For the quarter ended January 31, 2009, the Fund incurred a net investment loss of approximately U.S. $140,000 (equivalent to a loss of U.S. $0.01 per share). In addition, net realized and unrealized losses from investment activities and foreign currency transactions during that same three-month period were approximately U.S. $249,000 (equivalent to a loss of U.S. $0.02 per share).

In comparison, during the quarter ended January 31, 2008, the Fund incurred a net investment loss of approximately U.S. $110,000 (equivalent to a loss of U.S. $0.01 per share). In addition, net realized and unrealized losses from investment activities and foreign currency transactions during that same three-month period were approximately U.S. $13,753,000 (equivalent to a loss of U.S. $0.95 per share).

On January 31, 2009, the total net assets of the Fund were approximately U.S. $77.2 million. The net asset value ("NAV") per share on that date was U.S. $5.34, based on 14,441,200 shares outstanding. In comparison, total net assets on January 31, 2008 were approximately U.S. $110.4 million, equivalent to a NAV of U.S. $7.05 per share, based on 14,431,605 shares outstanding. The Fund generated a negative investment return of 0.45% for the three months ended January 31, 2009, when measured against the NAV per share of U.S. $5.41 on October 31, 2008, based on 14,431,605 shares outstanding at that time. During the same period, the Fund's benchmark, the Tokyo Stock Price Index (the "TOPIX Index"), decreased by 0.35% in U.S. dollar ("USD") terms.

As of January 31, 2009, the Fund had 98.05% of its net assets invested in Japanese common stocks. The remaining net assets were represented by a short-term USD-denominated time deposit (0.30%) and other assets less liabilities (1.65%).

As of March 2, 2009, the Fund's net asset value per share was U.S. $4.56, based on net assets of U.S. $65.8 million. At the same date, the market price of the Fund's shares on the New York Stock Exchange closed at U.S. $3.80, representing a trading discount to net asset value per share of 16.67%.

Market Review and Outlook

During the November 2008 to January 2009 period, in Japanese yen terms, the equity portion of the Fund fell 8.56%, while the TOPIX Index declined by 8.21%. During the period , however, the yen appreciated against the U.S. Dollar by 8.11%, partially offsetting the local currency declines of the TOPIX Index during the same period. Relative to the TOPIX Index, the sector allocation effect on the portfolio was +0.17%, while the stock selection effect was -0.52%. Our underweight position in the Securities and Commodities Futures sector and overweight in the Wholesale Trade sector were the major contributing factors of the positive sector selection effect, although these were partly offset by the negative effect derived from being underweight in the Electric Power & Gas sector. During the quarter, the continued collapse of the financial markets led financial stocks sharply lower. Commodities prices rebounded amid the plethora of fiscal stimulus packages announced by governments across the world and, as a result, Trading companies advanced.

Stock selection in Transportation Equipment and Bank names contributed positively, while stock selection in the Electrical Appliances, Land Transportation and Retail Trade sectors had a negative impact. Major positive contributors during the quarter were Resona Holdings (Banks) and Mitsubishi Heavy Industries (Machinery), while Mitsubishi Electric (Electrical Appliances), Mitsui Fudosan (Real Estate) and Denso Corp. (Transportation Equipment) contributed negatively. Resona performed particularly well, due to both its stable earnings prospects as well as the relatively small amount of equity cross-holdings on its balance sheet. Mitsubishi Heavy Industries also advanced, after Japan's leading heavy machinery producer revised its fiscal year 2008 earnings forecast upwards, due mainly to strong sales of power systems. Mitsubishi Electric declined, however, as the company's factory automation and semiconductor businesses are expected to deteriorate substantially. The deterioration of both the residential and non-residential real estate markets led shares of real estate companies, notably Mitsui Fudosan, to decline sharply. Shares of car manufactures and companies related to the automobile industry, including Denso Corp., also declined substantially, as global demand has deteriorated and as most major car manufactures -- including Toyota Motor Corporation, which forecast operating losses -- have revised down their earnings forecasts for the fiscal year ending March 2009.

During the three-month period from November 2008 to January 2009, the TOPIX Index declined by 8.21% in Japanese yen terms. Although the TOPIX Index rebounded sharply in the early part of November, from its lowest level in a quarter century (recorded in October), the benchmark once again declined amid concerns over the deepening global recession, the yen's appreciation and worsening profit outlooks. By the end of January, the TOPIX Index finished below the 800 level.