<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
THE FUND
The Japan Equity Fund, Inc. (the "Fund") is a diversified, closed-end
management investment company. The Fund invests substantially all of its assets
in equity securities of non-financial Japanese companies whose securities are
traded on the First Section of the Tokyo Stock Exchange ("TSE").
The investment objective of the Fund is to outperform over the long term, on
a total return basis (including appreciation and dividends), the non-financial
services sectors of the Tokyo Stock Price Index (TOPIX), a composite
market-capitalization weighted index of all common stocks listed on the First
Section of the TSE. Daiwa International Capital Management Corp. is the Fund's
Investment Manager. The Fund utilizes a statistical and optimization stock
selection process, known as the Daiwa Portfolio Optimization System ("DPOS"),
developed by the Global Portfolio Research Department of Daiwa Securities Trust
Company ("DSTC"), the Fund's Investment Adviser. DSTC believes that, by using
DPOS, it is able to identify undervalued securities of non-financial services
companies. From time to time, DSTC may make refinements to its DPOS model, which
may result in changes to its investment parameters.
SHAREHOLDER INFORMATION
The Fund's shares are listed on the New York Stock Exchange ("NYSE"). The
Fund understands that its shares may trade periodically on certain exchanges
other than the NYSE, but the Fund has not listed its shares on those other
exchanges and does not encourage trading on those exchanges.
The Fund's NYSE trading symbol is "JEQ". Weekly comparative net asset value
(NAV) and market price information about the Fund is published each Monday in
THE WALL STREET JOURNAL, each Sunday in THE NEW YORK TIMES, and each Saturday in
BARRON'S, and also appears in many other newspapers.
INQUIRIES
It is the policy of the Fund to respond to inquiries about its portfolio
holdings and performance. Such inquiries should be directed to DSTC, the Fund's
Administrator (the "Administrator") at (800) 933-3440 or (201) 915-3020.
Inquiries concerning your share account should be directed to PNC Bank, National
Association (the "Plan Agent") at the number noted below. All written inquiries
should be directed to the Fund, c/o Daiwa Securities Trust Company, One
Evertrust Plaza, 9th Floor, Jersey City, New Jersey 07302.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
A Dividend Reinvestment and Cash Purchase Plan (the "Plan") is available to
provide Shareholders with automatic reinvestment of dividends and capital gain
distributions in additional Fund shares. The Plan also allows you to make
optional annual cash investments in Fund shares through the Plan Agent. A
brochure fully describing the Plan's terms and conditions is available from the
Plan Agent by calling (800) 852-4750 or (302) 791-3425, or by writing PNC Bank,
National Association, c/o The Japan Equity Fund, Inc., P.O. Box 8950,
Wilmington, DE 19899.
A brief summary of the material aspects of the Plan follows:
WHO CAN PARTICIPATE IN THE PLAN? If you wish to participate and your shares
are held in your name, you may elect to become a direct participant in the Plan
by completing and mailing the Enrollment Authorization form on
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
GENERAL INFORMATION (CONCLUDED)
- --------------------------------------------------------------------------------
the back cover of the Dividend Reinvestment and Cash Purchase Plan Brochure
available from the Plan Agent. However, if your shares are held in the name of a
brokerage firm, bank or nominee, you should instruct your nominee to participate
in the Plan on your behalf. If your nominee is unable to participate in the Plan
for you, you should request that your shares be registered in your name, so that
you may elect to participate directly in the Plan.
MAY I WITHDRAW FROM THE PLAN? If your shares are held in your name and you
wish to receive all dividends and capital gain distributions in cash rather than
in shares, you may withdraw from the Plan without penalty at any time by
contacting the Plan Agent. If your shares are held in nominee name, you should
be able to withdraw from the Plan without a penalty at any time by sending
written notice to your nominee. If you withdraw, you or your nominee will
receive a share certificate for all full shares or, if you wish, the Plan Agent
will sell your shares and send you the proceeds, after the deduction of
brokerage commissions. The Plan Agent will convert any fractional shares to cash
at the then-current market price and send to you a check for the proceeds.
HOW ARE THE DIVIDENDS AND DISTRIBUTIONS REINVESTED? If the market price of
the Fund's shares on the payment date should equal or exceed their net asset
value per share, the Fund will issue new shares to you at the higher of net
asset value or 95% of the then-current market price. If the market price is
lower than the net asset value per share, the Fund will issue new shares to you
at the market price. If the dividends or distributions are declared and payable
as cash only, you will receive shares purchased for you by the Plan Agent on the
NYSE or otherwise on the open market to the extent available.
WHAT IS THE CASH PURCHASE FEATURE? Plan participants have the option of
making annual investments in Fund shares through the Plan Agent. You may invest
any amount from $100 to $3,000 annually. The Plan Agent will purchase shares for
you on the NYSE or otherwise on the open market on or about February 15th of
each year. Plan participants should send voluntary cash payments to be received
by the Plan Agent approximately ten days before the annual purchase date. The
Plan Agent will return any cash payments received more than thirty days prior to
the purchase date. You may withdraw a voluntary cash payment by written notice,
if the notice is received by the Plan Agent not less that two business days
before the purchase date.
IS THERE A COST TO PARTICIPATE? There are no Plan charges or brokerage
charges for shares issued directly by the Fund. However, each participant will
pay a pro rata portion of brokerage commissions for shares purchased on the NYSE
or on the open market by the Plan Agent.
WHAT ARE THE TAX IMPLICATIONS? The automatic reinvestment of dividends and
distributions does not relieve you of any income tax which may be payable (or
required to be withheld) on such dividends and distributions. In addition, the
Plan Agent will reinvest dividends for foreign participants and for any
participant subject to federal backup withholding after the deduction of the
amounts required to be withheld.
PLEASE NOTE THAT, IF YOU PARTICIPATE IN THE PLAN THROUGH A BROKERAGE
ACCOUNT, YOU MAY NOT BE ABLE TO CONTINUE AS A PARTICIPANT IF YOU TRANSFER THOSE
SHARES TO ANOTHER BROKER. CONTACT YOUR BROKER OR NOMINEE OR THE PLAN AGENT TO
ASCERTAIN WHAT IS THE BEST ARRANGEMENT FOR YOU TO PARTICIPATE IN THE PLAN.
2
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
December 1, 1997
DEAR SHAREHOLDERS:
It is our pleasure, on behalf of the Board of Directors, to present the
Annual Report for The Japan Equity Fund, Inc. (the "Fund") for the fiscal year
ended October 31, 1997.
BACKGROUND
The objective of the Fund is to outperform its benchmark, which is the Tokyo
Stock Price Index ("TOPIX") excluding its financial stocks (the "Benchmark").
The TOPIX includes approximately 1,300 stocks traded on the First Section of the
Tokyo Stock Exchange ("TSE") weighted by their market value. The way in which
the Fund seeks to meet its objective is to examine certain fundamental
characteristics of every non-financial stock in the First Section of the TSE.
These fundamental characteristics include, among others, earnings-to-price ratio
and book-to-price ratio. The various fundamental characteristics are weighted by
a method, known as the Daiwa Portfolio Optimization System ("DPOS"), which has
been developed by Daiwa Securities Trust Company, the Fund's Investment Adviser.
In this manner, the Fund seeks to identify currently undervalued stocks.
PERFORMANCE OF THE JAPANESE STOCK MARKET
The Nikkei 225 Average (the "Nikkei 225") closed at 16,459 on October 31,
1997, down 19.58% (in Yen terms) over the last twelve months, and down 14.06%
since April 30, 1997. A large part of Japan's market decline may be attributed
to the recent turmoil in the Asian markets. When Thailand moved from a fixed to
a floating exchange rate system in July, its currency was devalued immediately,
and a chain reaction of currency devaluations spread to other Asian countries.
Consequently, these local stock markets fell by 40% to 50%. Forty percent of
Japan's exports go to Asia, which equates to approximately 4% Gross Domestic
Product ("GDP") growth for Japan, and the weakened Asian economies have put that
figure at risk.
Other reasons for poor stock market performance include a growing
realization that Japan's consumption tax increase in April 1997 was more harmful
to the already fragile domestic economy than initially recognized. The Fund's
management expects Japan's growing fiscal crisis will thwart an economic
stimulus package consisting of a supplementary budget of increased spending
which has also been offered in the past. With few alternatives, Prime Minister
Hashimoto must restructure the stagnant economy by fostering deregulation and
competition, and as a result bankruptcies and mergers will be allowed to occur.
Most analysts expect zero GDP growth in Japan for the year 1998.
At this point, most of the negative news may have been factored into the
stock market, and the Fund's management expects the current range of 15,000 -
17,000 will hold. Any significant rebound, however, will require a demonstrated
ability from Japan's leaders to improve the domestic economy.
FUND PERFORMANCE
As of October 31, 1997, the Fund's net assets were approximately $75.6
million, which represents a net asset value of $6.99 per share. During the
fiscal year, the Fund paid a dividend of $0.6550 per share on December 27, 1996,
and issued 19,826 new shares as a result of dividend reinvestment. Adjusting for
this dividend payment, the time-weighted return on the Fund's net assets was
- -28.99% since the Fund's previous fiscal year-end on October 31, 1996. Over the
same annual period, the Benchmark (the TOPIX less its financial firms component)
return was -17.21%, as measured in U.S. Dollars.
3
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
The change in net asset value in U.S. Dollars depends on several factors;
among them: (1) the percentage change in the Benchmark during the period; (2)
the over- or under-performance of the Fund's portfolio, after expenses, relative
to the Benchmark; (3) the change in the Japanese Yen/U.S. Dollar exchange rate;
and (4) dividends paid by the Fund during the measurement period.
The investment process of the Fund, utilizing DPOS, may be divided into two
parts: one part consists of calculations for estimating the "expected" return on
any security, given its earnings, book value, dividend yield, stock price and
the like. The other part constitutes risk and control procedures for reducing
tracking error relative to the Benchmark. These risk control procedures include
"constraints" on certain characteristics of the Fund's portfolio, such as
constraints on sector holdings, so that the portfolio's characteristics do not
differ significantly from those of the Benchmark. The risk control procedures
also include a computation which finds the combination of securities which had
minimum historical tracking error among portfolios which meet certain
constraint, expected return and low turnover criteria.
Since the above mentioned expected return calculation favors stocks with low
price/earnings ratios, low price-to-book ratios, etc., the process generally
selects what are called "value" stocks. Historically, value stocks have
outperformed the market in Japan. Currently, however, value stocks have
under-performed the market since the fourth quarter of 1996. Selection of stocks
by value criteria alone will generally overweight a portfolio with stocks of
smaller companies and lower price stocks than is found in the Benchmark
portfolio. An analysis by the Fund's management shows that much of the
under-performance of value stocks since the fourth quarter of 1996 has been due
to under-performance of small capitalization stocks and lower-price stocks.
In August 1997, the Fund's portfolio was modified to reflect a tightened
constraint on small capitalization stocks, and a newly introduced constraint on
lower price stocks, as compared to the Benchmark's holding of such stocks. The
Fund's performance in September showed a reduced sensitivity to continued
weakness in small capitalization and low price stocks. In October 1997, the Fund
outperformed its Benchmark. The Fund's investment process continues to seek
stocks which are attractively priced in terms of forecasted earnings and other
fundamental variables, but the portfolio is now selected subject to the
tightened constraints as described above.
It is important to emphasize that it is not an objective of the Fund to
predict changes in its Benchmark. Rather, the Fund's goal is to outperform the
Benchmark, while staying fairly fully invested. Specifically, the goal is to
hold no more than 5% in cash. On October 31, 1997, the proportion of the Fund's
net assets invested in non-financial Japanese equities listed on the First
Section of the TSE was 98.47%, while short term investments and other net assets
represented 1.53%.
Using the close of July 24, 1992 (the date upon which the Fund commenced
operations) as the performance measurement starting point of 100, by the end of
October, 1997, the Benchmark as measured in Yen equaled 111.28, whereas the
Fund's portfolio for that same period equaled 106.46 in Yen (including cash,
after expenses, and adjusting for dividend payments, dividend reinvestment, and
two rights offerings). Thus, in Yen terms, the Fund under-performed its
Benchmark by 4.82 percentage points from commencement through October 31, 1997.
At the end of October, 1997, the Benchmark, as measured in U.S. Dollars,
equaled 117.40, whereas the value of the Fund's portfolio equaled 112.32 in U.S.
Dollars (including cash, after expenses, and adjusting for dividend payments,
dividend reinvestment, and two rights offerings). Thus, in U.S. Dollar terms,
the Fund
4
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
under-performed its Benchmark by 5.08 percentage points from commencement
through October 31, 1997. The difference between Yen and Dollar performance
reflects a favorable change for the Fund in the exchange rate, from Y126.900 per
Dollar on July 24, 1992 to Y120.290 per Dollar on October 31, 1997.
The invested position of the Fund's assets consisted of common stocks of
companies operating in 24 different industries. The Fund has relatively large
weightings in Electrical Machinery (20.84% of net assets), Transportation
Equipment (15.87%), Chemicals (9.11%), Pharmaceuticals (7.72%), Wholesale
(7.42%), and Electric Power & Gas (7.36%).
During the Fund's fiscal year ended October 31, 1997, the Fund's market
price on the New York Stock Exchange ("NYSE") ranged from a low of $6 7/8 per
share on October 28, 1997 to a high of $11 3/4 on November 27, 1996. The Fund's
NYSE market price closed at $7 3/8 per share on October 31, 1997.
The NYSE trading price in relation to the Fund's net asset value per share,
as measured by the weekly closing prices during the Fund's fiscal year ended
October 31, 1997 ranged from a premium of 23.77% on October 3, 1997 to a
discount of 3.85% on November 27, 1996, and ended the fiscal year at a premium
of 5.51%.
The Fund has not invested, and presently does not intend to invest, in
derivative securities. Although foreign currency hedging is permitted by the
Fund's prospectus, the Fund has not engaged in any foreign currency hedging.
PORTFOLIO MANAGEMENT
Dr. Harry Markowitz, winner of the 1990 Nobel Prize in Economic Sciences, is
the Fund's portfolio manager and is responsible for the day-to-day management of
the Fund's portfolio. Dr. Markowitz has been the Director of Research with Daiwa
Securities Trust Company since 1990; Marvin Speiser Distinguished Professor of
Finance and Economics, Baruch College 1982-1993 (currently, Distinguished
Professor, Emeritus); and Research Director with Brignoli Models, Inc. from 1984
to 1989.
We welcome your participation in The Japan Equity Fund, Inc. and your
continued interest in the Japanese economy and marketplace.
Sincerely,
[SIGNATURE] [SIGNATURE]
HIDEAKI MATSUURA HARRY M. MARKOWITZ
CHAIRMAN OF THE BOARD PRESIDENT
5
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
- -------------------------------------------
JAPANESE COMMON STOCKS--98.47%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
CHEMICALS--9.11%
139,000 Denki Kagaku Kogyo Co., Ltd........ $ 263,474
47,000 Fuji Photo Film Co., Ltd........... 1,703,621
33,000 Kansai Paint Co., Ltd.............. 97,394
281,000 Konica Corporation................. 1,401,671
66,000 Mitsubishi Gas Chemical Co.,
Inc............................... 229,904
220,000 Mitsui Petrochemical Industries,
Ltd............................... 813,900
115,000 Nippon Kayaku Co., Ltd............. 504,801
122,000 Okura Industrial Co., Ltd.......... 329,634
605,000 Showa Denko Co., Ltd.+............. 1,091,449
12,000 Tenma Corporation.................. 157,626
121,000 Toagosei Co., Ltd.................. 296,754
------------
6,890,228
------------
COMMUNICATION--0.94%
84 NTT Corporation.................... 712,308
------------
CONSTRUCTION--3.58%
51,000 Daiwa House Industry Co., Ltd...... 491,832
600 Kyudenko Corporation............... 3,846
167,000 Sekisui House, Ltd................. 1,430,020
140,000 SXL Corporation.................... 523,756
700 Toenec Corporation................. 2,613
54,800 Tokyo Denki Komusho Co., Ltd....... 250,572
------------
2,702,639
------------
ELECTRIC POWER & GAS--7.36%
15,200 Chugoku Electric Power Co., Inc.... 247,678
48,500 Hokkaido Electric Power Co.,
Inc............................... 794,322
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
134,800 Kyushu Electric Power Co., Inc..... $ 2,241,343
119,300 Tokyo Electric Power Co., Inc...... 2,281,166
------------
5,564,509
------------
ELECTRICAL MACHINERY--20.84%
8,000 Advantest Corporation.............. 661,762
65,000 Canon Inc.......................... 1,577,919
48,000 Fuji Electric Co., Ltd............. 146,851
17,000 Fujitsu Ltd........................ 186,557
65,000 Hitachi Ltd........................ 499,855
62,000 Hoshiden Co., Ltd.+................ 572,141
24,000 KOA Corporation.................... 293,303
29,400 Kyocera Corporation................ 1,684,050
171,000 Matsushita Electric Industrial Co.,
Ltd............................... 2,871,680
22,000 Matsushita Electric Works, Ltd..... 199,360
55,000 Matsushita-Kotobuki Electronics
Industries, Ltd................... 1,710,105
29,000 Mitsumi Electric Co., Ltd.......... 568,982
189,000 NEC Corporation.................... 2,074,074
21,000 Nichicon Corporation............... 260,132
23,000 Nippon Chemi-con Corporation....... 85,663
2,000 Rohm Co., Ltd...................... 197,863
8,700 Sony Corporation................... 722,559
9,000 TDK Corporation.................... 746,727
46,000 Tokyo Electric Co., Ltd.+.......... 177,828
115,000 Toshiba Corporation................ 521,054
------------
15,758,465
------------
</TABLE>
6
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
JAPANESE COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
FOODS--0.28%
10,000 Kirin Brewery Co., Ltd............. $ 83,967
800 Pokka Corporation.................. 3,385
26,000 Takara Shuzo Co., Ltd.............. 126,882
------------
214,234
------------
GLASS & CERAMIC PRODUCTS--1.69%
254,000 Chichibu Onoda Cement Co., Ltd..... 660,947
105,000 INAX Corporation................... 457,414
23,000 N.G.K. Spark Plug Co., Ltd......... 160,045
------------
1,278,406
------------
IRON & STEEL--3.58%
554,000 Kobe Steel, Ltd.+.................. 667,831
297,000 Nippon Steel Co., Ltd.............. 612,346
470,000 Sumitomo Metal Industries, Ltd..... 941,680
91,000 Yodogawa Steel Works, Ltd.......... 484,940
------------
2,706,797
------------
LAND TRANSPORT--2.93%
102 East Japan Railway Co.............. 496,072
71,000 Maruzen Showa Unyu Co., Ltd........ 198,329
100,000 Mitsui O.S.K. Lines, Ltd.+......... 160,452
270 Nishi-Nippon Railroad Co., Ltd..... 808
157,000 Seino Transportation Co., Ltd...... 1,357,443
------------
2,213,104
------------
MACHINERY--1.13%
51,000 Heiwa Corporation.................. 856,466
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
METAL PRODUCTS--1.52%
103,000 Bunka Shutter Co., Ltd............. $ 381,053
76,000 Hokkai Can Co., Ltd................ 230,619
114,000 Komai Tekko Inc.................... 312,757
32,000 Takada Kiko Co., Ltd............... 141,531
9,000 Takuma Co., Ltd.................... 79,312
700 Yokogawa Bridge Corporation........ 2,916
------------
1,148,188
------------
MINING--0.71%
96,000 Nittetsu Mining Co., Ltd........... 537,922
------------
NON-FERROUS METALS--2.19%
524,000 Dowa Mining Co., Ltd............... 1,651,045
------------
OTHER PRODUCTS--2.70%
57,000 Itoki Crebio Corporation........... 194,289
16,700 Nintendo Co., Ltd.................. 1,443,904
17,000 Sun Wave Corporation............... 79,428
26,000 Toppan Printing Co., Ltd........... 326,392
------------
2,044,013
------------
PHARMACEUTICALS--7.72%
71,000 Chugai Pharmaceutical Co., Ltd..... 570,786
125,000 Daiichi Pharmaceutical Co., Ltd.... 1,777,030
31,000 Ono Pharmaceutical Co., Ltd........ 909,756
182,000 Shionogi & Co., Ltd................ 1,106,056
60,000 Yamanouchi Pharmaceutical Co.,
Ltd............................... 1,476,493
------------
5,840,121
------------
PULP & PAPER--2.33%
97,000 Chuetsu Pulp & Paper Co., Ltd...... 218,539
</TABLE>
7
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
JAPANESE COMMON STOCKS (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
PULP & PAPER (CONCLUDED)
11,600 Daio Paper Corporation............. $ 79,272
268,000 Nippon Paper Industries Co.,
Ltd............................... 1,466,051
------------
1,763,862
------------
RETAIL--2.87%
10,000 Heiwado Co., Ltd................... 92,281
20,000 Ito-Yokado Co., Ltd................ 994,305
56,000 Kasumi Co., Ltd.................... 264,904
29,000 Nissho Corporation................. 240,853
41,500 Parco Co., Ltd..................... 202,178
5,000 Seven Eleven Co., Ltd.............. 374,112
------------
2,168,633
------------
RUBBER PRODUCTS--0.72%
25,000 Bridgestone Corporation............ 540,383
------------
SERVICES--0.15%
310 Nippon Television Network
Corporation....................... 110,305
------------
TEXTILE & APPAREL--1.42%
25,000 Gunze, Ltd......................... 73,783
35,000 Ichikawa Woolen Textile Co.,
Ltd............................... 79,727
121,000 Nippon Felt Co., Ltd............... 409,419
156,000 Teijin Ltd......................... 512,283
------------
1,075,212
------------
TRANSPORTATION EQUIPMENT--15.87%
115,000 Aichi Machine Industry Co., Ltd.... 409,195
170,000 Daihatsu Motor Co., Ltd............ 818,307
410,000 Fuji Heavy Industries, Ltd......... 1,632,706
30,000 Honda Motor Co., Ltd............... 1,010,101
47,000 Iseki & Co., Ltd.+................. 84,400
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
41,000 Mitsuba Electric Manufacturing Co.,
Ltd............................... $ 238,600
249,000 Mitsubishi Heavy Industries,
Ltd............................... 1,223,419
427,000 Nissan Motor Co., Ltd.............. 2,275,487
42,000 Toyota Auto Body Co., Ltd.......... 356,154
142,000 Toyota Motor Corporation........... 3,954,774
------------
12,003,143
------------
WAREHOUSING--0.93%
141,000 Sumitomo Warehouse Co., Ltd........ 699,813
------------
WAREHOUSING & HARBOR TRANSPORT SERVICES--0.48%
80,000 Kamigumi Co., Ltd.................. 362,472
------------
WHOLESALE--7.42%
320,000 Marubeni Corporation............... 1,000,291
32,000 Nagase & Co., Ltd.................. 162,281
419,000 Nichimen Corporation............... 916,133
90,000 Nichimo Co., Ltd................... 175,832
10,000 Ryosan Co., Ltd.................... 193,707
33,000 Sangetsu Co., Ltd.................. 534,979
100,000 Sanrio Co., Ltd.+.................. 744,066
22,000 Sanshin Electronics Co., Ltd....... 298,125
118,000 Seiko Corporation.................. 618,032
85,000 Sun Telephone Co., Ltd............. 346,261
118,000 Tomen Corporation.................. 198,163
111,000 Toyota Tsusho Corporation.......... 425,415
------------
5,613,285
------------
Total Japanese Common Stocks
(Cost--$89,889,420).......................... 74,455,553
------------
</TABLE>
8
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONCLUDED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
- -------------------------------------------
SHORT-TERM INVESTMENTS--0.05%
- -------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
- ---------- ------------
<C> <S> <C>
U.S. DOLLAR TIME DEPOSIT--0.05%
$40 Bank of New York, 3.60% due 11/3/97
(Cost--$39,737)................... $ 39,737
------------
Total Investments--98.52%
(Cost--$89,929,157).......................... 74,495,290
Other assets less liabilities--1.48%........... 1,122,764
------------
NET ASSETS (Applicable to 10,815,688 shares of
capital stock outstanding; equivalent to
$6.99 per share)--100.00%.................... $ 75,618,054
------------
------------
</TABLE>
- ------------------------
+ Non-income producing securities.
- -------------------------------------------
TEN LARGEST COMMON STOCK CLASSIFICATIONS HELD
OCTOBER 31, 1997
- -------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY NET ASSETS
- ----------------------------------- ----------
<S> <C>
Electrical Machinery............... 20.84%
Transportation Equipment........... 15.87
Chemicals.......................... 9.11
Pharmaceuticals.................... 7.72
Wholesale.......................... 7.42
Electric Power & Gas............... 7.36
Iron & Steel....................... 3.58
Construction....................... 3.58
Land Transport..................... 2.93
Retail............................. 2.87
</TABLE>
- -------------------------------------------
TEN LARGEST COMMON STOCK POSITIONS HELD
OCTOBER 31, 1997
- -------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
ISSUE NET ASSETS
- ----------------------------------- ----------
<S> <C>
Toyota Motor Corporation........... 5.23%
Matsushita Electric
Industrial Co., Ltd............... 3.80
Tokyo Electric Power Co., Inc...... 3.02
Nissan Motor Co., Ltd.............. 3.01
Kyushu Electric Power Co., Inc..... 2.96
NEC Corporation.................... 2.74
Daiichi Pharmaceutical Co., Ltd.... 2.35
Matsushita-Kotobuki Electronics
Industries, Ltd................... 2.26
Fuji Photo Film Co., Ltd........... 2.25
Kyocera Corporation................ 2.23
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value
(cost-$89,929,157)........................ $ 74,495,290
Cash denominated in foreign currency
(cost-$787,866)........................... 788,749
Interest and dividends receivable.......... 292,788
Receivable for securities sold............. 145,322
Prepaid expenses........................... 21,217
-------------
Total assets............................. 75,743,366
-------------
LIABILITIES
Payable to investment manager.............. 24,912
Payable to administrator................... 12,314
Accrued expenses and other liabilities..... 88,086
-------------
Total liabilities........................ 125,312
-------------
NET ASSETS
Capital stock, $0.01 par value per share;
total 30,000,000 shares authorized;
10,815,688 shares issued and
outstanding............................... 108,157
Paid-in capital in excess of par value..... 109,162,882
Accumulated net realized loss on
investments............................... (18,221,023)
Net unrealized depreciation on investments
and other assets and liabilities
denominated in foreign currency........... (15,431,962)
-------------
Net assets applicable to shares
outstanding............................. $ 75,618,054
-------------
-------------
NET ASSET VALUE PER SHARE............ $ 6.99
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of withholding taxes of
$145,008)................................. $ 822,398
Interest................................... 4,996
-------------
Total investment income.................. 827,394
-------------
EXPENSES:
Investment management fee and expenses..... 329,052
Administration fee......................... 167,746
Custodian fees and expenses................ 119,290
Reports and notices to shareholders........ 74,877
Audit and tax services..................... 56,925
Legal fees and expenses.................... 46,863
Directors' fees and expenses............... 37,514
Insurance expense.......................... 29,477
Amortization of organizational expenses.... 29,142
Transfer agency fee and expenses........... 19,743
Other...................................... 38,884
-------------
Total expenses........................... 949,513
-------------
NET INVESTMENT LOSS.......................... (122,119)
-------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM
INVESTMENT ACTIVITIES AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized losses on investments......... (18,221,023)
Net realized foreign currency transaction
losses.................................... (8,371)
Net change in unrealized appreciation
(depreciation) on investments in equity
securities................................ (12,729,929)
Net change in unrealized appreciation
(depreciation) on translation of
short-term investments and other assets
and liabilities denominated in foreign
currency.................................. 15,064
-------------
Net realized and unrealized losses from
investment activities and foreign currency
transactions................................ (30,944,259)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. $ (31,066,378)
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
OCTOBER 31,
-------------------------------
1997 1996
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment loss........................ $ (122,119) $ (54,371)
Net realized gain (loss) on:
Investments.............................. (18,221,023) 7,398,313
Foreign currency transactions............ (8,371) (215,519)
Net change in unrealized appreciation
(depreciation) on:
Investments in equity securities......... (12,729,929) (5,716,978)
Translation of short-term investments and
other assets and liabilities denominated
in foreign currency..................... 15,064 19,335
------------- -------------
Net increase (decrease) in net assets
resulting from operations................. (31,066,378) 1,430,780
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net realized gains from investment and
foreign currency transactions............. (7,071,290) (7,222,517)
------------- -------------
FROM CAPITAL STOCK TRANSACTIONS:
Sale of capital stock resulting from:
Reinvestment of dividends................ 178,930 203,106
Exercise of rights issued................ -- 26,502,050
------------- -------------
Net increase in net assets derived from
capital stock transactions................ 178,930 26,705,156
------------- -------------
Net increase (decrease) in net assets...... (37,958,738) 20,913,419
NET ASSETS:
Beginning of year.......................... 113,576,792 92,663,373
------------- -------------
End of year................................ $ 75,618,054 $ 113,576,792
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Japan Equity Fund, Inc. (the "Fund") was incorporated in Maryland on
July 12, 1990 under its former name "The Japan Emerging Equity Fund, Inc." and
commenced operations on July 24, 1992. It is registered with the Securities and
Exchange Commission as a closed-end, diversified management investment company.
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of its financial
statements. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts and disclosures in the financial statements.
Actual reporting results could differ from those estimates.
VALUATION OF INVESTMENTS--Securities which are listed on the First Section
of the Tokyo Stock Exchange and for which market quotations are readily
available are valued at the last reported sales price available to the Fund at
the close of business on the day the securities are being valued or, lacking any
such sales, at the last available bid price. In instances where quotations are
not readily available or where the price as determined by the above procedures
is deemed not to represent fair market value, fair value will be determined in
such manner as the Board of Directors (the "Board") may prescribe. Short-term
investments having a maturity of 60 days or less are valued at amortized cost,
except where the Board determines that such valuation does not represent the
fair value of the investment. All other securities and assets are valued at fair
value as determined in good faith by, or under the direction of, the Board.
FOREIGN CURRENCY TRANSLATION--The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities and other assets and liabilities stated in Japanese yen
are translated at the exchange rates prevailing at the end of the period; and
(2) purchases, sales, income and expenses are translated at the rate of exchange
prevailing on the respective dates of such transactions. The resulting exchange
gains and losses are included in the Statement of Operations. The Fund does not
generally isolate the effect of fluctuations in foreign exchange rates from the
effect of fluctuations in the market price of securities.
TAX STATUS--The Fund intends to continue to distribute substantially all of
its taxable income and to comply with the minimum distribution and other
requirements of the Internal Revenue Code applicable to regulated investment
companies. Accordingly, no provision for federal income or excise taxes is
required.
The Fund is not subject to any Japanese income, capital gains or other taxes
except for withholding taxes on certain income, generally imposed at rates of
10% on interest and 15% on dividends, paid to the Fund by Japanese corporations.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date (the date upon which the order to buy or sell is
executed). Realized and unrealized gains and losses from security and foreign
currency transactions are calculated on the identified cost basis. Dividend
income and corporate
13
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
actions are recorded generally on the ex-date, except for certain dividends and
corporate actions from Japanese securities which may be recorded after the
ex-date, but recorded as soon as the Fund acquires information regarding such
dividends. Interest income is recorded on an accrual basis.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--The Fund records dividends and
distributions payable to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations, which
may differ from generally accepted accounting principles. These book basis/tax
basis differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax basis treatment;
temporary differences do not require reclassifications. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in capital.
INVESTMENT MANAGER AND INVESTMENT ADVISER
The Fund has an Investment Management Agreement dated July 17, 1992 with
Daiwa International Capital Management Corp. (the "Manager"). Daiwa Securities
Trust Company ("DSTC" or the "Adviser") acts as the Fund's investment adviser
pursuant to an Investment Advisory Agreement dated July 17, 1992 between the
Manager and DSTC. For such investment services, the Fund pays the Manager a
monthly fee at an annual rate of 0.60% of the first $20 million, 0.40% of the
next $30 million and 0.20% of the excess over $50 million of the Fund's average
weekly net assets, of which fee 70% is paid by the Manager to DSTC.
Brokerage commissions of $281,611 were paid by the Fund to Daiwa Securities
Co. Ltd., an affiliate of the Manager and DSTC, in connection with portfolio
transactions during the year ended October 31, 1997. In addition, the Fund has
agreed to reimburse the Manager and the Adviser for all out-of-pocket expenses
related to the Fund. For the year ended October 31, 1997, investment management
fees and expenses include expenses of $4,401 paid to the Adviser, representing
reimbursement to the Adviser of costs relating to the attendance by an employee
of the Adviser at meetings of the Fund's Board.
ADMINISTRATOR AND CUSTODIAN AND OTHER RELATED PARTIES
DSTC provides certain administrative services to the Fund, for which the
Fund pays to DSTC a monthly fee at an annual rate of 0.20% of the first $60
million of the Fund's average weekly net assets, 0.15% of the next $40 million
and 0.10% of the excess over $100 million, with a minimum annual fee of
$120,000.
DSTC also acts as custodian for the Fund's assets and has appointed The
Sumitomo Bank, Limited to act as the sub-custodian for all of the cash and
securities of the Fund held in Japan. As compensation for its services as
custodian, DSTC receives a monthly fee and reimbursement of out-of-pocket
expenses. Such expenses include fees and out-of-pocket expenses of the
sub-custodian. During the year ended October 31, 1997, DSTC earned $49,721,
excluding sub-custodian fees and expenses, as compensation for its custodial
services to the Fund.
14
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
- --------------------------------------------------------------------------------
At October 31, 1997, the Fund owed $12,314 and $3,695 to DSTC for
administration and custodian fees, excluding sub-custodian fees and expenses,
respectively.
During the year ended October 31, 1997, the Fund paid or accrued $44,863,
for legal services in connection with the Fund's ongoing operations to a law
firm of which the Fund's Assistant Secretary is a partner.
INVESTMENTS IN SECURITIES AND FEDERAL INCOME TAX MATTERS
For federal income tax purposes, the cost of securities owned at October 31,
1997 was substantially the same as the cost of securities for financial
statement purposes. At October 31, 1997, the net unrealized depreciation of
investments for federal income tax purposes, excluding short-term securities, of
$15,433,867 was composed of gross appreciation of $2,010,617 for those
investments having an excess of value over cost, and gross depreciation of
$17,444,484 for those investments having an excess of cost over value. For the
year ended October 31, 1997, total aggregate purchases and sales on portfolio
securities, excluding short-term securities, were $56,767,627 and $64,303,752,
respectively.
At October 31, 1997, the Fund had a capital loss carryover of $18,221,023,
which expires in 2005.
To reflect reclassifications arising from permanent book/tax differences for
the year ended October 31, 1997, $186,676 was reclassified from accumulated net
investment loss, $28,270 was reclassified from distributions in excess of net
realized gains on investments and $214,946 was charged to paid-in capital in
excess of par value.
CAPITAL STOCK
There are 30,000,000 shares of $0.01 par value common stock authorized.
During the years ended October 31, 1997 and 1996, 19,826 and 15,985 shares were
issued, respectively, as a result of the reinvestment of dividends paid to those
shareholders electing to reinvest dividends.
Of the 10,815,688 shares of the Fund outstanding at October 31, 1997, Daiwa
Securities America Inc., an affiliate of the Manager and DSTC, owned 14,532
shares.
15
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding during each year is
presented below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED OCTOBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............................ $ 10.52 $ 11.47 $ 14.86 $ 14.69 $ 9.93
---------- ---------- ---------- ---------- ----------
Net investment loss........................................... (0.01) (0.01) (0.01) (0.03) (0.05)
Net realized and unrealized gains (losses) on investments and
foreign currency transactions................................ (2.86) 0.19 (1.90) 1.75 4.81
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value resulting from
operations................................................... (2.87) 0.18 (1.91) 1.72 4.76
---------- ---------- ---------- ---------- ----------
Less: dividends and distributions to shareholders
Net realized gains on investments and foreign currency
transactions............................................... (0.66) (0.67) (1.48) (1.09) --
---------- ---------- ---------- ---------- ----------
Dilutive effect of rights offering............................ -- (0.43) -- (0.42) --
---------- ---------- ---------- ---------- ----------
Offering costs charged to paid-in capital in excess of par
value........................................................ -- (0.03) -- (0.04) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year.................................. $ 6.99 $ 10.52 $ 11.47 $ 14.86 $ 14.69
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Per share market value, end of year........................... $ 7.375 $ 10.375 $ 12.875 $ 15.000 $ 13.625
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return:
Based on market price at beginning and end of year, assuming
reinvestment of dividends+................................. (23.76)% (13.55)% (4.21)% 22.10% 43.42%
Based on net asset value at beginning and end of year,
assuming reinvestment of dividends+........................ (28.73)% (1.18)% (13.86)% 11.88% 47.94%
Ratios and supplemental data:
Net assets, end of year (in millions)....................... $ 75.6 $113.6 $ 92.7 $119.6 $ 88.3
Ratios to average net assets of:
Expenses.................................................... 1.03% 0.90% 0.97% 0.93% 1.18%
Net investment loss......................................... (0.13)% (0.04)% (0.07)% (0.19)% (0.34)%
Portfolio turnover............................................ 61.75% 33.89% 28.35% 30.76% 25.42%
Average commission rate per share............................. $ 0.0237 $ 0.0325 N/A N/A N/A
</TABLE>
- --------------------------
+ For the years ended October 31, 1996 and 1994, the total investment
return includes the benefit of shares resulting from the exercise of
rights.
16
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders
and Board of Directors of
The Japan Equity Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Japan Equity Fund, Inc. (the
"Fund") at October 31, 1997, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1997 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 4, 1997
17
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
TAX INFORMATION
- --------------------------------------------------------------------------------
The Fund is required by Subchapter M of the Internal Revenue Code of 1986,
as amended, to advise you within 60 days of the Fund's fiscal year end (October
31, 1997) as to the federal tax status of distributions received by you during
such fiscal year. Accordingly, the Fund is hereby advising you that of the
$0.6550 per share distribution paid during the fiscal year, on December 27,
1996, $0.0420 represented an ordinary income dividend, and $0.6130 represented a
long-term capital gain distribution. This distribution was taxable for the
calendar year 1996.
There will be no dividend payment or foreign tax credit with respect to the
fiscal year 1997.
SHAREHOLDERS ARE STRONGLY ADVISED TO CONSULT THEIR OWN TAX ADVISERS WITH
RESPECT TO THE TAX CONSEQUENCES OF THEIR INVESTMENT IN THE FUND.
18
<PAGE>
THE JAPAN EQUITY FUND, INC.
- ----------------------------------------------------------------------
RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED)
- --------------------------------------------------------------------------------
On June 5, 1997, the Annual Meeting of Stockholders of The Japan Equity
Fund, Inc. (the "Fund") was held and the following matters were voted upon.
Proposals (1) and (2) were passed and Proposal (3) did not pass due to a lack of
affirmative votes as required.
(1) To elect two Class I Directors to the Board of Directors of the Fund, to
serve for a term expiring on the date on which the Annual Meeting of
Stockholders is held in the year 2000.
NUMBER OF SHARES/VOTES
<TABLE>
<CAPTION>
PROXY AUTHORITY
NAME OF DIRECTOR VOTED FOR WITHHELD NON-VOTES
- --------------------- --------- --------------- ---------
<S> <C> <C> <C>
Katsunari Rembutsu* 5,999,135 148,582 4,667,970
Martin J. Gruber 6,011,014 136,703 4,667,970
</TABLE>
In addition to the two Directors re-elected at the Meeting, Austin C.
Dowling, Robert F. Gurnee, Harry M. Markowitz and Frederick W. Zuckerman* were
the other members of the Board who continued to serve as Directors of the Fund.
(2) To ratify the selection of Price Waterhouse LLP as independent
accountants of the Fund for its fiscal year ending October 31, 1997.
NUMBER OF SHARES/VOTES
<TABLE>
<CAPTION>
VOTED FOR VOTED AGAINST ABSTENTIONS NON-VOTES
- --------- ------------- ----------- ---------
<S> <C> <C> <C>
5,983,725 104,722 59,270 4,667,970
</TABLE>
(3) Approval of an amendment to the Fund's investment restrictions to permit
the Fund to lend portfolio securities.
NUMBER OF SHARES/VOTES
<TABLE>
<CAPTION>
VOTED FOR VOTED AGAINST ABSTENTIONS NON-VOTES
- --------- ------------- ----------- ---------
<S> <C> <C> <C>
2,324,662 273,978 3,549,077 4,667,970
</TABLE>
- ------------------------
* Mr. Rembutsu and Mr. Zuckerman are no longer Directors of the Fund. Mr.
Rembutsu resigned as Chairman and as a Director in September, 1997 and Mr.
Zuckerman passed away in September, 1997. Mr. Hideaki Matsuura was elected in
September, 1997 as the Fund's Chairman and a Director and Mr. David G. Harmer
was elected as a Director in December, 1997 by the remaining members of the
Board to replace Mr. Rembutsu and Mr. Zuckerman, respectively. Under the
Fund's By-Laws, both Mr. Matsuura and Mr. Harmer must stand for election as
Directors at the next Annual Meeting of Stockholders, which will be held in
June, 1998.
19
<PAGE>
- ----------------------------------------
BOARD OF DIRECTORS
Hideaki Matsuura, CHAIRMAN
Austin C. Dowling
Martin J. Gruber
Robert F. Gurnee
David G. Harmer
Harry M. Markowitz
- --------------------------------------------
OFFICERS
Harry M. Markowitz
PRESIDENT
Daniel F. Barry
VICE PRESIDENT
Lawrence Jacob
SECRETARY
Edward J. Grace
TREASURER
John J. O'Keefe
ASSISTANT TREASURER
Laurence E. Cranch
ASSISTANT SECRETARY
- --------------------------------------------
ADDRESS OF THE FUND
c/o Daiwa Securities Trust Company
One Evertrust Plaza, 9th Floor
Jersey City, New Jersey 07302
- --------------------------------------------
INVESTMENT MANAGER
Daiwa International Capital Management Corp.
INVESTMENT ADVISER
Daiwa Securities Trust Company
ADMINISTRATOR AND CUSTODIAN
Daiwa Securities Trust Company
TRANSFER AGENT AND REGISTRAR
PNC Bank, National Association
LEGAL COUNSEL
Rogers & Wells
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
- --------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that from time to time the Fund may purchase shares of its
common stock in the open market at prevailing market prices.
This report is sent to shareholders of the Fund for their information. It is not
a prospectus, circular or representation intended for use in the purchase or
sale of shares of the Fund or of any securities mentioned in the report.
ANNUAL REPORT
OCTOBER 31, 1997
- -------------------------
[LOGO]
- -------------------------
THE JAPAN EQUITY
FUND, INC.
c/o Daiwa Securities Trust Company
One Evertrust Plaza
Jersey City, New Jersey 07302
INVESTMENT MANAGER
Daiwa International Capital
Management Corp.
INVESTMENT ADVISER
Daiwa Securities Trust Company
