<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
THE JAPAN FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Declaration of Trust)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[THE JAPAN FUND, INC. LOGO] September 1997
THE JAPAN FUND, INC.
IMPORTANT NEWS
While we encourage you to read the full text of the enclosed proxy
statement, here's a brief overview of some matters affecting your Fund which
require a stockholder vote.
Q & A: QUESTIONS AND ANSWERS
Q. WHAT IS HAPPENING?
A. Scudder, Stevens & Clark, Inc. ("Scudder"), your Fund's investment manager,
has agreed to form an alliance with Zurich Insurance Company ("Zurich").
Zurich is a leading international insurance and financial services
organization. As a result of the proposed alliance, there will be a change
in ownership of Scudder. In order for Scudder to continue to serve as
investment manager of your Fund, it is necessary for the Fund's stockholders
to approve a new investment management agreement. The following pages give
you additional information on Zurich and the proposed new investment
management agreement and certain other matters. The most important matters
to be voted upon by you are approval of the new investment management
agreement and the election of Directors. THE BOARD MEMBERS OF YOUR FUND,
INCLUDING THOSE WHO ARE NOT AFFILIATED WITH THE FUND OR SCUDDER, RECOMMEND
THAT YOU VOTE FOR THESE PROPOSALS.
Q. WHY AM I BEING ASKED TO VOTE ON THE PROPOSED NEW INVESTMENT MANAGEMENT
AGREEMENT?
A. The Investment Company Act of 1940, which regulates investment companies such
as the Fund, requires a vote whenever there is a change in control of a
fund's investment manager. Zurich's alliance with Scudder will result in such
a change of control and requires stockholder approval of a new investment
management agreement with the Fund.
Japan
<PAGE> 3
Q. HOW WILL THE SCUDDER-ZURICH ALLIANCE AFFECT ME AS A FUND STOCKHOLDER?
A. Your Fund and your Fund's investment objective will not change. You will
still own the same shares in the same Fund. The terms of the new investment
management agreement are the same in all material respects as the current
investment management agreement. Similarly, the other service arrangements
between your Fund and Scudder will not be affected. You should continue to
receive the same level of investment management services that you have come
to expect from Scudder over the years. If stockholders do not approve the new
investment management agreement, the current investment management agreement
will terminate upon the closing of the transaction and the Board of Directors
will take such action as it deems to be in the best interests of your Fund
and its stockholders.
Q. WHY HAS SCUDDER DECIDED TO ENTER INTO THIS ALLIANCE?
A. Scudder believes that the Scudder-Zurich alliance will enable Scudder to
enhance its capabilities as a global asset manager. Scudder further believes
that the alliance will enable it to enhance its ability to deliver the level
of services currently provided to you and your Fund and to fulfill its
obligations under the new investment management agreement consistent with
current practices.
Q. WILL THE INVESTMENT MANAGEMENT FEES BE THE SAME?
A. Yes, the investment management fees paid by your Fund will remain the same.
Q. WILL I CONTINUE TO BE ABLE TO PURCHASE SHARES WITHOUT ANY SALES LOAD?
A. Yes, you will be able to continue to purchase shares of your Fund without
any sales load.
Q. WHAT OTHER MATTERS AM I BEING ASKED TO VOTE ON?
A. In order to save your Fund the expense of a subsequent meeting, a vote is
also being sought to approve an amendment to the Fund's Articles of
Incorporation to grant the Directors discretionary authority to convert the
Fund into a "master/feeder" structure, and for the revision of certain
fundamental investment policies. You are also being asked to vote for the
ratification of the Board's selection of the Fund's accountants.
(continues on inside back cover)
<PAGE> 4
Q. HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND THAT I VOTE?
A. After careful consideration, the Board members of your Fund, including those
who are not affiliated with the Fund or Scudder, recommend that you vote in
favor of all the proposals on the enclosed proxy card.
Q. WHOM DO I CALL FOR MORE INFORMATION?
A. Please call Shareholder Communications Corporation, your Fund's information
agent, at 1-800-733-8481, ext. 488.
Q. WILL THE FUND PAY FOR THE PROXY SOLICITATION AND LEGAL COSTS ASSOCIATED WITH
THIS TRANSACTION?
A. No, Scudder will bear these costs.
ABOUT THE PROXY CARD
If you have more than one account in the Fund in your name at the same
address, you will receive separate proxy cards for each account but only one
proxy statement for the Fund. Please vote all issues on EACH proxy card that you
receive.
THANK YOU FOR MAILING YOUR PROXY CARD(S) PROMPTLY.
<PAGE> 5
[THE JAPAN FUND, INC. LOGO]
For more information, please call Shareholder Communications Corporation, your
Fund's information agent, at 1-800-733-8481, ext. 488.
Japan
<PAGE> 6
345 Park Avenue
New York, New York 10154
THE JAPAN FUND, INC.
September 8, 1997
Dear Stockholder:
On June 26, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") entered into
an agreement with Zurich Insurance Company ("Zurich") pursuant to which Scudder
and Zurich have agreed to form an alliance. Under the terms of the agreement,
Zurich will acquire a majority interest in Scudder, and Zurich Kemper
Investments, Inc., a Zurich subsidiary, will become part of Scudder. Scudder's
name will be changed to Scudder Kemper Investments, Inc. As a result of this
transaction, it is necessary for the stockholders of each of the funds for which
Scudder acts as investment manager, including your Fund, to approve a new
investment management agreement.
The following important facts about the transaction are outlined below:
- The transaction has no effect on the number of shares you own or the
value of those shares.
- The advisory fees and expenses paid by your Fund will not increase as a
result of this transaction. As is now the case, you will not pay sales
loads on purchases of shares of your Fund.
- The investment objective of your Fund will remain the same.
- The Non-interested Directors of your Fund have carefully reviewed the
proposed transaction, and have concluded that the transaction should
cause no reduction in the quality of services provided to the Fund and
should enhance Scudder's ability to provide such services.
Stockholders are also being asked to approve certain other matters that
have been set forth in the Fund's Notice of Meeting. THE BOARD MEMBERS OF YOUR
FUND BELIEVE THAT EACH OF THE PROPOSALS SET FORTH IN THE NOTICE OF MEETING FOR
YOUR FUND IS IMPORTANT AND RECOMMEND THAT YOU READ THE ENCLOSED MATERIALS
CAREFULLY AND THEN VOTE FOR ALL PROPOSALS.
Since all of the funds for which Scudder acts as investment manager are
required to conduct stockholder meetings, if you own shares of more than one
fund, you will receive more than one proxy card. Please sign and return each
proxy card you receive.
Your vote is important.(PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE.) If we do not
receive your executed proxy card(s) after a reasonable amount of time you may
<PAGE> 7
receive a telephone call from our proxy solicitor, Shareholder Communications
Corporation, reminding you to vote your shares.
Respectfully,
/s/ Lynn S. Birdsong /s/ Henry Rosovsky
Lynn S. Birdsong Henry Rosovsky
President Chairman of the Board
STOCKHOLDERS ARE URGED TO SIGN THE PROXY CARD(S) AND MAIL IT IN THE POSTAGE-PAID
ENVELOPE TO ENSURE A QUORUM AT THE SPECIAL MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.
<PAGE> 8
THE JAPAN FUND, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Please take notice that a Special Meeting of Stockholders of The Japan
Fund, Inc. (the "Fund") has been called to be held at the offices of Scudder,
Stevens & Clark, Inc., 13th Floor, Two International Place, Boston,
Massachusetts 02110, on October 16, 1997, at 10:00 a.m., Eastern time, for the
following purposes:
(1) To approve or disapprove a new investment management agreement
between the Fund and Scudder Kemper Investments, Inc.;
(2) To elect Directors;
(3) To approve or disapprove the Board's discretionary authority
to convert the Fund to a master/feeder fund structure through
a sale or transfer of assets or otherwise;
(4) To approve or disapprove the revision of certain fundamental
investment policies; and
(5) To ratify or reject the selection of Price Waterhouse LLP as
independent accountants for the Fund's current fiscal year.
The appointed proxies will vote on any other business as may properly come
before the Special Meeting or any adjournments thereof.
Holders of record of shares of common stock of the Fund at the close of
business on August 29, 1997 are entitled to vote at the Special Meeting and at
any adjournments thereof.
<PAGE> 9
In the event that the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the Special
Meeting, the persons named as proxies may propose one or more adjournments of
the Special Meeting in accordance with applicable law, to permit further
solicitation of proxies. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor and will vote
against any such adjournment those proxies to be voted against that proposal.
By Order of the Board of Directors,
/s/ KATHRYN L. QUIRK
Kathryn L. Quirk
Assistant Secretary
September 8, 1997
IMPORTANT--WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN IT
IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS INTENDED FOR
YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S) MAY SAVE THE
NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM AT THE SPECIAL
MEETING. IF YOU CAN ATTEND THE SPECIAL MEETING AND WISH TO VOTE YOUR SHARES IN
PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE> 10
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 Board of Directors (the "Board") of The Japan Fund, Inc. (the
"Fund") for use at the Special Meeting of Stockholders, to be held at the
offices of Scudder, Stevens & Clark, Inc. ("Scudder"), 13th Floor, Two
International Place, Boston, Massachusetts 02110, on October 16, 1997 at 10:00
a.m., Eastern time, and at any and all adjournments thereof (the "Special
Meeting"). (In the descriptions of various proposals below, the word "fund" is
sometimes used to mean an investment company or series thereof in general, and
not the Fund whose proxy statement this is.)
This Proxy Statement, the Notice of Special Meeting and the proxy card are
first being mailed to stockholders on or about September 8, 1997 or as soon as
practicable thereafter. Any stockholder giving a proxy has the power to revoke
it by mail (addressed to the Secretary at the principal executive office of the
Fund, c/o Scudder, Stevens & Clark, Inc., 345 Park Avenue, New York, New York
10154) or in person at the Special Meeting, by executing a superseding proxy or
by submitting a notice of revocation to the Fund. All properly executed proxies
received in time for the Special Meeting will be voted as specified in the proxy
or, if no specification is made, for each proposal referred to in the Proxy
Statement.
The presence at any stockholders' meeting, in person or by proxy, of the
holders of a majority of the shares entitled to be cast of the Fund shall be
necessary and sufficient to constitute a quorum for the transaction of business.
In the event that the necessary quorum to transact business or the vote required
to approve or disapprove any proposal is not obtained at the Special Meeting,
the persons named as proxies may propose one or more adjournments of the Special
Meeting in accordance with applicable law, to permit further solicitation of
proxies with respect to any proposal which did not receive the vote necessary
for its passage or to obtain a quorum. With respect to those proposals for which
there is represented a sufficient number of votes in favor, actions taken at the
Special Meeting will be effective irrespective of any adjournments with respect
to any other proposals. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor and will vote
against any such adjournment those proxies to be voted against that proposal.
For purposes of determining the presence of a quorum for transacting business at
the Special Meeting, abstentions and broker "non-votes" will be treated as
shares that are present but which have not been voted. Broker non-votes are
proxies received by the Fund from brokers or nominees when the broker or
<PAGE> 11
nominee has neither received instructions from the beneficial owner or other
persons entitled to vote nor has discretionary power to vote on a particular
matter. Accordingly, stockholders are urged to forward their voting instructions
promptly.
Proposals 1 and 4 each requires the affirmative vote of a "majority of the
outstanding voting securities" of the Fund. The terms "majority of the
outstanding voting securities" as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"), and as used in this Proxy Statement, means: the
affirmative vote of the lesser of (1) 67% of the voting securities of the Fund
present at the meeting if more than 50% of the outstanding shares of the Fund
are present in person or by proxy or (2) more than 50% of the outstanding shares
of the Fund. Approval of Proposal 3 requires the affirmative vote of a majority
of the shares of the Fund. Approval of Proposals 2 and 5 requires the
affirmative vote of a majority of the shares of the Fund voting at the Special
Meeting.
Abstentions will have the effect of a "no" vote on all proposals. Broker
non-votes will have the effect of a "no" vote for Proposals 1, 3 and 4, which
require the approval of a specified percentage of the outstanding shares of the
Fund. Broker non-votes will not constitute "yes" or "no" votes, and will be
disregarded in determining the voting securities "present" if such vote is
determined on the basis of the affirmative vote of 67% of the voting securities
of the Fund present at the Special Meeting with respect to Proposals 1 and 4.
Broker non-votes will not be counted in favor of, but will have no other effect
on the vote for Proposal 3, which requires the approval of a majority of the
shares of the Fund outstanding and entitled to vote and Proposals 2 and 5 which
require a majority of the shares of the Fund voting at the Special Meeting.
Holders of record of the common stock of the Fund at the close of business
on August 29, 1997 (the "Record Date"), as to any matter on which they are
entitled to vote, will be entitled to one vote per share on all business of the
Special Meeting. There were 53,726,564 shares of common stock outstanding as of
June 30, 1997.
The Fund provides periodic reports to all stockholders which highlight
relevant information, including investment results and a review of portfolio
changes. You may receive an additional copy of the most recent annual report for
the Fund and a copy of any more recent semi-annual report, without charge, by
calling 800-225-5163 or writing the Fund, c/o Scudder, Stevens & Clark, Inc.,
345 Park Avenue, New York, New York 10154.
2
<PAGE> 12
PROPOSAL 1: APPROVAL OF NEW
INVESTMENT MANAGEMENT AGREEMENT
INTRODUCTION
Scudder acts as the investment manager for the Fund pursuant to an
Investment Management Agreement dated January 1, 1994 (the "Current Investment
Management Agreement"). (Scudder is sometimes referred to in this proxy
statement as the "Investment Manager.") On June 26, 1997, Scudder entered into a
Transaction Agreement (the "Transaction Agreement") with Zurich Insurance
Company ("Zurich") pursuant to which Scudder and Zurich have agreed to form an
alliance. Under the terms of the Transaction Agreement, Zurich will acquire a
majority interest in Scudder, and Zurich Kemper Investments, Inc. ("ZKI"), a
Zurich subsidiary, will become part of Scudder. Scudder's name will be changed
to Scudder Kemper Investments, Inc. ("Scudder Kemper"). The foregoing are
referred to as the "Transactions." ZKI, a Chicago-based investment adviser and
the adviser to the Kemper funds, has approximately $80 billion under management.
The headquarters of Scudder Kemper will be in New York. Edmond D. Villani,
Scudder's Chief Executive Officer, will continue as Chief Executive Officer of
Scudder Kemper and will become a member of Zurich's Corporate Executive Board.
Consummation of the Transactions would constitute an "assignment," as that
term is defined in the 1940 Act, of the Fund's Current Investment Management
Agreement with Scudder. As required by the 1940 Act, the Current Investment
Management Agreement provides for its automatic termination in the event of its
assignment. In anticipation of the Transactions, a new investment management
agreement (the "New Investment Management Agreement," together with the Current
Investment Management Agreement, are sometimes hereinafter collectively referred
to as the "Investment Management Agreement") between the Fund and Scudder Kemper
is being proposed for approval by stockholders of the Fund. A copy of the New
Investment Management Agreement is attached hereto as Exhibit A. THE NEW
INVESTMENT MANAGEMENT AGREEMENT FOR THE FUND IS ON THE SAME TERMS IN ALL
MATERIAL RESPECTS AS THE CURRENT INVESTMENT MANAGEMENT AGREEMENT. Conforming
changes are being recommended to the New Investment Management Agreement in
order to promote consistency among all of the funds to be advised by Scudder
Kemper and to permit ease of administration. The material terms of the Current
Investment Management Agreement are described under "Description of the Current
Investment Management Agreement" below.
BOARD OF DIRECTORS' RECOMMENDATION
On August 23, 1997, the Board of the Fund, including a majority of the
Directors who are not parties to such agreement or "interested persons" (as
defined under the 1940 Act) (the "Non-interested Directors") of any such
3
<PAGE> 13
party, voted to approve the New Investment Management Agreement and to recommend
its approval to stockholders.
For information about the Board's deliberations and the reasons for its
recommendation, please see "Board of Directors' Evaluation" below.
The Board of the Fund recommends that its stockholders vote in favor of the
approval of the New Investment Management Agreement for the Fund.
BOARD OF DIRECTORS' EVALUATION
On July 14, 1997, the Board of the Fund convened by telephone to begin
giving consideration to the Transactions contemplated by the Transaction
Agreement with Zurich and the advisability of entering into the New Investment
Management Agreement with Scudder Kemper. At this time, senior members of
Scudder's management described Scudder's objectives in entering into the
Transaction Agreement and indicated their expectations for the Transactions'
positive effects on Scudder and the Fund, including their expectation that
Scudder Kemper would enhance the level of resources devoted to the analysis of
equity securities of Japanese companies. The Board continued its discussion of
the Transaction at its regularly scheduled Board meeting on July 24, 1997. At a
special, in-person meeting held on August 23, 1997, the Board discussed the
information provided about Zurich.
The Board obtained from Scudder and Zurich information regarding the
respective organizations and the future plans of the parties. Included in the
information furnished to and discussed with the Board were financial statements
and other information as to the financial condition of Zurich and ZKI, and
independent reports and analyses regarding Zurich.
Scudder advised the Board that the Transactions are not expected to have a
material effect on the operations of the Fund or on its stockholders and that no
material change in investment philosophy, objectives or strategies is currently
envisioned. The Transaction Agreement, by its terms, does not contemplate any
changes, other than changes in the ordinary course of business, in the
management or operation of Scudder relating to the Fund, the personnel managing
the Fund or other services provided to and business activities of the Fund.
Scudder representatives have informed the Board that, although they expect that
various portions of the ZKI organization would be combined with Scudder's
operations, the senior executives of Scudder overseeing those operations will
remain largely unchanged. It is possible, however, that changes in certain
personnel currently involved in providing certain services to the Fund may
result from future efforts to combine the strengths and efficiencies of both
firms. Based on the foregoing, Scudder advised the Board that it does not
anticipate that the Transactions will cause a reduction in the quality of
services provided to the Fund, or have any adverse effect on Scudder's ability
to fulfill its obligations under the New Investment Management Agreement or its
ability to operate its business in a manner consistent with its current
practices.
4
<PAGE> 14
The Board was advised that, under the Transaction Agreement Scudder and ZKI
each has agreed that it will use its commercially reasonable efforts to ensure
the satisfaction of the conditions set forth in Section 15(f) of the 1940 Act.
Section 15(f) provides a non-exclusive safe harbor for an investment adviser to
an investment company or any of the investment adviser's affiliated persons (as
defined under the 1940 Act) to receive any amount or benefit in connection with
a change in control of the investment adviser so long as two conditions are met.
First, for a period of three years after the transaction, at least 75% of the
board members of the investment company must not be "interested persons" of the
investment adviser. On or prior to consummation of the Transactions, the Board,
together with the nominees that you are being asked to elect in "Proposal 2:
Election of Directors," would be in compliance with this provision of Section
15(f). (See "Proposal 2: Election of Directors"). Second, an "unfair burden"
must not be imposed upon the investment company as a result of the transaction
or any express or implied terms, conditions or understandings applicable
thereto. The term "unfair burden" is defined in Section 15(f) to include any
arrangement during the two-year period after the transaction whereby the
investment adviser, or any interested person of the adviser, receives or is
entitled to receive any compensation, directly or indirectly, from the
investment company or its stockholders (other than fees for bona fide investment
advisory or other services) or from any person in connection with the purchase
or sale of securities or other property to, from or on behalf of the investment
company (other than bona fide ordinary compensation as principal underwriter for
such investment company). No such compensation agreements are contemplated in
connection with the Transactions. Scudder has undertaken to pay the costs of
preparing and distributing proxy materials to, and of holding the Special
Meeting of, the Fund's stockholders as well as other fees and expenses in
connection with the Transactions, including the fees and expenses of legal
counsel to the Fund and the Directors who are not interested persons of the Fund
or of Scudder ("Non-interested Directors") as defined in the 1940 Act.
In addition to the factors that the Board considered in evaluating the
Transactions and their effect on the Fund, which included (i) that there were no
contemplated changes in the investment philosophy, objectives or strategies of
the Fund, or in the quality of services provided to the Fund by Scudder and (ii)
the undertaking that no unfair burden would be imposed upon the Fund as a result
of the Transactions, the Board also took into account that the New Investment
Management Agreement for the Fund, including the terms relating to the services
to be provided to, and the fees and expenses payable by, the Fund, is on the
same terms in all material respects as the Current Investment Management
Agreement, except for the date of effectiveness. The Board noted that, in
previously approving the continuation of the Current Investment Management
Agreement, the Board, including the Non-interested Directors, had considered a
number of factors, including the nature, quality and extent of the services
furnished by Scudder to the Fund; the necessity of Scudder maintaining and
5
<PAGE> 15
enhancing its ability to retain and attract capable personnel to serve the Fund;
the experience of Scudder in international investing; possible economies of
scale; the investment record of Scudder in managing the Fund; Scudder's
profitability with respect to the Fund and the other investment companies
managed by Scudder; comparative data as to investment performance, advisory fees
and other fees, including administrative fees, and expense ratios of the Fund
compared with other funds advised by Scudder and other investment advisers; the
risks assumed by Scudder; the advantages and possible disadvantages to the Fund
of having an adviser which also serves other investment companies as well as
other accounts; possible benefits to Scudder from serving as adviser to the
Fund; current and developing conditions in the financial services industry,
including the entry into the industry of large and well capitalized companies
which are spending and appear to be prepared to continue to spend substantial
sums to engage personnel and to provide services to competing investment
companies; the financial resources of Scudder and the continuance of appropriate
incentives to assure that Scudder will continue to furnish high quality services
to the Fund; and various other factors.
Based upon its review, the Board, including a majority of the
Non-interested Directors, concluded that the New Investment Management Agreement
is in the best interest of the Fund and the Fund's stockholders. Accordingly,
after consideration of all of the above factors, the Board, including a majority
of the Non-interested Directors, approved the New Investment Management
Agreement and voted to recommend its approval to the stockholders of the Fund.
In reviewing the terms of the Investment Management Agreement, the Non-
interested Directors of the Fund had been advised and represented by their
independent counsel.
INFORMATION CONCERNING THE TRANSACTIONS AND ZURICH
Under the Transaction Agreement, Zurich will pay $866.7 million in cash to
acquire two-thirds of Scudder's outstanding shares and will contribute ZKI to
Scudder for additional shares, following which Zurich will have a 79.1% fully
diluted equity interest in the combined business. Zurich will then transfer a
9.6% fully diluted equity interest in Scudder Kemper to a defined contribution
plan for the benefit of Scudder and ZKI employees, as well as cash and warrants
on Zurich shares for award to Scudder employees, in each case subject to
five-year vesting schedules. After giving effect to the Transactions, current
Scudder stockholders will have a 29.6% fully diluted equity interest in Scudder
Kemper and Zurich will have a 69.5% fully diluted interest in Scudder Kemper.
Scudder's name will be changed to Scudder Kemper Investments, Inc.
The purchase price for Scudder or for ZKI in the Transactions is subject to
adjustment based on the impact to revenues of non-consenting clients, and will
be reduced if the annualized investment management fee revenues (excluding the
effect of market changes, but taking into account new assets under manage-
6
<PAGE> 16
ment) from clients at the time of closing, as a percentage of such revenues as
of June 30, 1997 (the "Revenue Run Percentage"), is less than 90%.
At the closing, Zurich and the other stockholders of Scudder Kemper will
enter into a Second Amended and Restated Security Holders Agreement (the "New
SHA"). Under the New SHA, Scudder stockholders will be entitled to designate
three of the seven members of the Scudder Kemper board of directors and two of
the four members of an Executive Committee, which will be the primary
management-level committee of Scudder Kemper. Zurich will be entitled to
designate the other four members of the Scudder Kemper board and the other two
members of the Executive Committee.
The names, addresses and principal occupations of the initial Scudder-
designated directors of Scudder Kemper are as follows: Lynn S. Birdsong, 345
Park Avenue, New York, New York, Managing Director of Scudder; Cornelia M.
Small, 345 Park Avenue, New York, New York, Managing Director of Scudder; and
Edmond D. Villani, 345 Park Avenue, New York, New York, President, Chief
Executive Officer and Managing Director of Scudder.
The names, addresses and principal occupations of the initial Zurich-
designated directors of Scudder Kemper are as follows: Lawrence W. Cheng,
Mythenquai 2, Zurich, Switzerland, Chief Investment Officer for Investments and
Institutional Asset Management and the corporate functions of Securities and
Real Estate for Zurich; Steven M. Gluckstern, Mythenquai 2, Zurich, Switzerland,
responsible for Reinsurance, Structured Finance, Capital Market Products and
Strategic Investments, and a member of the Corporate Executive Board of Zurich;
Rolf Hueppi, Mythenquai 2, Zurich, Switzerland, Chairman of the Board and Chief
Executive Officer of Zurich; and Markus Rohrbasser, Mythenquai 2, Zurich,
Switzerland, Chief Financial Officer and member of the Corporate Executive Board
of Zurich.
The initial Scudder-designated Executive Committee members will be Messrs.
Birdsong and Villani (Chairman). The initial Zurich-designated Executive
Committee members will be Messrs. Cheng and Rohrbasser.
The New SHA requires the approval of a majority of the Scudder-designated
directors for certain decisions, including changing the name of Scudder Kemper,
effecting an initial public offering before April 15, 2005, causing Scudder
Kemper to engage substantially in non-investment management and related
business, making material acquisitions or divestitures, making material changes
in Scudder Kemper's capital structure, dissolving or liquidating Scudder Kemper,
or entering into certain affiliated transactions with Zurich. The New SHA also
provides for various put and call rights with respect to Scudder Kemper stock
held by current Scudder employees, limitations on Zurich's ability to purchase
other asset management companies outside of Scudder Kemper, rights of Zurich to
repurchase Scudder Kemper stock upon termination of employment of Scudder Kemper
personnel, and registration rights for stock held by continuing Scudder
stockholders.
7
<PAGE> 17
The Transactions are subject to a number of conditions, including approval
by Scudder stockholders; the Revenue Run Rate Percentages of Scudder and ZKI
being at least 75%; Scudder and ZKI having obtained director and stockholder
approvals from U.S.-registered funds representing 90% of assets of such funds
under management as of June 30, 1997; the absence of any restraining order or
injunction preventing the Transactions, or any litigation challenging the
Transactions that is reasonably likely to result in an injunction or
invalidation of the Transactions, and the continued accuracy of the
representations and warranties contained in the Transaction Agreement. The
Transactions are expected to close during the fourth quarter of 1997.
The information set forth above concerning the Transactions has been
provided to the Fund by Scudder, and the information set forth below concerning
Zurich has been provided to the Fund by Zurich.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services,
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich Insurance Group is particularly strong in the insurance of
international companies and organizations. Over the past few years, Zurich's
global presence, particularly in the United States, has been strengthened by
means of selective acquisitions.
DESCRIPTION OF THE CURRENT INVESTMENT MANAGEMENT AGREEMENT
Under the Current Investment Management Agreement, Scudder provides the
Fund with continuing investment management services. The Investment Manager also
determines which securities shall be purchased, held, or sold, and what portion
of the Fund's assets shall be held uninvested, subject to the Fund's Articles of
Incorporation, By-Laws, investment policies and restrictions, the provisions of
the 1940 Act, and such policies and instructions as the Directors may determine.
The Current Investment Management Agreement provides that the Investment
Manager will provide portfolio management services, place portfolio transactions
in accordance with policies expressed in the Fund's registration statement, pay
the Fund's office rent, render significant administrative services on behalf of
the Fund (not otherwise provided by third parties) necessary for the Fund's
operating as an open-end investment company including, but not limited to,
preparing reports to and meeting materials for the Fund's Board of Directors and
reports and notices to Fund stockholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of
various third-party and affiliated service providers to the Fund (such as the
Fund's transfer and pricing agents, fund accounting agent, custo-
8
<PAGE> 18
dian, accountants and others) and other persons in any capacity deemed necessary
or desirable to Fund operations; preparing and making filings with the
Securities and Exchange Commission (the "SEC" or the "Commission") 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 returns pursuant to Section 4982 of the Internal Revenue Code of
1986, as amended; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio securities and the calculation of
net asset value; monitoring the registration of shares of the Fund 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 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 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 an authorized person;
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its stockholders, preparing and arranging
for the printing of dividend notices to stockholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Fund in the conduct of its
business, subject to the direction and control of the Fund's Board of Directors.
Under the Current Investment Management Agreement, the Fund is responsible
for other expenses, including organizational expenses (including out-of-pocket
expenses, but not including the Investment Manager's overhead or employee
costs); brokers' commissions or other costs of acquiring or disposing of any
portfolio securities of the Fund; legal, auditing and accounting expenses;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; taxes and governmental fees;
the fees and expenses of the Fund's transfer agent; expenses of preparing share
certificates and any other expenses, including clerical expenses, of issuance,
offering, distribution, sale, redemption or repurchase of shares; the expenses
of and fees for registering or qualifying securities for sale; the fees and
expenses of Non-interested Directors; the cost of printing and distributing
reports, notices and dividends to current stockholders; and the fees and
expenses of the Fund's custodians, subcustodians, accounting agent, dividend
disbursing agents and
9
<PAGE> 19
registrars. The Fund may arrange to have third parties assume all or part of the
expenses of sale, underwriting and distribution of shares of the Fund. The Fund
is also responsible for expenses of stockholders' and other meetings, the cost
of responding to stockholders' inquiries, and its expenses incurred in
connection with litigation, proceedings and claims and the legal obligation it
may have to indemnify officers and Directors of the Fund with respect thereto.
The Fund is also responsible for the 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; any
fees, dues and expenses incurred by the Fund in connection with membership in
investment company trade organizations; expenses of printing and mailing
prospectuses and statements of additional information of the Fund and
supplements thereto to current stockholders; costs of stationery; fees payable
to the Investment Manager and to any other Fund advisers or consultants;
expenses relating to investor and public relations; interest charges, bond
premiums and other insurance expense; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; and other
expenses.
The Investment Manager is responsible for the payment of the compensation
and expenses of all Directors, officers and executive employees of the Fund
(including the Fund's share of payroll taxes) affiliated with the Investment
Manager and making available, without expense to the Fund, the services of such
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. The Fund is responsible for the fees and expenses (specifically including
travel expenses relating to Fund business) of Directors not affiliated with the
Investment Manager. Under the Current Investment Management Agreement, the
Investment Manager also pays the Fund's share of payroll taxes, as well as
expenses, such as travel expenses (or an appropriate portion thereof), of
Directors and officers of the Fund who are directors, officers or employees of
the Investment Manager, to the extent that such expenses relate to attendance at
meetings of the Board of Directors of the Fund or any committees thereof or
advisers thereto, held outside Boston, Massachusetts or New York, New York.
During the Fund's most recent fiscal year, no compensation, direct or otherwise
(other than through fees paid to the Investment Manager), was paid or became
payable by the Fund to any of its officers or Directors who were affiliated with
the Investment Manager.
In return for the services provided by the Investment Manager as investment
adviser, and the expenses it assumes under the Current Investment Management
Agreement, the Fund pays the Investment Manager a management fee which is
accrued daily and payable monthly. The management fee rate is currently equal on
an annual basis to 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 and up to and including
$300 million, 0.70 of 1% on assets in excess of $300 million and up to and
including $600 million, and 0.65 of 1% of assets in excess of $600 million. As
of the end of the Fund's last fiscal year, it had approximately
10
<PAGE> 20
$385,963,962 in net assets and paid a management fee of $3,621,876 during such
period.
The Current Investment Management Agreement further provides that the
Investment Manager 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
such agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Manager in the
performance of its duties or from reckless disregard by the Investment Manager
of its obligations and duties under such agreement.
The Current Investment Management Agreement may be terminated without
penalty upon sixty (60) days' written notice by either party. The Fund may agree
to terminate the Current Investment Management Agreement either by the vote of a
majority of the outstanding voting securities of the Fund, or by a vote of the
Board of Directors. As stated above, the Current Investment Management Agreement
automatically terminates in the event of its assignment.
Scudder has acted as the Investment Manager for the Fund since Scudder
succeeded Asia Management as the Fund's investment manager in 1993. The Current
Investment Management Agreement is dated January 1, 1994, and was last approved
by the Directors on October 25, 1996, and by the stockholders of the Fund on
December 21, 1993, and ratified by stockholders of the Fund on July 22, 1994.
The Agreement continues until October 31, 1997. The purpose of the last
submission to stockholders of the Current Investment Management Agreement was to
approve the change of investment managers from Asia Management to Scudder.
THE NEW INVESTMENT MANAGEMENT AGREEMENT
The New Investment Management Agreement for the Fund will be dated as of
the date of the consummation of the Transactions, which is expected to occur in
the fourth quarter of 1997, but in no event later than February 28, 1998. The
New Investment Management Agreement will be in effect for an initial term ending
on the same date as would the Current Investment Management Agreement but for
the Transactions, and may continue thereafter from year to year only if
specifically approved at least annually by the vote of "a majority of the
outstanding voting securities" of the Fund, or by the Board and, in either
event, the vote of a majority of the Non-interested Directors cast in person at
a meeting called for such purpose. In the event that stockholders of the Fund do
not approve the New Investment Management Agreement, the Current Investment
Management Agreement will remain in effect until the closing of the Transactions
at which time it would terminate. In such event, the Board will take such
action, if any, as it deems to be in the best interests of the Fund and its
stockholders. In the event the Transactions are not consummated, Scudder will
continue to provide services to the Fund in accordance with the terms of the
Current Investment Management Agreement for such periods as may be ap-
11
<PAGE> 21
proved at least annually by the Board, including a majority of the
Non-interested Directors.
DIFFERENCES BETWEEN THE CURRENT AND NEW INVESTMENT MANAGEMENT AGREEMENT
The New Investment Management Agreement is substantially the same as the
Current Investment Management Agreement in all material respects. The principal
changes that have been made are summarized below. The New Investment Management
Agreement reflects conforming changes that have been made in order to promote
consistency among all the funds currently advised by Scudder and to permit ease
of administration. For example, the New Investment Management Agreement updates
the list of types of services that may be provided by the Investment Manager to
include the monitoring of accounting agents. In addition, the New Investment
Management Agreement provides that the Investment Manager is not responsible for
payment of the fees and expenses of the Fund's accounting agent, and proposes to
add "accounting agents" to the list of service providers to which the Investment
Manager must provide information in connection with the payment of dividends and
distributions.
The New Investment Management Agreement omits a provision referencing the
Fund's ability to obtain services from Nikko International Capital Management
Co., Ltd. pursuant to a separate agreement. That agreement was terminated
effective December 31, 1995. The New Investment Management Agreement also omits
a reference to other entities in Japan or elsewhere that may be hired by the
Fund for the purpose of providing investment-related information and advice.
In addition, the New Investment Management Agreement clarifies that
purchase and sale opportunities, which are suitable for more than one client of
the Investment Manager, will be allocated by the Investment Manager in an
equitable manner. Other conforming changes include: deletion of the Investment
Manager's potential responsibility for monitoring the calculation and payment of
distributions to stockholders; and deletion of a provision not permitting
application of the Current Investment Management Agreement to newly-created
series.
INVESTMENT MANAGER
Scudder is one of the most experienced investment counsel firms in the
United States. It was established in 1919 as a partnership and was restructured
as a Delaware corporation in 1985. The principal source of Scudder's income is
professional fees received from providing continuing investment advice. Scudder
provides investment counsel for many individuals and institutions, including
insurance companies, endowments, industrial corporations and financial and
banking organizations.
12
<PAGE> 22
As stated above, Scudder is a Delaware corporation. Daniel Pierce* is the
Chairman of the Board of Scudder, Edmond D. Villani# is President and Chief
Executive Officer of Scudder, Stephen R. Beckwith#, Lynn S. Birdsong#, Nicholas
Bratt#, E. Michael Brown*, Mark S. Casady*, Linda C. Coughlin*, Margaret D.
Hadzima*, Jerard K. Hartman#, Richard A. Holt@, John T. Packard+, Kathryn L.
Quirk#, Cornelia M. Small# and Stephen A. Wohler* are the other members of the
Board of Directors of Scudder (see footnote for symbol key).+ 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 the representatives of the beneficial owners of
such securities (the "Representatives"), pursuant to a Security Holders'
Agreement among Scudder, the beneficial owners of securities of Scudder and such
Representatives. Pursuant to the Security Holders' Agreement, the
Representatives have the right to reallocate shares among the beneficial owners
from time to time. Such reallocations will be at net book value in cash
transactions. All Managing Directors of Scudder own voting and nonvoting stock
and all Principals own nonvoting stock.
Directors, officers and employees of Scudder from time to time may enter
into 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.
Scudder Service Corporation ("SSC"), also a subsidiary of Scudder, is the
transfer, shareholder servicing and dividend-paying agent for the Fund. For the
most recently completed fiscal year, the Fund was charged by SSC a fee of
$685,999. Scudder Trust Company ("STC"), an affiliate of Scudder, provides
subaccounting and recordkeeping services for stockholder accounts in certain
retirement and employee benefit plans. For the most recently completed fiscal
year, the Fund was not charged a fee by STC.
STC will continue to provide, subaccounting and recordkeeping services to
the Fund under the current arrangements if the New Investment Management
Agreement is approved. The Board of the Fund is currently evaluating whether to
continue to retain SSC as the Fund's transfer agent or whether to retain an
independent transfer agency service provider.
- ------------------------------
+
* Two International Place, Boston, Massachusetts
# 345 Park Avenue, New York, New York
+ 101 California Street, San Francisco, California
@ Two Prudential Plaza, 180 North Stetson, Suite 5400, Chicago, Illinois
13
<PAGE> 23
Exhibit B sets forth the fees and other information regarding other
investment companies advised by Scudder.
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
To the maximum extent feasible, Scudder places orders for portfolio
transactions through Scudder Investor Services, Inc., Two International Place,
Boston, Massachusetts 02110 (the "Distributor") (a corporation registered as a
broker/dealer and a subsidiary of Scudder), which in turn places orders on
behalf of the Fund with issuers, underwriters or other brokers and dealers. In
selecting brokers and dealers with which to place portfolio transactions for the
Fund, Scudder will not consider sales of shares of funds currently advised by
ZKI, although it may place such transactions with brokers and dealers that sell
shares of funds currently advised by ZKI. The Distributor receives no
commissions, fees or other remuneration from the Fund for this service.
Allocation of portfolio transactions is supervised by Scudder.
REQUIRED VOTE
Approval of the New Investment Management Agreement requires the
affirmative vote of a "majority of the outstanding voting securities" of the
Fund. The Directors of the Fund recommend that the stockholders of the Fund vote
in favor of this Proposal 1.
PROPOSAL 2: ELECTION OF
DIRECTORS FOR THE FUND
At the Special Meeting, eight Directors are to be elected to constitute the
Fund's Board. For election of Directors at the Special Meeting, the Board of
Directors has approved the nomination of the following individuals: William L.
Givens, William H. Gleysteen, Jr., John F. Loughran, Yoshihiko Miyauchi, William
V. Rapp, Henry Rosovsky, O. Robert Theurkauf and Hiroshi Yamanaka.
The persons named as proxies on the enclosed proxy card will vote for the
election of the nominees named above unless authority to vote for any or all of
the nominees is withheld in the proxy. Each Director so elected will serve as a
Director of the Fund until the next meeting of stockholders, if any, called for
the purpose of electing Directors and until the election and qualification of a
successor or until such Director sooner dies, resigns or is removed as provided
in the Articles of Incorporation of the Fund.
14
<PAGE> 24
Each of the nominees has indicated that he is willing to serve as a
Director. If any or all of the nominees should become unavailable for election
due to events not now known or anticipated, the persons named as proxies will
vote for such other nominee or nominees as the Directors may recommend. The
following table sets forth certain information concerning the current Directors
and the nominees:
NOMINEES:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND,
(DATE NOMINEE BECAME DIRECTOR)
PRINCIPAL OCCUPATION OR
NAME (AGE) EMPLOYMENT AND DIRECTORSHIPS
- ----------------------------------------- --------------------------------
<S> <C>
William L. Givens (68) Director (1978). President,
Twain Associates.
William H. Gleysteen, Jr. (71) Director (1993). Consultant;
Guest Scholar, Brookings
Institution; Former President,
The Japan Society, Inc. (until
1996). Mr. Gleysteen serves on
the Boards of an additional 4
Corporations whose Funds are
advised by Scudder.
John F. Loughran (65) Director (1974). Retired Senior
Adviser for Asia Pacific to J.P.
Morgan & Co., Inc.; Director,
The Finisterre Fund (Health Care
Institutional Fund); Director,
The Industrial Bank of Japan
Trust Company.
Yoshihiko Miyauchi (61) Director (1996). President and
Chief Executive Officer, ORIX
Corporation; Chairman and
Director, ORIX Interior
Corporation; Director, Korean
Development Leasing Corporation;
Director, Lanka ORIX Leasing
Company Limited; Chairman and
Director, ORIX Leasing Pakistan
Limited; and Director, United
Overseas Land Limited.
</TABLE>
15
<PAGE> 25
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND,
(DATE NOMINEE BECAME DIRECTOR)
PRINCIPAL OCCUPATION OR
NAME (AGE) EMPLOYMENT AND DIRECTORSHIPS
- ----------------------------------------- --------------------------------
<S> <C>
William V. Rapp (58) Director (1991). Managing
Director, Rue Associates;
Academic Director, International
Relations, Yale University;
Senior Research Associate,
Columbia University--Center on
Japan Economy and Business;
Former Professor, University of
Victoria.
Henry Rosovsky (70)** Chairman of the Board and
Director (1979). Geysor
University, Professor Emeritus,
Harvard University; Director,
Paine Webber Group; Director,
Corning, Inc.
O. Robert Theurkauf* (69) Director (1991). Advisory
Managing Director, Scudder,
Stevens & Clark, Inc.
Hiroshi Yamanaka (84) Director (1962). Advisor to the
Board of Meiji Mutual Life
Insurance Company; Lifetime
Executive Director, Japan
Association of Corporate
Executives; Vice Chairman, The
Security Analysts Association of
Japan; Governor, Board of
Governors, Tokyo Stock Exchange;
Auditor, The Bank of
Tokyo-Mitsubishi Ltd., The
Mitsubishi Foundation,
Mitsubishi Research Institute;
Director, Kirin Brewery Co.,
Ltd.; Director, Seijo Gakuen;
Doctor of Commerce, Chuo
University Director.
</TABLE>
- ------------------------------
* Director considered by the Fund and its counsel to be an "interested person"
(as defined in the 1940 Act) of the Fund or of its investment manager
because of his employment by the Investment Manager.
** Director considered by the Fund and its counsel to be an "interested person"
(as defined in the 1940 Act) of the Fund or of its investment manager
because of his affiliation with a broker-dealer.
16
<PAGE> 26
DIRECTOR NOT STANDING FOR RE-ELECTION:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND,
(DATE NOMINEE BECAME DIRECTOR)
PRINCIPAL OCCUPATION OR
NAME (AGE) EMPLOYMENT AND DIRECTORSHIPS
- ----------------------------------- -----------------------------------
<S> <C>
Shoji Umemura (77) Director (1988). Board Counselor,
The Nikko Securities Co. Ltd.;
Counselor, Tokyo Stock Exchange;
Advisor, Japan Securities Dealers
Association, Association of Tokyo
Stock Exchange Regular Members;
Associate Advisor, Tokyo Chamber of
Commerce & Industry; Director, The
Securities Analysts Association of
Japan, Advisor, Japan Association
of Corporate Executives.
</TABLE>
The table below sets forth the number of shares of the Fund owned directly
or beneficially by the nominees to and the Directors of the Board of Directors
as of June 30, 1997. Nominees or Directors who do not own any Shares have been
omitted from the table.
<TABLE>
<CAPTION>
ALL CURRENT
DIRECTORS
AND
OFFICERS AS
FUND NAME(1) GIVENS GLEYSTEEN LOUGHRAN RAPP ROSOVSKY THEURKAUF A GROUP
- ------------ ------ --------- -------- ----- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
The Japan
Fund, Inc. 212 4,536 1,005 4,701 7,111 41,662 75,555(2)
</TABLE>
- ------------------------------
(1) The information as to beneficial ownership is based on statements furnished
to the Fund by each Director and nominee. Unless otherwise noted, beneficial
ownership is based on sole voting and investment power. Each Director's and
nominee's individual shareholdings of the Fund constitute less than 1/4 of
1% of the shares outstanding of such Fund. As a group, the Directors and
officers own less than 1/4 of 1% of the shares of the Fund.
(2) As a group on June 30, 1997, the Directors and officers of the Fund held
25,214 shares with sole investment and voting power, 5,053 shares with
shared voting and investment power, and 45,288 shares with sole voting but
no investment power. Shares held with sole voting but no investment power
are shares held in profit sharing and 401(k) plans for which Jerard K.
Hartman serves as Trustee.
As of June 30, 1997, 10,175,269 shares in the aggregate, 18.94% of the
outstanding shares of the Fund were held in the name of Charles Schwab & Co.,
101 Montgomery Street, San Francisco, CA 94104, who may be deemed to be the
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
17
<PAGE> 27
To the best of the Fund's knowledge, as of June 30, 1997, no person owned
beneficially more than 5% of its outstanding shares, except as stated above.
RESPONSIBILITIES OF THE BOARD--BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Fund is responsible for the general oversight
of Fund business. A majority of the Board's members are not affiliated with
Scudder. These Non-interested Directors have primary responsibility for assuring
that the Fund is managed in a manner consistent with the best interests of its
shareholders.
The Board of Directors meets at least quarterly to review the investment
performance of the Fund and other operational matters, including policies and
procedures designed to assure compliance with various regulatory requirements.
At least annually, the Non-interested Directors review the fees paid to the
Investment Manager and its affiliates for investment advisory services and other
administrative and shareholder services. In this regard, they evaluate, among
other things, the Fund's investment performance, the quality and efficiency of
the various other services provided, costs incurred by the Investment Manager
and its affiliates, and comparative information regarding fees and expenses of
competitive funds. They are assisted in this process by the Fund's independent
public accountants and by independent legal counsel selected by the Non-
interested Directors. In addition, the Non-interested Directors from time to
time have established and served on task forces and subcommittees focusing on
particular matters such as investment, accounting and shareholder service
issues.
The Board of the Fund has both an Audit Committee and an Executive
Committee, the responsibilities of which are described below.
AUDIT COMMITTEE
The Board of the Fund has an Audit Committee consisting of the Non-
interested Directors. The Audit Committee reviews with management and the
independent accountants for the Fund, among other things, the scope of the audit
and the controls of the Fund and its agents, reviews and approves in advance the
type of services to be rendered by independent accountants, recommends the
selection of independent accountants for the Fund to the Board and, in general,
considers and reports to the Board on matters regarding the Fund's accounting
and bookkeeping practices.
EXECUTIVE COMMITTEE
The Board of the Fund has an Executive Committee charged with the duty of
making all nominations for Non-interested Directors and consideration of other
related matters. Stockholders' recommendations as to nominees received by
management are referred to the Executive Committee for its consideration and
action.
18
<PAGE> 28
The Board met four times and the Audit Committee met two times in the 1996
fiscal year. Each then current Director attended at least 75% of the total
numbers of meetings of the Board and each committee on which they served as
regular members that were held during that period except Messrs. Loughran,
Umemura, Yamanaka and Miyauchi, who attended 67%, 25%, 0% and 33%, respectively.
HONORARY DIRECTORS
In addition to the Board and committee meetings listed above, the Directors
of the Fund attended various other meetings on behalf of the Fund during the
year, including meetings with their independent legal counsel and informational
meetings.
Tristan E. Beplat, Allan Comrie, Jonathan Mason, James W. Morley and Robert
G. Stone, Jr. currently serve as Honorary Directors of the Fund. At the
invitation of the Board, Mr. Umemura has agreed to serve as an Honorary Director
of the Fund upon his resignation from the Board. Honorary Directors are invited
to attend all Board meetings and to participate in Board discussions, but are
not entitled to vote on any matter presented to the Board.
EXECUTIVE OFFICERS
The following persons are Executive Officers of The Japan Fund, Inc.:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND;
PRINCIPAL OCCUPATION OR YEAR FIRST BECAME
NAME (AGE) EMPLOYMENT(1) AN OFFICER(2)
- ------------------------- ----------------------------- -----------------
<S> <C> <C>
Lynn S. Birdsong (51) President; Managing Director 1996
of Scudder, Stevens & Clark,
Inc.
Elizabeth J. Allan (44) Vice President; Principal of 1991
Scudder, Stevens & Clark,
Inc.
William E. Holzer (48) Vice President; Managing 1987
Director of Scudder, Stevens
& Clark, Inc.
Thomas W. Joseph (58) Vice President; Principal of 1987
Scudder, Stevens & Clark,
Inc.
Seung K. Kwak (36) Vice President; Managing 1994
Director of Scudder, Stevens
& Clark, Inc.
Thomas F. McDonough (50) Assistant Secretary; 1992
Principal of Scudder, Stevens
& Clark, Inc.
</TABLE>
19
<PAGE> 29
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND;
PRINCIPAL OCCUPATION OR YEAR FIRST BECAME
NAME (AGE) EMPLOYMENT(1) AN OFFICER(2)
- ------------------------- ----------------------------- -----------------
<S> <C> <C>
Pamela A. McGrath (43) Assistant Treasurer; Managing 1994
Director of Scudder, Stevens
& Clark, Inc.
Edward J. O'Connell (52) Vice President; Principal of 1993
Scudder, Stevens & Clark,
Inc.
Gina Provenzano (55) Vice President and Treasurer; 1978
Senior Associate of Scudder,
Stevens & Clark, Inc.
Kathryn L. Quirk (44) Vice President and Assistant 1991
Secretary; Managing Director
of Scudder, Stevens & Clark,
Inc.
Miyuki Wakatsuki (61) Vice President; General 1994
Manager, Japan Fund Office,
Nikko International Capital
Management Co., Ltd.
</TABLE>
- ------------------------------
(1) Unless otherwise stated, all of the Executive Officers have been associated
with their respective companies for more than five years, although not
necessarily in the same capacity.
(2) The President, Treasurer and Secretary each holds office until his or her
successor has been duly elected and qualified, and all other officers hold
offices in accordance with the By-laws of the Fund.
COMPENSATION OF DIRECTORS AND OFFICERS
The Fund pays each Non-interested Director an annual Director's fee plus
specified amounts for Board and committee meetings attended and compensates him
for expenses related to Fund business.
Under the Fund's Directors' Retirement Plan (the "Retirement Plan"),
Non-interested Directors retiring at or after age 72 with five or more years of
service are entitled to receive, each year for ten years, a payment equal to 50
to 100 percent (depending on the number of years of service) of the basic annual
Directors' retainer on the retirement date. Non-interested Directors who retire
after age 62 but before age 72 are entitled to the same annual payments, reduced
by 3 percent for each year by which their retirement precedes age 72. The
obligations of the Fund to pay benefits and expenses under the Retirement Plan
will not be secured or funded in any manner and such obligations will not have
preference over the lawful claims of the Fund's creditors or stockholders. Upon
the retirement of a Non-interested Director, the Fund, at its option, may
purchase an annuity contract to meet its obligation to the Non-interested
Director.
20
<PAGE> 30
Scudder supervises the Fund's investments, pays the compensation and
certain expenses of its personnel who serve as Directors and officers of the
Fund and receives a management fee for its services. Several of the Fund's
officers and Directors are also officers, Directors, employees or stockholders
of Scudder, The Nikko Securities Co., Ltd. or Nikko International Capital
Management Co., Ltd., and participate in the fees paid to those firms, although
the Fund makes no direct payments to them other than for reimbursement of travel
expenses in connection with their attendance at Directors' and committee
meetings.
The following Compensation Table provides in tabular form the following
data:
Column (1) All Directors who receive compensation from the Fund.
Column (2) Aggregate compensation received by each Director of the
Fund during the calendar year 1996.
Columns (3) and (4) Pension or retirement benefits accrued or proposed
to be paid by the Fund.
Column (5) Total compensation received by each Director from funds
managed by Scudder (collectively, the "Fund Complex") during the calendar
year 1996.
COMPENSATION TABLE
<TABLE>
<CAPTION>
(3) (5)
(4) TOTAL COMPENSATION
(2) PENSION OR RETIREMENT ESTIMATED ANNUAL FROM THE FUND AND
(1) AGGREGATE BENEFITS ACCRUED AS BENEFITS UPON FUND COMPLEX
NAME OF DIRECTOR COMPENSATION* PART OF FUND EXPENSES RETIREMENT TO DIRECTOR**
- ------------------------- ------------- --------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
William L. Givens $16,250 $ 4,183 $6,000 $ 20,433 (1 Fund)
William H. Gleysteen, Jr. $16,250 $ 4,888 $3,000 $135,224 (13 Funds)
John F. Loughran $14,500 $ 4,313 $6,000 $ 18,813 (1 Fund)
Yoshihiko Miyauchi $ 5,456 $ 2,149+ $6,000 $ 5,456 (1 Fund)
William V. Rapp $16,250 $ 2,301 $6,000 $ 18,551 (1 Fund)
Henry Rosovsky $24,000 $ 2,568 $6,000 $ 26,568 (1 Fund)
Hiroshi Yamanaka $ 6,000 $ 7,725 $6,000 $ 13,725 (1 Fund)
Tristan E. Beplat, $ 2,000 $ 200 N/A $ 2,200 (1 Fund)
Honorary Director
Allan Comrie, $ 5,196 $ 4,969 $5,196 $ 10,165 (1 Fund)
Honorary Director
Jonathan Mason, $ 6,000 $ 6,911 $6,000 $ 12,911 (1 Fund)
Honorary Director
James W. Morley, $ 7,000 $ 6,176 $6,000 $ 13,176 (1 Fund)
Honorary Director
Robert G. Stone, Jr., $11,000 $ 6,189 $6,000 $ 18,461 (2 Funds)
Honorary Director
</TABLE>
- ---------------
* Includes pension or retirement benefits.
21
<PAGE> 31
** Includes pension or retirement benefits accrued.
+ Mr. Miyauchi became a Director of the Fund effective July 19, 1996.
Accordingly, this figure represents projected accrued benefits for the
calendar year 1997 and is not reflected in column 5.
REQUIRED VOTE
Election of each of the listed nominees for Director requires the
affirmative vote of a majority of the votes cast at the Special Meeting in
person or by proxy. The Directors of the Fund recommend that the stockholders of
the Fund vote in favor of each of the nominees listed in this Proposal 2.
PROPOSAL 3: APPROVAL OR DISAPPROVAL OF THE BOARD'S
DISCRETIONARY AUTHORITY TO CONVERT THE FUND INTO
A MASTER/FEEDER FUND STRUCTURE
If this Proposal 3 is approved by stockholders, the Board could determine
that the objectives of the Fund would be achieved more efficiently, while
retaining its current distribution arrangements, by investing in a master fund
in a master/feeder fund structure as described below, and in that case cause the
Fund to do so without further approval by stockholders.
A master/feeder fund structure is one in which a fund (a feeder), instead
of investing directly in a portfolio of securities, invests all of its
investment assets in another investment company (the master) with substantially
the same investment objectives and policies as the feeder. Such a structure
permits the pooling of assets of two or more feeder funds in the master fund in
an effort to achieve possible economies of scale and efficiencies in portfolio
management, while preserving separate identities, management and distribution
channels at the feeder level. An existing investment company could convert to a
feeder by selling all of its investments, which involves brokerage and other
transaction costs and the realization of taxable gain or loss, or by
contributing its assets to the master fund and avoiding transaction costs and,
if proper procedures are followed, the realization of taxable gain or loss.
In this regard, the Maryland General Corporation law permits a Maryland
corporation, at the discretion of its Board of Directors, to transfer its assets
to an entity or entities of which all of the equity interests are owned by the
transferring corporation. This provision would permit the Fund to convert into a
feeder fund by contributing Fund assets to an entity or entities owned by such
Fund, at such time as the Board of Directors of the Fund deems such a transfer
to be advisable.
The Board of Directors of the Fund, having determined to amend the Articles
of Incorporation of the Fund to make this discretionary power express, has
adopted the following resolutions.
22
<PAGE> 32
RESOLVED, that the Fund's Articles of Incorporation be amended to add
the following article:
The [Fund] shall be empowered to transfer some or all of its assets
to any entity or entities of which all of the equity interests are owned
by the [Fund] at the time of transfer for the purpose of creating a
master-feeder or similar structure in accordance with the Investment
Company Act of 1940, as amended, the precise structure of such transfer
of assets to be determined by action of the [Fund's] Board of Directors
as constituted at the time such Board of Directors deems any such
transfer to be advisable; and
RESOLVED FURTHER, that the Board of Directors declares such
amendment to be advisable and directs that the proposed amendment be
submitted for consideration at the special meeting of stockholders of
the Fund to be held on October 16, 1997.
A master fund must have the identical investment objective and
substantially the same investment policies as its feeder funds. This means that
the assets of the master fund are invested in the same types of securities in
which its feeder funds are authorized to invest.
Management of the Corporation believes that, generally, the larger the pool
of assets being managed the more efficiently and cost-effectively it can be
managed. Because a master fund pools the assets of multiple feeder funds, it
provides an effective means of creating larger asset pools. Whether the Board
would exercise its discretionary authority to convert the Fund to a
master/feeder fund structure would depend upon the existence of appropriate
opportunities to pool the Fund's assets with those of other feeder funds. The
primary motivation for considering a master/feeder fund structure is to seek to
achieve possible economies of scale and efficiencies in portfolio management,
while preserving separate identities, management and distribution channels at
the feeder fund level. The Directors' decision to convert the Fund would be
based upon their determination that it would be in the best interests of both
the Fund and its stockholders after consideration of all relevant factors,
including relative Fund expenses associated with a master/feeder fund structure.
A feeder fund can withdraw its investment in a master fund at any time if
its board determines that it is in the best interests of the stockholders to do
so or if the investment policies or restrictions of the master fund were changed
so that they were inconsistent with the policies and restrictions of the feeder
fund. Upon any such withdrawal, the board of the fund would consider what action
might be taken, including the investment of all of the assets of the fund in
another pooled investment entity having substantially the same investment
objectives and policies as the fund or the investment of the fund's assets
directly in a portfolio of investments in accordance with its investment
objective and policies.
23
<PAGE> 33
REQUIRED VOTE
Approval of this Proposal 3 by the Fund requires the affirmative vote of a
majority of all outstanding shares of stock of the Fund entitled to vote on the
matter. The Directors of the Fund recommend that stockholders of the Fund vote
in favor of the amendment of the Fund's Articles of Incorporation.
PROPOSAL 4: APPROVAL OR DISAPPROVAL OF
THE REVISION OF CERTAIN FUNDAMENTAL
INVESTMENT POLICIES
The 1940 Act requires an investment company to have adopted certain
specified investment policies which can be changed only by a stockholder vote.
Those policies are often referred to as "fundamental" policies. In the past,
fundamental policies were adopted by the Fund, and in some cases amended by vote
of the stockholders of the Fund, in order to reflect regulatory, business or
industry conditions which were in effect at the time the particular action was
taken. Because of the opportunity afforded by this Special Meeting, there has
been a review of the Fund's fundamental policies with the goal of simplifying,
modernizing and making consistent as far as possible the fundamental policies of
all open-end investment companies managed by Scudder.
This Proposal seeks stockholder approval of changes which are intended to
accomplish that goal. The proposed changes to the fundamental policies are
discussed in detail below. Please refer to the proposed policies as set forth in
Exhibit C. The Fund's current fundamental investment policies are set forth in
Exhibit D.
Each of the fundamental policies proposed for adoption with respect to the
Fund is in an area in which the 1940 Act requires that the Fund adopt a
fundamental policy. Except for the policies on borrowing and senior securities
as discussed below, none of the proposed policies differs from the Fund's
current comparable policy in a material way, although the formulation of the
policy may differ from the current one in the interest of uniformity and
simplicity. The policies with respect to diversification and the underwriting of
securities issued by others differ from the current policies of the Fund in that
the requirements of the 1940 Act, which of course apply, are not spelled out in
detail. Under such new policies, the limitation on the Fund would, therefore, be
determined by reference to the provisions of the 1940 Act, the rules thereunder,
and applicable interpretations of the Commission or its staff rather than the
express terms of the policies.
Stockholders will be asked to vote on each proposed fundamental policy
separately on the enclosed proxy card.
24
<PAGE> 34
PROPOSAL 4.1: DIVERSIFICATION
The Fund is a "diversified" fund under the 1940 Act. Under its current
diversification policy, the Fund, with respect to 75% of the value of its total
assets, may not purchase more than 10% of the voting securities of any one
issuer or invest more than 5% of the value of its total assets in the securities
of any one issuer, with exceptions for U.S. Government securities and securities
of other investment companies. This restriction is substantially identical to
the definition of a diversified fund under the 1940 Act. Accordingly, the
proposed statement that the Fund has elected to be classified as a diversified
Fund represents no substantive change in the current diversification policy for
the Fund.
PROPOSAL 4.2: BORROWING
The current policy of the Fund prohibits borrowing money, except as a
temporary measure for extraordinary or emergency purposes and except in
connection with reverse repurchase agreements, provided that the Fund maintains
asset coverage of 300% for all borrowings. Under the proposed policy, the Fund
would not be limited to borrowing for temporary or emergency purposes; however,
if the Directors determine with respect to the Fund to permit borrowing for
other purposes, which they currently do not intend to do, the Fund's disclosure
documents would be amended to disclose that fact. Although the Directors do not
currently intend to permit the Fund to borrow for investment leverage purposes;
which policy can be changed by the Directors without a shareholder vote, such
borrowings would increase the Fund's volatility and the risk of loss in a
declining market. Borrowings under reverse repurchase agreements are now
permitted, and would be permitted under the proposed policy. The 1940 Act
requires borrowings to have 300% asset coverage, which requirement would,
therefore, remain unchanged under the proposed policy. Accordingly, therefore,
except as stated above, the borrowing policy of the Fund would not be changed by
adoption of the proposed policy except to the extent that reverse repurchase
agreements would not be subject, under the proposed policy, to the 300% asset
coverage requirement. Consequently, the proposed policy would permit the Fund to
engage in reverse repurchase agreements to a greater extent than under the
current policy.
PROPOSAL 4.3: SENIOR SECURITIES
The current policy of the Fund prohibits the issuance of senior securities
(i.e., securities which are instruments or obligations evidencing indebtedness)
or debt securities, except in connection with the issuance of securities to
evidence permitted indebtedness. The current policy, therefore, specifically
excepts from the prohibition on the issuance of senior securities certain
practices which, under the current policies of the SEC or its staff, are not
deemed to involve the issuance of senior securities. Under the proposed policy
and applicable interpretations of the SEC and its staff, the issuance of
separate
25
<PAGE> 35
classes or series of shares also would not involve the issuance of senior
securities. Accordingly, management of the Fund believes that it is not
necessary to specify exceptions in the Fund's fundamental policies with regard
to senior securities but to afford the Fund the flexibility permitted under the
1940 Act and applicable interpretations of the SEC or its staff.
PROPOSAL 4.4: CONCENTRATION
The Fund's current policy in effect prohibits the purchase of securities if
it would result in more than 25% of the Fund's total assets being invested in
securities of one or more issuers having their principal business activities in
the same industry. There is an exception in the case of rights offerings of
Japanese corporations which permits the Fund to purchase the securities of any
issuer pursuant to an exercise of rights distributed to the Fund by the issuer,
even though after such purchase more than 25% of the Fund's total assets would
be invested in securities of issuers in a particular industry. While the 1940
Act does not define what constitutes "concentration" in an industry, the staff
of the Commission takes the position that investment of more than 25% of a
fund's assets in an industry constitutes concentration. If a fund concentrates
in an industry, it must at all times have more than 25% of its assets invested
in that industry, and if its policy is not to concentrate, it may not invest
more than 25% of its assets in the applicable industry, unless, in either case,
the fund discloses the specific conditions under which it will change from
concentrating to not concentrating or vice versa. A fund is permitted to adopt
reasonable definitions of what constitutes an industry, or it may use standard
classifications promulgated by the Commission, or some combination thereof.
Because a fund may create its own reasonable industry classifications,
management of the Fund believes that it is not necessary to include such matters
in the fundamental policy of the Fund. In addition, in order to comply with
positions of the Commission and its staff, the exception to the current
concentration policy in the case of rights offerings of Japanese companies is
proposed to be deleted.
PROPOSALS 4.5 THROUGH 4.8: OTHER POLICIES
Each of the other proposed fundamental policies regarding underwriting of
securities (Proposal 4.5), investment in real estate (Proposal 4.6), purchase of
physical commodities (Proposal 4.7) and lending (Proposal 4.8) is not materially
different from the current comparable policy of the Fund except that these
policies have been reworded or clarified.
REQUIRED VOTE
Approval of the proposed fundamental policies with respect to the Fund
requires the affirmative vote of a "majority of the outstanding voting
securities", as defined above, of the Fund. If the stockholders of the Fund fail
to approve any proposed fundamental policy, the current such policy will remain
in effect. The Directors of the Fund recommend that the stockholders of the Fund
vote in favor of each item in this Proposal 4.
26
<PAGE> 36
PROPOSAL 5: RATIFICATION OR REJECTION
OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Corporation, including a majority of the Non-
interested Directors, has selected Price Waterhouse LLP to act as independent
accountants for the Fund for the Fund's current fiscal year. Price Waterhouse
LLP are independent accountants and have advised the Fund that they have no
direct financial interest or material indirect financial interest in the Fund.
One or more representatives of Price Waterhouse LLP are expected to be present
at the Special Meeting and will have an opportunity to make a statement if they
so desire. Such representatives are expected to be available to respond to
appropriate questions posed by stockholders or management.
REQUIRED VOTE
Ratification of the selection of independent accountants requires the
affirmative vote of a majority of the votes cast at the Special Meeting in
person or by proxy. The Directors of the Fund recommend that the stockholders of
the Fund vote in favor of this Proposal 5.
ADDITIONAL INFORMATION
GENERAL
The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs incurred in
connection with the solicitation of proxies, including any additional
solicitation made by letter, telephone or telegraph, will be paid by Scudder. In
addition to solicitation by mail, certain officers and representatives of the
Fund, officers and employees of Scudder and certain financial services firms and
their representatives, who will receive no extra compensation for their
services, may solicit proxies by telephone, telegram or personally.
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies. As the Special Meeting date approaches, certain
stockholders of the Fund may receive a telephone call from a representative of
SCC if their vote has not yet been received. Authorization to permit SCC to
execute proxies may be obtained by telephonic or electronically transmitted
instructions from stockholders of the Fund. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below. The Directors believe that these procedures are reasonably designed to
ensure that the identity of the stockholder casting the vote is accurately
determined and that the voting instructions of the stockholder are accurately
determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each stockholder's full name, address, social security or
employer identification number, title (if the stockholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned
and
27
<PAGE> 37
to confirm that the stockholder has received the proxy statement card in the
mail. If the information solicited agrees with the information provided to SCC,
then the SCC representative has the responsibility to explain the process, read
the proposals listed on the proxy card, and ask for the stockholder's
instructions on each proposal. The SCC representative, although he or she is
permitted to answer questions about the process, is not permitted to recommend
to the stockholder how to vote, other than to read any recommendation set forth
in the proxy statement. SCC will record the stockholder's instructions on the
card. Within 72 hours, the stockholder will be sent a letter or mailgram to
confirm his or her vote and asking the stockholder to call SCC immediately if
his or her instructions are not correctly reflected in the confirmation.
If the stockholder wishes to participate in the Special Meeting, but does
not wish to give his or her proxy by telephone, the stockholder may still submit
the proxy card originally sent with the proxy statement or attend in person.
Should stockholders require additional information regarding the proxy or
replacement proxy cards, they may contact SCC toll-free at 1-800-733-8481, ext.
488. Any proxy given by a stockholder, whether in writing or by telephone, is
revocable.
PROPOSALS OF STOCKHOLDERS
Stockholders wishing to submit proposals for inclusion in a proxy statement
for a stockholder meeting subsequent to the Special Meeting, if any, should send
their written proposals to the Secretary of the Fund, 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 meeting. The timely submission of a
proposal does not guarantee its inclusion.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
The Board of Directors is not aware of any matters that will be presented
for action at the Special Meeting other than the matters set forth herein.
Should any other matters requiring a vote of stockholders arise, the proxy in
the accompanying form will confer upon the person or persons entitled to vote
the shares represented by such proxy the discretionary authority to vote the
shares as to any such other matters in accordance with their best judgment in
the interest of the Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) PROMPTLY. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
/s/ KATHRYN L. QUIRK
Kathryn L. Quirk
Assistant Secretary
28
<PAGE> 38
EXHIBIT A
THE JAPAN FUND, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
, 199
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
INVESTMENT MANAGEMENT AGREEMENT
Ladies and Gentlemen:
The Japan Fund, Inc. (the "Corporation") has been established as a Maryland
corporation to engage in the business of an investment company. Pursuant to the
Corporation's Articles of Incorporation, as amended from time-to-time (the
"Articles"), the Board of Directors may divide the Corporation's shares of
capital stock, par value $.33 1/3 per share, (the "Shares") into separate
series, or funds. Series may be abolished and dissolved, and additional series
established, from time to time by action of the Directors.
The Corporation, on behalf of the Fund, has selected you to act as the sole
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 Corporation on behalf of the
Fund agrees with you as follows:
1. Delivery of Documents. The Corporation 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") relating to the Fund
included in the Corporation's Registration Statement on Form N-1A, as
amended from time to time, (the "Registration Statement") filed by the
Corporation 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 Corporation. The Corporation has also furnished you with copies
properly certified or authenticated of each of the following additional
documents related to the Corporation and the Fund:
(a) The Articles dated , 19 , as amended to date.
(b) By-Laws of the Corporation as in effect on the date hereof (the
"By-Laws").
A-1
<PAGE> 39
(c) Resolutions of the Directors of the Corporation and the
shareholders of the Fund selecting you as investment manager and
approving the form of this Agreement.
The Corporation 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 Corporation'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
Corporation or counsel to you. You shall also make available to the
Corporation promptly upon request all of the Fund's investment records and
ledgers as are necessary to assist the Corporation in complying 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 Corporation 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.
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 Corporation'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
A-2
<PAGE> 40
additional reports and information as the Corporation's officers or Board
of Directors shall reasonably request.
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 in the United
States 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 Corporation
administrative services on behalf of the Fund necessary for operating as an
open-end 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 Corporation'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,
accounting agents, custodians, depositories, transfer agents 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 and the calculation of net
asset value; monitoring the registration of Shares of the Fund 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 an authorized
person; 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, the
custodian, and the accounting agent with such information as is required
for such parties to effect the payment of dividends and distributions; and
otherwise assisting the Corporation as it may reasonably request in the
conduct of the Fund's
A-3
<PAGE> 41
business, subject to the direction and control of the Corporation'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 executive employees of the
Corporation (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 Corporation, 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: 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 Corporation;
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 accounting agent, 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 Corporation business) of Directors, officers and employees of
the Corporation 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;
A-4
<PAGE> 42
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 Corporation; costs of
shareholders' and other meetings; and travel expenses (or an appropriate
portion thereof) of Directors and officers of the Corporation 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
Corporation 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 Corporation on behalf of the Fund
shall have adopted a plan in conformity with Rule 12b-1 under the 1940 Act
providing that the Fund (or some other party) shall assume 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 Corporation on behalf of the Fund shall pay you in United
States Dollars on the last day of each month the unpaid balance of a fee
equal to the excess of (a) 1/12 of 0.85 of 1 percent of the average daily
net assets as defined below of the Fund for such month; provided that, for
any calendar month during which the average of such values exceeds
$100,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $100,000,000 shall be 1/12 of 0.75 of 1
percent of such portion; and provided that, for any calendar month during
which the average of such values exceeds $300,000,000, the fee payable for
that month based on the portion of the average of such values in excess of
$300,000,000 shall be 1/12 of 0.70 of 1 percent of such portion; and
provided that, for any calendar month during which the average of such
values exceeds $600,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $600,000,000 shall be
1/12 of 0.65 of 1 percent of such portion; over any compensation waived by
you from time to time (as more fully described below). You shall be
entitled to receive during any month such interim payments of your fee
hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund
and unpaid.
A-5
<PAGE> 43
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 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 Corporation.
7. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Corporation
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 Corporation, the Fund or its shareholders
to
A-6
<PAGE> 44
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 September 30, 19 , 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 Corporation, 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 and
any applicable SEC exemptive order therefrom.
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 Corporation's Board of
Directors on 60 days' written notice to you, or by you on 60 days' written
notice to the Corporation. 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 and any applicable
SEC exemptive order therefrom.
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.
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.
A-7
<PAGE> 45
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 Corporation on behalf of 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 Corporation, whereupon this letter shall become a binding
contract effective as of the date of this Agreement.
Yours very truly,
THE JAPAN FUND, INC.
By:
---------------------------------------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
-------------------------------------------------------------------
Managing Director
A-8
<PAGE> 46
EXHIBIT B
INVESTMENT OBJECTIVES AND ADVISORY FEES
FOR EQUITY FUNDS ADVISED BY SCUDDER, STEVENS & CLARK, INC.
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
ASSET ALLOCATION
Scudder Pathway Balanced Balance of growth and income by There will be no $ 167,721,722***
Portfolio investing in a mix of Scudder fee as the Manager
money market, bond and equity will receive a fee
mutual funds. from the underlying
funds.
Scudder Pathway Growth Long-term growth of capital by There will be no $ 42,234,535***
Portfolio investing predominantly in fee as the Manager
Scudder equity mutual funds will receive a fee
designed to provide long-term from the underlying
growth. funds.
Scudder Pathway Maximize total return by There will be no $ 8,983,598***
International Portfolio investing in a select mix of fee as the Manager
established international and will receive a fee
global Scudder Funds. from the underlying
funds.
U.S. GROWTH AND INCOME
Scudder Balanced Fund A balance of growth and income 0.700% of $ 109,541,542
from a diversified portfolio of net assets+
equity and fixed income
securities and long-term
preservation of capital through a
quality oriented investment
approach designed to reduce risk.
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise indicated.
*** Assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>
B-1
<PAGE> 47
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder Growth and Income Long-term growth of capital, 0.600% to $4,186,481,205
Fund current income and growth of $500 million
income primarily from common 0.550% next
stocks, preferred stocks and $500 million
securities convertible into 0.500% next
common stocks. $500 million
0.475% next
$500 million
0.450% next
$1 billion
0.425% next
$1.5 billion
0.405% thereafter
U.S. GROWTH
Scudder Large Company Value Maximize long-term capital 0.750% to $1,651,459,797
Fund (formerly Scudder appreciation through a value $500 million
Capital Growth Fund) driven investment program 0.650% next
emphasizing common stocks and $500 million
preferred stocks. 0.600% next
$500 million
0.550% thereafter
Scudder Value Fund Long-term growth of capital 0.700% of $ 88,874,292
through investment in undervalued net assets
equity securities.
Scudder Small Company Value Long-term growth of capital by 0.750% of $ 41,187,186
Fund investing primarily in net assets+
undervalued equity securities of
small U.S. companies.
Scudder Micro Cap Fund Long-term growth of capital by 0.750% of $ 72,048,339***
investing primarily in a net assets+
diversified portfolio of U.S.
micro-cap common stocks.
Scudder Classic Growth Fund Long-term growth of capital while 0.700% of $ 33,867,066
keeping the value of its shares net assets+
more stable than other growth
mutual funds.
Scudder Large Company Growth Long-term growth of capital 0.700% of $ 221,253,633
Fund (formerly Scudder through investment primarily in net assets
Quality Growth Fund) the equity securities of
seasoned, financially strong U.S.
growth companies.
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise indicated.
*** Assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>
B-2
<PAGE> 48
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder Development Fund Long-term growth of capital by 1.000% to $ 861,564,138
investing primarily in equity $500 million
securities of emerging growth 0.950% next
companies. $500 million
0.900% thereafter
Scudder 21st Century Growth Long-term growth of capital by 1.000% of $ 20,942,531***
Fund investing primarily in the net assets+
securities of emerging growth
companies poised to be leaders in
the 21st century.
GLOBAL GROWTH
Scudder Global Fund Long-term growth of capital 1.000% to $1,604,465,769
through investment in a $500 million
diversified portfolio of 0.950% next
marketable foreign and domestic $500 million
securities, primarily equity 0.900% thereafter
securities.
Institutional International Long-term growth of capital 0.900% of $ 17,897,508
Equity Portfolio primarily through a diversified net assets+
portfolio of marketable foreign
equity securities.
Scudder International Growth Long-term growth of capital and 1.000% of $ 25,631,898***
and Income Fund current income primarily from net assets+
foreign equity securities
Scudder International Fund Long-term growth of capital 0.900% to $2,583,030,686
primarily through a diversified $500 million
portfolio of marketable foreign 0.850% next
equity securities. $500 million
0.800% next
$1 billion
0.750% next
$1 billion
0.700% thereafter
Scudder Global Discovery Above-average capital 1.100% of $ 350,829,980
Fund appreciation over the long-term net assets
by investing primarily in the
equity securities of small
companies located throughout the
world.
Scudder Emerging Markets Long-term growth of capital 1.25% of $ 75,793,693
Growth Fund primarily through equity net assets+
investments in emerging markets
around the globe.
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise indicated.
*** Assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>
B-3
<PAGE> 49
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder Gold Fund Maximum return consistent with 1.000% of $ 163,932,814
investing in a portfolio of gold- net assets
related equity securities and
gold.
Scudder Greater Europe Long-term growth of capital 1.000% of $ 120,300,058
Growth Fund through investment primarily in net assets
the equity securities of European
companies.
Scudder Pacific Long-term growth of capital 1.100% of $ 329,391,540
Opportunities Fund primarily through investment in net assets
the equity securities of Pacific
Basin companies, excluding Japan.
Scudder Latin America Fund Long-term capital appreciation Effective 9/11/97: $ 621,914,690
through investment primarily in 1.250% to
the securities of Latin American $1 billion
issuers. 1.150% thereafter
The Japan Fund, Inc. Long-term capital appreciation 0.850% to $ 385,963,962
through investment primarily in $100 million
equity securities of Japanese 0.750% next
companies. $200 million
0.700% next
$300 million
0.650% thereafter
CLOSED-END FUNDS
The Argentina Fund, Inc. Long-term capital appreciation Adviser: $ 117,596,046
through investment primarily in Effective 11/1/97:
equity securities of Argentine 1.100% of
issuers. net assets
Sub-Adviser:
Paid by Adviser.
0.160% of
net assets
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise indicated.
</TABLE>
B-4
<PAGE> 50
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
The Brazil Fund, Inc. Long-term capital appreciation 1.200% to $ 417,981,869
through investment primarily in $150 million
equity securities of Brazilian 1.050% next
issuers. $150 million
1.000% thereafter
Effective 10/29/97:
1.200% to
$150 million
1.050% next
$150 million
1.000% next
$200 million
0.900% thereafter
Administrator:
Receives an annual
fee of $50,000
The Korea Fund, Inc. Long-term capital appreciation Adviser: $ 661,690,073
through investment primarily in 1.150% to
equity securities of Korean $50 million
companies. 1.100% next
$50 million
1.000% next
$250 million
0.950% next
$400 million
0.900% thereafter
Sub-Adviser -
Daewoo:
Paid by Adviser.
0.2875% to
$50 million
0.275% next
$50 million
0.250% next
$250 million
0.2375% next
$400 million
0.225% thereafter
Scudder New Asia Fund, Inc. Long-term capital appreciation 1.250% to $ 133,363,686
through investment primarily in $75 million
equity securities of Asian 1.150% next
companies. $125 million
1.100% thereafter
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise indicated.
</TABLE>
B-5
<PAGE> 51
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder New Europe Fund, Long-term capital appreciation 1.250% to $ 266,418,730
Inc. through investment primarily in $75 million
equity securities of companies 1.150% next
traded on smaller or emerging $125 million
European markets and companies 1.100% thereafter
that are viewed as likely to
benefit from changes and
developments throughout Europe.
Scudder Spain and Portugal Long-term capital appreciation Adviser: $ 75,127,194
Fund, Inc. through investment primarily in 1.000% of
equity securities of Spanish & net assets
Portuguese issuers. Administrator:
0.200% of
net assets
INSURANCE PRODUCTS
Balanced Portfolio Balance of growth and income 0.475% of $ 88,342,837
consistent with long-term net assets
preservation of capital through a
diversified portfolio of equity
and fixed income securities.
Capital Growth Portfolio Long-term capital growth from a 0.475% to $ 440,481,308
portfolio consisting primarily of $500 million
equity securities. 0.450% thereafter
Global Discovery Portfolio Above-average capital 0.975% of $ 16,757,264
appreciation over the long-term net assets+
by investing primarily in the
equity securities of small
companies located throughout the
world.
Growth and Income Portfolio Long-term growth of capital, 0.475% of $ 91,091,547
current income and growth of net assets
income.
International Portfolio Long-term growth of capital 0.875% to $ 726,038,527
primarily through diversified $500 million
holdings of marketable foreign 0.775% thereafter
equity investments.
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>
B-6
<PAGE> 52
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
AARP FUNDS
AARP Balanced Stock and Bond Long-term growth of capital and 0.350% to $ 403,179,939
Fund income, consistent with a stable $2 billion
share price, through investment 0.330% next
in a combination of stocks, bonds $2 billion
and cash reserves. 0.300% next
$2 billion
0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.190% of
net assets
AARP Capital Growth Fund Long-term capital growth, 0.350% to $ 826,136,713
consistent with a share price $2 billion
more stable than other capital 0.330% next
growth funds through investment $2 billion
primarily in common stocks and 0.300% next
securities convertible into $2 billion
common stocks. 0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.320% of
net assets
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise indicated.
</TABLE>
B-7
<PAGE> 53
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
AARP Global Growth Fund Long-term growth of capital, 0.350% to $ 77,651,978
consistent with a share price $2 billion
more stable than other global 0.330% next
equity funds through investment $2 billion
primarily in a diversified 0.300% next
portfolio of equity securities of $2 billion
corporations worldwide. 0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND FEE
0.550% of
net assets
AARP Growth and Income Fund Long-term growth of capital and 0.350% to $4,218,983,398
income, consistent with a stable $2 billion
share price, through investment 0.330% next
primarily in common stocks and $2 billion
securities convertible into 0.300% next
common stocks. $2 billion
0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240%
thereafter
INDIVIDUAL FUND FEE
0.190% of
net assets
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>
B-8
<PAGE> 54
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
AARP International Stock Long-term growth of capital, 0.350% to $ 12,699,109***
Fund consistent with a share price $2 billion
more stable than other 0.330% next
international equity funds, $2 billion
through investment primarily a 0.300% next
diversified Portfolio of in $2 billion
foreign equity securities. 0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter+
INDIVIDUAL FUND FEE
0.600% of
net assets
AARP Small Company Stock Long-term growth of capital, 0.350% to $ 25,425,137***
Fund consistent with a share price $2 billion
more stable than other small 0.330% next
company stock funds, through $2 billion
investment primarily in stocks of 0.300% next
small U.S. companies. $2 billion
0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND FEE
0.550% of
net assets
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise indicated.
*** Assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>
B-9
<PAGE> 55
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
AARP U.S. Stock Index Fund Long-term growth of capital, 0.350% to $ 23,917,674***
consistent with greater share $2 billion
price stability than a S&P 500 0.330% next
index fund, by taking an indexing $2 billion
approach to investing in common 0.300% next
stocks, emphasizing higher $2 billion
dividend stocks while maintaining 0.280% next
investment characteristics $2 billion
otherwise similar to the S&P 500 0.260% next
index. $3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND FEE
0.000% of
net assets
AARP Diversified Growth Long-term growth of capital There will be no $ 36,411,938***
Portfolio through investment primarily in fee as the manager
AARP stock mutual funds. will receive a fee
from the underlying
funds.
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise indicated.
*** Assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>
B-10
<PAGE> 56
EXHIBIT C
PROPOSED FUNDAMENTAL INVESTMENT POLICIES
THE JAPAN FUND, INC.
4.1 The Fund has elected to be classified as a diversified open-end
investment company.
In addition, as a matter of fundamental policy, the Fund will not:
4.2 borrow money, except as permitted under the Investment Company Act
of 1940, as amended and interpreted by regulatory authority having
jurisdiction from time to time;
4.3 issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended and interpreted by regulatory authority
having jurisdiction from time to time;
4.4 concentrate its investments in a particular industry, as that term
is used in the Investment Company Act of 1940, as amended and interpreted
by regulatory authority having jurisdiction from time to time;
4.5 engage in the business of underwriting securities issued by
others, except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio securities;
4.6 purchase or sell real estate, which term does not include
securities of companies which deal in real estate or mortgages or
investments secured by real estate or interests therein, except that the
Fund reserves freedom of action to hold and to sell real estate acquired as
a result of the Fund's ownership of securities;
4.7 purchase physical commodities or contracts relating to physical
commodities; or
4.8 make loans to other persons, except (i) loans of portfolio
securities, and (ii) to the extent that entry into repurchase agreements
and the purchase of debt instruments or interests in indebtedness in
accordance with the Fund's investment objective and policies may be deemed
to be loans.
C-1
<PAGE> 57
EXHIBIT D
CURRENT FUNDAMENTAL INVESTMENT POLICIES
THE JAPAN FUND, INC.
The Fund may not, without the approval of holders of a majority of its
outstanding voting securities (as defined by the 1940 Act):
(1) With respect to 75% of its total assets taken at market value,
purchase more than 10% of the outstanding voting securities of any one
issuer, or invest more than 5% of the value of its total assets in the
securities of any one issuer, except obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and except
securities of other investment companies;
(2) Borrow money except as a temporary measure for extraordinary or
emergency purposes or except in connection with reverse repurchase
agreements provided that the Fund maintains asset coverage of 300% for all
borrowings;
(3) Purchase or sell real estate (except that the Fund may invest in
(i) securities of companies which deal in real estate or mortgages, and
(ii) securities secured by real estate or interests therein, and that the
Fund reserves freedom of action to hold and to sell real estate acquired as
a result of the Fund's ownership of securities).
(4) Purchase or sell physical commodities or contracts relating to
physical commodities;
(5) Act as an underwriter of securities issued by others, except to
the extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund;
(6) Make loans to other persons, except (a) loans of portfolio
securities, and (b) to the extent the entry into repurchase agreements and
the purchase of debt securities in accordance with its investment objective
and investment policies may be deemed to be loans; and
In addition, the Fund's Articles of Incorporation, which can be amended
only with the approval of holders of a majority of its outstanding stock, do not
authorize the issuance of senior securities or debt securities other than
securities to evidence borrowings as permitted by investment restriction (c)
above.
It is also the Fund's policy not to concentrate its investments in
particular industries and not in any event to invest more than 25% of its total
assets in any one industry. An exception to this policy in the case of rights
offerings of Japanese corporations permits the Fund to purchase the securities
of any issuer pursuant to the exercise of rights distributed to the Fund by the
issuer, even though after such purchase more than 25% of the total assets of the
Fund would be invested in securities of issuers in the same industry, with the
limitation that no such purchase may be made if as a result the Fund would no
longer be a diversified investment company as defined by the 1940 Act.
D-1
<PAGE> 58
PROXY THE JAPAN FUND, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS -- OCTOBER 16, 1997
The undersigned hereby appoints [ ], [ ] and [ ] and each of
them, the proxies of the undersigned, with the power of substitution to each of
them, to vote all shares of the Fund which the undersigned is entitled to vote
at the Special Meeting of Stockholders of the Fund to be held at the offices of
Scudder, Stevens & Clark, Inc., Two International Place, Boston Massachusetts
02110, on October 16, 1997 at 10:00 a.m., eastern time, and at any adjournments
thereof.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR EACH NUMBERED ITEM LISTED BELOW.
The Board members of your Fund, including those who are not affiliated with
the Fund or Scudder, recommend that you vote FOR each item.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. The election of Directors;
<TABLE>
<S> <C> <C> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD
(except as marked to the contrary AUTHORITY to
below) vote
for all
nominees
listed below
</TABLE>
Nominees: William L. Givens, William H. Gleysteen, Jr., John F. Loughran,
Yoshihiko Miyauchi, William V. Rapp, Henry Rosovsky, O. Robert Theurkauf, and
Hiroshi Yamanaka.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
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(continued on other side)
<PAGE> 59
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve changes to certain of the fundamental investment policies and
restrictions.
<TABLE>
<S> <C>
4.1 diversification; 4.5 underwriting of securities;
4.2 borrowing; 4.6 investment in real estate;
4.3 senior securities; 4.7 commodities;
4.4 concentration; 4.8 loans.
</TABLE>
TO VOTE AGAINST OR ABSTAIN WITH RESPECT TO A PARTICULAR PROPOSED CHANGE, REFER
TO THE PROXY STATEMENT FOR THE CHANGES AND WRITE THE NUMBER OF THE
SUB-PROPOSAL ON THE LINE BELOW.
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5. Ratification of the selection of Price Waterhouse L.L.P. as the Fund's
independent accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
Please sign exactly as your name or names
appear. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title as
such.
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(Signature of Stockholder)
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(Signature of joint owner, if any)
Dated , 1997
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PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
