York 10154. Shareholders who
are unable to attend this meeting are strongly encouraged to vote by proxy,
which is customary in corporate meetings of this kind. A Proxy Statement
and notice regarding the meeting, a proxy card so your vote may be cast and
a postage-paid envelope for returning your proxy card are enclosed.
Your Fund's Directors recommend that you vote in favor of the matters
set forth in this Proxy Statement.
Respectfully,
/s/Robert G. Stone, Jr.
Robert G. Stone, Jr.
Chairman of the Board
SHAREHOLDERS ARE URGED TO SIGN THE PROXY CARD AND MAIL IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE SO AS TO ENSURE A QUORUM AT THE MEETING. THIS IS
IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
The Japan Fund, Inc.
Notice of Special Meeting of Shareholders
To the Shareholders of
The Japan Fund, Inc.:
Please take notice that a Special Meeting of Shareholders of The Japan
Fund, Inc. (the "Fund") has been called to be held at the offices of
Scudder, Stevens & Clark, Inc., 25th Floor, 345 Park Avenue (at 51st
Street), New York, New York 10154 on July 22, 1994, at 9:00 a.m., eastern
time, for the following purposes:
(1) To ratify the approval of, and to approve the continuance in
effect of, the Investment Management Agreement between the Fund and
Scudder, Stevens & Clark, Inc.
(2) To ratify the approval of, and to approve the continuance in
effect of, the Research Agreement between Scudder, Stevens & Clark, Inc.
and Nikko International Capital Management Co., Ltd.
(3) To transact such other business as may properly come before the
meeting or any adjournments thereof.
Holders of record of shares of common stock of the Fund at the close
of business on May 18, 1994 are entitled to vote at the meeting and at any
adjournments thereof.
By Order of the Board of Directors,
May 25, 1994 Kathryn L. Quirk, Secretary
IMPORTANT_We urge you to sign and date the enclosed proxy card and return
it in the enclosed postage-paid envelope. Your prompt return of the
enclosed proxy may save the necessity and expense of further solicitations
to ensure a quorum at the Special Meeting. If you can attend the meeting
and wish to vote your shares in person at that time, you will be able to do
so.
The Japan Fund, Inc.
345 Park Avenue
New York, New York 10154
PROXY STATEMENT
General
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Directors of The Japan Fund, Inc. (the "Fund") for use at
the Special Meeting of Shareholders, to be held at the offices of Scudder,
Stevens & Clark, Inc., 25th Floor, 345 Park Avenue (at 51st Street), New
York, New York 10154, on July 22, 1994 at 9:00 a.m., eastern time, and at
any adjournments thereof.
This Proxy Statement, the Notice of Special Meeting of Shareholders
and the proxy card are first being mailed to shareholders on or about May
25, 1994. All properly executed proxies received in time for the meeting
will be voted as specified in the proxy or, if no specification is made, in
favor of each proposal referred to in the Proxy Statement. Any shareholder
giving a proxy has the power to revoke it by mail (addressed to the
Secretary of the Fund at the principal executive office of the Fund, 345
Park Avenue, New York, New York 10154) or in person at the meeting, by
executing a superseding proxy or by submitting a notice of revocation to
the Fund.
In order to hold the Special Meeting, a majority of the shares
entitled to be voted must have been received by proxy or be present at the
meeting. Proxies which are returned marked to abstain from voting, as well
as proxies returned by brokers or others who have not received voting
instructions and do not have discretion to vote for their clients will be
counted towards this majority of shares. These proxies will have the effect
of a "No" vote for proposals (1) and (2), because these proposals require
the approval of a specified percentage of the outstanding shares or of the
shares present at the meeting. Because of this, shareholders who hold their
shares through a broker or other nominee are urged to forward their voting
instructions.
Holders of record of shares of the common stock of the Fund at the
close of business on May 18, 1994 (the "Record Date"), will be entitled to
one vote per share on all business of the meeting and any adjournments
thereof. There were 55,346,250 shares of the common stock of the Fund
outstanding on the Record Date.
PROPOSALS 1 AND 2: RATIFICATION OF THE APPROVAL OF, AND APPROVAL OF THE
CONTINUANCE IN EFFECT OF, THE INVESTMENT MANAGEMENT AGREEMENT AND THE
RESEARCH AGREEMENT
Background
As discussed in the Chairman's letter, shareholders are being asked to
ratify the action taken on December 21, 1993, and to approve the
continuance of the Investment Management and Research Agreements of the
Fund. Your vote in favor of the proposals will signify your reapproval of
the agreements' effectiveness from January 1, 1994 through the date of the
Special Meeting, as well as their continuance in effect going forward.
Prior to January 1, 1994, the Fund retained Asia Management
Corporation ("Asia Management") to provide management services and
investment advice. Asia Management was a wholly-owned subsidiary of
Scudder, Stevens & Clark, Inc. ("Scudder"). Scudder made available to Asia
Management research, personnel and services in connection with the
provision of these services to the Fund. Asia Management was formed for the
purpose of providing management services and investment advice to the Fund.
Nikko International Capital Management Co., Ltd. ("NICAM"), an indirectly
controlled affiliate of The Nikko Securities Co. Ltd. ("Nikko Securities"),
provided information and investment advice to Asia Management for the
benefit of the Fund. Asia Management received investment advisory and
management fees for services rendered to the Fund; NICAM received
investment advisory fees from Asia Management for services rendered for the
benefit of the Fund.
Nikko Securities had served as sole investment adviser to the Fund
from its formation in 1961 until Asia Management became investment adviser
in 1974. An affiliate of Nikko Securities has been retained as a
sub-adviser to the Fund since 1974, in recognition of the Fund's continuing
need for experienced, on-site advice on investing in the Japanese
securities markets. Since this time, Scudder has developed internal
expertise in Japanese investments and, since 1987, has maintained a Tokyo
based office through which Japanese field research is conducted. Scudder,
through Asia Management, has become increasingly less in need of investment
advice from NICAM. Accordingly, as described further below, the Fund's
current contracts provide for the phasing out of NICAM's advisory services
to the Fund. In addition, effective January 1, 1994, Asia Management was
dissolved and, under the current contracts, Scudder has assumed all of Asia
Management's advisory and management responsibilities.
The following provides specific information about the terms of the
agreements and the rates of compensation under the agreements. Additional
information about Scudder and NICAM, including the audited balance sheet of
Scudder, may be found at the back of this proxy statement as Exhibit A. In
addition, the Investment Management and Research Agreements are attached as
Exhibits B and C.
The Investment Management Agreement between the Fund and Scudder (the
"current Management Agreement") replaced the prior Investment Management
Agreement with Asia Management dated May 24, 1991 (the "prior Management
Agreement") and decreased the rates of the fees payable under that
Agreement in the manner described below. The Research Agreement between
Scudder and NICAM (the "NICAM Agreement") replaced the prior Advisory
Agreement between Asia Management and NICAM dated May 24, 1991 (the "prior
NICAM Agreement") and provides for the phasing out of the services provided
by NICAM in the manner described below. The current Management Agreement
and the current NICAM Agreement were last submitted for shareholder
approval on December 21, 1993.
Reduced Rate of Compensation Under the Current Agreements
Apart from the parties to the agreements as described above, the
principal difference between the prior Management Agreement and the current
Management Agreement is that the annual fee payable to Scudder decreased
from (a) 0.85 of 1% on the first $200 million of average daily net assets,
0.80 of 1% on assets in excess of $200 million up to and including $300
million, 0.75 of 1% on assets in excess of $300 million up to and including
$700 million and 0.70 of 1% of assets in excess of $700 million, payable
monthly; to (b) 0.85 of 1% of the first $100 million of average daily net
assets, 0.75 of 1% on assets in excess of $100 million up to and including
$300 million, 0.70 of 1% on assets in excess of $300 million up to and
including $600 million, and 0.65 of 1% on assets in excess of $600 million,
payable monthly.
The following table compares actual fees incurred under the prior
Management Agreement with the fees which would have been payable under the
current Management Agreement during the last two fiscal years of the Fund
(unaudited). As explained in the Chairman's letter accompanying this Proxy
Statement, the figures indicated in the last three columns for fiscal year
1992 restate the figures that were inadvertently stated incorrectly (as
$2,674,426, $-253,767 and -8.67%, respectively) in the Proxy Statement
relating to the December 21, 1993 shareholder meeting.
<TABLE>
<CAPTION>
Advisory Fees Fees Payable Under
Actually the Current
Year Ended Incurred (a) Agreement (b) $ Change % Change
----------- ------------ ------------- --------- --------
<S> <C> <C> <C> <C>
December 31, 1993 $4,147,194 $3,893,693 $-253,501 -6.11%
December 31, 1992 $2,928,192 $2,753,228 $-174,964 -5.98%
- ---------
(a) Computed pursuant to the prior fee schedule as described above. In
addition, Scudder Service Corporation, a wholly-owned subsidiary of
Scudder, charged $833,053 for shareholder and transfer agent services
during 1993 and $763,093 during 1992.
(b) Computed pursuant to the current fee schedule as described on page 3.
</TABLE>
In order to provide for an orderly transition of advisory services,
the current NICAM Agreement is structured to phase-out over a two-year
period. The current NICAM Agreement represents a decrease from the prior
NICAM Agreement in the annual fee payable to NICAM by Scudder from (a) 0.23
of 1% on the first $200 million of average daily net assets, 0.21 of 1% on
assets in excess of $200 million up to and including $300 million, 0.19 of
1% on assets in excess of $300 million up to and including $700 million and
0.17 of 1% on assets in excess of $700 million, payable monthly; to (b)
0.15 of 1% up to $700 million of average daily net assets, 0.14 of 1% on
assets in excess of $700 million, payable monthly during fiscal year 1994
and 0.10 of 1% of average daily net assets, payable monthly during fiscal
year 1995. On December 31, 1995, the research contract with NICAM
terminates. Thereafter, from time to time, it is expected that Scudder will
continue to employ NICAM to provide general economic advice under an
agreement between Scudder and NICAM.
Because of the phase-out of the NICAM Agreement, fees retained by
Scudder under the current Management Agreement represent an increase over
the fees retained by Asia Management under the prior Management Agreement,
even though, as stated, overall fees payable under the current Management
Agreement represent a decrease from the prior Management Agreement.
Board of Directors' Approval and Recommendation
The Board of Directors at a meeting on October 28, 1993 approved the
current Management Agreement and the current NICAM Agreement and
recommended the agreements for approval by shareholders. At the same
meeting these agreements were approved by a majority of the Directors who
are not "interested persons" of the Fund or of any party to the respective
agreements as that term is defined under the 1940 Act (the "Non-Interested
Directors"). In approving the agreements and the fee decreases provided
thereunder, the Directors of the Fund, including the Non-Interested
Directors, took into account all factors they deemed relevant. These
factors included the nature, quality and extent of services furnished by
Scudder and NICAM, including the intensive and complex research, tailored
to the Fund's objectives, entailed in the active management of the Fund's
portfolio; the investment record of Scudder (through Asia Management) in
managing the Fund; the personnel of Scudder supporting the Fund; the
services rendered by NICAM to Scudder, including the quality and quantity
of research materials and the frequency of communication about market and
investment conditions in Japan; the profitability and costs of Scudder and
NICAM with respect to the Fund; possible economies of scale to Scudder and
NICAM if the Fund's assets increase; the risks assumed by Scudder and
NICAM; data as to the investment performance, advisory fees and expense
ratios of funds deemed comparable to the Fund; possible corollary benefits
to Scudder and NICAM resulting from the advisory relationships; financial
and other benefits to Scudder Service Corporation of receiving payments
from the Fund for acting as transfer, dividend-paying and shareholder
service agent for the Fund; Scudder's expenditures in developing worthwhile
and innovative shareholder services for the Fund; improvements in the
quality and scope of the shareholder services provided to the Fund's
shareholders; the financial resources of Scudder and NICAM and the
continuance of appropriate incentives to assure the continued furnishing of
high quality services to the Fund; and various other factors.
On May 6, 1994 the Board of Directors considered the restated
information appearing on page 4 of this Proxy Statement and reconfirmed, by
majority vote of both the full Board and the Non-Interested Directors,
their prior determination that the approval of the current Management
Agreement and NICAM Agreement was in the best interests of the Fund's
shareholders. The Board also determined that shareholders be given the
opportunity to ratify their approval of, and to approve the continuance of,
the current Management Agreement and NICAM Agreement, and recommended that
shareholders vote in favor of such ratification and approval.
Description of the Current Management Agreement
The terms of both the prior and current agreements are the same. The
only differences are the parties to the current agreement and the reduced
fee structure of the current agreement. The following summary of certain
provisions of the current Management Agreement is qualified in its entirety
by reference to the current Management Agreement, which is attached hereto
as Exhibit B.
Under the current Management Agreement, Scudder agrees to provide
continuing investment management of the Fund's assets, as well as to use
reasonable efforts to manage the Fund so that it will qualify as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, to make available investment records and ledgers as necessary to
assist the Fund to comply with the 1940 Act and other applicable laws, to
determine what portion of the Fund's portfolio shall be invested in
securities and other assets and what portion, if any, should be held
uninvested, and to furnish periodic reports on the investment performance
of the Fund and on the performance of Scudder's obligations under the
current Management Agreement to the Fund's Board of Directors.
In addition to the provision of portfolio management services and
furnishing at its expense office space and facilities for the Fund, under
the current Management Agreement Scudder renders significant administrative
services (not otherwise provided by third parties) necessary for the Fund's
operations as an open-end investment company, including, but not limited
to, preparing reports and notices to the directors and shareholders;
supervising, negotiating contractual arrangements with, and monitoring
various third-party service providers to the Fund (such as the Fund's
transfer agent, pricing agents, custodian, accountants and others);
preparing and making filings with the Securities and Exchange Commission
and other regulatory agencies; assisting in the preparation and filing of
the Fund's federal, state and local tax returns; preparing and filing the
Fund's federal excise tax returns; assisting with investor and public
relations matters; monitoring the valuation of securities and the
calculation of net asset value; monitoring the registration of shares of
the Fund under applicable federal and state securities laws; maintaining
the Fund's books and records to the extent not otherwise maintained by a
third party; assisting in establishing accounting policies of the Fund;
assisting in the resolution of accounting and legal issues; establishing
and monitoring the Fund's operating budget; processing the payment of the
Fund's bills; assisting the Fund in, and otherwise arranging for, the
payment of distributions and dividends and otherwise assisting the Fund in
the conduct of its business, subject to the direction and control of the
Directors.
Under the current Management Agreement, Scudder provides the Fund with
portfolio management services and administrative services (which include
provision of office facilities). The Fund is responsible for all expenses
not entailed in Scudder's provision of those services. The current
Management Agreement enumerates certain expenses for which the Fund and not
Scudder is responsible, including fees and expenses incurred in connection
with membership in investment company organizations; brokers' commissions;
legal, auditing and accounting expenses; portfolio pricing services; taxes
and governmental fees; the fees and expenses of the transfer agent;
expenses of preparing share certificates and any other expenses of issue,
redemption or repurchase of shares; the expenses of and fees for
registering or qualifying securities for sale; the fees and expenses of
Directors who are not affiliated with Scudder; the cost of printing and
distributing reports and notices to shareholders; and the fees and
disbursements of custodians. The custodian agreement provides that the
custodian shall compute the net asset value. The Fund is also responsible
for expenses of shareholders' meetings and indemnification of officers and
Directors of the Fund. All costs associated with this Special Meeting will
be paid by Scudder, Stevens & Clark, Inc.
Under the current Management Agreement, Scudder pays the compensation
of all officers and employees of the Fund who are affiliated persons of
Scudder and makes available, without expense to the Fund, the services of
such directors, officers and employees of Scudder as may be duly elected
officers of the Fund, subject to their individual consent to serve and to
any limitations imposed by law. The Fund is responsible for the fees and
expenses of Directors not affiliated with Scudder. The current Management
Agreement also provides that the Fund pays the expenses, such as travel
expenses, of Directors and officers of the Fund who are Directors, officers
or employees of Scudder, to the extent that such expenses relate to
attendance at meetings of the Board of Directors or any committees thereof
held outside Boston, Massachusetts, or New York, New York.
The current Management Agreement provides that Scudder shall not be
liable for any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with matters to which the Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of Scudder in the performance of its duties or from
reckless disregard by Scudder of its obligations and duties under the
Agreement.
The prior Management Agreement terminated and the current Management
Agreement became effective on January 1, 1994 and remains in force by its
terms until February 28, 1995. The current Management Agreement continues
in effect thereafter by its terms from year to year only so long as its
continuance is specifically approved at least annually by the vote of a
majority of those Directors who are not "interested persons" of the Fund or
Scudder cast in person at a meeting called for that purpose, and either by
vote of the Directors, or a majority of the Fund's outstanding voting
securities, as defined below. The current Management Agreement may be
terminated on 60 days' written notice, without penalty, by the Directors,
by the vote of the holders of a majority of the Fund's outstanding voting
securities, or by Scudder, and automatically terminates in the event of its
assignment. The prior Management Agreement required annual approval of its
continuance and contained the same termination provisions as the current
Management Agreement.
Description of the Current NICAM Agreement
The terms of both the prior and current agreements are the same. The
only differences are the parties to the current agreement, the phased out
fee structure and the termination date of the current agreement. Pursuant
to the current NICAM Agreement, NICAM provides Scudder with information,
investment recommendations, advice and assistance for use by Scudder in
advising the Fund. NICAM is free to render similar services to others,
including other investment companies.
The prior NICAM Agreement terminated, and the current NICAM Agreement
became effective on January 1, 1994 and remains in force by its terms until
December 31, 1995. Pursuant to its terms the current NICAM Agreement may be
terminated by the Directors, by vote of the holders of a majority of the
Fund's outstanding voting securities or by Scudder on 60 days' written
notice to NICAM or by NICAM on six months' written notice to the Fund and
Scudder and terminates automatically if it or the Management Agreement
between the Fund and Scudder is assigned.
Voting Requirements for Proposals 1 and 2
A favorable vote by the holders of a majority of the outstanding
voting securities of the Fund will be necessary for adoption of Proposals 1
and 2, which under the 1940 Act means the vote of the lesser of (a) 67% or
more of the shares present at a meeting, if the holders of more than 50% of
the outstanding shares are present or represented by proxy or (b) more than
50% of the outstanding shares of the Fund.
If Proposal 1 or 2 is not approved by shareholders, the current
Management Agreement and NICAM Agreement would continue in effect for the
time being, pending consideration by the Directors of such further action
as they may deem to be in the best interest of the shareholders. The
Directors recommend that you vote FOR approval of Proposals 1 and 2.
(3) OTHER MATTERS
The Directors do not know of any matters to be presented at the
Special Meeting other than the matters discussed in this Proxy Statement.
The appointed proxies will vote on any other business that comes before the
Special Meeting or any adjournments thereof in accordance with their best
judgment.
Please complete and sign the enclosed proxy and return it in the
envelope provided so that the Special Meeting may be held and action may be
taken, with the greatest possible number of shares participating, on the
matters described in this Proxy Statement. This will not preclude your
voting in person if you attend the Special Meeting.
Miscellaneous
Proxies will be solicited by mail and may be solicited in person or by
telephone or telegraph by officers of the Fund or an agent of the Fund for
compensation. The expenses connected with the solicitation of proxies and
with any further proxies which may be solicited will be borne by Scudder.
Scudder will reimburse banks, brokers, and other persons holding the Fund's
shares registered in their names, or in the names of their nominees, for
their expenses incurred in sending proxy material to and obtaining proxies
from the beneficial owners of such shares.
In the event that sufficient votes in favor of the proposals set forth
in the Notice of Special Meeting are not received by July 22, 1994, the
persons named in the enclosed proxy card may propose one or more
adjournments of the meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of the holders of a
majority of the shares entitled to vote on the matter present in person or
by proxy at the session of the meeting to be adjourned. The persons named
in the enclosed proxy card will vote in favor of such adjournment those
proxies which they are entitled to vote in favor of the proposal for which
further solicitation of proxies is to be made. They will vote against any
such adjournment those proxies required to be voted against such proposal.
The costs of any such additional solicitation and of any adjourned session
will be borne by Scudder.
Shareholder Proposals
Shareholders wishing to submit proposals for inclusion in a proxy
statement for any subsequent shareholders' meeting should send their
written proposals to Kathryn L. Quirk, Secretary of the Corporation, c/o
Scudder, Stevens & Clark, Inc., 345 Park Avenue, New York, New York 10154
within a reasonable time before the solicitation of proxies for such
shareholders' meeting. The timely submission of a proposal does not
guarantee its inclusion.
345 Park Avenue By Order of the Directors
New York, New York 10154 Kathryn L. Quirk
May 25, 1994 Secretary
EXHIBIT A
INFORMATION CONCERNING SCUDDER AND NICAM
Information Concerning Scudder
Scudder is a Delaware corporation. Daniel Pierce, Two International
Place, Boston, Massachusetts, is the Chairman of the Board of Scudder.
Edmond D. Villani, 345 Park Avenue, New York, New York, is the President of
Scudder. Stephen R. Beckwith, Lynn S. Birdsong, Nicholas Bratt, Linda C.
Coughlin, Cuyler W. Findlay, Jerard K. Hartman, Douglas M. Loudon, Juris
Padegs and Cornelia M. Small, each of 345 Park Avenue, New York, New York;
Dudley H. Ladd and David B. Watts, each of Two International Place, Boston,
Massachusetts; and John T. Packard, 101 California Street, San Francisco,
California, are the other members of the Board of Directors of Scudder. The
principal occupation of each of the above named individuals is serving as a
Managing Director of Scudder.
All of the outstanding voting and nonvoting securities of Scudder are
held of record by Stephen R. Beckwith, Juris Padegs, Daniel Pierce and
Edmond D. Villani, in their capacity as representatives (the
"Representatives") of the beneficial owners of such securities, pursuant to
a Security Holders' Agreement among Scudder, the beneficial owners of
securities of Scudder, and the Representatives. Pursuant to such Security
Holders' Agreement, the Representatives have the right to reallocate shares
among the beneficial owners from time to time. Such reallocation will be in
cash transactions at net book value. All Managing Directors of Scudder own
voting and nonvoting stock; all Principals own nonvoting stock.
In addition to acting as Investment Manager to individuals and other
organizations, Scudder, or an affiliate acts as investment adviser to all
of the investment companies, including the Fund, listed below, and the
separate series thereof. All of the investment companies listed below,
except for The Argentina Fund, Inc., The Brazil Fund, Inc., The First
Iberian Fund, Inc., The Korea Fund, Inc., The Latin America Dollar Income
Fund, Inc., Montgomery Street Income Securities, Inc., Scudder New Asia
Fund, Inc., Scudder New Europe Fund, Inc. and Scudder World Income
Opportunities Fund, Inc., are open-end investment companies or mutual
funds.
<TABLE>
<CAPTION>
Total Net
Assets as of Management Compensation
April 30, 1994 on an Annual Basis Based on the
Name (000 omitted) Value of Average Daily Net Assets
------ ------------- -----------------------------------
<S> <C> <C>
Scudder $389,300 Scudder California Tax Free Fund:
California 0.625 of 1%; 0.60 of 1% on net assets
Tax Free in excess of $200 million. Scudder
Trust California Tax Free Money Fund: 0.50
of 1%.
Scudder Cash $1,560,000 0.50 of 1%; 0.45 of 1% on net assets
Investment in excess of $250 million; 0.40 of 1%
Trust on net assets in excess of $500
million; 0.35 of 1% on net assets in
excess of $1 billion.
Scudder $625,200 1%; 0.95 of 1% on net assets in excess
Development of $500 million; 0.90 of 1% on net
Fund assets in excess of $1 billion.
Scudder $1,310,600 Scudder Capital Growth Fund: 0.75 of
Equity Trust 1%; 0.65 of 1% on net assets in excess
of $500 million; 0.60 of 1% on net
assets in excess of $1 billion.
Scudder Value Fund: 0.70 of 1%.
Scudder Fund, $551,300 Managed Government Securities Fund:
Inc. 0.40 of 1%; 0.35 of 1% on net assets
in excess of $1.5 billion. Managed
Cash Fund: 0.40 of 1%; 0.35 of 1% on
net assets in excess of $1.5 billion.
Managed Federal Securities Fund: 0.40
of 1%; 0.35 of 1% on net assets in
excess of $1.5 billion. Managed Tax
Free Fund: 0.40 of 1%; 0.35 of 1% on
net assets in excess of $1.5 billion.
Managed Intermediate Government Fund:
0.65 of 1%.
Scudder Funds $2,797,600 Scudder Short Term Bond Fund: 0.60 of
Trust 1%; 0.50 of 1% on net assets in excess
of $500 million; 0.45 of 1% on net
assets in excess of $1 billion; 0.40
of 1% on net assets in excess of $1.5
billion; 0.375 of 1% on net assets in
excess of $2 billion and 0.35 of 1% on
net assets in excess of $3 billion.
Scudder Zero Coupon 2000 Fund: 0.60 of
1%.
Scudder $3,421,100 Scudder Global Fund: 1%; 0.95 of 1% on
Global Fund, net assets in excess of $500 million.
Inc. Scudder International Bond Fund: 0.85
of 1%. Scudder Short Term Global
Income Fund: 0.75 of 1%; 0.70 of 1% on
net assets in excess of $1 billion.
Scudder Global Small Company Fund:
1.10%. Scudder Emerging Markets Income
Fund: 1%.
Scudder GNMA $523,000 0.65 of 1%; 0.60 of 1% on net assets
Fund in excess of $200 million; 0.55 of 1%
on net assets in excess of $500
million.
Scudder $783,700 Federal Portfolio: 0.15 of 1%.
Institutional Government Portfolio: 0.15 of 1%. Cash
Fund, Inc. Portfolio: 0.15 of 1%. Tax-Free
Portfolio: 0.15 of 1%.
Scudder $3,254,200 Scudder International Fund: 1%; 0.90
International of 1% on net assets in excess of $200
Fund, Inc. million; 0.85 of 1% on net assets in
excess of $400 million; 0.80 of 1% on
net assets in excess of $800 million.
Scudder Latin America Fund: 1.25%.
Scudder Pacific Opportunities Fund:
1.10%.
Scudder $1,840,700 Scudder Growth and Income Fund: 0.65
Investment of 1%; 0.60 of 1% on net assets in
Trust excess of $200 million; 0.55 of 1% on
net assets in excess of $400 million;
0.50 of 1% on net assets in excess of
$900 million. Scudder Quality Growth
Fund: 0.70 of 1%.
Scudder $1,116,300 Scudder High Yield Tax Free Fund: 0.70
Municipal of 1%; 0.65 of 1% on net assets in
Trust excess of $200 million. Scudder
Managed Municipal Bonds: 0.55 of 1%;
0.50 of 1% on net assets in excess of
$200 million; 0.475 of 1% on net
assets in excess of $700 million.
Scudder $125,600 Scudder Gold Fund: 1%.
Mutual Funds,
Inc.
Scudder $567,300 Scudder Income Fund: 0.65 of 1%; 0.60
Portfolio of 1% on net assets in excess of $200
Trust million; 0.55 of 1% on net assets in
excess of $500 million. Scudder
Balanced Fund: 0.70 of 1%.
Scudder State $753,400 Scudder Massachusetts Limited Term Tax
Tax Free Free Fund: 0.60 of 1%. Scudder
Trust Massachusetts Tax Free Fund: 0.60 of
1%. Scudder New York Tax Free Fund:
0.625 of 1%; 0.60 of 1% on net assets
in excess of $200 million. Scudder New
York Tax Free Money Fund: 0.50 of 1%.
Scudder Ohio Tax Free Fund: 0.60 of
1%. Scudder Pennsylvania Tax Free
Fund: 0.60 of 1%.
Scudder Tax $252,100 0.50 of 1%; 0.48 of 1% on net assets
Free Money in excess of $500 million.
Fund
Scudder Tax $932,200 Scudder Limited Term Tax Free Fund:
Free Trust 0.60 of 1%. Scudder Medium Term Tax
Free Fund: 0.60 of 1%; 0.50 of 1% on
net assets over $500 million.
Scudder U.S. $427,200 0.50 of 1%.
Treasury
Money Fund
Scudder $708,600 Money Market Portfolio: 0.37 of 1%.
Variable Life Capital Growth Portfolio: 0.475 of 1%.
Investment Bond Portfolio: 0.475 of 1%. Balanced
Fund Portfolio: 0.475 of 1%. International
Portfolio: 0.875 of 1%.
The Japan $646,600 0.85 of 1% of the first $100 million
Fund, Inc. of average daily net assets; 0.75% of
1% on assets in excess of $100 million
up to and including $300 million; 0.70
of 1% on assets in excess of $300
million up to and including $600
million; 0.65 of 1% on assets in
excess of $600 million. The Investment
Manager pays The Nikko International
Capital Management Co., Ltd. for
investment and research services: 0.15
of 1% up to $700 million of average
daily net assets; 0.14% of 1% on
assets in excess of $700 million,
payable monthly during fiscal year
1994; 0.10 of 1% of average daily net
assets, payable during fiscal year
1995.
Total Net
Assets as of Management Compensation
April 30, 1994 on an Annual Basis Based on the
Name (000 omitted) Value of Average Weekly Net Assets
------ ------------- -----------------------------------
The Argentina $128,700 1.30%; the Investment Manager pays
Fund, Inc.* Sociedad General de Negocios y Valores
S.A. for investment and research
services 0.36 of 1%.
The Brazil $271,200 1.30%; 1.25% on net assets in excess
Fund, Inc.* of $150 million; and 1.20% on net
assets in excess of $300 million; the
Investment Manager pays Banco Icatu
S.A. for investment and research
services 0.25 of 1%; 0.15 of 1% on net
assets in excess of $150 million; and 0.05 of 1% on net assets
in excess of $300 million.
The First $60,900 1.00%.
Iberian Fund,
Inc.*
The Latin $77,500 1.20%.
America
Dollar Income
Fund, Inc.*
Scudder New $187,400 1.25%; 1.15% on net assets in excess
Asia Fund, of $75 million; 1.10% on net assets in
Inc.* excess of $200 million.
Scudder New $188,900 1.25%; 1.15% on net assets in excess
Europe Fund, of $75 million; 1.10% on net assets in
Inc.* excess of $200 million.
Scudder World $47,700 1.20%.
Income
Opportunities
Fund, Inc.*
Total Net
Assets as of Management Compensation
April 30, 1994 on an Annual Basis Based on the
Name (000 omitted) Value of Average Monthly Net Assets
------ ------------- -----------------------------------
The Korea $560,300 1.15%; 1.10% on net assets in excess
Fund, Inc.* of $50 million; 1% on net assets in
excess of $100 million. The Investment
Manager pays Daewoo Capital Management
Co., Ltd. for investment and research
services 0.2875 of 1%; 0.275 of 1% on
net assets in excess of $50 million;
0.25 of 1% on net assets in excess of
$100 million.
Montgomery $188,600 0.50 of 1%; 0.45 of 1% on net assets
Street Income in excess of $150 million; 0.40 of 1%
Securities, on net assets in excess of $200
Inc.* million.
- ---------
* These funds are not subject to state imposed expense limitations.
</TABLE>
The Investment Manager also provides investment advisory services to
the mutual funds which comprise the AARP Investment Program from Scudder
(the "Program") with assets of approximately $12 billion. The eight funds,
which are series of the four AARP trusts, and their compensation rates are
as follows:
<TABLE>
<CAPTION>
Total Net
Assets as of
April 30, 1994
Name (000 omitted) Individual Fund Fee Rate+++
------ ------------- -----------------------------------
<S> <C> <C>
AARP Cash $330,900 AARP High Quality Money Fund: 0.10 of
Investment 1%.
Funds
AARP Income $6,592,900 AARP GNMA and U.S. Treasury Fund: 0.12
Trust of 1%. AARP High Quality Bond Fund:
0.19 of 1%.
AARP Tax Free $2,127,000 AARP High Quality Tax Free Money Fund:
Income Trust 0.10 of 1%. AARP Insured Tax Free
General Bond Fund: 0.19 of 1%.
AARP Growth $2,796,400 AARP Growth and Income Fund: 0.19 of
Trust 1%. AARP Capital Growth Fund: 0.32 of
1%. AARP Balanced Stock and Bond Fund:
0.19 of 1%.
- ---------
+++ In addition to the Individual Fund Fee listed above, each of the
eight AARP Funds pays the Investment Manager an Annual Base Fee
in proportion to the ratio of its daily net assets to the daily
net assets of all of the AARP Funds. The Annual Base Fee Rate is:
0.35 of 1% on net assets of the Program up to and including $2
billion; 0.33 of 1% on net assets of the Program in excess of $2
billion up to and including $4 billion; 0.30 of 1% on net assets
of the Program in excess of $4 billion up to and including $6
billion; 0.28 of 1% on net assets of the Program in excess of $6
billion up to and including $8 billion; 0.26 of 1% on net assets
of the Program in excess of $8 billion up to and including $11
billion; 0.25 of 1% on net assets of the Program in excess of $11
billion up to and including $14 billion; and 0.24 of 1% on net
assets of the Program in excess of $14 billion.
</TABLE>
The Investment Manager (or an affiliate) also acts as investment
adviser to the following foreign investment funds: Canadian High Income
Fund, Scudder Floating Rate Fund for Fannie Mae Mortgage Securities, Global
Balanced Fund, Hot Growth Companies Fund, Indosuez High Yield Bond Fund,
InverLatin Dollar Income Fund, Inc., ProMexico Fixed Income Dollar Fund,
Scudder Global Opportunities Funds, Scudder Mortgage Fund, Sovereign High
Yield Investment Company N.V. (A), Sovereign High Yield Investment Company
N.V. (B), The Venezuela High Income Fund N.V., Latin America Income and
Appreciation Fund N.V. and The World Capital Fund.
Scudder has agreed to maintain the expenses of certain of the above
investment companies (or series thereof) at or below a specified percentage
of net assets.
Directors, officers, and employees of Scudder, from time to time may
have transactions with various banks, including the Fund's custodian bank.
It is Scudder's opinion that the terms and conditions of those transactions
will not be influenced by existing or potential custodial or other Fund
relationships.
The balance sheet for Scudder's most recent year end is attached.
Principal Underwriter
The shares of beneficial interest of the Fund are distributed by
Scudder Investor Services, Inc. (the "Distributor"). No sales commission or
load is charged to the investor on shares of the Fund sold through the
Distributor.
Under the underwriting agreement, the Fund is responsible for the
payment of all fees and expenses in connection with the preparation and
filing with the SEC of the registration statement and Prospectus and any
amendments and supplements thereto; the registration and qualification of
shares for sale in the various states, including registering the Fund as a
broker or dealer in various states as required; the fees and expenses of
preparing, printing and mailing prospectuses annually to existing
shareholders; notices, proxy statements, reports, or other communications
to shareholders of the Fund; the cost of printing and mailing confirmations
of purchases of shares and any prospectuses accompanying such
confirmations; any issuance taxes and/or any initial transfer taxes; a
portion of shareholder toll-free telephone charges and expenses of
shareholder service representatives; the cost of wiring funds for share
purchases and redemptions (unless paid by the shareholder who initiates the
transaction); the cost of printing and postage of business reply envelopes;
and a portion of the cost of the computer terminals used by both the Fund
and the Distributor. Although the Fund does not currently have a Rule 12b-1
Plan and the Directors have no current intention of adopting one, the Fund
will also pay those fees and expenses permitted to be paid or assumed by
the Fund pursuant to a Rule 12b-1 Plan, if any, adopted by the Fund,
notwithstanding any other provision to the contrary in the underwriting
agreement.
The Distributor pays for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the Fund's
shares to the public; and preparing, printing and mailing any other
literature or advertising in connection with the offering of the shares of
the Fund to the public. The Distributor pays all fees and expenses in
connection with its qualification and registration as a broker or dealer
under federal and state laws; a portion of the cost of toll free telephone
service and expenses of shareholder service representatives; a portion of
the cost of computer terminals; and expenses of any activity which is
primarily intended to result in the sale of shares issued by the Fund,
unless a Rule 12b-1 Plan is in effect which provides that the Fund shall
bear some or all of such expenses.
The officers and directors of the Distributor include Thomas W.
Joseph, Douglas M. Loudon, Thomas F. McDonough, Edward J. O'Connell and
Kathryn L. Quirk, each of whom is an interested person of the Fund.
Information Concerning NICAM and Nikko Securities
NICAM, a Japanese corporation which is an indirectly controlled
affiliate of Nikko Securities, is engaged in an investment counseling and
management business providing economic research, business information and
security analysis to a variety of Japanese and international clients,
including investors interested in Japanese and other Far Eastern securities
and companies vested in international direct investments and joint ventures
or in raising funds in international capital markets.
Nikko Securities, a Japanese corporation which is one of the largest
securities houses of Japan, conducts a general investment banking business
and acts as broker, dealer and underwriter with respect to all types of
corporate and government securities. In the course of its customary
activities, Nikko Securities purchases and sells Japanese securities as a
dealer for its own account and it may have long or short positions in
securities of companies which are represented in the Fund's portfolio.
Mr. Shoji Umemura, a member of the Fund's Board of Directors, is
Chairman of the Board of Nikko Securities. As of March 31, 1994, Mr.
Umemura owned 419,000 shares of the 1,468,268,005 shares of common stock of
Nikko Securities outstanding as of that date. All outstanding shares of
Nikko Securities common stock have voting power.
Officers and Directors of NICAM
The names and titles of the principal executive officers and directors
of NICAM are set forth below. The principal occupation of all such persons
is that of fund manager or investment advisor for both international and
domestic clients.
The Directors and executive officers of NICAM are as follows: Todao
Kobayashi, President and Director; Takashi Murakami, Executive Vice
President; Kazuhiro Higashino, Managing Director; Yoshihito Kubota,
Managing Director; Takashi Murakami, Managing Director; Masayuki Shinozaki,
Director; Makoto Tsuda, Director; Kenji Wada, Director; Tadahiko Minagawa,
Auditor; Takeo Masuda, Auditor*.
* Part-time.
The principal office of NICAM in Japan, 17-9, Nihonbashi-Hakozakicho,
Chuo-ku, Tokyo 103, Japan, is the address of each of the officers and
directors of NICAM.
Brokerage Commissions on Portfolio Transactions
Total brokerage commissions paid by the Fund amounted to $2,278,248
for 1993, $1,325,290 for 1992 and $997,636 for 1991. Of such amounts,
commissions were paid by the Fund for brokerage services rendered by The
Nikko Securities Co., Ltd. ("Nikko Securities") in respect of portfolio
transactions by the Fund in the amounts of $19,432 for 1993, $0 for 1992,
and $7,339 for 1991. Such amounts represented 0.85%, 0%, and 0.74% of the
total brokerage commissions paid by the Fund in such years, respectively.
The advisory fee paid to NICAM (or its predecessor, Nikko Research) was not
reduced because of such brokerage commissions and it is not expected that
the advisory fees paid in the future to NICAM will be so reduced.
The Fund always seeks to place portfolio transactions with those
brokers which, in the opinion of the management of the Fund, provide the
best execution of Fund orders. The Fund considers the obtaining of the most
favorable price for Fund orders a major factor in best execution. Subject
to this practice of seeking the best execution, the Fund, in allocating
brokerage, may consider research information provided by brokers to the
Fund or to Scudder for use in advising the Fund. Orders for portfolio
transactions of the Fund may be placed through Scudder Investor Services,
Inc., which in turn places orders on behalf of the Fund with other brokers
and dealers. Scudder Investor Services, Inc. receives no commissions, fees
or other remuneration from the Fund for this service.
Although certain research, market and statistical information from
brokers and dealers can be useful to the Fund and to Scudder, it is the
opinion of Scudder that such information will only supplement Scudder's own
research effort since the information must still be analyzed, weighed and
reviewed by Scudder's staff. Such information may be useful to Scudder in
providing services to clients other than the Fund, and not all such
information will be used by Scudder in connection with the Fund.
Conversely, such information provided to Scudder by brokers and dealers
through whom other clients of Scudder effect securities transactions may be
useful to Scudder in providing services to the Fund.
Certain investments may be appropriate for the Fund and also for other
clients advised by Scudder. Investment decisions for the Fund and other
clients will be made with a view to achieving their respective investment
objectives and after consideration of such factors as their current
holdings, availability of cash for investment, and the size of their
investments generally. Frequently, a particular security may be bought or
sold for only one client or in different amounts and at different times for
more than one but less than all clients. Likewise, a particular security
may be bought for one or more clients when one or more clients are selling
the security. In addition, purchases or sales of the same security may be
made for two or more clients on the same day. In such event, such
transactions will be allocated among the clients in a manner believed by
Scudder to be equitable to each. In some cases, this procedure could have
an adverse effect on the price or amount of the securities purchased or
sold by the Fund. Purchase and sale orders for the Fund may be combined
with those of other clients of Scudder in the interest of obtaining the
most favorable net results to the Fund.
SCUDDER, STEVENS & CLARK, INC.
Consolidated Statement of Condition
December 31, 1993
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $11,689,984
Short term investments 50,196,591
Investment advisory fees receivable 36,806,144
Service fees receivable 5,005,051
Expense reimbursement from funds 1,399,751
Income taxes receivable 4,502,214
Receivables for fund shares 5,466,585
Other current assets 4,840,317
------------
Total current assets 119,906,637
Investments available for sale 9,095,068
Other investments 2,222,345
Fixed assets, net of accumulated depreciation and 33,756,800
amortization
Other assets 5,554,131
------------
Total assets $170,534,981
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $19,572,911
Short term borrowing 13,000,000
Payables for fund shares 5,466,585
Deferred lease obligations 1,566,163
Total current liabilities 39,605,659
Deferred lease obligations 6,844,331
------------
Deferred income taxes 8,675,236
------------
Total liabilities 55,125,226
------------
Stockholders' equity
Common stock, par value $.01 per share:
Class A:
Authorized 9,250 shares, issued and outstanding 8,712 87
shares
Class B:
Authorized 8,000,000 shares, issued and outstanding 60,505
6,050,546 shares
Capital in excess of par value 58,784,982
Unrealized securities gains on investments available 1,343,658
for sale, net
Cumulative translation adjustment 264,316
Retained earnings 54,956,207
------------
Total stockholders' equity 115,409,755
------------
Total liabilities and stockholders' equity $170,534,981
============
</TABLE>
See accompanying notes to consolidated statement of condition.
SCUDDER, STEVENS & CLARK, INC.
Notes to Consolidated Statement of Condition
December 31, 1993
(1) Summary of Significant Accounting Policies
Organization, Principles of Consolidation
Scudder, Stevens & Clark, Inc. (the "Parent") serves as a registered
investment adviser to individuals, institutions and investment companies.
Its principal subsidiaries include Scudder Investor Services, Inc., a
registered broker/dealer which acts as principal underwriter and
administrator for a group of investment companies managed by the Parent;
Scudder Service Corporation which acts as transfer agent for these
investment companies; and Scudder Trust Company which acts as the
trustee/custodian of IRA, Keogh and other retirement plans primarily
invested in mutual funds managed or administered by the Parent and also
sponsors collective investment trusts and New Hampshire investment trusts.
The consolidated statement of condition includes the accounts of Scudder,
Stevens & Clark, Inc. and its subsidiaries (the "Company"). All significant
intercompany transactions have been eliminated in consolidation.
Cash Equivalents
Cash equivalents represent primarily investments in affiliated Scudder
money market mutual funds amounting to $6,712,700 at December 31, 1993. The
Company is the investment manager for these funds.
Investment Securities
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities," as
of December 31, 1993. The adoption of this standard did not have a material
impact on the Company's financial position. The following summarizes the
Company's accounting for its investments:
1. Short Term Investments
Short term investments consist of shares of short and medium term bond
funds advised by the Company. The Company does not intend to hold these
investments over the long term and carries them for liquidity purposes and
investment income and to realize gains from market fluctuations. The
investments are carried at market value. Gains and losses on redemptions
are calculated on the first in, first out cost method.
2. Investments Available for Sale
Investments available for sale consist of various equity and bond funds
advised by the Company and U.S. Treasury obligations. The Company intends
to hold these securities for the foreseeable future unless liquidity needs
demand or market conditions make it advantageous to liquidate them. The
investments are carried at market value, with unrealized gains and losses
net of deferred income taxes recognized as an adjustment to stockholders'
equity. Gains and losses on redemptions and sales are calculated on the
first in, first out cost method. In determining cost basis, premiums and
discounts are amortized on a level yield basis.
3. Other Investments
Other investments consist of seed money required for various mutual funds
advised by the Company which will be held until permitted to be liquidated,
normally 5 years, and equity interests in joint ventures and other
miscellaneous equity investments which will be held indefinitely. These
investments are carried at cost unless their value is permanently impaired.
Financial Instruments
In the course of its activities, the Company deals in financial instruments
such as cash, various receivables, investment securities, and expenses
payable. Due to the short term nature of all financial instruments except
for investment securities, the market value of such instruments
approximates the carrying value of the instruments. Market values of
investment securities have been disclosed in the financial statements and
footnotes.
Fund Share Transactions
Sales of fund shares are recorded on a trade date basis.
Fixed Assets
Fixed assets are carried at cost less accumulated depreciation and
amortization.
Deferred Lease Obligations
The Company recognizes lease obligations in connection with landlord
incentive rental terms or payments and premature lease terminations.
Income Taxes
The Company files a consolidated federal income tax return. The Parent and
its subsidiaries file separate state and local income tax returns.
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes," which requires a change from the deferred method of
accounting for timing differences in the recognition of revenues and
expenses for tax and financial reporting purposes to the "asset and
liability method." Under the asset and liability method, deferred income
taxes are recognized for the tax consequences of temporary differences
between the financial statements and the tax bases of assets and
liabilities. The adoption of this standard did not have a material impact
on the Company's financial position.
(2) Related Party Transactions
The Company serves as an investment manager to various related investment
companies. Certain stockholders of the Company are members of the Boards of
Directors of these investment companies. At December 31, 1993, investment
advisory fees receivable and service fees receivable from affiliated mutual
funds were $22,470,588.
The Company pays certain expenses on behalf of affiliated mutual funds for
which it is reimbursed. At December 31, 1993, the amounts due to the
Company relating to these expenses were $1,399,751. In addition, the
Company absorbs expenses of mutual funds whose expenses exceed statutory or
Company imposed limitations. At December 31, 1993, the Company owed
$1,195,345 to these funds related to these expense limitations.
(3) Investments Available for Sale
The following table presents information relating to the Company's
investments available for sale at December 31, 1993.
<TABLE>
<CAPTION>
Gross Unrealized
Cost Market Value Gains (Losses)
<S> <C> <C> <C> <C>
Shares of mutual $4,738,294 $7,126,039 $2,453,988 $(66,243)
funds
U.S. Treasury 1,939,156 1,937,354 _ (1,802)
obligations
Other 20,529 31,675 11,146 _
------ ------ ------ ------
$6,697,979 $9,095,068 $2,465,134 $(68,045)
========== ========== ========== =========
</TABLE>
U.S. Treasury obligations mature in two years or less in 1993.
(4) Other Investments
The following table presents information relating to the Company's other
investments at December 31, 1993.
<TABLE>
<CAPTION>
Gross Unrealized
Cost Market Value Gains (Losses)
<S> <C> <C> <C> <C>
Other securities $1,849,060 $3,114,960 $1,265,900 $_
Shares of mutual 373,285 418,809 50,215 (4,691)
funds (restricted) ------- ------- ------ ------
$2,222,345 $3,533,769 $1,316,115 $(4,691)
========== ========== ========== ========
</TABLE>
(5) Fixed Assets
<TABLE>
<CAPTION>
Fixed assets at December 31, 1993 consisted of the following:
<S> <C>
Furniture and fixtures $15,340,356
Office equipment 33,904,357
Leasehold improvements 18,220,875
----------
67,465,588
Less accumulated depreciation and amortization 33,708,788
----------
Fixed assets, net $33,756,800
===========
</TABLE>
(6) Short Term Borrowing
The Company borrowed $13,000,000 under an unsecured $20,000,000 line of
credit from a commercial bank at an average rate of 4.85% to mature
February 8, 1994.
(7) Employee Benefit Plans
The Company sponsors the Scudder, Stevens & Clark Profit Sharing and 401(k)
Plan Trust and Scudder Defined Benefit Plan and Trust.
Scudder, Stevens & Clark Profit Sharing and 401(k) Plan Trust ("PSk")
The profit sharing part of PSk covers all employees of the Parent and
participating affiliates (the "Employer") who have worked 1,000 hours
during each year after the first year of employment. Employer contributions
made to the profit sharing part of PSk are completely discretionary and
dependent upon profits. The final determination as to the amount of
contribution for any year is made by the Board of Directors of the Parent.
Employer contributions are allocated to the profit sharing accounts of
eligible participants based on a percentage of such participants'
compensation exclusive of commissions. Combined contributions to PSk for
any calendar year are limited by statute to $30,000 per participant.
Employees are eligible to participate in the 401(k) part of PSk after three
months of service. The Employer makes no contributions to the 401(k) part
of PSk, employee participation in which is voluntary. Eligible participants
may contribute to either or both the profit sharing or 401(k) parts of PSk
to a combined maximum of 7% of defined compensation.
Scudder Defined Benefit Plan and Trust ("DBP")
Effective February 1, 1986, the Employer adopted a noncontributory defined
benefit plan covering employees who have worked 1,000 hours during each
year after the first year of employment. In general, benefits under DBP are
based on a participant's years of service with the Employer after January
31, 1986 and such participant's compensation exclusive of commissions.
The funding policy is to contribute annually to DBP the maximum amount that
can be deducted for federal income tax purposes. The Parent and its
participating affiliates contribute the amount necessary to fund DBP with
regard to each entity's employees.
The following table sets forth the plan's funded status and the basis for
the amounts recognized in the Company's consolidated financial statements
at December 31, 1993.
<TABLE>
<CAPTION>
Defined Benefit Plan:
<S> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation including vested benefits of $(8,721,044)
$7,274,399 ============
Projected benefit obligation for service rendered to date $(11,241,787)
Plan assets at fair value 10,897,542
----------
Plan assets less than projected benefit obligations (344,245)
Unrecognized net loss from past experience different from 1,671,673
that assumed and effects of changes in assumptions
Prior service cost not yet recognized in net periodic 160,508
pension cost
Unrecognized net assets at February 1, 1987 amortized over 34,964
15 years ------
Prepaid pension cost $1,522,900
==========
</TABLE>
At December 31, 1993, essentially all plan assets were invested in related
Scudder mutual funds primarily through the Scudder Balanced Fund.
The straight line amortization method is used in calculating prior service
cost. Gains and losses are amortized only if they are outside of the 10%
corridor of the larger of projected benefit obligation or fair value of
plan assets.
The weighted average discount rate and rate of increase in future
compensation levels used in determining the projected benefit obligation
were 7.5% and 6%, respectively. The expected long term rate of return on
plan assets, net of expenses, was 8.5%.
In addition, the Company established a defined contribution plan in London
to cover local employees.
The Company does not provide any other postretirement benefits to its
employees.
(8) Stockholders' Equity
The Company has two classes of common stock, Class A voting shares and
Class B nonvoting shares. The Company has the option to convert any (but
not all) shares of Class A common stock into an equal number of shares of
Class B common stock, and to convert any or all Class B common stock into
Class A common stock.
(9) Income Taxes
The components of income taxes receivable and deferred income taxes at
December 31, 1993 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Income taxes receivable:
Federal $2,639,473
State and local 1,862,741
---------
$4,502,214
==========
Deferred income taxes:
Federal $(6,109,967)
State and local (2,565,269)
-----------
$(8,675,236)
============
</TABLE>
The components of the net deferred tax liability at December 31, 1993 are
as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax liabilities relating to:
Accrual to cash adjustment (Parent only) $7,325,143
Unrealized gain on investments available for sale 1,053,430
Pension contribution 700,418
Foreign exchange 151,929
----------
Total deferred liabilities 9,230,920
----------
Deferred tax assets relating to:
Depreciation 274,345
Unrealized loss on short term investments 169,243
Compensation expense 112,096
----------
Total deferred tax assets 555,684
----------
Net deferred tax liability $8,675,236
==========
</TABLE>
(10) Commitments
Minimum rentals under noncancelable operating leases for office space and
equipment at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Year ending December 31
<S> <C>
1994 $24,300,055
1995 22,220,816
1996 21,419,054
1997 16,219,558
1998 15,463,942
Later years 143,521,297
------------
243,144,722
Less minimum future rentals under noncancelable operating 1,191,207
subleases ------------
Total net minimum payment required $241,953,515
============
Such rentals are subject to escalation clauses.
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Scudder, Stevens & Clark, Inc.
We have audited the accompanying consolidated statement of condition of
Scudder, Stevens & Clark, Inc. and subsidiaries as of December 31, 1993.
This financial statement is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of condition is
free of material misstatement. An audit of a statement of condition
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of condition. An audit of a statement of
condition also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of condition presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated statement of condition referred to above
presents fairly, in all material respects, the consolidated financial
position of Scudder, Stevens & Clark, Inc. and subsidiaries as of December
31, 1993 in conformity with generally accepted accounting principles.
KPMG Peat Marwick
New York, New York
February 11, 1994
EXHIBIT B
THE JAPAN FUND, INC.
345 Park Avenue
New York, New York 10154
January 1, 1994
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, NY 10154
Investment Management Agreement
Dear Sirs:
The Japan Fund, Inc. (the "Fund") has been established as a Maryland
Corporation to engage in the business of an investment company.
The Fund has selected you (the "Advisor") to act as investment manager
of the Fund and to provide certain other services, as more fully set forth
below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Fund agrees with you as
follows:
1. Delivery of Documents. The Fund engages in the business of
investing and reinvesting the assets of the Fund in the manner and in
accordance with the investment objectives, policies and restrictions
specified in the currently effective Prospectus (the "Prospectus") and
Statement of Additional Information (the "SAI") included in the Fund's
Registration Statement on Form N-1A, as amended from time to time (the
"Registration Statement"), filed by the Fund under the Investment Company
Act of 1940, as amended (the "1940 Act"), and the Securities Act of 1933,
as amended. Copies of the documents referred to in the preceding sentence
have been furnished to you by the Fund. The Fund has also furnished you
with copies properly certified or authenticated of each of the following
additional documents related to the Fund:
(a) Articles of Amendment and Restatement of the Fund dated January 7,
1992, as amended to date (the "Articles").
(b) By-Laws of the Fund as in effect on the date hereof (the
"By-Laws").
(c) Resolutions of the Directors of the Fund and the shareholders of
the Fund selecting you as investment manager and approving the form of
this Agreement.
The Fund will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to
the foregoing, including the Prospectus, the SAI and the Registration
Statement.
2. Portfolio Management Services. As manager of the assets of the
Fund, you shall provide continuing investment management of the assets of
the Fund in accordance with the investment objectives, policies and
restrictions set forth in the Prospectus and SAI; the applicable provisions
of the 1940 Act and the Internal Revenue Code of 1986, as amended (the
"Code"), relating to regulated investment companies and all rules and
regulations thereunder; and all other applicable federal and state laws and
regulations of which you have knowledge; subject always to policies and
instructions adopted by the Fund's Board of Directors. In connection
therewith, you shall use reasonable efforts to manage the Fund so that it
will qualify as a regulated investment company under Subchapter M of the
Code and regulations issued thereunder. The Fund shall have the benefit of
the investment analysis and research, the review of current economic
conditions and trends and the consideration of long-range investment policy
generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you
shall be entitled to receive and act upon advice of counsel to the Fund or
counsel to you. You shall also make available to the Fund promptly upon
request all of the Fund's investment records and ledgers as are necessary
to assist the Fund to comply with the requirements of the 1940 Act and
other applicable laws. To the extent required by law, you shall furnish to
regulatory authorities having the requisite authority any information or
reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the
Fund are being conducted in a manner consistent with applicable laws and
regulations.
You shall determine the securities, instruments, investments,
currencies, repurchase agreements, futures, options and other contracts
relating to investments to be purchased, sold or entered into by the Fund
and place orders with broker-dealers, foreign currency dealers, futures
commission merchants or others pursuant to your determinations and all in
accordance with Fund policies as expressed in the Registration Statement
and with guidelines and directions from the Board of Directors. Subject to
such policies and guidelines, you shall determine what portion of the
Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Fund's Board of Directors periodic reports on
the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such
additional reports and information as the Fund's officers or Board of
Directors shall reasonably request.
In rendering the services required under this section you may receive
the assistance of The Nikko International Capital Management Co., Ltd.
("NICAM"), which is to furnish investment research services with respect
to the Fund pursuant to an agreement with the Advisor dated as of the date
hereof (as the same may be amended from time to time), and may contract
with or consult with such banks, other securities firms or other parties in
Japan or elsewhere as it may deem appropriate to obtain information and
advice, including investment recommendations, advice regarding economic
factors and trends, advice as to currency exchange matters, and clerical
and accounting services and other assistance, but any fees, compensation or
expenses to be paid to any such parties shall be paid by you, and no
obligation shall be incurred on the Fund's behalf in any such respect.
3. Administrative Services. In addition to the portfolio management
services specified above in section 2, you shall furnish at your expense
for the use of the Fund such office space and facilities as the Fund may
require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Fund administrative
services necessary for operating as an investment company and not provided
by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Fund's Board of
Directors and reports and notices to Fund shareholders; supervising,
negotiating contractual arrangements with, to the extent appropriate, and
monitoring the performance of, custodians, depositories, transfer and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary
or desirable to Fund operations; preparing and making filings with the
Securities and Exchange Commission (the "SEC") and other regulatory and
self-regulatory organizations, including, but not limited to, preliminary
and definitive proxy materials, post-effective amendments to the
Registration Statement, semi-annual reports on Form N-SAR and notices
pursuant to Rule 24f-2 under the 1940 Act; overseeing the tabulation of
proxies by the Fund's transfer agent; assisting in the preparation and
filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities, the calculation of net
asset value and the calculation and payment of distributions to Fund
shareholders; monitoring the registration of the Fund's shares of capital
stock, $.33 1/3 par value per share (the "Shares") under applicable federal
and state securities laws; maintaining or causing to be maintained for the
Fund all books, records and reports and any other information required
under the 1940 Act, to the extent that such books, records and reports and
other information are not maintained by the Fund's custodian or other
agents of the Fund; assisting in establishing the accounting policies of
the Fund; assisting in the resolution of accounting issues that may arise
with respect to the Fund's operations and consulting with the Fund's
independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the
payment of bills that have been approved by a person authorized by the
Fund; assisting the Fund in determining the amount of dividends and
distributions available to be paid by the Fund to its shareholders,
preparing and arranging for the printing of dividend notices to
shareholders, and providing the transfer and dividend paying agent and the
custodian with such information as is required for such parties to effect
the payment of dividends and distributions; and otherwise assisting the
Fund as it may reasonably request in the conduct of its business, subject
to the direction and control of the Fund's Board of Directors. Nothing in
this Agreement shall be deemed to shift to you or to diminish the
obligations of any agent of the Fund or any other person not a party to
this Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise
specifically provided in this section 4, you shall pay the compensation and
expenses of all Directors, officers and employees of the Fund (including
the Fund's share of payroll taxes) who are affiliated persons of you and
you shall make available, without expense to the Fund, the services of such
of your directors, officers and employees as may duly be elected officers
of the Fund, subject to their individual consent to serve and to any
limitations imposed by law. You shall provide at your expense the portfolio
management services described in section 2 hereof and the administrative
services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than
those specifically allocated to you in this section 4. In particular, but
without limiting the generality of the foregoing, you shall not be
responsible, except to the extent of the reasonable compensation of such of
the Fund's Directors and officers as are directors, officers or employees
of you whose services may be involved, for the following expenses of the
Fund, to the extent they are not entailed in your provision of the services
described in section 2 and section 3 hereof: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance
of books and records which are required to be maintained by the Fund's
custodian or other agents of the Fund; telephone, telex, facsimile, postage
and other communications expenses; taxes and governmental fees; fees, dues
and expenses incurred by the Fund in connection with membership in
investment company trade organizations; fees and expenses of the Fund's
custodians, subcustodians, transfer agents, dividend disbursing agents and
registrars; payment for portfolio pricing or valuation services to pricing
agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section
4, other expenses in connection with the issuance, offering, distribution,
sale, redemption or repurchase of securities issued by the Fund; expenses
relating to investor and public relations; expenses and fees of registering
or qualifying Shares of the Fund for sale; interest charges, bond premiums
and other insurance expense; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; the
compensation and all expenses (specifically including travel expenses
relating to Fund business) of Directors, officers and employees of the Fund
who are not affiliated persons of you; brokerage commissions or other costs
of acquiring or disposing of any portfolio securities of the Fund; expenses
of printing and distributing reports, notices and dividends to
shareholders; expenses of printing and mailing Prospectuses and SAIs of the
Fund and supplements thereto; costs of stationery; any litigation expenses;
indemnification of Directors and officers of the Fund; costs of
shareholders' and other meetings; and travel expenses (or an appropriate
portion thereof) of Directors and officers of the Fund who are directors,
officers or employees of you to the extent that such expenses relate to
attendance at meetings of the Board of Directors of the Fund or any
committees thereof or advisors thereto held outside of Boston,
Massachusetts or New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the
extent that (i) such expenses are required to be borne by a principal
underwriter which acts as the distributor of the Fund's Shares pursuant to
an underwriting agreement which provides that the underwriter shall assume
some or all of such expenses, or (ii) the Fund shall have adopted a plan in
conformity with the 1940 Act providing that the Fund (or some other party)
shall assumed some or all of such expenses. You shall be required to pay
such of the foregoing sales expenses as are not required to be paid by the
principal underwriter pursuant to the underwriting agreement or are not
permitted to be paid by the Fund (or some other party) pursuant to such a
plan.
5. Management Fee. For all services to be rendered, payments to be
made and costs to be assumed by you as provided in sections 2, 3 and 4
hereof, the Fund shall pay you a monthly fee, payable in dollars, equal on
an annual basis to .85 of 1% of the value of the average daily net assets
of the Fund up to and including $100 million; plus .75 of 1% of the value
of the average daily net assets of the Fund over $100 million and up to and
including $300 million; plus .70 of 1% of the value of the average daily
net assets of the Fund over $300 million and up to and including $600
million; plus .65 of 1% of the average daily net assets over $600 million.
The "average daily net assets" of the Fund shall mean the average of
the values placed on the Fund's net assets as of 4:00 p.m. (New York time)
on each day on which the net asset value of the Fund is determined
consistent with the provisions of Rule 22c-1 under the 1940 Act or, if the
Fund lawfully determines the value of its net assets as of some other time
on each business day, as of such time. The value of the net assets of the
Fund shall always be determined pursuant to the applicable provisions of
the Articles and the Registration Statement. If the determination of net
asset value does not take place for any particular day, then for the
purposes of this section 5, the value of the net assets of the Fund as last
determined shall be deemed to be the value of its net assets as of 4:00
p.m. (New York time), or as of such other time as the value of the net
assets of the Fund's portfolio may be lawfully determined on that day. If
the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall
be deemed to be the sole determination thereof on that day for the purposes
of this section 5.
You agree that your gross compensation for any fiscal year shall not
be greater than an amount which, when added to the other expenses of the
Fund, shall cause the aggregate expenses of the Fund to equal the maximum
expenses under the lowest applicable expense limitation established
pursuant to the statutes or regulations of any jurisdiction in which the
Shares of the Fund may be qualified for offer and sale. Except to the
extent that such amount has been reflected in reduced payments to you, you
shall refund to the Fund the amount of any payment received in excess of
the limitation pursuant to this section 5 as promptly as practicable after
the end of such fiscal year, provided that you shall not be required to pay
the Fund an amount greater than the fee paid to you in respect of such year
pursuant to this Agreement. As used in this section 5, "expenses" shall
mean those expenses included in the applicable expense limitation having
the broadest specifications thereof, and "expense limitation" means a limit
on the maximum annual expenses which may be incurred by an investment
company determined (i) by multiplying a fixed percentage by the average, or
by multiplying more than one such percentage by different specified amounts
of the average, of the values of an investment company's net assets for a
fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year. The words "lowest
applicable expense limitation" shall be construed to result in the largest
reduction of your compensation for any fiscal year of the Fund; provided,
however, that nothing in this Agreement shall limit your fees if not
required by an applicable statute or regulation referred to above in this
section 5.
You may waive all or a portion of your fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of your
services. You shall be contractually bound hereunder by the terms of any
publicly announced waiver of your fee, or any limitation of the Fund's
expenses, as if such waiver or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other
investments for the account of the Fund, neither you nor any of your
directors, officers or employees shall act as a principal or agent or
receive any commission. You or your agent shall arrange for the placing of
all orders for the purchase and sale of portfolio securities and other
investments for the Fund's account with brokers or dealers selected by you
in accordance with Fund policies as expressed in the Registration
Statement. If any occasion should arise in which you give any advice to
clients of yours concerning the Shares of the Fund, you shall act solely as
investment counsel for such clients and not in any way on behalf of the
Fund.
Your services to the Fund pursuant to this Agreement are not to be
deemed to be exclusive and it is understood that you may render investment
advice, management and services to others. In acting under this Agreement,
you shall be an independent contractor and not an agent of the Fund.
7. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Fund agrees
that you shall not be liable under this Agreement for any error of judgment
or mistake of law or for any loss suffered by the Fund in connection with
the matters to which this Agreement relates, provided that nothing in this
Agreement shall be deemed to protect or purport to protect you against any
liability to the Fund or its shareholders to which you would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties, or by reason of your reckless disregard of
your obligations and duties hereunder. Any person, even though also
employed by you, who may be or become an employee of and paid by the Fund
shall be deemed, when acting within the scope of his or her employment by
the Fund, to be acting in such employment solely for the Fund and not as
your employee or agent.
8. Duration and Termination of This Agreement. This Agreement shall
remain in force until February 28, 1995, and continue in force from year to
year thereafter, but only so long as such continuance is specifically
approved at least annually (a) by the vote of a majority of the Directors
who are not parties to this Agreement or interested persons of any party to
this Agreement, cast in person at a meeting called for the purpose of
voting on such approval and (b) by the Directors of the Fund, or by the
vote of a majority of the outstanding voting securities of the Fund. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with
the 1940 Act and the rules and regulations thereunder.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the
outstanding voting securities of the Fund or by the Fund's Board of
Directors on 60 days' written notice to you, or by you on 60 days' written
notice to the Fund. This Agreement shall terminate automatically in the
event of its assignment.
9. Amendment of This Agreement. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought and no amendment of this
Agreement shall be effective until approved in a manner consistent with the
1940 Act and rules and regulations thereunder.
10. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
This Agreement shall not apply to the management of assets allocated
to any series of the Fund's Shares hereafter established by the Fund's
Board of Directors.
In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"affiliated person," "assignment" and "majority of the outstanding voting
securities"), as from time to time amended, shall be applied, subject,
however, to such exemptions as may be granted by the SEC by any rule,
regulation or order.
This Agreement shall be construed in accordance with the laws of the
State of Maryland, provided that nothing herein shall be construed in a
manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or
management agreements entered into between you and the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Fund, whereupon this letter shall become a binding
contract effective as of the date of this Agreement.
Yours very truly,
THE JAPAN FUND, Inc.
By /s/Douglas M. Loudon
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER, STEVENS & CLARK, INC.
By /s/David S. Lee
Managing Director
EXHIBIT C
SCUDDER, STEVENS & CLARK, INC.
345 Park Avenue
New York, NY 10154-0004
January 1, 1994
NIKKO INTERNATIONAL CAPITAL
MANAGEMENT CO., LTD.
17-9, Nihonbashi-Hakozakicho
Chuo-ku, Tokyo 103
Japan
RESEARCH AGREEMENT
Dear Sirs:
We have entered into an Investment Management Agreement (the
"Management Agreement") dated as of January 1, 1994 with The Japan Fund,
Inc., a Maryland corporation (the "Fund"), pursuant to which we act as
investment advisor to and manager of the Fund. A copy of the Management
Agreement has been previously furnished to you. In furtherance of such
duties to the Fund, and with the approval of the Fund, we wish to avail
ourselves of your investment research services. Accordingly, with the
acceptance of the Fund, we hereby agree with you as follows for the
duration of this Agreement:
1. You agree to furnish to us such information, investment
recommendations, advice and assistance, as we shall from time to time
reasonably request. In addition, for the benefit of the Fund, you agree to
pay the fees and expenses of any directors of the Fund who are directors,
officers or employees of you or of The Nikko Securities Co., Ltd.
2. We agree to pay in United States dollars to you, as compensation
for the services to be rendered by you hereunder, a monthly fee, payable in
dollars, as follows:
(a) For the period ended December 31, 1994 the fee shall be an
amount equal on an annual basis to .15 of 1% of the value of the
average daily net assets of the Fund up to and including $700
million; plus .14 of 1% of the value of the average daily net
assets over $700 million.
(b) For the period January 1, 1995 through December 31, 1995 the
fee shall be an amount equal on an annual basis to .10 of 1% of
the value of the average daily net assets of the Fund.
For purposes of computing the monthly fee, the "average daily net assets"
of the Fund for any calendar month means the average of the daily net asset
values of the Fund's portfolio for such calendar month determined by the
Fund's custodian pursuant to the procedures established by the Board of
Directors of the Fund and in accordance with the requirements of the
Investment Company Act of 1940, as amended, and the applicable rules and
regulations of the Securities and Exchange Commission. Each payment of a
monthly fee shall be made by us to you no later than the fifteenth day of
the following calendar month.
3. You agree that there will be full compliance with any and all
provisions of the Investment Company Act of 1940, as amended, applicable to
you and your directors, officers or employees, or to interested persons
with respect to you.
4. You agree that you will not make a short sale of any capital
stock of the Fund, or purchase any share of the capital stock of the Fund
otherwise than for investment.
5. Your services to us are not to be deemed exclusive and you are
free to render similar services to others.
6. Nothing herein shall be construed as constituting you as agent of
us or of the Fund.
7. We and the Fund agree that you may rely on information reasonably
believed by you to be accurate and reliable. We and the Fund further agree
that, except as may otherwise be provided by the Investment Company Act of
1940, as amended, neither you nor your officers, directors, employees or
agents shall be subject to any liability for any act or omission in the
course of, connected with or arising out of any services to be rendered
hereunder except by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties or by reason of reckless
disregard of your obligations and duties under this Agreement.
8. This Agreement shall remain in effect until December 31, 1995.
9. This Agreement may nevertheless be terminated at any time,
without penalty, by us or by the Fund's Board of Directors or by vote of
holders of a majority of the outstanding voting securities of the Fund,
upon sixty (60) days' written notice delivered or sent by registered mail,
postage prepaid, to you, at your address given above or at any other
address of which you shall have notified us in writing, or by you upon six
(6) months' such written notice to us and to the Fund, and shall
automatically be terminated in the event of its assignment or of the
assignment of the Management Agreement. Any such notice shall be deemed
given when received by the addressee.
10. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by either party hereto. It may be amended by
mutual agreement, but only after authorization of such amendment by the
affirmative vote of (i) the holders of a majority of the outstanding voting
securities of the Fund, and (ii) a majority of the members of the Fund's
Board of Directors who are not interested persons of the Fund, you or us,
cast in person at a meeting called for the purpose of voting on such
approval.
11. This Agreement shall be construed in accordance with the laws of
the State of New York, provided, however, that nothing herein shall be
construed as being inconsistent with the Investment Company Act of 1940, as
amended. As used herein the terms "interested person," "assignment," and
"vote of a majority of the outstanding voting securities" shall have the
meanings set forth in the Investment Company Act of 1940, as amended.
12. This Agreement shall supersede all prior investment advisory,
sub-advisory, research or management agreements entered into between you
and us or any of our affiliates.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart hereof and return the same to us.
Yours very truly,
SCUDDER, STEVENS & CLARK, INC.
By /s/David S. Lee
Managing Director
The foregoing Agreement is hereby accepted as of the date first above
written.
NIKKO INTERNATIONAL CAPITAL
MANAGEMENT CO., LTD.
By /s/ Todao Kobayashi
President
Accepted:
THE JAPAN FUND, INC.
By /s/Douglas M. Loudon
President
