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PROPOSALS 4 AND 5
New Investment Management Agreement Between the Fund and Asia Management and New Advisory Agreement between
Asia Management and NICAM
The Board of Directors of the Fund has approved and recommended for the approval of
stockholders at the 1991 Special Meeting a new Investment Management Agreement with Asia
Management (the "proposed Management Agreement") and a new Advisory Agreement between
Asia Management and NICAM (the "proposed NICAM Agreement"). The proposed Manage-
ment Agreement is a new form of agreement that would replace the existing Investme nt
Advisory and Management Agreement with Asia Management dated as of June 5, 1989 (the
"present Management Agreement") and increase the rates of the fees payable to Asia
Management in the manner described below. The proposed NICAM Agreement would amend
the existing Advisory Agreement between Asia Management and NICAM dated as of June 5,
1989 (the "present NICAM Agreement") by increasing the rates of the fees payable to NICAM
by Asia Management in the manner described below. The proposed Management Agreement and
the proposed NICAM Agreement are attached hereto as Exhibits C and D, respectively.
Rate of Compensation Under the New Agreements
The principal difference between the present Management Agreement and the proposed
Management Agreement is that the annual fee payable to Asia Management would be increased
from (a) 0.75 of I % on the first S 150 million of average daily net assets, 0.60 of I % on assets in
excess of $150 million up to and including $200 million and 0.55 on 1% on assets excess of
$200 million, payable monthly to (b) 0.85 of 1% on the first $200 million of average daily ne t
assets, 0.80 of 1% on assets in excess of $200 million up to and including $300 million, 0.75 of
1% on assets in excess of $300 million up to and including $700 million and 0.70 of assets in
excess of $700 million, payable monthly. The fee structure under the present Management
Agreement has been in effect since July 1, 1986.
The table below compares actual fees incurred under the present Management Agreement with
the fees that would have been payable under the proposed Management Agreement during the
last fiscal year of the Fund (unaudited):
Advisory Fees Fees Payable
Actually Under the
Year Ended Incurred(s) Proposed Agreement (b) $ Change % Change
December 31, 1990 $2,290,568 $2,930,319 $639,751 28% ______________
(a) Computed pursuant to the current fee schedule as described above. In addition, Scudder
Service Corporation, a wholly owned subsidiary of Scudder, charged $400,514 for
shareholder and transfer agent services during 1990.
(b) Computed pursuant to the proposed fee schedule as described above.
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The ratio of operating expenses to average net assets for the fiscal year ended December
31, 1990 was 1.05%. If the proposed Management Agreement had been in effect the ratio would
have been 1.23%. At February 28, 1991, the net assets of the Fund were approximately
$371,831,624. There can be no assurance as to the future size of the Fund.
The proposed NICAM Agreement would increase the annual fee payable to NICAM by
Asia Management from (a) 0.1875 of 1 % on the first $150 million of average daily net asset s,
0.15 of 1 % on assets in excess of $150 million up to and including $200 million and 0.1375 of
1% on assets in excess of $200 million, payable monthly, to (b) 0.23 of 1% on the first $200
million of average daily net assets, 0.21 of 1% on assets in excess of $200 million up to a nd
including $300 million, 0.19 of 1% on assets in excess of $300 million up to and including $700
million and 0.17 of 1% on assets in excess of $700 million, payable monthly. The fee structure
under the present NICAM Agreement has been in effect since July 1, 1986.
In 1990, the advisory fee incurred by Asia Management to NICAM was $572,642. Had
the rates provided under the proposed NICAM Agreement been in effect, the advisory fee
incurred to NICAM would have been $779,014.
Board of Directors' Approval and Recommendation
The Board of Directors at a meeting on January 25, 1991 approved the proposed Manage-
ment Agreement and the proposed NICAM Agreement and recommended the agreements for
approval by stockholders. At the same meeting these agreements were approved by a majori ty of
the directors who are not "interested persons" of the Fund or of any party to the respective
agreements as that term is defined under the 1940 Act (the "Non-Interested Directors"). In
approving the agreements and the fee increases provided thereunder, the directors of the Fund,
including the Non-Interested Directors, took into account all factors they deemed rel evant. These
factors included the nature, quality and extent of services furnished by Asia Management and
NICAM, including the intensive and complex research, tailored to the Fund's objectives, e ntailed
in the active management of the Fund's portfolio; the investment record of Asia Managem ent and
NICAM in managing the Fund; the personnel of Asia Management, Scudder and NICAM
supporting the Fund; the desirability of providing in one contract for investment advisory and
administrative services necessary or appropriate for managing the Fund; the services rendered by
NICAM to Asia Management, including the quality and quantity of research materials a nd the
frequency of communication about market and investment conditions in Japan; the profitabi lity
and costs of Asia Management and NICAM with respect to the Fund; possible economies of
scale to Asia Management and NICAM if the Fund's assets increase; the risks assumed by Asia
Management, Scudder and NICAM; data as to the investment performance, advisory fees and
expense ratios of funds deemed comparable to the Fund; possible corollary benefits to Asia
Management, Scudder and NICAM resulting from the advisory relationships; possible benefits to
Asia Management and Scudder from affiliates of Asia Management and Scudder serving as
principal underwriter and transfer agent of the Fund; financial and other benefits of Scudder
Trust Company receiving payments from the Fund's shareholders for providing retirement plan
services; financial and other benefits to Scudder Service Corporation of receiving payment s from
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the Fund for acting as transfer, dividend-paying and shareholder service agent for the Fund;
Scudder's expenditures in developing worthwhile and innovative shareholder services for the
Fund; improvements in the quality and scope of the shareholder services provided to the Fund's
shareholders; the financial resources of Asia Management and NICAM and the continuance of
appropriate incentives to assure the continued furnishing of high quality services to the Fund;
and various other factors.
Description of the Proposed Management Agreement
The following summary of certain provisions of the proposed Management Agreement is
qualified in its entirety by reference to the proposed Management Agreement, which is at tached
hereto as Exhibit C.
Under the proposed Management Agreement, Asia Management will agree to provide
continuing investment management of the Fund's assets, as well as to use reasonable effort s to
manage the Fund so that it will qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended, to make available investment records and ledgers as
necessary to assist the Fund to comply with the 1940 Act and other applicable laws, to determine
what portion of the Fund's portfolio shall be invested in securities and other assets and wha t
portion, if any, should be held uninvested, and to furnish periodic reports on the investment
performance of the Fund and on the performance of Asia Management's obligations under the
proposed Management Agreement to the Fund's Board of Directors.
In addition to the provision of portfolio management services and furnishing at its
expense office space and facilities for the Fund, under the proposed Management Agreement
Asia Management will render significant administrative services (not otherwise provided by
third parties) necessary for the Fund's operations as an open-end investment company, including,
but not limited to, preparing reports and notices to the directors and shareholders; supervisi ng,
negotiating contractual arrangements with, and monitoring various third-party service providers
to the Fund (such as the Fund's transfer agent, pricing agents, custodian, accountants and others);
preparing and making filings with the Securities and Exchange Commission and other regulat ory
agencies; assisting in the preparation and filing of the Fund's federal, state and loc al tax returns;
preparing and filing the Fund's federal excise tax returns; assisting with investor and public
relations matters; monitoring the valuation of securities and the calculation of net asset value;
monitoring the registration of shares of the Fund under applicable federal and state sec urities
laws; maintaining the Fund's books and records to the extent not otherwise maintained by a third
party-, assisting in establishing accounting policies of the Fund; assisting in the resolution of
accounting and legal issues; establishing and monitoring the Fund's operating budget; processi ng
the payment of the Fund's bills; assisting the Fund in, and otherwise arranging for, the payment
of distributions and dividends and otherwise assisting the Fund in the conduct of its business,
subject to the direction and control of the directors. The directors believe it is desirable to include
the responsibility for providing these services in the proposed Management Agreement.
Under the proposed Management Agreement, Asia Management will provide the Fund
with portfolio management services and administrative services (which include provision of
office facilities). Under both the present and proposed Agreements, the Fund is responsible for
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all expenses not entailed in Asia Management's provision of those services. The proposed
Management Agreement enumerates certain expenses for which the Fund and not Asia
Management would be responsible, including fees and expenses incurred in connection with
membership in investment company organizations; brokers' commissions; legal, auditing and
accounting expenses; portfolio pricing services; taxes and governmental fees; the fees and
expenses of the transfer agent; expenses of preparing share certificates and any other expense s,
of issue, redemption or repurchase of shares; the expenses of and fees for registering or
qualifying securities for sale; the fees and expenses of directors who are not affiliated with Asia
Management; the cost of printing and distributing reports and notices to stockholders; and t he
fees and disbursements of custodians. The custodian agreement provides that the custodian shall
compute the net asset value. The Fund is also responsible for expenses of stockholders' meetings
and indemnification of officers and directors of the Fund.
Under the proposed Management Agreement, Asia Management pays the compensation
of all officers and employees of the Fund who are affiliated persons of Asia Management a nd
makes available, without expense to the Fund, the services of such directors, officers and
employees of Asia Management or of Scudder as may be duly elected officers of the Fund,
subject to their individual consent to serve and to any limitations imposed by law. Sim ilarly,
Asia Management is also responsible for the salaries of such persons under the present
Management Agreement. Under both Agreements, the Fund is responsible for the fees and
expenses of directors not affiliated with Asia Management. The proposed Management
Agreement also specifically provides that the Fund will pay the expenses, such as trave l
expenses, of directors and officers of the Fund who are directors, officers or employees of Asia
Management, to the extent that such expenses relate to attendance at me etings of the Board of
Directors or any committees thereof held outside Boston, Massachusetts or New York, New York.
The proposed Management Agreement provides that Asia Management shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund in connection
with matters to which the Agreement relates, except a loss resulting from will ful misfeasance,
bad faith or gross negligence on the part of Asia Management in the performance of its dut ies or
from reckless disregard by Asia Management of its obligations and duties under the Agreement.
If approved by the stockholders, the present Management Agreement will terminate and
the proposed Management Agreement will become effective on the day following approval and
will remain in force until February 28, 1993. The proposed Management Agreement would
continue in effect thereafter by its terms from year to year only so long as it s continuance is
specifically approved at least annually by the vote of a majority of those directors who are not
"interested persons" of the Fund or Asia Management cast in person at a meeting call ed for that
purpose, and either by vote of the directors, or a majority of the Fund's outstanding voting
securities, as defined below. The proposed Management Agreement may be terminated on 60
days' written notice, without penalty, by the directors, by the vote of the holders of a ma jority of
the Fund's outstanding voting securities, or by Asia Management, and automatically termi nates
in the event of its assignment. The present Management Agreement requires annual approval of
its continuance and contains the same termination provisions as the proposed Management
Agreement.
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Description of the Proposed NICAM AgreementPursuant to the present NICAM Agreement, NICAM provides, and under the proposed
NICAM Agreement NICAM will provide, Asia Management with information, investment
recommendations, advice and assistance for use by Asia Management in advising the Fund.
NICAM is free, under the terms of both NICAM Agreements, to render similar services to
others, including other investment companies.
If approved by the stockholders, the present NICAM Agreement will terminate, and the
proposed NICAM Agreement will become effective on the day following approval and will
remain in force until February 28, 1993. The proposed NICAM Agreement would continue in
effect thereafter by its terms from year to year only so long as its continua nce is specifically
approved at least annually by vote of a majority of those directors who are not "interest ed
persons" of the Fund, Asia Management or NICAM cast in person at a meeting called for that
purpose, and either by vote of the directors, or a majority of the Fund's outstanding voting
securities, as defined below. Pursuant to its terms the proposed NICAM Agreement may be
terminated by the directors, by vote of the holders of a majority of the Fund's outstanding vot ing
securities or by Asia Management on 60 days’ written notice to NICAM or by NICAM on six
months' written notice to the Fund and Asia Management and terminates automatical ly if it or the
Agreement between the Fund and Asia Management is assigned.
Voting Requirement for Proposals 4 and 5
A favorable vote by the holders of a majority of the outstanding voting securities of the
Fund will be necessary for adoption of Proposals 4 and 5, which under the 1940 Act means the
vote of the lesser of (a) 67% or more of the shares present at a meeting, if the holders of more
than 50% of the outstanding shares are present or represented by proxy or (b) more than 50% of
the outstanding shares of the Fund.
If Proposal 4 or 5 is not approved by stockholders, the present Management Agreement
or the present NICAM Agreement, as the case may be, will continue in full force and effect.
The Board of Directors recommends that you vote FOR approval of Proposals 4 and
5.
INFORMATION CONCERNING ASIA MANAGEMENT
Asia Management, a Delaware corporation, was created to provide management services
and investment advice to the Fund as well as to others, including, but not limited t o, other
investment companies investing in- Japan. Asia Management presently has no understanding or
arrangement with respect to providing services to any company or person other than the Fund,
although it may provide advisory services to Scudder. The capitalization of Asia Manageme nt at
December 31, 1990 is set forth in the balance sheet attached as Exhibit A. All of the stock of
Asia Management is owned by Scudder.
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The directors of Asia Management include Mr. 0. Robert Theurkauf, Ms. Gina
Provenzano, Mr. Douglas M. Loudon, Mr. Nicholas Bratt and Ms. Kathryn L. Quirk. Mr.
Theurkauf is President of Asia Management and of the Fund, Ms. Quirk is Vice President and
Secretary of Asia Management and Secretary of the Fund and Mr. William E. Holzer is a Vice
President of Asia Management and of the Fund. Ms. Elizabeth J. Allan is a Vice President of
Asia Management, the Fund and Scudder. Mr. Seung K. Kwak is a Vice President of Asia
Management and Scudder. Ms. Gina Provenzano serves as Vice President and Treasurer of both
the Fund and Asia Management and is also a Vice President of Scudder. Ms. Carol Berg serves
as Assistant Secretary of both the Fund and Asia Management. Messrs. Bratt, Holzer, Loudon
and Theurkauf and Ms. Quirk are Managing Directors of Scudder.
The address of Asia Management and its officers and directors is 345 Park Avenue, New
York, New York 10154.
INFORMATION CONCERNING SCUDDER
Scudder, a Delaware corporation, is one of the most experienced investment management
firms in the United States. Since 1919 it has pioneered the practice of providing inve stment
counsel to clients on a fee basis rather than receiving compensation based on portfolio
transactions for clients. The principal source of Scudder's income is professional fees receive d
from providing continuing investment advice and management. The firm derives no income from
banking, brokerage or underwriting of securities.
Today Scudder provides investment management services for individuals and institutions,
including employee benefit funds, insurance companies, colleges, industrial corporations,
financial and banking organizations and investment companies. In some instances, investme nts
appropriate for the Fund may also be appropriate for clients, including investment companies,
advised by Scudder. Scudder maintains a large research department, which conducts continuous
studies of the factors that affect various industries, companies and individual securities both in
the United States and abroad. In this work, Scudder utilizes certain reports and statist ics from a
wide variety of sources, including brokers and dealers who may execute portfolio transactions
for investment companies and other clients of Scudder.
Scudder has been active in international investment for over 35 years and its investme nt
company clients include Scudder International Fund, Inc., an investment company specializ ing in
foreign investments, initially incorporated in Canada as the first foreign investment company
registered with the United States Securities and Exchange Commission, The Korea Fund, Inc., a
closed-end investment company organized in 1984 to invest in Korean securities, Scudder New
Asia Fund, Inc., a closed-end investment company organized in 1987 to invest in Asian
companies, including smaller Japanese companies, The Brazil Fund, Inc., a closed-end
investment company organized in 1988 to invest in Brazilian securities and Scudder Ne w Europe
Fund, Inc., a closed-end investment company organized in 1990 to invest in smaller or emerging
European securities markets and companies. Several members of Scudder's research staff have
extensive experience in portfolio investment in Japanese securities, and Scudder has dea lt with
Nikko Securities for many years.
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Scudder has managed investment companies since 1928 and is today the adviser of
registered investment companies with combined assets of over $14 billion. Total assets under
Scudder's supervision exceed $45 billion.
Daniel Pierce, 175 Federal Street, Boston, Massachusetts, is the Chairman of the Board
of Scudder, Edmond D. Villani, 345 Park Avenue, New York, New York, is the President and a
director of Scudder and Stephen R. Beckwith, 345 Park Avenue, New York, New York, Lynn S.
Birdsong, 345 Park Avenue, New York, New York, Nicholas Bratt, 345 Park Avenue, New
York, New York, Cuyler W. Findlay, 345 Park Avenue, New York, New York, Jerard K.
Hartman, 345 Park Avenue, New York, New York, Douglas M. Loudon, 345 Park Avenue, New
York, New York, John T. Packard, 101 California Street, San Francisco, California, Juris
Padegs, 345 Park Avenue, New York, New York, Cornelia M. Small, 345 Park Avenue, New
York, New York, 0. Robert Theurkauf, 345 Park Avenue, New York, New York, and David B.
Watts, 175 Federal Street, Boston, Massachusetts are the other members of the Board of
Directors of Scudder. The principal occupation of each of the above-named individuals is serving
as a Managing Director of Scudder.
INFORMATION CONCERNING NICAM AND NIKKO SECURITIES
NICAM, a Japanese corporation which is an indirectly controlled affiliate of Nikko
Securities, is engaged in an investment counseling and management business providing
economic research, business information and security analysis to a variety of Japanese and
international clients, including investors interested in Japanese and other Far East ern securities
and companies interested in international direct investments and joint ventures or in raising funds
in international capital markets. NICAM has agreed that its separate staff which prepares and
makes specific investment recommendations to Asia Management and the Fund will not make
specific investment recommendations to any other person or entity.
Nikko Securities, a Japanese corporation which is one of the largest securities houses of
Japan, conducts a general investment banking business and acts as broker, dealer and underwrite r
with respect to all types of corporate and government securities. In the course of its cust omary
activities, Nikko Securities purchases and sells Japanese securities as a dealer for its own account
and it may have long or short positions in securities of companies which are represented in t he
Fund's portfolio.
Mr. Shoji Umemura, a member of the Fund's Board of Directors, is Chairman of the
Board of Nikko Securities. As of January 31, 1991, Mr. Umemura owned 416,000 shares of the
1,466,162,197 shares of common stock of Nikko Securities outstanding as of that date. All
outstanding shares of Nikko Securities common stock have voting power.
Officers and Directors of NICAM
The names and titles of the principal executive officers and directors of NICAM are set
forth below. The principal occupation of all such persons is that of fund manager or investment
advisor for both international and domestic clients. A separate staff within the NICAM
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organization prepares and makes specific investment recommendations to Asia Management and
is supervised by a director whose principal occupation is investment research.
Todao Kobayashi, President and Director Satoru Takahashi, Director
Tsuneo Izawa, Senior Managing Director Kazuhiro Higashino, Director
Toshiyuki Kiyohara, Managing Director Takashi Murakami, Director
Takashi Murakami, Managing Director Kazuyuki Utsunomiya, Auditor
Yoshihiko Kubota, Managing Director Kohei Ohiwa, Auditor*
Yukihiro Noguchi, Director____________________
*Part-time.
The principal office of NICAM in Japan, 7-3, Marunouchi 2-chome, Chiyoda-Ku, Tokyo
100, Japan, is the address of each of the officers and directors of NICAM.
SECURITIES TRANSACTIONS FOR AND WITH THE FUND
Total brokerage commissions paid by the Fund amounted to $908,407 for 1990,
$1,177,634 for 1989 and $788,279 for 1988. Of these amounts, commissions were paid by the
Fund- for brokerage services rendered by Nikko Securities in respect of portfolio transactions by
the Fund in the amounts of $51,688 for 1990, $63,049 for 1989 and $49,831 for 1988. Such
amounts represented 5.7%, 5.4% and 6.3% of the total brokerage commissions paid by the Fund
in these years, respectively. The advisory fee paid to NICAM was not reduced because of the se
brokerage commissions and it is not expected that the advisory fees paid in the fut ure to NICAM
will be so reduced. The rate of total portfolio turnover of the Fund for the years 1990, 1989 and
1988 was 52.7%, 60.4% and 38.8%, respectively.
One of the Fund's directors is affiliated with J.P. Morgan Securities Asia, Ltd. In 1990
there were $2,659 in commissions paid or accrued by the Fund to J.P. Morgan Securities Asia,
Ltd.
The Fund always seeks to place portfolio transactions with those brokers which, in the
opinion of the Management of the Fund, provide the best execution of Fund orders. The Fund
considers the obtaining of the most favorable price for Fund orders a major factor in best
execution. Subject to this practice of seeking the best execution, the Fund in alloc ating brokerage
may consider research information provided by brokers to the Fund or to Asia Management for
use in advising the Fund. Orders for portfolio transactions of the Fund may be placed through
Scudder Fund Distributors, Inc., a wholly owned subsidiary of Scudder, which in turn places
orders on behalf of the Fund with other brokers and dealers. Scudder Fund Distributors, Inc.
receives no commissions, fees or other remuneration from the Fund for this service.
The 1940 Act prohibits Asia Management, NICAM or Nikko Securities as principal from
knowingly selling any security to the Fund or knowingly purchasing any security from the Fund,
subject to certain limited exceptions including the purchase of securities issued by t he Fund. It is
the policy of the Fund not to deal with Asia Management, NICAM and Nikko Securities a s
principal in the purchase or sale of securities.
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EXHIBIT C
Proposed Investment Management Agreement between the Fund and Asia Management _______________________
THE JAPAN FUND, INC. 345 Park Avenue
New York, New York 10154
May 24, 1991
Asia Management Corporation
345 Park Avenue
New York, NY 10154
INVESTMENT MANAGEMENT AGREEMENT
Dear Sirs: The Japan Fund, Inc. (the "Fund") has been established as a Maryland Corporation to
engage in the business of an investment company.
The Fund has selected you (the "Advisor") to act as investment manager of the Fund and
to provide certain other services, as more fully set forth below, and you have indicated tha t you
are willing to act as such investment manager and to perform such services under t he terms and
conditions hereinafter set forth. Accordingly, the Fund agrees with you as follows:
1. Delivery of Document. The fund engages in the business of investing and reinvesting
the assets of the Fund in the manner and in accordance with the investment object ives, policies
and restrictions specified in the currently effective Prospectus (the "Prospectus") and State ment
of Additional Information (the "SAI") included in the Fund's Registration Statement on Form N-
IA, as amended from time to time, (the "Registration Statement") filed by the Fund under the
Investment Company Act of 1940, as amended, (the "1940 Act") and the Securities Act of 1933,
as amended. Copies of the documents referred to in the preceding sentence have been furni shed
to you by the Fund. The Fund has also furnished you with copies properly certified or
authenticated of each of the following additional documents related to the Fund:
(a) Articles of Incorporation of the Fund dated June 8, 1989, as amended to date
(the "Articles").
(b) By-laws of the Fund as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Directors of the Fund and the shareholders of the Fund
selecting you as investment manager and approving the form of this Agreement.
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The Fund will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing, including the
Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you shall
provide continuing investment management of the assets of the Fund in accordance with the
investment objectives, policies and restrictions set forth in the Prospectus and SAI; the applicable
provisions of the 1940 Act and the Internal Revenue Code of 1986, as amended, (the "Code")
relating to regulated investment companies and all rules and regulations thereunde r; and all other
applicable federal and state laws and regulations of which you have knowledge; subjec t always
to policies and instructions adopted by the Fund's Board of Directors. In connection therewith,
you shall use reasonable efforts to manage the Fund so that it will qualify as a regul ated
investment company under Subchapter M of the Code and regulations issued thereunder. In
managing the Fund in accordance with the requirements set forth in this section 2, you sha ll be
entitled to receive and act upon advice of counsel to the Fund or counsel to you. You shall also
make available to the Fund promptly upon request all of the Fund's investment records and
ledgers as are necessary to assist the Fund to comply with the requirements of the 1940 Ac t and
other applicable laws. To the extent required by law, you shall furnish to regulatory a uthorities
having the requisite authority any information or reports in connection with the service s provided
pursuant to this Agreement which may be requested in order to ascertain whether the ope rations
of the Fund are being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies, repurchase
agreements, futures, options and other contracts relating to investments to be purchased, sol d or
entered into by the Fund and place orders with broker-dealers, foreign currency dealers, futures
commission merchants or others pursuant to your determinations and all in accordance with
Fund policies as expressed in the Registration Statement and with guidelines and dire ctions from
the Board of Directors. Subject to such policies and guidelines, you shall determine wha t portion
of the Fund's portfolio shall be invested in securities and other assets and what portion, if any,
should be held uninvested.
You shall furnish to the Fund's Board of Directors periodic reports on the investment
performance of the Fund and on the performance of your obligations pursuant to this Agreement,
and you shall supply such additional reports and information as the Fund's officers or Board of
Directors shall reasonably request.
In rendering the services required under this section you may receive the assistance of
The Nikko International Capital Management Co., Ltd. ("NICAM"), which is to furnish regular
investment research and advisory services with respect to the Fund pursuant to an agreement
with the Advisor dated as of the date hereof (as the same may be amended from tim e to time),
and may contract with or consult with such banks, other securities firms or other parties in Japan
or elsewhere, including Scudder, Stevens & Clark, Inc. (an Affiliated company of the Advisor, as
defined in the Investment Company Act of 1940, as amended) as it may deem appropriate to
obtain information and advice, including investment recommendations, advice regarding
economic factors and trends, advice as to currency exchange matters, and clerical and accounting
services and other assistance, but any fees, compensation or expenses to be paid to any such
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parties shall be paid by you, and no obligation shall be incurred on the Fund's behalf in any such
respect.3. Administrative Services. In addition to the portfolio management services specified
above in section 2, you shall furnish at your expense for the use of the Fund such office space
and facilities as the Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Fund administrative services necessary for
operating as an investment company and not provided by persons not parties to this Agreem ent
including, but not limited to, preparing reports to and meeting materials for the Fund's B oard of
Directors and reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys, printers, underwriters, brokers
and dealers, insurers and other persons in any capacity deemed to be necessary or desirable t o
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 Regist ration State-
ment, 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 pre paration
and filing of the Fund's federal, state and local tax returns; preparing and filing the Fund's federal
excise tax return pursuant to Section 4982 of the Code; providing assistance with investor and
public relations matters; monitoring the valuation of portfolio securities, the calc ulation of net
asset value and the calculation and payment of distributions to Fund shareholders; moni toring the
registration of the Fund's shares of capital stock, S.331/3 par value per share (the "Shares") under
applicable federal and state securities laws; maintaining or causing to be m aintained for the Fund
all books, records and reports and any other information required under the 1940 Act, to the
extent that such books, records and reports and other information are not maintained by the
Fund's custodian or other agents of the Fund; assisting in establishing the accounting policies of
the Fund; assisting in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel and the Fund's
other agents as necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the payment of bills that have
been approved by a person authorized by the Fund; assisting the Fund in determining the amount
of dividends and distributions available to be paid by the Fund to its shareholders, preparing a nd
arranging for the printing of dividend notices to shareholders, and providing the transfer and
dividend paying agent and the custodian with such information as is required for such parties to
effect the payment of dividends and distributions; and otherwise assisting the Fund as it may
reasonably request in the conduct of its business, subject to the direction and control of the
Fund's Board of Directors. Nothing in this Agreement shall be deemed to shift to you or to
diminish the obligations of any agent of the Fund or any other person not a party to this
Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided in this
section 4, you shall pay the compensation and expenses of all Directors, officers and employees
of the Fund (including the Fund's share of payroll taxes) who are affiliated persons of you, or are
affiliated persons of 'Scudder, Stevens & Clark, Inc., and you shall make available, without
expense to the Fund, the services of such of your, or Scudder, Stevens & Clark, Inc.'s, directors,
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officers and employees as may duly be elected officers of the Fund, subject to their individual
consent to serve and to any limitations imposed by law. You shall provide at your expense the
portfolio management services described in section 2 hereof and the administrative servi ces
described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those specifically
allocated to you in this section 4. In particular, but without limiting the generality of the
foregoing, you shall not be responsible, except to the extent of the reasonable compensation of
such of the Fund's Directors and officers as are directors, officers or employees of you whose
services may be involved, for the following expenses of the Fund, to the extent they are not
entailed in your provision of the services described in section 2 and section 3 hereof:
organization expenses of the Fund (including out-of-pocket expenses, but not including your
overhead or employee costs); fees payable to you and to any other Fund advisors or consultants
expenses; auditing and accounting expenses; maintenance of books and records which are
required to be maintained by the Fund's custodian or other agents of the Fund; telephone, tel ex,
facsimile, postage and other communications expenses; taxes and governmental fees; fe es, dues
and expenses incurred by the Fund in connection with membership in investment company tra de
organizations; fees and expenses of the Fund's custodians, sub-custodians, transfer agents,
dividend disbursing agents and registrars payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers an d other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 4, other expenses in connection with the
issuance, offering, distribution, sale, redemption or repurchase of securities issued by the Fund;
expenses relating to investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the Fund's portfolio
securities; the compensation and all expenses (specifically including travel expenses relating to
Fund business) of Directors, officers and employees of the Fund who are not affiliated persons of
you; brokerage commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and dividends to shareholders;
expenses of printing and mailing Prospectuses and SAIs of the Fund and supplements thereto;
costs of stationery; any litigation expenses, indemnification of Directors and officers of the Fund;
costs of shareholders' and other meetings; and travel expenses (or an appropriate portion thereof)
of Directors and officers of the Fund who are directors, officers or employees of you to the
extent that such expenses relate to attendance at meetings of the Board of Direc tors of the Fund
or any committees thereof or advisors thereto hold 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 re quired to be
borne by a principal underwriter which acts as the distributor of the Fund's Shares pursuant to a n
underwriting agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Fund shall have adopted a plan in conformity with the 1940 Act providing
that the Fund (or some other party) shall assumed some or all of such expenses. You shall be
required to pay such of the foregoing sales expenses as are not required to be paid by the
principal underwriter pursuant to the underwriting agreement or are not permitted to be pai d by
the Fund (or some other party) pursuant to such a plan.
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5. Management Fee. For all services to be rendered, payments to be made and costs to be
assumed by you as provided in sections 2, 3 and 4 hereof, the Fund shall pay you a monthly fee,
payable in dollars, equal on an annual basis to .85 of I% of the value of the average dail y net
assets of the Fund up to and including $200 million; plus .80 of I% of the value of the average
daily net assets of the Fund over $200 million and up to and including $300 million; plus .75 of
1% of the value of the average daily net assets of the Fund over $300 million and up to a nd
including $700 million; plus .70 of 1% of the average daily net assets over $700 million.
The "average daily net assets" of the Fund shall mean the average of the values pl aced 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 e ach business
day, as of such time. The value of the net assets of the Fund shall always be determine d 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 thi s 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 ne t 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 det ermination
thereof on that day shall be deemed to be the sole determination thereof on that day for the
purposes of this section 5.
You agree that your gross compensation for any fiscal year shall not be greater than an
amount which, when added to the other expenses of the Fund, shall cause the aggregate expenses
of the Fund to equal the maximum expenses under the lowest applicable expense limita tion
established pursuant to the statutes or regulations of any jurisdiction in which the Shares of the
Fund may be qualified for offer and sale. Except to the extent that such amount has be en
reflected in reduced payments to you, you shall refund to the Fund the amount of any payment
received in excess of the limitation pursuant to this section 5 as promptly as prac ticable after the
end of such fiscal year, provided that you shall not be required to pay the Fund an amount gre ater
than the fee paid to you in respect of such year pursuant to this Agreement. As used in this
section 5, “expenses" shall mean those expenses included in the applicable expense li mitation
having the broadest specifications thereof, and "expense limitation" means a lim it on the
maximum annual expenses which may be incurred by an investment company determined (i) by
multiplying a fixed percentage by the average, or by multiplying more than one such pe rcentage
by different specified amounts of the average, of the values of an investment company's net
assets for a fiscal year or (ii) by multiplying a fixed percentage by an investment company's net
investment income for a fiscal year. The words "lowest applicable expense limitat ion" shall be
construed to result in the largest reduction of your compensation for any fiscal year of the Fund;
provided, however, that
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
- 14 -
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 se rvices
to others. In acting under this Agreement, you shall be an independent contractor and not an
agent of the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to render
services pursuant to this Agreement, the Fund agrees that you shall not be liable under t his
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 t o the Fund
or its shareholders to which you would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of your duties, or by reason of your reckless
disregard of your obligations and duties hereunder. Any person, even though also employed by
you, who may be or become an employee of and paid by the Fund shall be deemed, when acting
within the scope of his or her employment by the Fund, to be acting in such employment solely
for the Fund and not as your employee or agent.
8. Duration and Termination of This Agreement . This Agreement shall remain in force
until February 28, 1993, 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 ma jority of the
Directors who are not parties to this Agreement or interested persons of any party to thi s
Agreement, cast in person at a meeting called for the purpose of voting on such approval and (b)
by the Directors of the Fund, or by the vote of a majority of the outstanding voting securities of
the Fund. The aforesaid requirement that continuance of this Agreement be "specificall y
approved at least annually" shall be construed in a manner consistent with the 1940 Act a nd the
rules and regulations thereunder.
This Agreement may be terminated with respect to the Fund at any time, without the
payment of any penalty, by the vote of a majority of the outstanding voting securities of t he Fund
or by the Fund's Board of Directors on 60 days' written notice to you, or by you on 60 days'
written notice to the Fund. This Agreement shall terminate automatically in the event of its
assignment.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing signed by the pa rty
against whom enforcement of the change, waiver, discharge or termination is sought.
10. Miscellaneous. The captions in this Agreement are included for convenience of refer-
ence only and in no way define or limit any of the provisions hereof or otherwise affect the ir
construction or effect. This Agreement may be executed simultaneously in two or more counte r-
- 15 -
parts, each of which shall be deemed an original, but all of which together shall constitute one
and the same instrument.
This Agreement shall not apply to the management of assets allocated to any seri es of the
Fund's Shares hereafter established by the Fund's Board of Directors.
In interpreting the provisions of this Agreement, the definitions contained in Section 2(a)
of the 1940 Act (particularly the definitions of "affiliated person," "assignment" and "majorit y 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 Maryla nd,
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 Subchapt er M
of the Code.
This Agreement shall supersede all prior investment advisory or management agreements
entered into between you and the Fund.
If you are in agreement with the foregoing, please execute the form of acceptance on t he
accompanying counterpart of this letter and return such counterpart to the Fund, whereupon this
letter shall become a binding contract effective as of the date of this Agreement.
Yours very truly,
THE JAPAN FUND, INC.
By ______________________________ Chairman
The foregoing Agreement is hereby accepted as of the date hereof.
ASIA MANAGEMENT
CORPORATION
By ______________________________President
- 16 -
EXHIBIT D
Proposed Advisory Agreement
between Asia Management and NICAM ________________________
ASIA MANAGEMENT CORPORATION 345 Park Avenue
New York, NY 10154-0004 May 24, 1991
THE NIKKO INTERNATIONAL CAPITAL
MANAGEMENT CO., LTD.
7-3, 2-chome, Marunouchi,
Chiyoda-ku
Tokyo, Japan
Dear Sirs:
We have entered into an Investment Management Agreement (the "Management Agree-
ment") dated as of May 24, 1991 with The Japan Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which we act as investment advisor to and manager of the Fund. A copy of
the Management Agreement has been previously furnished to you. In furtherance of such duties
to the Fund, and with the approval of the Fund, we wish to avail ourselves of your investment
advisory services. Accordingly, with the acceptance of the Fund, we hereby agree with you as
follows for the duration of this Agreement:
1. You agree to furnish to us such information, investment recommendations, advice and
assistance, as we shall from time to time reasonably request. In that connection, you a gree to
continue to maintain a separate staff within your organization to furnish such servic es
exclusively to us. In addition for the benefit of the Fund, you agree to pay the fees and expenses
of any directors of the Fund who are directors, officers or employees of you or of the Nikko
Securities Co., Ltd.
2. We agree to pay in United States dollars to you, as compensation for the services t o be
rendered by you hereunder, a monthly fee, payable in dollars, equal on an annual basis to .23 of
1% of the value of the average daily net assets of the Fund up to and including $200 mil lion; plus
.21 of 1% of the value of the average daily net assets over $200 million and up to and including
$300 million; plus .19 of I% of the value of the average daily net assets over $300 million and up
to and including $700 million; plus .17 of 1% of the value of the average daily net asset s over
$700 million. For purposes of computing the monthly fee, the "average daily net assets" of the
Fund for any calendar month means the average of the daily net asset values of the Fund's
portfolio for such calendar month determined by the Fund's custodian pursuant to the procedures
established by the Board of Directors of the Fund and in accordance with the requirements of the
Investment Company Act of 1940, as amended, and the applicable rules and regulations of the
Securities and Exchange Commission. Each payment of a monthly fee shall be made by us to
you no later than the fifteenth day of the following calendar month.
- 17 -
3. You agree that there will be full compliance with any and all provisions of the
Investment Company Act of 1940, as amended, applicable to you and your directors, officers or
employees, or to interested persons with respect to you.
4. You agree that you will not make a short sale of any capital stock of the Fund, or
purchase any share of the capital stock of the Fund otherwise than for investment.
5. Your services to us are not to be deemed exclusive and you are free to render simila r
services to others, except as otherwise provided in section I hereof.
6. Nothing herein shall be construed as constituting you as agent of us or of the Fund.
7. We and the Fund agree that you may rely on information reasonably believed by you
to be accurate and reliable. We and the Fund further agree that, except as may otherwise be
provided by the Investment Company Act of 1940, as amended, neither you nor your officers,
directors, employees or agents shall be subject to any liability for any act or omissi on in the
course of, connected with or arising out of any services to be rendered hereunder except by
reason of willful misfeasance, bad faith or gross negligence in the performance of your duties or
by reason of reckless disregard of your obligations and duties under this Agreement.
8. This Agreement shall remain in effect until February 28, 1993, and shall continue in
effect thereafter, but only so long as such continuance is specifically approved at l east annually
by the affirmative vote of (i) a majority of the members of the Fund's Board of Directors who are
not interested persons of the Fund, you or us, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) a majority of the Fund's Board of Directors or the holders of a
majority of the outstanding voting securities of the Fund. This Agreement may nevertheless be
terminated at any time, without penalty, by us or by the Fund's Board of Directors or by vote of
holders of a majority of the outstanding voting securities of the Fund, upon sixty (60) days
written notice delivered or sent by registered mail, postage prepaid, to you, at your addre ss given
above or at any other address of which you shall have notified us in writing, or by you upon six
(6) months such written notice to us and to the Fund, and shall automatically be termi nated in the
event of its assignment or of the assignment of the Management Agreement. Any such notice
shall be deemed given when received by the addressee.
9. This Agreement may not be transferred, assigned, sold or in any manner hypothecated
or pledged by either party hereto. It may be amended by mutual agreement, but only aft er
authorization of such amendment by the affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Fund, and (ii) a majority of the members of the Fund's Boa rd
of Directors who are not interested persons of the Fund, you or us, cast in person at a meeting
called for the purpose of voting on such approval.
10. This Agreement shall be construed in accordance with the laws of the State of New
York, provided, however, that nothing herein shall be construed as being inconsistent with the
Investment Company Act of 1940, as amended. As used herein the terms "interested person",
"assignment", and "vote of a majority of the outstanding voting securities" shall have the
meanings set forth in the Investment Company Act of 1940, as amended.
- 18 -
If you are in agreement with the foregoing, please sign the form of acceptance on the
enclosed counterpart hereof and return the same to us.
Very truly yours,
THE JAPAN FUND, INC.
By _______________________________Chairman
The foregoing agreement is hereby accepted as of the date first above written.
ASIA MANAGEMENT CORPORATION
By ________________________________President
