<PAGE> 1
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 Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
THE JAPAN FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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
November 4, 1998
THE JAPAN FUND, INC.
IMPORTANT NEWS
FOR STOCKHOLDERS
LOGO
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 that will
be the subject of a stockholder vote.
Q & A: QUESTIONS AND ANSWERS
Q. WHAT IS HAPPENING?
A. Zurich Insurance Company ("Zurich"), which is the majority owner of your
Fund's investment manager, Scudder Kemper Investments, Inc. ("Scudder
Kemper"), has combined its businesses with the financial services businesses
of B.A.T Industries p.l.c. ("B.A.T"). The resulting company, Zurich
Financial Services ("Zurich Financial Services"), has become Zurich's parent
company. Although this transaction will have virtually no effect on the
operations of Scudder Kemper or your Fund, we are asking the Fund's
stockholders to approve a new investment management agreement to assure that
there is no interruption in the services Scudder Kemper provides to your
Fund. The following pages give you additional information about Zurich
Financial Services, the new investment management agreement and certain
other matters. THE BOARD MEMBERS OF YOUR FUND, INCLUDING THOSE WHO ARE NOT
AFFILIATED WITH THE FUND, SCUDDER KEMPER OR ZURICH, RECOMMEND THAT YOU VOTE
FOR APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENT.
Q. WHY AM I BEING ASKED TO VOTE ON THE NEW INVESTMENT MANAGEMENT AGREEMENT?
A. As a result of the Zurich-B.A.T transaction, the former shareholders of
B.A.T indirectly own a 43% interest in Zurich through a new holding company,
Allied Zurich p.l.c. This change in ownership of Zurich may be deemed to
have caused a "change in control" of Scudder Kemper, even though Scudder
Kemper's operations will not change as a result. The Investment Company Act
of 1940, which regulates investment companies such as your Fund, requires
that fund stockholders approve a new investment management agreement
whenever there is a change in control of a fund's investment manager (even
in the most technical sense). Pursuant to an exemptive order issued by the
Securities and Exchange Commission, your Fund entered into a new investment
management agreement, subject to receipt of stockholder approval within 150
days. Accordingly, we are
<PAGE> 3
seeking stockholder approval of the new investment management agreement with
your Fund.
Q. HOW WILL THE ZURICH-B.A.T TRANSACTION AFFECT ME AS A FUND STOCKHOLDER?
A. We do not expect the transaction to affect you as a Fund stockholder. Your
Fund and your Fund's investment objectives will not change as a result of
the transaction. You will still own the same shares in the same Fund. The
new investment management agreement is substantially identical to the former
investment management agreement, except for the dates of execution and
termination. Similarly, the other service arrangements between your Fund and
Scudder Kemper or affiliates of Scudder Kemper will not be affected by the
transaction. If stockholders do not approve the new investment management
agreement, the agreement will terminate and the Board Members of your Fund
will take such action as they deem to be in the best interests of your Fund
and its stockholders.
Q. WILL THE INVESTMENT MANAGEMENT FEES INCREASE?
A. No, the investment management fee rates paid by your Fund will remain the
same.
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 for the election of Directors of your Fund and for the
ratification of the Board's selection of the Fund's accountants. In
addition, a vote is being sought for a revision of your Fund's fundamental
lending policy to give the Board of your Fund discretionary authority to
permit your Fund to enter into interfund lending arrangements, subject to
Securities and Exchange Commission approval.
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, Scudder Kemper or Zurich, recommend
that you vote FOR the Proposals on the enclosed proxy card(s).
Q. WILL THE FUND PAY FOR THIS PROXY SOLICITATION?
A. No, Zurich or its affiliates will bear these costs.
Q. WHOM DO I CALL FOR MORE INFORMATION?
A. Please call Shareholder Communications Corporation, your Fund's information
agent, at 1-800-248-2681.
<PAGE> 4
THE JAPAN FUND, INC.
345 Park Avenue
New York, New York 10154
November 4, 1998
Dear Stockholders:
Zurich Insurance Company, the majority owner of Scudder Kemper Investments,
Inc., has combined its businesses with the financial services businesses of
B.A.T Industries p.l.c. The resulting company, Zurich Financial Services, has
become the parent company of Zurich and the majority owner of Scudder Kemper. As
a result of this transaction, we are asking the stockholders of the funds for
which Scudder Kemper acts as investment manager, including your Fund, to approve
a new investment management agreement with Scudder Kemper.
The Zurich-B.A.T transaction should not affect you as a Fund stockholder.
Your Fund shares will not change, the advisory fee rates and expenses paid by
your Fund will not increase, the investment objectives of your Fund will remain
the same, and, as is now the case, you will not pay sales loads on purchases of
shares of your Fund.
Stockholders are also being asked to approve certain other matters that
have been set forth in the Notice of Meeting. AFTER CAREFUL REVIEW, THE MEMBERS
OF YOUR FUND'S BOARD HAVE APPROVED THE NEW INVESTMENT MANAGEMENT AGREEMENT. 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.
Because all of the funds for which Scudder Kemper acts as investment
manager are holding shareholder 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
<PAGE> 5
may receive a telephone call from our proxy solicitor, Shareholder
Communications Corporation, reminding you to vote.
Respectfully,
<TABLE>
<S> <C>
Birdsong signature Rosovsky signature
Lynn S. Birdsong Henry Rosovsky
President Chairman of the Board
</TABLE>
WE URGE YOU TO SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT REGARDLESS OF
THE NUMBER OF SHARES YOU OWN.
<PAGE> 6
THE JAPAN FUND, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Please take notice that a Special Meeting of Stockholders (the "Special
Meeting") of The Japan Fund, Inc. (the "Fund") will be held at the offices of
Scudder Kemper Investments, Inc., 13th Floor, Two International Place, Boston,
Massachusetts 02110, on December 11, 1998, at 9:30 a.m., Eastern time, for the
following purposes:
PROPOSAL 1: To elect Directors of the Fund;
PROPOSAL 2: To approve a new investment management agreement for the
Fund with Scudder Kemper Investments, Inc.;
PROPOSAL 3: To approve the revision of the Fund's fundamental lending
policy; and
PROPOSAL 4: To ratify the selection of PricewaterhouseCoopers LLP as
the independent accountants for the Fund for the Fund's
current fiscal year.
The appointed proxies will vote in their discretion on any other business
as may properly come before the Special Meeting or any adjournments thereof.
Holders of record of shares of the Fund at the close of business on October
19, 1998 are entitled to vote at the Special Meeting and at any adjournments
thereof.
In the event that the necessary quorum to transact business or the vote
required to approve a 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. Any such adjournment as to a matter will require the affirmative vote
of the holders of a majority of the Fund's shares present in person or by proxy
at the Special Meeting. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of the
<PAGE> 7
Proposals and will vote against any such adjournment those proxies to be voted
against the Proposals.
By Order of the Board of Directors,
KATHRYN L. QUIRK SIGNATURE
Kathryn L. Quirk
Secretary
November 4, 1998
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> 8
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 Kemper Investments, Inc. ("Scudder Kemper"), 13th Floor, Two
International Place, Boston, Massachusetts 02110, on December 11, 1998 at 9:30
a.m., Eastern time, and at any and all adjournments thereof (the "Special
Meeting").
In the descriptions of the Proposals below, the word "fund" is sometimes
used to mean investment companies 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 November 4, 1998 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 Kemper Investments, Inc., at 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, in favor of the Proposals 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 of the Fund entitled to be cast 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 any Proposal is not obtained at the Special Meeting with respect to
the Fund, 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 the Proposal that did not receive the
vote necessary for its passage or to obtain a quorum. Any such adjournment as to
a matter will require the affirmative vote of the holders of a majority of the
Fund's shares present in person or by proxy at the Special Meeting. The persons
named as proxies will vote in favor of such adjournment those proxies which they
are entitled to vote in favor of that Proposal 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
<PAGE> 9
by the Fund from brokers or nominees when the broker or 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
shares of the Fund voting at the Special Meeting. Proposals 2 and 3 each
requires the affirmative vote of a "majority of the outstanding voting
securities" of the Fund. The term "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 voting securities of the Fund are
present in person or by proxy or (2) more than 50% of the outstanding voting
securities of the Fund.
Abstentions will have the effect of a "no" vote on each Proposal. Broker
non-votes will have the effect of a "no" vote on each of Proposals 2 and 3, each
of which requires the approval of a specified percentage of the outstanding
shares of the Fund, if such vote is determined on the basis of obtaining the
affirmative vote of more than 50% of the outstanding voting securities 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 each of Proposals 2
and 3. Broker non-votes will not be counted in favor of, but will have no other
effect on, the vote for Proposals 1 and 4, each of which requires the approval
of a majority of the shares of the Fund voting at the Special Meeting.
Holders of record of the shares of the Fund at the close of business on
October 19, 1998 (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. As of June 30, 1998, there were 41,843,948.368 shares of common
stock of the Fund outstanding.
The Fund provides periodic reports to all of its 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 Kemper
Investments, Inc., at 345 Park Avenue, New York, New York 10154.
PROPOSAL 1: ELECTION OF DIRECTORS FOR THE FUND
At the Special Meeting, eleven 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: Peter Booth,
William L. Givens, William H. Gleysteen, Jr., Thomas M. Hout, John F. Loughran,
Yoshihiko Miyauchi, William V. Rapp, Henry Rosovsky, Takeo Shiina, O. Robert
2
<PAGE> 10
Theurkauf and Hiroshi Yamanaka. 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 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.
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 EMPLOYMENT***
NAME (AGE) AND DIRECTORSHIPS
---------- -------------------------------------
<S> <C>
Peter Booth (58) Director (1998). Senior Vice President,
Corning Inc.
William L. Givens (69) Director (1978). President, Twain
Associates.
William H. Gleysteen, Jr. (72) 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 Kemper.
Thomas M. Hout (56) Director (1998). Vice President and
Director, Boston Consulting Group.
John F. Loughran (66) 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.
</TABLE>
3
<PAGE> 11
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND,
(DATE NOMINEE BECAME DIRECTOR)
PRINCIPAL OCCUPATION OR EMPLOYMENT***
NAME (AGE) AND DIRECTORSHIPS
---------- -------------------------------------
<S> <C>
Yoshihiko Miyauchi (63) 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.
William V. Rapp (59) 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 (71)** Chairman of the Board and Director (1979).
Geysor University, Professor Emeritus,
Harvard University; Director, PaineWebber
Group; Director, Corning, Inc.
Takeo Shiina (69) Director (1998). Chairman, President and
CEO, IBM Japan, Ltd.
O. Robert Theurkauf (70)* Director (1991). Advisory Managing
Director, Scudder Kemper Investments, Inc.
Hiroshi Yamanaka (85) Director (1962). Advisor to the Board of
Meji 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>
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* 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.
*** Unless otherwise stated, all the Directors of the Fund have been associated
with their respective companies for more than five years, but not
necessarily in the same capacity.
4
<PAGE> 12
To the best of the Fund's knowledge, as of June 30, 1998, no person owned
beneficially more than 5% of the Fund's outstanding shares, except that:
As of June 30, 1998, 5,647,602 shares in the aggregate, 13.49% 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.
Appendix 1 hereto sets forth the number of shares of the Fund owned
directly or beneficially by the Directors of the Board and by the President of
the Fund.
RESPONSIBILITIES OF THE BOARD -- BOARD AND COMMITTEE MEETINGS
The Board is responsible for the general oversight of Fund business. A
majority of the Board's members are not affiliated with Scudder Kemper. 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 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 Messrs. Booth,
Givens, Gleysteen, Hout, Loughran, Miyauchi, Rapp and Shiina. 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.
5
<PAGE> 13
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.
The Board met six times and the Audit Committee met once during the 1997
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 Mr. Miyauchi, who
attended 43% of those meetings.
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.
Allan Comrie, Jonathan Mason, James W. Morley, Robert G. Stone, Jr. and
Shoji Umemura currently serve as Honorary Directors of the Fund. 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.
6
<PAGE> 14
OFFICERS
The following persons are 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 (52) President; Managing Director of 1996
Scudder Kemper Investments, Inc.
Elizabeth J. Allan (45) Vice President; Senior Vice 1991
President of Scudder Kemper
Investments, Inc.
John R. Hebble(40) Assistant Treasurer; Senior Vice 1998
President of Scudder Kemper
Investments, Inc.
William E. Holzer (49) Vice President; Managing 1987
Director of Scudder Kemper
Investments, Inc.
Thomas W. Joseph (59) Vice President; Senior Vice 1987
President of Scudder Kemper
Investments, Inc.
Seung K. Kwak (37) Vice President; Managing 1994
Director of Scudder Kemper
Investments, Inc.
Thomas F. McDonough (51) Assistant Secretary; Senior Vice 1992
President of Scudder Kemper
Investments, Inc.
Gina Provenzano (56) Vice President and Treasurer; 1978
Senior Associate of Scudder
Kemper Investments, Inc.
Kathryn L. Quirk (45) Vice President and Secretary; 1991
Managing Director of Scudder
Kemper Investments, Inc.
Miyuki Wakatsuki (62) Vice President; General Manager, 1994
Japan Fund Office, Nikko
International Capital Management
Co., Ltd.
</TABLE>
- ------------------------------
(1) Unless otherwise stated, all of the 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 Director who is not affiliated with Scudder Kemper or
The Nikko Securities Co., Ltd. an annual Director's fee plus specified amounts
for Board and committee meetings attended and compensates him for expenses
related to Fund business. Each such unaffiliated Director receives an annual
Director's fee of $6,000 with the exception of the Chairman of the Board, who
7
<PAGE> 15
receives $16,000 annually. Each Director also receives fees of $1,000 for
attending each meeting of the Board and $750 for attending each committee
meeting, or meeting held for the purpose of considering arrangements between the
Fund and Scudder Kemper, or any of its other affiliates. Each unaffiliated
Director also receives $750 per committee meeting attended. Each Honorary
Director of the Fund receives $1,000 for each Board meeting attended.
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
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.
Scudder Kemper 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 Kemper, Nikko International Capital Management Co., Ltd., a former
sub-adviser to the Fund, or its affiliated broker-dealer, The Nikko Securities
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 Board 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 1997.
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 Kemper (collectively, the "Fund Complex") during the
calendar year 1997.
8
<PAGE> 16
COMPENSATION TABLE
<TABLE>
<CAPTION>
THE JAPAN FUND, INC.
------------------------------ PENSION OR
AGGREGATE AGGREGATE RETIREMENT ESTIMATED
COMPENSATION* COMPENSATION* BENEFITS ACCRUED AS ANNUAL
PAID BY THE PAID BY PART OF FUND BENEFITS UPON
NAME OF DIRECTOR FUND THE ADVISER(1) EXPENSES RETIREMENT
- ---------------- ------------- -------------- ------------------- -------------
<S> <C> <C> <C> <C>
William L. Givens................ $21,317 $2,000 $4,372 $6,000
William H. Gleysteen, Jr......... $14,750 $2,000 $5,498 $3,000
John F. Loughran................. $11,750 $2,000 $4,724 $6,000
Yoshihiko Miyauchi............... $12,250 $1,000 $2,149 $6,000
William V. Rapp.................. $15,500 $1,000 $2,499 $6,000
Henry Rosovsky................... $26,250 $2,000 $2,776 $6,000
Hiroshi Yamanaka................. $ 7,750 $ 0 $7,803 $6,000
Allan Comrie, Honorary
Director....................... $ 5,196 $ 0 $4,789 $5,196
Jonathan Mason, Honorary
Director....................... $ 6,000 $ 0 $6,703 $6,000
James W. Morley, Honorary
Director....................... $ 6,000 $ 0 $5,988 $6,000
Robert G. Stone, Jr., Honorary
Director....................... $ 8,000 $ 0 $6,026 $6,000
<CAPTION>
ALL SCUDDER FUNDS**
---------------------------------------
NAME OF DIRECTOR PAID BY THE FUNDS PAID BY THE ADVISER
- ---------------- ----------------- -------------------
<S> <C> <C>
William L. Givens................ $ 21,317 $ 2,000 (1 fund)
William H. Gleysteen, Jr......... $136,150 $19,850 (14 funds)
John F. Loughran................. $ 11,750 $ 2,000 (1 fund)
Yoshihiko Miyauchi............... $ 12,250 $ 1,000 (1 fund)
William V. Rapp.................. $ 15,500 $ 1,000 (1 fund)
Henry Rosovsky................... $ 26,250 $ 2,000 (1 fund)
Hiroshi Yamanaka................. $ 7,750 $ 0 (1 fund)
Allan Comrie, Honorary
Director....................... $ 5,196 $ 0 (1 fund)
Jonathan Mason, Honorary
Director....................... $ 6,000 $ 0 (1 fund)
James W. Morley, Honorary
Director....................... $ 6,000 $ 0 (1 fund)
Robert G. Stone, Jr., Honorary
Director....................... $ 8,000 $ 0 (1 fund)
</TABLE>
- ---------------
(1) For meetings related to consideration of the Adviser's alliance with Zurich
Insurance Company.
* Includes pension or retirement benefits.
** Includes pension or retirement benefits accrued.
THE BOARD MEMBERS OF THE FUND RECOMMEND THAT THE STOCKHOLDERS OF THE FUND VOTE
IN FAVOR OF THIS PROPOSAL 1.
9
<PAGE> 17
PROPOSAL 2: APPROVAL OF NEW
INVESTMENT MANAGEMENT AGREEMENT
INTRODUCTION
Scudder Kemper acts as the investment manager to the Fund pursuant to an
investment management agreement entered into by the Fund and Scudder Kemper. The
investment management agreement in effect between the Fund and Scudder Kemper
prior to the consummation of the transaction between Zurich Insurance Company
("Zurich") and B.A.T Industries p.l.c. ("B.A.T") (the "Zurich-B.A.T Transaction"
or the "Transaction"), which is described below, is referred to in this Proxy
Statement as the "Former Investment Management Agreement." The investment
management agreement currently in effect between the Fund and Scudder Kemper,
which is also described below, was executed as of the consummation of the
Zurich-B.A.T Transaction and is referred to in this Proxy Statement as the "New
Investment Management Agreement," and, together with the Former Investment
Management Agreement, the "Investment Management Agreements." (Scudder Kemper is
sometimes referred to in this Proxy Statement as the "Investment Manager.")
The information set forth in this Proxy Statement and the accompanying
materials concerning the Transaction, Scudder Kemper, Zurich, B.A.T and their
respective affiliates has been provided to the Fund by Scudder Kemper based upon
information that Scudder Kemper received from Zurich and its affiliates.
On June 26, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") entered into
an agreement with Zurich pursuant to which Scudder and Zurich agreed to form an
alliance. On December 31, 1997, Zurich acquired a majority interest in Scudder,
and Zurich Kemper Investments, Inc. ("Kemper"), a Zurich subsidiary, became part
of Scudder. Scudder's name was changed to Scudder Kemper Investments, Inc. The
transaction between Scudder and Zurich (the "Scudder-Zurich Transaction")
resulted in the termination of the Fund's investment management agreement with
Scudder. Consequently, the Former Investment Management Agreement between the
Fund and Scudder Kemper was approved by the Fund's Board and by the Fund's
stockholders.
The Zurich-B.A.T Transaction. On December 22, 1997, Zurich and B.A.T
entered into a definitive agreement (the "Merger Agreement") pursuant to which
businesses of Zurich (including Zurich's almost 70% ownership interest in
Scudder Kemper) were to be combined with the financial services businesses of
B.A.T. On October 12, 1997, Zurich and B.A.T had confirmed that they were
engaged in discussions concerning a possible business combination; on October
16, 1997, Zurich and B.A.T announced that they had entered into an Agreement in
Principle, dated as of October 15, 1997 (the "Agreement in Principle"), to merge
B.A.T's financial services businesses with Zurich's businesses. The Merger
Agreement superseded the Agreement in Principle.
10
<PAGE> 18
In order to effect this combination, Zurich and B.A.T first reorganized
their respective operations. Zurich became a subsidiary of a new Swiss holding
company, Zurich Allied AG, and Zurich shareholders became Zurich Allied AG
shareholders. At the same time, B.A.T separated its financial services business
from its tobacco-related businesses by spinning off to its shareholders a new
British company, Allied Zurich p.l.c., 22 Arlington Street, London, England SW1A
1RW, United Kingdom, which held B.A.T's financial services businesses.
Zurich Allied AG then contributed its interest in Zurich, and Allied Zurich
p.l.c. contributed the B.A.T financial services businesses, to a jointly owned
company, Zurich Financial Services ("Zurich Financial Services"), in each case
in exchange for shares of Zurich Financial Services. These transactions were
completed on September 7, 1998. As a result, upon the completion of the
Transaction, the former Zurich shareholders became the owners (through Zurich
Allied AG) of 57% of the voting stock of Zurich Financial Services, and former
B.A.T shareholders initially became the owners (through Allied Zurich p.l.c.) of
43% of the voting stock of Zurich Financial Services. Zurich Financial Services
now owns Zurich and the financial services businesses previously owned by B.A.T.
11
<PAGE> 19
Below is a simplified chart showing the corporate structure of Zurich
Financial Services after these transactions:
[FLOWCHART FOR ZURICH FINANCIAL SERVICES]
Corporate Governance. At the closing of the Zurich-B.A.T Transaction, the
parties entered into a Governing Agreement that establishes the corporate
governance structure for Zurich Allied AG, Allied Zurich p.l.c. and Zurich
Financial Services.
The Board of Directors of Zurich Financial Services consists of ten
members, five of whom were initially selected by Zurich and five by B.A.T. Mr.
Rolf Huppi, Zurich's Chairman and Chief Executive Officer, became Chairman and
Chief Executive Officer of Zurich Financial Services. In addition to his vote by
virtue of
12
<PAGE> 20
his position on the Board of Directors, as Chairman, Mr. Huppi will have a tie-
breaking vote on all matters except recommendations of the Audit Committee,
recommendations of the Remuneration Committee in respect of the remuneration of
the Chairman and the CEO, appointment and removal of the Chairman and CEO,
appointments to the Nominations, Audit and Remuneration Committees and
nominations to the Board of Directors not made through the Nominations
Committee.
The Group Management Board of Zurich Financial Services has been given
responsibility by the Board of Directors for the executive management of Zurich
Financial Services and has wide authority for such purpose. Of the 11 initial
members of the Group Management Board, eight were members of the Corporate
Executive Board of Zurich (including Mr. Edmond D. Villani, CEO of Scudder
Kemper, who is responsible for Global Asset Management for Zurich Financial
Services), and three were B.A.T executives.
The Board of Directors of Zurich Allied AG initially consists of 11
members, eight of whom were Zurich directors and three of whom were proposed by
B.A.T. The Board of Directors of Allied Zurich p.l.c. also initially consists of
11 members, eight of whom were B.A.T directors and three of whom were proposed
by Zurich. The parties have agreed that, as soon as possible, the Boards of
Directors of Zurich Financial Services, Zurich Allied AG and Allied Zurich
p.l.c. will have identical membership.
Shareholder resolutions of Zurich Financial Services in general require
approval by at least 58% of all shares outstanding.
The Governing Agreement also contains provisions relating to dividend
equalization and provisions intended to ensure equal treatment of Zurich Allied
AG and Allied Zurich p.l.c. shareholders in the event of a takeover bid for
either company.
The B.A.T financial services businesses, which, since the closing of the
Transaction, are owned by Zurich Financial Services, include: the Farmers Group
of Insurance companies; Eagle Star Reinsurance Company Ltd., UK ("Eagle Star")
(which Zurich Financial Services has agreed to sell to GE Capital); Allied-
Dunbar, one of the leading U.K. unit-linked life insurance and pensions
companies; and Threadneedle Asset Management, which was formed initially to
manage the investment assets of Eagle Star and Allied-Dunbar, and which, at
December 31, 1997, had $58.8 billion under management. Overall, at year-end
1997, the financial services businesses of B.A.T had $79 billion in assets under
management, including $18 billion in third party assets.
Zurich has informed the Fund that the financial services businesses of
B.A.T do not include any of B.A.T's tobacco businesses and that, after careful
review, Zurich has concluded that the tobacco-related liabilities connected with
B.A.T's tobacco business should not adversely affect Zurich or the present
Zurich subsidiaries, including Scudder Kemper.
13
<PAGE> 21
Governance arrangements that were put in place at the time of the
acquisition of Zurich's 70% interest in Scudder Kemper (which are discussed
below under "Investment Manager") remain unaffected by the Transaction. These
arrangements preclude the making of certain major decisions affecting Scudder
Kemper without the approval of Scudder Kemper directors elected by the
non-Zurich shareholders of Scudder Kemper.
Consummation of the Zurich-B.A.T Transaction may be deemed to have
constituted an "assignment," as that term is defined in the 1940 Act, of the
Fund's Former Investment Management Agreement with Scudder Kemper. As required
by the 1940 Act, the Former Investment Management Agreement provided for its
automatic termination in the event of its assignment. Accordingly, a New
Investment Management Agreement between the Fund and Scudder Kemper was approved
by the Board members of the Fund and is now being proposed for approval by
stockholders of the Fund. Scudder Kemper has received an exemptive order from
the Securities and Exchange Commission (the "SEC" or the "Commission")
permitting the Fund to obtain stockholder approval of its New Investment
Management Agreement within 150 days after the consummation of the Transaction,
which occurred on September 7, 1998 (and, consequently, within 150 days after
the termination of its Former Investment Management Agreement), instead of
before the consummation of the Transaction. Pursuant to the exemptive order, the
Fund's investment management fees are being held in escrow until the earlier of
stockholder approval of the Fund's New Investment Management Agreement or the
expiration of the 150 day period. A copy of the form of New Investment
Management Agreement is attached hereto as Exhibit A. THE NEW INVESTMENT
MANAGEMENT AGREEMENT FOR THE FUND IS SUBSTANTIALLY IDENTICAL TO THE FORMER
INVESTMENT MANAGEMENT AGREEMENT, EXCEPT FOR THE DATES OF EXECUTION AND
TERMINATION. In addition, the portfolio managers for the Fund will not change as
a result of the Transaction. The material terms of the Investment Management
Agreements are described under "Description of the Investment Management
Agreements" below.
BOARD'S RECOMMENDATION
On July 9, 1998, the Board of the Fund met and the Board members of the
Fund, including the Directors who are not parties to such agreement or
"interested persons" (as defined in the 1940 Act) (the "Independent Directors")
of any such party, voted to approve the New Investment Management Agreements and
to recommend approval to the stockholders of the Fund.
For information about the Board's deliberations and the reasons for their
recommendation, please see "Board's Evaluation" below.
BOARD'S EVALUATION
The Independent Directors of the Fund have been aware of the proposed
Zurich-B.A.T Transaction since the announcement of the Agreement in Principle
14
<PAGE> 22
on October 16, 1997. The Board members of the Fund were kept informed by Scudder
Kemper of significant subsequent developments regarding the Transaction,
including the execution of the Merger Agreement on December 22, 1997 and the
receipt of necessary regulatory approvals.
In the course of the annual review by the Independent Directors of the
continuance of the investment management agreement between the Fund and Scudder
Kemper, Scudder Kemper furnished the Board members with detailed information
regarding the proposed Transaction, including information provided to the
shareholders of Zurich and B.A.T and information regarding the structure of the
Transaction, the resulting ownership and governance arrangements of Zurich and
the investment management business of B.A.T expected to be acquired by Scudder
Kemper following completion of the Transaction. The Independent Directors had
the opportunity to consider this information with the assistance of their
independent counsel and to ask questions of Scudder Kemper representatives. In
the course of these deliberations, Scudder Kemper advised the Independent
Directors that the proposed Transaction would not have a material effect on the
operations of the Fund or on its stockholders.
During the course of their deliberations, the Independent Directors
considered a variety of factors, including the nature, quality and extent of the
services furnished by Scudder Kemper to the Fund; the necessity of Scudder
Kemper's maintaining and enhancing its ability to retain and attract capable
personnel to serve the Fund; the increased complexity of the securities markets;
the investment record of Scudder Kemper in managing the Fund; Scudder Kemper's
profitability with respect to the Fund and the other investment companies
managed by Scudder Kemper before marketing expenses paid by Scudder Kemper;
possible economies of scale; comparative data as to investment performance,
advisory fees and expense ratios; Scudder Kemper's expenditures in developing
worthwhile and innovative stockholder services for the Fund; improvements in the
quality and scope of the stockholder services provided to the Fund's
stockholders; the advantages and possible disadvantages to the Fund of having an
adviser of the Fund which also serves other investment companies as well as
other accounts; possible benefits to Scudder Kemper from serving as adviser and
from affiliates of Scudder Kemper serving as principal underwriter, transfer
agent and fund accounting agent of 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 Kemper and the continuance of appropriate incentives to assure that
Scudder Kemper will continue to furnish high quality services to the Fund; and
various other factors. The Independent Directors of the Fund considered the
foregoing factors with respect to the Fund.
The Board of the Fund was advised that Zurich intends to rely on Section
15(f) of the 1940 Act, which provides a non-exclusive safe harbor for an
15
<PAGE> 23
investment adviser to an investment company or any of the investment adviser's
affiliated persons (as defined in 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 company's investment adviser or its predecessor
adviser. On or prior to the consummation of the Transaction, the Board was in
compliance with this provision of Section 15(f). Second, an "unfair burden" must
not be imposed upon the investment company as a result of such 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 any such 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 Transaction. Zurich or its affiliates will pay the costs of
preparing and distributing proxy materials to, and of holding the meeting of,
the Fund's stockholders as well as other fees and expenses in connection with
the Transaction, including the fees and expenses of legal counsel and
consultants to the Fund and the Independent Directors.
In addition to the foregoing factors, the Independent Directors gave
careful consideration to the likely impact of the Transaction on the Scudder
Kemper organization. In this regard, the Independent Directors considered, among
other things, the fact that the Transaction does not appear to alter in any
material respect the substantial autonomy afforded to Scudder Kemper executives
over Scudder Kemper's operations, the equity participation and incentives for
many Scudder Kemper employees, or Zurich's strategy for the development of its
asset management business through Scudder Kemper. Based on the foregoing, the
Independent Directors concluded that the Transaction should cause no reduction
in the quality of services provided to the Fund and believe that the Transaction
should enhance Scudder Kemper's capabilities and strengths.
DESCRIPTION OF THE INVESTMENT MANAGEMENT AGREEMENTS
Except as disclosed below, the Former and New Investment Management
Agreements are substantially identical. Under the Investment Management
Agreements, Scudder Kemper provides the Fund with continuing investment
management services. The Investment Manager also determines which securities
should be purchased, held, or sold, and what portion of the Fund's assets should
be held uninvested, subject to the Fund's Charter, By-Laws, investment policies
and restrictions, the provisions of the 1940 Act, and such policies and
instructions as the Directors may have determined.
16
<PAGE> 24
Each 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, and 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 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, custodian, accountants and
others) and other persons in any capacity deemed necessary or desirable to Fund
operations; preparing and making filings with 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 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 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.
Each Investment Management Agreement also provides that the Investment
Manager is not required to pay any expenses of any activity primarily intended
to result in the sale of Fund securities if and to the extent that (i) the
expenses are to be borne by a principal underwriter acting as the distributor;
or (ii) the Fund has adopted a Rule 12b-1 Plan providing for the assumption of
some or all of
17
<PAGE> 25
those expenses. Under each 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 Independent 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 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 and its expenses incurred in connection with litigation 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 advisors 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 each 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, except to the extent that such expenses relate to attendance at
meetings of the Board of the Fund, or any committees thereof or advisers
thereto, held outside Boston, Massachusetts or New York, New York. During the
18
<PAGE> 26
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
manager and the expenses it assumes under each 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, December 31, 1997, the Fund had net assets of
$265,181,931 and paid an aggregate management fee to the Investment Manager
during such period of $2,949,980.
Each 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. Each Investment Management Agreement also
provides 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. Lastly, each Investment Management Agreement
contains a provision stating that it supersedes all prior agreements.
Each Investment Management Agreement may be terminated without penalty upon
sixty (60) days' written notice by either party. The Fund may agree to terminate
its 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. As stated
above, each Investment Management Agreement automatically terminates in the
event of its assignment.
Scudder Kemper or one of its predecessors has acted as the Investment
Manager for the Fund since Scudder succeeded to Asia Management as the Fund's
investment manager in 1993. The Former Investment Management Agreement is dated
December 31, 1997 and was last approved by the stockholders of the Fund on
October 16, 1997. The Former Investment Management Agreement was last submitted
to stockholders prior to its becoming effective, as required by the 1940 Act, in
connection with the Scudder-Zurich Transaction. The New Investment Management
Agreement was last approved by the Directors of the Fund on July 9, 1998 and was
last continued to October 31, 1999.
19
<PAGE> 27
THE NEW INVESTMENT MANAGEMENT AGREEMENT
The New Investment Management Agreement for the Fund, which is currently in
effect, is dated the date of the consummation of the Transaction, which occurred
on September 7, 1998. The New Investment Management Agreement will be in effect
for an initial term ending on October 31, 1999, 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 Independent 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, it will
terminate. In such event, the Board will take such action as it deems to be in
the best interests of the Fund and its stockholders.
DIFFERENCES BETWEEN THE FORMER AND NEW INVESTMENT MANAGEMENT AGREEMENTS
The New Investment Management Agreement is substantially identical to the
Former Investment Management Agreement, except for the dates of execution and
termination.
INVESTMENT MANAGER
Scudder Kemper, an indirect subsidiary of Zurich which resulted from the
combination of the businesses of Scudder and Kemper in connection with the
Scudder-Zurich Transaction, is one of the largest and most experienced
investment counsel firms in the United States. Scudder was established in 1919
as a partnership and was restructured as a Delaware corporation in 1985. Scudder
launched its first fund in 1928. Kemper launched its first fund in 1948. Since
December 31, 1997, Scudder Kemper has served as investment adviser to both
Scudder and Kemper funds. As of August 31, 1998, Scudder Kemper has more than
$241.1 billion in assets under management. The principal source of Scudder
Kemper's income is professional fees received from providing continuing
investment advice. Scudder Kemper provides investment counsel for many
individuals and institutions, including insurance companies, endowments,
industrial corporations and financial and banking organizations.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office (and the home offices of Zurich
Financial Services and Zurich Allied AG) 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 owns approximately 70% of the Investment Manager, with the
balance owned by the Investment Manager's officers and employees.
20
<PAGE> 28
As stated above, Scudder Kemper is a Delaware corporation. Rolf Huppi* is
the Chairman of the Board and Director, Edmond D. Villani(#) is the President,
Chief Executive Officer and Director, Stephen R. Beckwith(#) is the Treasurer
and Chief Financial Officer, Kathryn L. Quirk(#) is the General Counsel, Chief
Compliance Officer and Secretary, Lynn S. Birdsong(#) is a Corporate Vice
President and Director, Cornelia M. Small(#) is a Corporate Vice President and
Director, Laurence Cheng* is a Director, and, effective November 1, 1998, each
of Gunther Gose* and William H. Bolinder(+) is a Director of the Investment
Manager. The principal occupation of each of Edmond D. Villani, Stephen R.
Beckwith, Kathryn L. Quirk, Lynn S. Birdsong and Cornelia M. Small is serving as
a Managing Director of the Investment Manager; the principal occupation of Rolf
Huppi is serving as an officer of Zurich; the principal occupation of Laurence
Cheng is serving as a senior partner of Capital Z Partners, an investment fund;
the principal occupation of Gunther Gose is serving as the Chief Financial
Officer of Zurich Financial Services; the principal occupation of William H.
Bolinder is serving as a member of the Group Executive Board of Zurich Financial
Services.
The outstanding voting securities of the Investment Manager are held of
record 36.63% by Zurich Holding Company of America ("ZHCA"), a subsidiary of
Zurich; 32.85% by ZKI Holding Corp. ("ZKIH"), a subsidiary of Zurich; 20.86% by
Stephen R. Beckwith, Lynn S. Birdsong, Kathryn L. Quirk, Cornelia M. Small and
Edmond D. Villani, in their capacity as representatives (the "Management
Representatives") of the Investment Manager's management holders and retiree
holders pursuant to a Second Amended and Restated Security Holders Agreement
(the "Security Holders Agreement") among the Investment Manager, Zurich, ZHCA,
ZKIH, the Management Representatives, the management holders, the retiree
holders and Edmond D. Villani, as trustee of Scudder Kemper Investments, Inc.
Executive Defined Contribution Plan Trust (the "Plan Trust"); and 9.66% by the
Plan Trust. There are no outstanding non-voting securities of the Investment
Manager.
In connection with the Scudder-Zurich Transaction (described above),
pursuant to which Zurich acquired a two-thirds interest in Scudder for $866.7
million in cash in December, 1997, O. Robert Theurkauf, a Director of the Fund,
sold 93.2% of his holdings in Scudder to Zurich for cash.
Pursuant to the Security Holders Agreement (which was entered into in
connection with the Scudder-Zurich Transaction), the Board of Directors of the
Investment Manager consists of four directors designated by ZHCA and ZKIH and
three directors designated by Management Representatives.
- ------------------------------
* Mythenquai 2, Zurich, Switzerland
(#) 345 Park Avenue, New York, New York
(+) 1400 American Lane, Schaumburg, Illinois
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<PAGE> 29
The Security Holders Agreement 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
Security Holders Agreement also provides for various put and call rights with
respect to Scudder Kemper stock held by persons who were employees of Scudder at
the time of the Scudder-Zurich Transaction, 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 stockholders
of Scudder continuing after the Scudder-Zurich Transaction.
Directors, officers and employees of Scudder Kemper from time to time may
enter into transactions with various banks, including the Fund's custodian bank.
It is Scudder Kemper's opinion that the terms and conditions of those
transactions will not be influenced by existing or potential custodial or other
Fund relationships.
Scudder Trust Company ("STC"), an affiliate of Scudder Kemper, provides
subaccounting and recordkeeping services for shareholder accounts in certain
retirement and employee benefit plans. Scudder Service Corporation ("SSC"), a
subsidiary of Scudder Kemper, is the transfer and dividend-paying agent for the
shares of the Fund. During the fiscal year ended December 31, 1997, the Fund
paid SSC aggregate fees of $516,112. During the fiscal year ended December 31,
1997, the Fund was not charged a fee by STC.
STC and SSC will continue to provide fund accounting, transfer agency,
subaccounting and recordkeeping services to the Fund, as described above, under
the current arrangements if the New Investment Management Agreements are
approved.
Exhibit B sets forth (as of each fund's last fiscal year end, unless
otherwise noted) the fees and other information regarding investment companies
advised by Scudder Kemper that have similar investment objectives to the Fund.
(See "Description of the Investment Management Agreements" above for information
regarding the management fee rate, net assets and aggregate management fee paid
for the Fund.)
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
To the maximum extent feasible, Scudder Kemper places orders for portfolio
transactions through Scudder Investor Services, Inc. ("SIS"), Two International
Place, Boston, Massachusetts 02110, which in turn places orders on behalf of the
Fund with issuers, underwriters or other brokers and dealers. SIS is a
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<PAGE> 30
corporation registered as a broker/dealer and a subsidiary of Scudder Kemper.
SIS does not receive any commissions, fees or other remuneration from the Fund
for this service. In selecting brokers and dealers with which to place portfolio
transactions for the Fund, Scudder Kemper will not consider sales of shares of
funds currently advised by Scudder Kemper as a decision-making factor, although
it may place such transactions with brokers and dealers that sell shares of
funds currently advised by Scudder Kemper. When it can be done consistently with
the policy of obtaining the most favorable net results, Scudder Kemper may place
such orders with brokers and dealers who supply research, market and statistical
information to the Fund or to Scudder Kemper. Scudder Kemper is authorized when
placing portfolio transactions for the Fund to pay a brokerage commission (to
the extent applicable) in excess of that which another broker might charge for
executing the same transaction on account of the receipt of research, market or
statistical information. Allocation of portfolio transactions is supervised by
Scudder Kemper.
THE BOARD MEMBERS OF THE FUND RECOMMEND THAT THE STOCKHOLDERS OF THE FUND VOTE
IN FAVOR OF THIS PROPOSAL 2.
PROPOSAL 3: APPROVAL OF THE REVISION OF THE FUND'S
FUNDAMENTAL LENDING POLICY
This Proposal seeks stockholder approval of a change to the Fund's
fundamental lending policy. The 1940 Act requires an investment company to adopt
policies with respect to certain activities, including the making of loans by
the Fund, which can be changed only by a stockholder vote (i.e., "fundamental"
policies). The proposed change would permit the Fund to engage in lending in a
manner and to the extent permitted by applicable law. The proposed change would,
therefore, permit the Fund, subject to the receipt of any necessary regulatory
approval and Board authorization, to enter into lending arrangements, including
lending agreements under which the funds advised by Scudder Kemper could for
temporary purposes lend money directly to and borrow money directly from each
other through a credit facility ("Interfund Lending Arrangements"). The Board
has no present intention to engage in lending other than that permitted under
the Fund's current fundamental lending policy. The Fund believes that the
flexibility provided by this policy change could possibly reduce substantially
the Fund's borrowing costs and enhance its ability to earn higher rates of
interest on short-term lendings in the event that the Board determines that such
arrangements are warranted in light of the Fund's circumstances. Certain other
fund groups have obtained the exemptive relief necessary to permit the funds to
engage in lending and borrowing among the funds advised by the same adviser.
Approval of the revision to the Fund's lending policy 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 the proposed
fundamental policy, the Fund's current policy will remain in effect. The Board
members of the Fund recommend that the stockholders of
23
<PAGE> 31
the Fund vote in favor of the Proposal. The proposed change to the Fund's
fundamental lending policy is discussed in detail below.
LENDING POLICY
The current policy of the Fund prohibits the making of loans, except loans
of portfolio securities and to the extent the entry into repurchase agreements
and the purchase of debt securities or interests in indebtedness in accordance
with the Fund's investment objectives and policies are deemed to be loans. The
proposed policy, unlike the current policy, does not specify the particular
types of lending in which the Fund is permitted to engage; instead, the proposed
policy permits the Fund to lend only in a manner and to an extent in accordance
with applicable law. Accordingly, the Fund's fundamental lending policy would be
revised as follows (with additions to the policy underscored and deletions to
the policy struck through):
As a matter of fundamental policy, the Fund may not make loans
except as permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time. 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 objectives and policies may be deemed to be
loans.
DISCUSSION
Management believes that there may be advantages to these Interfund Lending
Arrangements as compared with other arrangements currently in place for the
Fund. Currently, the Fund may, in effect, lend money to banks and broker-dealers
by entering into repurchase agreements or purchasing other short-term
instruments. The Fund may also borrow money from the same or other banks for
temporary purposes to satisfy redemption requests or to cover other
unanticipated cash shortfalls. The Fund has entered into uncommitted lines of
credit with banks under which the banks may, but are not required to, lend money
to the Fund to meet the Fund's temporary cash needs. If the Fund were to borrow
money from a bank under its current line of credit agreement, the Fund would pay
interest on the borrowed cash at a rate that would be significantly higher than
the rate that would be earned by other (non-borrowing) funds on investments in
repurchase agreements and other short-term instruments of the same maturity as
the bank loan. The Fund believes this differential represents the bank's profit
for serving as "middleman" between borrower and lender. Other bank loan
arrangements, such as committed lines of credit into which the Fund has entered,
require the Fund to pay substantial commitment fees in addition to the interest
rate to be paid by the Fund when borrowing.
24
<PAGE> 32
The 1940 Act generally prohibits one fund from lending money or other
property to or borrowing money or other property from another fund having the
same investment adviser (currently, in order to be able to participate in these
lending or borrowing arrangements, a fund must first receive an exemptive order
from the SEC). If the revised policy is adopted, the Board would have discretion
to request an order from the SEC to permit the Fund to enter into Interfund
Lending Arrangements consistent with its investment objective and policies.
The Fund's current borrowing policy would permit the Fund to engage in the
contemplated Interfund Lending Arrangements; thus no corresponding revision of
that policy is being sought. The Fund currently has a non-fundamental policy,
which may be changed without a shareholder vote, limiting borrowings in certain
circumstances that, unless changed by Board action, restrict the Fund's ability
to borrow through Interfund Lending Arrangements. The Fund anticipates that the
Interfund Lending Arrangements may provide the Fund, when borrowing, with
savings when the Fund's cash position is insufficient to meet temporary cash
requirements arising, for example, when redemptions exceed anticipated volumes.
When the Fund is forced to liquidate portfolio securities to meet redemption
requests, the proceeds of which are normally paid the next day after receipt of
the request immediately, the Fund often does not receive payment in settlement
on a sale of portfolio securities for up to three days (or longer, when the Fund
sells foreign securities). The Interfund Lending Arrangements would provide a
source of immediate, short-term liquidity pending settlement of the sale of
portfolio securities. In addition, in making short-term cash loans directly to
other funds, the Fund would earn interest at a higher rate than they otherwise
could obtain from investing its cash through repurchase agreements or otherwise.
Although Interfund Lending Arrangements may reduce the Fund's borrowing costs,
enhance its ability to earn higher rates of interest on short-term lendings, and
substantially reduce the Fund's need to borrow from banks, the Fund may also
continue to maintain uncommitted or committed lines of credit or other borrowing
arrangements with banks as an added measure of safety and liquidity.
THE BOARD MEMBERS OF THE FUND RECOMMEND THAT THE STOCKHOLDERS OF THE
FUND VOTE IN FAVOR OF THIS PROPOSAL 3.
PROPOSAL 4: RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Fund, including a majority of the Independent
Directors, has selected PricewaterhouseCoopers LLP to act as independent
accountants for the Fund for the Fund's current fiscal year.
PricewaterhouseCoopers 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 PricewaterhouseCoopers 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
25
<PAGE> 33
expected to be available to respond to appropriate questions posed by
stockholders or management. Ratification of the selection of independent
accountants requires the affirmative vote of a majority of the votes of the Fund
cast at the Special Meeting in person or by proxy.
THE BOARD MEMBERS OF THE FUND RECOMMEND THAT THE STOCKHOLDERS OF THE
FUND VOTE IN FAVOR OF THIS PROPOSAL 4.
ADDITIONAL INFORMATION
GENERAL
The cost of preparing, printing and mailing the enclosed proxy card 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 Zurich or its affiliates. In addition to solicitation
by mail, certain officers and representatives of the Fund, officers and
employees of Scudder Kemper 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 votes have 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 to confirm that the stockholder has received the proxy materials 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 on the proxy card, and ask for the stockholder's instructions on
the Proposals. 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
26
<PAGE> 34
vote and asking the stockholder to call SCC immediately if his or her
instructions are not correctly reflected in the confirmation.
If a stockholder wishes to participate in the Special Meeting, but does not
wish to give a 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 1-800-248-2681. Any proxy given
by a stockholder, whether in writing or by telephone, is revocable until voted
at the Special Meeting.
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 Kemper
Investments, Inc., at 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
No Director is 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,
KATHRYN L. QUIRK SIGNATURE
Kathryn L. Quirk
Secretary
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<PAGE> 35
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<PAGE> 36
EXHIBIT A
FORM OF NEW
INVESTMENT MANAGEMENT AGREEMENT
THE JAPAN FUND, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
September 7, 1998
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
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<PAGE> 37
authenticated of each of the following additional documents related to the
Corporation and the Fund:
(a) The Articles dated January 10, 1992, as amended to date.
(b) By-Laws of the Corporation as in effect on the date hereof (the
"By-Laws").
(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
A-2
<PAGE> 38
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
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
A-3
<PAGE> 39
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 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
A-4
<PAGE> 40
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;
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 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
million, the fee payable for that month based on the portion of the average
of such values in excess of $100 million 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 million, the fee payable for that month
based on the portion of the average of such values in excess of $300
million 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 million, the fee payable for that month based on the portion
of the average of such values in excess of $600 million 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,
A-5
<PAGE> 41
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.
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.
Whenever the Fund and one or more other accounts or investment
companies advised by the Manager have available funds for investment,
investments suitable and appropriate for each shall be allocated in
accordance with procedures believed by the Manager to be equitable to each
A-6
<PAGE> 42
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by the Manager to be equitable. The Fund recognizes that in
some cases this procedure may adversely affect the size of the position
that may be acquired or disposed of for the Fund.
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 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 October 31, 1999, 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.
A-7
<PAGE> 43
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.
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> 44
EXHIBIT B
INVESTMENT OBJECTIVES AND ADVISORY FEES
FOR FUNDS NOT INCLUDED IN THIS PROXY STATEMENT AND
ADVISED BY SCUDDER KEMPER INVESTMENTS, INC.
SCUDDER FUNDS+
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
ASSET ALLOCATION FUNDS
Scudder Pathway Balanced Balance of growth and income There will be no fee as $ 192,145,173
Portfolio by investing in a mix of the Manager will receive
Scudder money market, bond and a fee from the
equity mutual funds. underlying funds
Scudder Pathway Growth Long term growth of capital by There will be no fee as $ 49,574,256
Portfolio investing predominantly in the Manager will receive
Scudder equity mutual funds a fee from the
designed to provide long term underlying funds
growth.
Scudder Pathway International Maximize total return, There will be no fee as $ 11,728,045
Portfolio consisting of capital the Manager will receive
appreciation plus dividend a fee from the
income and interest by underlying funds
investing in a select mix of
established international and
global Scudder Funds.
U.S. GROWTH AND INCOME FUNDS
Scudder Balanced Fund A balance of growth and income 0.700% of net assets++ $ 158,711,908
from a diversified portfolio
of equity and fixed-income
securities and long term
preservation of capital
through a quality-oriented
investment approach designed
to reduce risk.
Scudder Dividend & Growth High current income and long 0.750% of net assets N/A**
Fund term growth of capital through
investment in income paying
equity securities.
Scudder Growth and Income Long term growth of capital, 0.600% to $500 million $6,833,584,122
Fund current income and growth of 0.550% next $500 million
income. 0.500% next $500 million
0.475% next $500 million
0.450% next $1 billion
0.425% next $1.5 billion
0.405% next 1.5 billion
0.3875% next $4 billion
0.370% over $10 billion*
U.S. GROWTH FUNDS
Classic Growth Fund Long term growth of capital 0.700% of net assets++ $ 53,225,783
with reduced share price
volatility compared to other
growth mutual funds.
Scudder 21st Century Growth Long term growth of capital by 1.000% of net assets++ $ 23,296,176
Fund investing primarily in the
securities of emerging growth
companies poised to be leaders
in the 21st century.
</TABLE>
B-1
<PAGE> 45
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
Scudder Development Fund Long term growth of capital by 1.000% to $500 million $ 845,405,075
investing primarily in 0.950% next $500 million
securities of small and medium 0.900% thereafter
size growth companies.
Scudder Financial Services Long term growth of capital by 0.750% of net assets++ $ 36,926,469@
Fund investing primarily in common
stocks and other equity
securities of companies in a
group of related industries.
Scudder Health Care Fund Long term growth of capital by 0.850% of next assets++ $ 40,923,873@
investing primarily in common
stocks and other equity
securities of companies in a
group of related industries.
Scudder Large Company Growth Long term growth of capital 0.700% of net assets $ 288,064,975
Fund (formerly Scudder through investment primarily
Quality Growth Fund) in the equity securities of
seasoned, financially strong
U.S. growth companies.
Scudder Large Company Value Maximize long term capital 0.750% to $500 million $2,212,733,138
Fund (formerly Scudder appreciation through a value 0.650% next $500 million
Capital Growth Fund) driven investment program. 0.600% next $500 million
0.550% next $500 million
0.500% next $1.0 billion*
Scudder Micro Cap Fund Long term growth of capital by 0.750% of net assets $ 91,627,404
investing primarily in a
diversified portfolio of U.S.
micro-cap common stocks.
Scudder Real Estate Long term capital growth and 0.800% of net assets++ $ 20,435,489
Investment Fund current income by investing
primarily in equity securities
of companies in the real
estate industry.
Scudder S&P 500 Index Fund Investment results that, 0.150% of net assets++ $ 16,912,276
before expenses, correspond to
the total return of common
stocks publicly traded in the
United States, as represented
by the Standard & Poor's 500
Composite Stock Price Index.
Scudder Small Company Value Long term growth of capital by 0.750% of net assets $ 123,398,822
Fund investing primarily in
undervalued stocks of small
U.S. companies.
Scudder Technology Fund Long term growth of capital by 0.850% of net assets++ $ 37,159,344@
investing primarily in common
stocks and other equity
securities of companies in a
group of related industries.
Value Fund Long term growth of capital 0.700% to $500 million $ 297,979,779
through investment in 0.650% over $500
undervalued equity securities. million*
GLOBAL GROWTH FUNDS
Global Discovery Fund Above-average capital 1.100% of net assets $ 349,121,954
appreciation over the long
term by investing primarily in
the equity securities of small
companies located throughout
the world.
</TABLE>
B-2
<PAGE> 46
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
Scudder Emerging Markets Long term growth of capital 1.250% of net assets++ $ 219,624,481
Growth Fund primarily through equity
investment in emerging markets
around the globe.
Scudder Global Fund Long term growth of capital 1.000% to $500 million $1,766,207,742
through a diversified 0.950% next $500 million
portfolio of marketable 0.900% next $500 million
securities, primarily equity 0.850% over $1.5 billion
securities, including common
stock, preferred stocks and
debt securities convertible
into common stocks.
Scudder Gold Fund Maximum return (principal 1.000% of net assets $ 132,131,545
change and income) consistent
with investing in a portfolio
of gold-related equity
securities and gold.
Scudder Greater Europe Growth Long term growth of capital 1.000% to $1 billion $ 195,514,335
Fund through investments primarily 0.900% thereafter*
in the equity securities of
European companies.
Scudder International Fund Long term growth of capital 0.900% to $500 million $2,884,919,345
primarily from foreign equity 0.850% next $500 million
securities. 0.800% next $1 billion
0.750% next $1 billion
0.700% thereafter
Scudder International Growth Long term growth of capital 1.000% of net assets++ $ 48,880,164
and Income Fund and current income primarily
from foreign equity
securities.
Scudder International Growth Long term capital appreciation 1.000% of net assets N/A**
Fund through investment primarily
in the equity securities of
foreign companies with high
growth potential.
Scudder International Value Long term capital appreciation 1.000% of net assets N/A**
Fund through investment primarily
in undervalued foreign equity
securities.
Scudder Latin America Fund Long term capital appreciation 1.250% to $1 billion $ 882,555,049
through investment primarily 1.150% thereafter
in the securities of Latin
American issuers.
Scudder Pacific Opportunities Long term growth of capital 1.100% of net assets $ 147,276,692
Fund primarily through investment
in the equity securities of
Pacific Basin companies,
excluding Japan.
CLOSED-END FUNDS
The Argentina Fund, Inc. Long term capital appreciation Adviser: $ 135,327,320
through investment primarily 1.100% of net assets(#)
in equity securities of Sub-Adviser:
Argentine issuers. Paid by Adviser. 0.160%
of net assets
</TABLE>
B-3
<PAGE> 47
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
The Brazil Fund, Inc. Long term capital appreciation 1.200% to $150 million $ 429,429,751
through investment primarily 1.050% next $150 million
in equity securities of 1.000% next $200 million
Brazilian issuers. 0.900% thereafter
Administrator: Receives
an annual fee of $50,000
The Korea Fund, Inc. Long term capital appreciation Adviser: $ 406,244,000
through investment primarily 1.150% to $50 million
in equity securities of Korean 1.100% next $50 million
companies. 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 $75 million $ 98,866,168
through investment primarily 1.150% next $125 million
in equity securities of Asian 1.100% thereafter
companies.
Scudder New Europe Fund, Inc. Long term capital appreciation 1.250% to $75 million $ 320,293,393
through investment primarily 1.150% next $125 million
in equity securities of 1.100% thereafter
companies traded on smaller or
emerging European markets and
companies that are viewed as
likely to benefit from changes
and developments throughout
Europe.
Scudder Spain and Portugal Long term capital appreciation Adviser: $ 112,909,567
Fund, Inc. through investment primarily 1.000% of net assets
in equity securities of Administrator:
Spanish & Portuguese issuers. 0.200% of net assets
INSURANCE PRODUCTS
Scudder Variable Life Balance of growth and income, 0.475% of net assets $ 118,373,215
Investment Fund Balanced as well as long term
Portfolio preservation of capital, from
a diversified portfolio of
equity and fixed income
securities.
Scudder Variable Life Maximize long term capital 0.475% to $500 million $ 676,317,582
Investment Fund Capital growth from a portfolio 0.450% next $500 million
Growth Portfolio consisting primarily of equity 0.425% on assets over
securities. $1.0 billion*
Scudder Variable Life Above-average capital 0.975% of net assets++ $ 20,115,141
Investment Fund Global appreciation over the long
Discovery Portfolio term by investing primarily in
the equity securities of small
companies located throughout
the world.
Scudder Variable Life Long term growth of capital, 0.475% of net assets $ 163,603,606
Investment Fund Growth and current income and growth of
Income Portfolio income from a portfolio
consisting primarily of common
stocks and securities
convertible into common
stocks.
</TABLE>
B-4
<PAGE> 48
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
Scudder Variable Life Long term growth of capital 0.875% to $500 million $ 427,237,880
Investment Fund principally from a diversified 0.725% thereafter
International Portfolio portfolio of foreign equity
securities.
AARP FUNDS
AARP Balanced Stock and Bond Long term capital growth and 0.350% to $2 billion $ 638,356,257
Fund income, consistent with a 0.330% next $2 billion
share price more stable than 0.300% next $2 billion
other balanced mutual funds, 0.280% next $2 billion
through investment in a 0.260% next $3 billion
combination of stocks, bonds 0.250% next $3 billion
and cash reserves. 0.240% thereafter
INDIVIDUAL FUND FEE
0.190% of net assets
AARP Capital Growth Fund Long term capital growth, 0.350% to $2 billion $1,228,379,954
consistent with a share price 0.330% next $2 billion
more stable than other growth 0.280% next $2 billion
funds, through investment in a 0.260% next $3 billion
combination of common stocks 0.250% next $3 billion
and securities convertible 0.240% thereafter
into common stocks. INDIVIDUAL FUND FEE
0.320% of net assets
AARP Diversified Growth Long term growth of capital There will be no fee as $ 61,796,818
Portfolio through investment primarily the manager will receive
in AARP stock mutual funds. a fee from the
underlying funds
AARP Global Growth Fund Long term capital growth, 0.350% to $2 billion $ 148,029,373
consistent with a share price 0.330% next $2 billion
more stable than other global 0.300% next $2 billion
funds, through investment 0.280% next $2 billion
primarily in common stocks of 0.260% next $3 billion
established corporations in a 0.250% next $3 billion
wide variety of developed 0.240% thereafter
countries. INDIVIDUAL FUND FEE
0.550% of net assets
AARP Growth and Income Fund Long term capital growth and 0.350% to $2 billion $6,606,012,897
income, consistent with a 0.330% next $2 billion
share price more stable than 0.300% next $2 billion
other growth and income mutual 0.280% next $2 billion
funds, through investment 0.260% next $3 billion
primarily in common stocks 0.250% next $3 billion
with above-average dividend 0.240% thereafter
yields and securities INDIVIDUAL FUND FEE
convertible into common 0.190% of net assets
stocks.
AARP International Growth and Long term capital growth, 0.350% to $2 billion $ 20,259,062
Income Fund consistent with a share price 0.330% next $2 billion
more stable than other 0.300% next $2 billion
international mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in a diversified portfolio of 0.250% next $3 billion
foreign common stocks with 0.240% thereafter++
above-average dividend yields INDIVIDUAL FUND FEE
and foreign securities 0.600% of net assets
convertible into common
stocks.
</TABLE>
B-5
<PAGE> 49
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
AARP Small Company Stock Fund Long term growth of capital, 0.350% to $2 billion $ 50,271,473
consistent with a share price 0.330% next $2 billion
more stable than other small 0.300% next $2 billion
company stock mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in common stocks of small U.S. 0.250% next $3 billion
companies. 0.240% thereafter++
INDIVIDUAL FUND FEE
0.550% of net assets
AARP U.S. Stock Index Fund Long term capital growth and 0.350% to $2 billion $ 38,085,073
income, consistent with 0.330% next $2 billion
greater share price stability 0.300% next $2 billion
than an S&P 500 Index mutual 0.280% next $2 billion
fund, by taking an indexing 0.260% next $3 billion
approach to investing in 0.250% next $3 billion
common stocks, emphasizing 0.240% thereafter++
higher dividend stocks while INDIVIDUAL FUND FEE
maintaining investment 0.000% of net assets
characteristics otherwise
similar to the S&P 500 Index.
</TABLE>
- ------------------------------
+ The information provided below is shown as of the end of each Fund's last
fiscal year, unless otherwise noted.
++ Subject to waivers and/or expense limitations.
* The addition of this breakpoint is effective October 1, 1998.
** Net asset information is not available for Scudder Dividend & Growth Fund,
which commenced operations on June 1, 1998; or Scudder International Growth
Fund and Scudder International Value Fund, each of which commenced
operations on September 1, 1998.
@ Net asset information is provided for the semi-annual period ended May 31,
1998.
(#) This fee rate was reduced to 1.04% on October 27, 1998.
B-6
<PAGE> 50
KEMPER FUNDS(+)
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
EQUITY/GROWTH STYLE FUNDS
Kemper Aggressive Growth Capital appreciation through 0.650% of net assets $ 11,609,000
Fund the use of aggressive plus or minus an
investment techniques. incentive fee based on
the performance of the
Standard & Poor's 500
Stock Index, which may
result in a fee ranging
from 0.450 of 1.000% to
0.850 of 1.000% of net
assets
Kemper Blue Chip Fund Growth of capital and income. 0.580% to $250 million $ 446,891,000
0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Growth Fund Growth of capital through 0.580% to $250 million $2,827,565,000
professional management and 0.550% next $750 million
diversification of investment 0.530% next $1.5 billion
securities having potential 0.510% next $2.5 billion
for capital appreciation. 0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Quantitative Equity Growth of capital and 0.580% to $250 million $ 11,217,000
Fund reduction of risk through 0.550% next $750 million
professional management of a 0.530% next $1.5 billion
diversified portfolio of 0.510% next $2.5 billion
equity securities. 0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Small Capitalization Maximum capital appreciation. 0.650% of net assets $1,095,478,000
Equity Fund plus or minus an
incentive fee based on
the performance of the
Standard & Poor's 500
Stock Index, which may
result in a fee ranging
from 0.350 of 1.000% to
0.950 of 1.000% of net
assets
Kemper Technology Fund Growth of capital. 0.580% to $250 million $1,209,723,000
0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
</TABLE>
B-7
<PAGE> 51
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
Kemper Total Return Fund The highest total return, a 0.580% to $250 million $3,241,383,000
combination of income and 0.550% next $750 million
capital gain, consistent with 0.530% next $1.5 billion
reasonable risk. 0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Value + Growth Fund Growth of capital through 0.720% to $250 million $ 97,741,000
professional management of 0.690% next $750 million
growth and value stocks. 0.660% next $1.5 billion
0.640% next $2.5 billion
0.600% next $2.5 billion
0.580% next $2.5 billion
0.560% next $2.5 billion
0.540% thereafter
EQUITY/VALUE STYLE FUNDS
Kemper Contrarian Fund Long-term capital 0.750% to $250 million $ 178,115,000
appreciation and, 0.720% next $750 million
secondarily, current income. 0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper Small Cap Relative Long-term capital 0.750% to $250 million N/A*
Value Fund appreciation. 0.720% next $750 million
0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter**
Kemper Small Cap Value Fund Long-term capital 0.750% to $250 million $1,263,144,000
appreciation 0.720% next $750 million
0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper U.S. Growth and Long-term growth of capital, 0.600% to $250 million $ 3,864,000***
Income Fund current income and growth of 0.570% next $750 million
income. 0.550% next $1.5 billion
0.530% thereafter
Kemper-Dreman Financial Long-term capital 0.750% to $250 million N/A*
Services Fund appreciation by investing 0.720% next $750 million
primarily in common stocks 0.700% next $1.5 billion
and other equity securities 0.680% next $2.5 billion
of companies in the financial 0.650% next $2.5 billion
services industry believed by 0.640% next $2.5 billion
the Fund's investment manager 0.630% next $2.5 billion
to be undervalued. 0.620% thereafter**
</TABLE>
B-8
<PAGE> 52
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
Kemper-Dreman High Return High total rate of return. 0.750% to $250 million $2,931,721,000
Equity Fund 0.720% next $750 million
0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
GLOBAL AND INTERNATIONAL FUNDS
Kemper Asian Growth Fund Long-term capital growth by 0.850% to $250 million $ 6,398,000
investing in a diversified 0.820% next $750 million
portfolio of Asian equity 0.800% next $1.5 billion
securities. 0.780% next $2.5 billion
0.750% next $2.5 billion
0.740% next $2.5 billion
0.730% next $2.5 billion
0.720% thereafter**
Kemper Emerging Markets Long-term growth of capital 1.250% of net assets** $ 1,147,000@
Growth Fund primarily through equity
investment in emerging
markets around the globe.
Kemper Europe Fund Long-term capital growth by 0.750% to $250 million $ 23,910,000
investing in a diversified 0.720% next $750 million
portfolio of European equity 0.700% next $1.5 billion
securities. 0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper Global Blue Chip Fund Long-term growth of capital 1.000% to $250 million $ 3,663,000@
through a diversified 0.950% next $750 million
worldwide portfolio of 0.900% thereafter**
marketable securities,
primarily equity securities.
Kemper International Fund Total return, a combination 0.750% to $250 million $ 588,069,000
of capital growth and income, 0.720% next $750 million
principally through an 0.700% next $1.5 billion
internationally diversified 0.680% next $2.5 billion
portfolio of equity 0.650% next $2.5 billion
securities. 0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper International Growth Long-term growth of capital 1.000% of net assets** $ 1,556,000@
and Income Fund and income, primarily from
foreign equity securities.
Kemper Latin America Fund Long-term capital 1.250% to $250 million $ 1,441,000@
appreciation through 1.200% next $750 million
investment primarily in the 1.150% thereafter**
securities of Latin American
issuers.
</TABLE>
B-9
<PAGE> 53
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
ASSET ALLOCATION FUNDS
Kemper Horizon 10+ Portfolio A balance between growth of 0.580% to $250 million $ 106,339,000
capital and income, 0.550% next $750 million
consistent with moderate 0.530% next $1.5 billion
risk. 0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Horizon 20+ Portfolio Growth of capital and, 0.580% to $250 million $ 110,076,000
secondarily, income. 0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
TARGET EQUITY FUNDS
Kemper Retirement Fund-- Long-term capital growth with 0.500% of net assets $ 111,687,000
Series I guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
Kemper Retirement Fund-- Long-term capital growth with 0.500% of net assets $ 158,437,000
Series II guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
Kemper Retirement Fund-- Long-term capital growth with 0.500% of net assets $ 118,084,000
Series III guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
Kemper Retirement Fund-- Long-term capital growth with 0.500% of net assets $ 124,417,000
Series IV guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
Kemper Retirement Fund-- Long-term capital growth with 0.500% of net assets $ 125,886,000
Series V guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
Kemper Retirement Long-term capital growth with 0.500% of net assets $ 70,487,000
Fund--Series VI guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
</TABLE>
B-10
<PAGE> 54
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
Kemper Retirement Long-term capital growth with 0.500% of net assets $ 25,787,000
Fund--Series VII guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
Kemper Worldwide 2004 Fund Total return with guaranteed 0.600% of net assets $ 33,070,000
return of investment on the
maturity date to investors
who reinvest all their
dividends and hold their
shares to the maturity date
(11/15/2004).
CLOSED-END FUNDS
The Growth Fund of Spain, Long-term capital 1.000% of net assets(1) $ 315,059,000
Inc. appreciation by investing
primarily in equity
securities of Spanish
companies.
ANNUITY PRODUCTS
Kemper Blue Chip Portfolio Growth of capital and income. 0.650% of net assets $ 18,421,000
Kemper Contrarian Value High rate of return. 0.750% of net assets $ 162,380,000
Portfolio
Kemper Global Blue Chip Long-term growth of capital 1.000% to $250 million N/A*
Portfolio through diversified worldwide 0.950% next $750 million
portfolio of marketable 0.900% thereafter
securities, primarily equity
securities.
Kemper Growth Portfolio Maximum appreciation of 0.600% of net assets $ 563,016,000
capital.
Kemper High Yield Portfolio High level of current income 0.600% of net assets $ 391,664,000
by investing in fixed income
securities.
Kemper Horizon 10+ Portfolio A balance between growth of 0.600% of net assets $ 22,553,000
capital and income consistent
with moderate risk.
Kemper Horizon 20+ Portfolio Growth of capital and, 0.600% of net assets $ 16,659,000
secondarily, income.
Kemper International Growth Long-term growth of capital 1.000% of net assets N/A*
and Income Portfolio and current income, primarily
from foreign equity
securities.
Kemper International Total return, a combination 0.750% of net assets $ 200,046,000
Portfolio of capital growth and income,
principally through an
internationally diversified
portfolio of equity
securities.
Kemper Small Cap Growth Maximum capital appreciation 0.650% of net assets $ 137,415,000
Portfolio from a portfolio primarily
consisting of growth stocks
of small companies.
Kemper Small Cap Value Long-term capital 0.750% of net assets $ 76,108,000
Portfolio appreciation from a portfolio
primarily of value stocks of
smaller companies.
</TABLE>
B-11
<PAGE> 55
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
Kemper Total Return High total return through a 0.550% of net assets $ 786,996,000
Portfolio combination of income and
capital appreciation.
Kemper Value+Growth Growth of capital through 0.750% of net assets $ 69,094,000
Portfolio professional management of a
portfolio of growth and value
stocks.
Kemper-Dreman Financial Long-term capital 0.750% to $250 million N/A*
Services Portfolio appreciation by investing 0.720% next $750 million
primarily in common stocks 0.700% next $1.5 billion
and other equity securities 0.680% next $2.5 billion
of companies in the financial 0.650% next $2.5 billion
services industry believed by 0.640% next $2.5 billion
the investment manger to be 0.630% next $2.5 billion
undervalued. 0.620% thereafter
Kemper-Dreman High Return High rate of total return. 0.750% to $250 million N/A*
Equity Portfolio 0.720% next $750 million
0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
</TABLE>
- ------------------------------
(+) The information provided below is shown as of the end of each Fund's last
fiscal year, unless otherwise noted.
* Net asset information is not available for Kemper-Dreman Financial Services
Fund, which commenced operations on March 9, 1998; Kemper-Dreman High Return
Equity Portfolio, which commenced operations on May 1, 1998; Kemper-Dreman
Financial Services Portfolio, which commenced operations on May 4, 1998;
Kemper Global Blue Chip Portfolio and Kemper International Growth and Income
Portfolio, each of which commenced operations on May 5, 1998; or Kemper
Small Cap Relative Value Fund, which commenced operations on May 6, 1998.
** Subject to waivers and/or reimbursements.
*** Net asset information is provided as of semi-annual period ended April 30,
1998.
@ Net asset information is provided as of semi-annual period ended March 31,
1998.
(1) Based on average weekly net assets.
B-12
<PAGE> 56
APPENDIX 1
FUND SHARES OWNED BY DIRECTORS
<TABLE>
<CAPTION>
Fund Name(1) Birdsong(+) Givens Gleysteen Loughran Miyauchi Rapp Rosovsky Theurkauf
------------ ----------- ------ --------- -------- -------- ---- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Japan Fund, Inc. 2,248 222 4,712 1,160 -- 193 7,454 43,677(2)
<CAPTION>
All Current
Directors and
Officers as a
Fund Name(1) Umemura Yamanaka Group
------------ ------- -------- -------------
<S> <C> <C> <C>
The Japan Fund, Inc. -- -- 72,778(3)
</TABLE>
- ---------------
(1) The information as to beneficial ownership is based on statements furnished
to the Fund by each Director. Unless otherwise noted, beneficial ownership
is based on sole voting and investment power. On June 30, 1998, each
Director's individual shareholdings of the Fund constitute less than 1/4 of
1% of the shares outstanding of such Fund. As a group, on June 30, 1998, the
Directors and Officers own less than 1/4 of 1% of the shares of the Fund.
(2) Mr. Theurkauf's total in The Japan Fund, Inc. includes 38,886 shares held
with sole investment power and no voting power. Shares held with sole
investment but no voting power are shares held in profit sharing and 401(k)
plans for which Scudder Kemper Investments, Inc. serves as Trustee.
(3) As a group, on June 30, 1998, the Directors and Officers of the Fund held
15,333 shares with sole voting and investment power, 10,179 shares with
shared voting and investment power, and 47,264 shares with sole investment
and no voting power. Shares held with sole investment but no voting power
are shares held in profit sharing and 401(k) plans for which Scudder Kemper
Investments, Inc. serves as Trustee.
(+) Mr. Birdsong serves as President of the Fund.
<PAGE> 57
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<PAGE> 58
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<PAGE> 59
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<PAGE> 60
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<PAGE> 61
LOGO
For more information, please call Shareholder Communications Corporation, your
Fund's information agent, at 1-800-248-2681.
Japan
<PAGE> 62
<TABLE>
<S> <C>
THE JAPAN FUND, INC. PLEASE VOTE YOUR PROXY TODAY!
P.O. BOX 2291
BOSTON, MA 02107-2291 YOUR VOTE IS IMPORTANT!
PLEASE SIGN AND RETURN PROMPTLY
IN THE ENCLOSED POSTAGE PAID ENVELOPE.
Please fold and detach card at perforation before mailing.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD MEMBERS OF YOUR FUND
</TABLE>
PROXY SPECIAL MEETING OF STOCKHOLDERS -- DECEMBER 11, 1998 PROXY
The undersigned hereby appoints Bruce H. Goldfarb, Kathryn L. Quirk, Thomas
F. McDonough and Daniel Pierce 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 Kemper Investments, Inc., Two
International Place, Boston, Massachusetts 02110, on Friday, December 11, 1998
at 9:30 a.m., eastern time, and at any adjournments thereof.
Dated ______________________, 1998
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.
-----------------------------------
(Signature of joint owner, if any)
<PAGE> 63
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
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 Kemper Investments, Inc. or Zurich Insurance Company,
recommend that you vote FOR each item.
Please vote by filling in the boxes below.
<TABLE>
<S> <C> <C>
1. The election of Directors; FOR WITHHOLD
Nominees: Peter Booth, William L. Givens, William H. all nominees listed authority to vote
Gleysteen, Jr., Thomas M. Hout, John F. Loughran, Yoshihiko below (except as for all nominees
Miyauchi, William V. Rapp, Henry Rosovsky, Takeo Shiina, O. marked to the listed below
Robert Theurkauf, Hiroshi Yamanaka. contrary below)
[ ] [ ]
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
2. To approve the new Investment Management Agreement [ ] FOR [ ] AGAINST [ ] ABSTAIN
between the Fund and Scudder Kemper Investments, Inc.;
3. To approve the revision of the Fund's fundamental lending [ ] FOR [ ] AGAINST [ ] ABSTAIN
policy.
4. To ratify the selection of PricewaterhouseCoopers LLP as [ ] FOR [ ] AGAINST [ ] ABSTAIN
the independent accountants for the Fund for the Fund's
current fiscal year.
</TABLE>
The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
[CONTINUED ON OTHER SIDE] JAPAN
