This prospectus sets forth concisely the information about The Japan Fund,
Inc., an open-end management investment company, that a prospective investor
should know before investing. Please retain it for future reference.
If you require more detailed information, a Statement of Additional
Information dated May 1, 1995, as amended from time to time, may be obtained
without charge by writing Scudder Investor Services, Inc., Two International
Place, Boston, MA 02110-4103, care of The Japan Fund Service Center or calling
1-800-53-JAPAN. The Statement of Additional Information has been incorporated by
reference into this prospectus and has been filed with the Securities and
Exchange Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Contents
Expense information 2
Financial highlights 3
Shareholder benefits 4
Investment objective 4
Investment policies 4
Investment strategies 4
Why invest in the Fund? 5
Additional information about investment policies
and strategies 6
Risk factors 7
Investment results 10
Distribution and performance information 14
Fund organization 14
Purchases and redemptions 16
Transaction information 19
Shareholder services 20
Tax-advantaged retirement plans 22
The Scudder Family of Funds 23
How to contact The Japan Fund Back cover
Directors and officers Back cover
Distributor: Scudder Investor Services, Inc.
83-2-55R
SFD69PR1
MIS69P
THE JAPAN FUND, INC.
PROSPECTUS
MAY 1, 1995
AS REVISED
JUNE 7, 1995
o Offering opportunities for long-term capital appreciation by investing
primarily in the equity securities of Japanese companies.
o A pure no-load(TM) mutual fund with no commissions to buy, sell or
exchange shares.
Scudder, Stevens & Clark, Inc.
Investment Adviser
<PAGE>
Expense information
How to compare The Japan Fund, Inc.
This information is designed to help you understand the various costs and
expenses of investing in The Japan Fund, Inc. (the "Fund"). By reviewing this
table and those in other mutual funds' prospectuses, you can compare the Fund's
fees and expenses with those of other funds. With The Japan Fund, Inc., you pay
no commissions to purchase or redeem shares. As a result, all of your investment
goes to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares ("sales NONE
load")
Commissions to reinvest dividends NONE
Deferred sales load NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the year ended December 31,
1994.
Investment management fees 0.73%
12b-1 fees NONE
Other expenses 0.35%
------
Total Fund operating expenses 1.08%
======
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its net
investment income to shareholders. (As noted above, the Fund has no redemption
fees of any kind.)
1 Year 3 Years 5 Years 10 Years
------- ------- ------- -------
$11 $34 $60 $132
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than those
shown.
* You may redeem by writing or calling the Fund. If you wish to receive
your redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Purchases and redemptions."
2
<PAGE>
Financial highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the audited financial
statements. Prior to August 14, 1987, the Fund was operated as a closed-end,
diversified management investment company. Since August 14, 1987, the Fund has
operated as an open-end, diversified management investment company, commonly
known as a "mutual fund." Accordingly, except with respect to information for
the period January 1, 1985 to August 14, 1987, the data set forth below reflect
the investment performance of the Fund as a mutual fund rather than a closed-end
investment company.
If you would like more detailed information concerning the Fund's performance, a
complete portfolio listing and audited financial statements are available in the
Fund's Annual Report dated December 31, 1994 and may be obtained without
charge by writing or calling Scudder Investor Services, Inc.
The following information has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report thereon is included in the Annual Report
to Shareholders, which is included in the Fund's Statement of Additional
Information. The financial highlights should be read in conjunction with the
financial statements and notes thereto included in the Annual Report.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------------------
1994(a) 1993(a) 1992 1991 1990 1989 1988 1987 1986(a) 1985(a)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period. . . . $10.33 $8.90 $10.69 $10.76 $14.27 $16.24 $16.97 $20.28 $15.53 $12.60
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (loss) . . . . . (.05) (.05) (.05) (.03) .09 .04 .04 .16 .10 .08
Net realized and
unrealized gain
(loss) on
investments . . . . . . 1.07 2.15 (1.74) .37 (2.41) 1.66 3.13 5.81 9.34 4.28
------ ----- ------ ----- ------ ----- ----- ----- ----- -----
Total from investment
operations . . . . . . . 1.02 2.10 (1.79) .34 (2.32) 1.70 3.17 5.97 9.44 4.36
------ ----- ------ ----- ------ ----- ----- ----- ----- ------
Less distributions from:
Net investment
income . . . . . . . . . -- -- -- -- (.09) (.08) (.02) (.20) (.02) (.07)
In excess of net
investment income. . . . -- (.28) -- -- -- -- -- -- -- --
Net realized gains on
investment transactions. (.80) (.39) -- (.41) (1.10) (3.59) (3.88) (9.08) (4.67) (1.36)
In excess of net
realized gains . . . . . (.05) -- -- -- -- -- -- -- -- --
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions . . . . (.85) (.67) -- (.41) (1.19) (3.67) (3.90) (9.28) (4.69) (1.43)
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period . . . . . . $10.50 $10.33 $8.90 $10.69 $10.76 $14.27 $16.24 $16.97 $20.28 $15.53
======= ====== ====== ====== ======= ====== ====== ====== ====== ======
TOTAL RETURN (%) . . . . . 10.03 23.64 (16.74) 3.11 (16.36) 11.63 19.40 33.01 77.54 38.89
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions). . . . 586 471 409 335 313 401 404 394 584 360
Ratio of operating
expenses to average
net assets (%) . . . . . 1.08 1.25 1.42 1.26 1.05 1.02 1.01 .90 .70 .64
Ratio of net investment
income (loss) to
average net
assets (%) . . . . . . . (.40) (.47) (.31) (.15) .72 .34 .28 .41 .51 .63
Portfolio turnover
rate (%) . . . . . . . . 74.3 81.7 47.0 46.4 52.7 60.4 38.8 34.0 38.2 23.9
<FN>
(a) Per share amounts have been calculated using weighted average shares outstanding.
</FN>
</TABLE>
3
<PAGE>
Shareholder benefits
* broad and diversified investment portfolio
* active professional management by Scudder, Stevens & Clark, Inc.
* no sales charges or Rule 12b-1 distribution charges; a pure no-load(tm)
fund
* shares redeemable at net asset value at any time with no redemption
charge
* individual attention from a Japan Fund Service Specialist (8 a.m.-
8 p.m. eastern time, Monday-Friday) at the toll-free number
1-800-53-JAPAN
* optional participation in the Scudder Family of Funds, a group of pure
no-load(tm) mutual funds managed by Scudder, Stevens & Clark, Inc.
* $1,000 minimum initial investment
Investment objective
The investment objective of The Japan Fund, Inc. (the "Fund"), a
diversified mutual fund, is long-term capital appreciation, which it seeks
to achieve by investing primarily in equity securities (including American
Depositary Receipts) of Japanese companies. Equity securities are defined as
common and preferred stock, debt securities convertible into common stock
(sometimes referred to as "convertible debentures") and common stock purchase
warrants.
There can be no assurance that the Fund's objective will be met. The Fund's
objective is a fundamental investment policy and may not be changed without
shareholder approval.
Investment policies
Unless otherwise noted, the investment policies of the Fund are
non-fundamental and may be changed by the Fund's Board of Directors without
shareholder approval. Shareholders will, however, receive written notice of any
changes in these policies.
Under normal conditions, the Fund will invest at least 80% of its assets in
Japanese securities, that is, securities issued by entities that are organized
under the laws of Japan ("Japanese companies"), securities of affiliates of
Japanese companies, wherever organized or traded, and securities of issuers not
organized under the laws of Japan but deriving 50% or more of their revenues
from Japan. These securities may include debt securities (Japanese government
debt securities and debt securities of Japanese companies) when the Fund's
investment adviser, Scudder, Stevens & Clark, Inc. (the "Adviser") believes that
the potential for capital appreciation from investment in debt securities equals
or exceeds that available from investment in equity securities.
Investment strategies
The Fund currently intends to focus its investments in select Japanese
companies, whether large or small, that have an active market for their shares
and that show a potential for greater-than-average growth. These companies may
be situated in the post-industrial sectors of the economy, sensitive to consumer
demand, technology-driven, and globally competitive, including companies that
are sharing in the rapid growth of Japan's Asia-Pacific neighbors. The Fund
anticipates that most equity securities of Japanese companies in which it
invests, either directly or indirectly by means of American Depositary Receipts
or convertible debentures, will be listed on securities exchanges in Japan.
The Fund may also invest up to 30% of its net assets in equity securities
of Japanese companies which are traded in an over-the-counter market. These are
4
<PAGE>
generally securities of relatively small or little-known companies that the
Adviser believes have above-average earnings growth potential. When evaluating
an individual company for the purpose of stock selection, the Adviser takes into
consideration, among other factors, the size of the company; the depth and
quality of management; a company's product line, business strategy or
competitive position in its industry; marketing and technical strengths;
research and development efforts; financial strength, including degree of
leverage; cost structure; revenue and earnings growth potential; price-earnings
ratios and other stock valuation measures.
The Fund may invest up to 20% of its assets in cash or in short-term
government or other short-term prime obligations in order to have funds readily
available for general corporate purposes, including the payment of operating
expenses, dividends and redemptions, or the investment in securities through
exercise of rights or otherwise, or in repurchase agreements in order to earn
income for periods as short as overnight. Where the Adviser determines that
market or economic conditions so warrant, the Fund may, for temporary defensive
purposes, invest more than 20% of its assets in cash or such securities. For
instance, there may be periods when changes in market or other economic
conditions, or in political conditions, will make advisable a reduction in
equity positions and increased commitments in cash or corporate debt securities,
whether or not Japanese, or in the obligations of the Government of the United
States or of Japan or of other governments.
Why invest in the Fund?
The Japan Fund, Inc. is the oldest and largest U.S. mutual fund investing
primarily in Japan. With the second largest GNP in the world and its stock
exchanges comprising over 25% of the world's equity market, Japan represents a
significant part of global investment opportunities. Japan is not only the
producer of high-quality automobiles, computers, televisions, VCRs and stereos,
but is also home to some of the world's largest securities firms, utility
companies and banks. Japan's long-term record of growth is outstanding, and the
Fund believes that its economy and that of its neighbors in which some Japanese
companies participate offer further substantial growth opportunities in the long
term.
Over the past 30 years Japan has experienced significant economic
development. During the era of high economic growth in the 1960s and early 1970s
the expansion was based on the development of heavy industries such as steel and
shipbuilding. In the 1970s Japan moved into assembly industries which employ
high levels of technology and consume relatively low quantities of resources,
and since then Japan has become a major producer of electrical and electronic
products and automobiles.
While it would be highly unlikely that Japan's economy will continue to
grow at the same phenomenal rates seen in the 1960s, 1970s and 1980s, it should
continue to offer investors many attractive investment opportunities. Japan is
now in a major transition toward becoming a domestic-led economy, driven in
large part by one of the world's highest average per capita incomes, above-
average savings rates, and a rise in leisure spending. In addition to a growing
domestic market, the economy should also benefit from a continuing
high-technology focus, above-average capital spending, and established ties to
markets in the high-growth economies of Asia and the Pacific. As a result,
select Japanese securities continue to offer above-average growth potential for
investors willing to assume the risks associated with investing in Japan.
Investors undertaking direct foreign investments in Japan often encounter
complications and extra costs. They may find it difficult to make purchases and
5
<PAGE>
sales, to obtain current information, to hold securities in safekeeping and to
convert the value of their investments from yen into dollars. The Fund manages
these problems for the investor. With a single investment, the investor has a
diversified portfolio which is managed by experienced professionals. The Adviser
of the Fund has extensive experience dealing in the Japanese market and with
Japanese brokers and custodian banks. In addition, the Adviser has the benefit
of established information sources and believes the Fund affords an efficient
and cost-effective method of investing in Japan.
Additional information about investment policies and strategies
Investment restrictions
The Fund may not, without shareholder approval:
* borrow money except as a temporary measure for extraordinary or emergency
purposes or except in connection with reverse repurchase agreements
provided that the Fund maintains asset coverage of 300% for all borrowings;
or
* make loans to other persons, except (a) loans of portfolio securities, and
(b) to the extent the entry into repurchase agreements and the purchase of
debt securities in accordance with its investment objective and investment
policies may be deemed to be loans.
In addition, as a matter of nonfundamental policy, the Fund may not invest
more than 10% of its net assets in securities which are not readily marketable,
restricted securities and repurchase agreements maturing in more than seven
days. The Fund may not invest more than 5% of its net assets in restricted
securities.
Please refer to the Statement of Additional Information for a listing of
the Fund's other investment restrictions.
Debt securities
The debt securities in which the Fund may invest for cash management
purposes are short-term government or other short-term prime obligations (i.e.,
high-quality debt obligations maturing not more than one year from the date of
issuance). All other debt securities in which the Fund invests are rated no
lower than BBB by Standard & Poor's ("S&P") or Baa by Moody's Investors Service,
Inc. ("Moody's") or, if unrated, are of equivalent quality as determined by the
Fund's adviser. The Fund intends to continue these practices with respect to
investment in debt securities in the future.
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund
may enter into repurchase agreements with selected banks and broker/dealers.
Under a repurchase agreement, the Fund acquires securities, subject to the
seller's agreement to repurchase them at a specified time and price.
Convertible securities
The Fund may invest in convertible securities which are securities that may
be converted or exchanged at a stated or determinable exchange ratio into
underlying shares of common stock. Convertible securities may offer higher
income than the common stocks into which they are convertible. The convertible
securities in which the Fund may invest include bonds, notes, debentures,
preferred stocks and other securities convertible into common stocks and may be
fixed-income or zero coupon debt securities. Prior to their conversion,
convertible securities may have characteristics similar to nonconvertible debt
securities.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
6
<PAGE>
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain. These
strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect
against possible changes in the market value of securities held in or to be
purchased for the Fund's portfolio resulting from securities markets or currency
exchange rate fluctuations, to protect the Fund's unrealized gains in the value
of its portfolio securities, to facilitate the sale of such securities for
investment purposes, to manage the effective maturity or duration of
fixed-income securities in the Fund's portfolio, or to establish a position in
the derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these strategic transactions may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes. Please refer to "Risk factors--Strategic
Transactions and derivatives" for more information.
Risk factors
Investors should consider the following factors inherent in investment in
Japan.
Trade issues
Because of the concentration of Japanese exports in highly visible products
such as automobiles, machine tools and semiconductors, and the large trade
surpluses ensuing therefrom, Japan is in a difficult phase in its relations with
its trading partners, particularly the United States, where the trade imbalance
is the greatest. Japan's trade surplus increased to $146 billion in
1994 from $141 billion in 1993.
Currency factors
Over a long period of years, the yen has generally appreciated in relation
to the dollar. The yen's appreciation has added to the returns of dollars
invested through the Fund in Japan. A decline in the value of the yen would have
the opposite effect, adversely affecting the value of the Fund in dollar terms.
7
<PAGE>
The Japanese Stock Market
Like other stock markets, the Japanese stock market can be volatile. For
example, the Japanese stock market, as measured by the Tokyo Stock Price Index
(TOPIX), increased by over 500% during the ten-year period ended December 31,
1989, reaching its high of 2884.80 on December 18, 1989, and it has declined by
over 45% since that time, falling to 1559.09 on December 30, 1994. This decline
has had an adverse effect on the availability of credit and on the value of the
substantial stock holdings of Japanese companies, in particular, Japanese banks,
insurance companies and other financial institutions. This in turn has
contributed to the recent weakness in Japan's economy. A continuation or
recurrence of a Japanese stock market decline could have an adverse impact
throughout Japan's economy.
Differences in accounting methods make it difficult to compare the earnings
of Japanese companies with those of companies in other countries, especially the
U.S. In general, however, reported net income in Japan is understated relative
to U.S. accounting standards and this is one reason why price-earnings ratios of
the stocks of Japanese companies have tended historically to be higher than
those for U.S. stocks. In addition, Japanese companies have tended historically
to have higher growth rates than U.S. companies and Japanese interest rates have
generally been lower than in the U.S., both of which factors tend to result in
lower discount rates and higher price-earnings ratios in Japan than in the U.S.
Investment in foreign securities
Investments in foreign securities involve special considerations due to
more limited information, higher brokerage costs, different accounting
standards, thinner trading markets as compared to domestic markets and the
likely impact of foreign taxes on the income from debt securities. They may also
entail certain other risks, such as the possibility of one or more of the
following: imposition of dividend or interest withholding or confiscatory taxes;
currency blockages or transfer restrictions; expropriation, nationalization or
other adverse political or economic developments; less government supervision
and regulation of securities exchanges, brokers and listed companies; and the
difficulty of enforcing obligations in other countries. Purchases of foreign
securities are usually made in foreign currencies and, as a result, the Fund may
incur currency conversion costs and may be affected favorably or unfavorably by
changes in the value of foreign currencies against the U.S. dollar.
Further, it may be more difficult for the Fund's agents to keep currently
informed about corporate actions which may affect the prices of portfolio
securities. Communications between the United States and foreign countries may
be less reliable than within the United States, thus increasing the risk of
delayed settlements of portfolio transactions or loss of certificates for
portfolio securities. The Fund's ability and decisions to purchase and sell
portfolio securities may be affected by laws or regulations relating to the
convertibility of currencies and repatriation of assets. The management of the
Fund seeks to mitigate the risks associated with these considerations through
diversification and professional management.
Other factors
The Fund is also susceptible to a relatively turbulent political
environment which affects issuers located in Japan and the surrounding Pacific
Basin region. For example, in 1992, a major power broker in the Liberal
Democratic Party ("LDP") was forced to step down for allegedly dealing with
gangsters. This resignation threw factional political alignments into disarray
and hastened the passage of power temporarily to a new generation of LDP
politicians. Public disapproval of official improprieties created a move toward
8
<PAGE>
reform of the political system. In 1993, a seven-party alliance that was formed
to endorse a non-LDP coalition government named two Prime Ministers by April
1994. In June 1994, a coalition of Social Democrats, the LDP and a small
representation by the New Harbinger Party named yet another Prime Minister to
succeed. Three substantial economic stimulus programs were put into place in
1993, and in 1994 a personal income tax cut of considerable magnitude and a
major political reform bill were announced. While the political situation
continues to be uncertain, electoral reforms and deregulation passed through
Parliament by the non-LDP coalition have attracted much public support and are
unlikely to be overturned.
The following are descriptions of some additional investment risks the Fund
may entail, depending upon the composition of its portfolio at any given time.
Investing in small company securities. The securities of small companies
are often traded over-the-counter and may not be traded in the volumes typical
on a national securities exchange. Consequently, in order to sell this type of
holding, the Fund may need to discount the securities from recent prices or
dispose of the securities over a long period of time. The prices of this type of
security may be more volatile than those of larger companies which are often
traded on a national securities exchange.
The investment risk associated with these companies is higher than that
normally associated with larger, older companies due to the greater business
risks of small size, including limited product lines, distribution channels and
financial and managerial resources. Further, there is typically less publicly
available information concerning smaller companies than for larger, more
established ones.
Debt securities. Securities rated BBB by S&P or Baa by Moody's are neither
highly protected nor poorly secured. These securities normally pay higher yields
but involve potentially greater price variability than higher-quality
securities. These securities are regarded as having adequate capacity to repay
principal and pay interest, although adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to do so. Moody's
considers bonds it rates Baa to have speculative elements as well as
investment-grade characteristics.
Repurchase agreements. In the event of the commencement of bankruptcy or
insolvency proceedings with respect to the seller of securities under a
repurchase agreement before repurchase of the securities, the Fund may encounter
delay and incur costs including a decline in value of the securities before
being able to sell the securities.
Convertible securities. While convertible securities generally offer lower
yields than nonconvertible debt securities of similar quality, their price may
increase if the value of the underlying common stock increases. Conversely,
their price may decrease, but to a lesser extent, if the value of the underlying
common stock decreases. Convertible securities entail less credit risk than the
issuer's common stock.
Strategic Transactions and derivatives. Strategic Transactions, including
derivative contracts, have risks associated with them including possible default
by the other party to the transaction, illiquidity and, to the extent the Fund
management's view as to certain market movements is incorrect, the risk that the
use of such Strategic Transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation the Fund
9
<PAGE>
can realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements, or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures contracts and options transactions for hedging should tend to minimize
the risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's Statement of Additional Information.
Investment results
The Fund is designed for long-term investors who can accept international
stock-market risk. The value of the Fund's portfolio securities fluctuates with
market and economic conditions, causing Fund shares to fluctuate in value. In
addition, the Fund's investments are denominated in yen, the value of which
continually changes in relation to the dollar. This varying relationship will
also affect the value of the Fund's shares. Depending on when you sell your
shares, their value may be higher or lower than when you purchased them. In
return for accepting stock-market risk, you may earn a greater return on your
investment than from a money-market or income fund.
The first table on page 11 shows percent change in the Fund's net asset
value per share for the past ten years. The second table on page 11 presents the
total returns earned by an assumed investment of $10,000 in the Fund over the
one-, five- and ten-year periods ended December 31, 1994. The chart and related
table beginning on page 12 show the history of a $10,000 investment in the
Fund's shares made at the initial public offering price in 1962, assuming
reinvestment of capital gains and income distributions.
10
<PAGE>
Except with respect to information pertaining to the period August 14, 1987, to
December 31, 1994, the tables on this and the following pages present investment
results of the Fund when it operated as a closed-end investment company and are
included for informational purposes only. Investors should note that the
investment results of the Fund when operated as an open-end investment company
as described herein may vary from the results set forth below for the period
when the Fund operated as a closed-end investment company.
Annual capital changes
Net Asset Capital Gains Capital
December 31, Value/Share Dividends Distributions Change
1984 $ 12.60 _ _ _
1985 15.53 $0.07 $1.36 38.07%
1986 20.28 0.02 4.67 77.30
1987 16.97 0.20 9.08 31.86
1988 16.24 0.02 3.88 19.28
1989 14.27 0.08 3.59 11.09
1990 10.76 0.09 1.10 -17.81
1991 10.69 _ 0.41 3.11
1992 8.90 _ _ -16.74
1993 10.33 0.28 0.39 20.47
1994 10.50 _ 0.85 10.03
Growth of a $10,000 Investment
Years Ended Value of Initial Cumulative Average Annual
December 31, 1994 $10,000 Investment Total Return Total Return
One Year $11,003 10.03% 10.03%
Five Years 9,768 -2.32 -0.47
Ten Years 42,701 327.01 15.62
* "Capital Change" measures the return from capital, including reinvestment
of any capital gains distributions, and does not include the reinvestment
of income dividends.
* "Growth of a $10,000 Investment" assumes dividends and capital gains
distributions, if any, were reinvested.
* These results are not intended to indicate future investment
performance.
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THE JAPAN FUND, INC.
INVESTMENT PERFORMANCE
History of a $10,000 Investment in Stock Assuming
Reinvestment of Capital Gains and Income Distributions
Income Capital Gains Net Asset
Dividends Distributions Value of
Reinvested Reinvested Initial Investment
0 10000 10000
9240 0 9240
8016 376 8671
8033 377 9073
532 13465 11328
569 14979 12120
1099 15437 11633
4339 25690 16327
11406 57081 33912
9500 36430 19176
19769 56425 24168
35741 97493 39744
31357 77138 28032
33149 73741 22056
49813 104143 27048
65599 133458 31440
66110 130772 27720
109337 211121 38976
90296 169675 27192
122689 225249 30840
148419 270555 33024
153181 275642 28800
198646 355661 33360
195911 349335 30240
274986 485179 37272
504968 861411 48672
689290 1145732 40728
831796 1368049 38976
933110 1527089 34248
769292 1277244 25824
794208 1316999 25656
661221 1096472 21360
797519 1355675 24792
Key Assumptions
* The data have been adjusted to reflect a three-for-one stock split in April
1970.
* Investment income distributions prior to 1978 are assumed to have been
reinvested at the mean market price on the ex-dividend date. Investment
income distributions subsequent to 1977 and all capital gains distributions
are assumed to have been reinvested at the lower of the mean market price
or net asset value on the ex-dividend date of the respective distribution.
* No adjustments have been made for income taxes.
* The two capital stock rights offerings of the Fund, in July 1963 and May
1975, have been treated as capital gain distributions, the value of which
was determined by reference to the individual right's market value on the
date of issuance. It is assumed that all rights were sold in the open
market and the resultant proceeds were reinvested in the Fund at the mean
market price on the date of the right's issuance without giving effect to
transaction costs.
* Initial $10,000 investment was made at initial public offering price.
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Net Asset Income Total
End of Value Initial Capital Gains Dividends Net Asset
Year Investment Distribution Reinvested Asset
4/62* $ 10,000 $ 10,000
1962 9,240 $ 0 $ 0 9,240
1963 8,016 376 279 8,671
1964 8,033 377 663 9,073
1965 11,328 532 1,605 13,465
1966 12,120 569 2,290 14,979
1967 11,633 1,098 2,707 15,438
1968 16,327 4,339 5,023 25,689
1969 33,912 11,406 11,764 57,082
1970 19,176 9,500 7,754 36,430
1971 24,168 19,769 12,488 56,425
1972 39,744 35,741 22,008 97,493
1973 28,032 31,357 17,749 77,138
1974 22,056 33,149 18,536 73,741
1975 27,048 49,813 27,282 104,143
1976 31,440 65,599 36,419 133,458
1977 27,720 66,110 36,942 130,772
1978 38,976 109,337 62,808 211,121
1979 27,192 90,296 52,187 169,675
1980 30,840 122,689 71,720 225,249
1981 33,024 148,419 89,112 270,555
1982 28,800 153,181 93,661 275,642
1983 33,360 198,646 123,655 355,661
1984 30,240 195,911 123,184 349,335
1985 37,272 274,986 172,921 485,179
1986 48,672 504,968 307,771 861,411
1987** 40,728 689,290 415,714 1,145,732
1988 38,976 831,796 497,276 1,368,048
1989 34,248 933,110 559,731 1,527,089
1990 25,824 769,292 482,128 1,277,244
1991 25,656 794,208 497,135 1,316,999
1992 21,360 661,221 413,891 1,096,472
1993 24,792 797,519 533,365 1,355,676
1994 25,223 879,600 586,882 1,491,705
During the period from the Fund's initial public offering until August 14, 1987,
the market price of the Fund's stock was sometimes above net asset value and
sometimes below; accordingly, the data set forth above should not be construed
as an indication of the record of a shareholder's investment in the Fund based
on market prices. Nor should it be construed as a representation of the future
performance of the Fund's net asset value. In addition, the data set forth above
reflect the considerable enhancement of the Fund's assets in 1985, 1986 and 1987
resulting from the sharp appreciation in the value of the yen versus the U.S.
dollar.
* Inception of The Japan Fund, Inc.
** The Japan Fund, Inc. converted to an open-end investment company as of
August 14, 1987.
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Distribution and performance information
Dividends and capital gain distributions
The Fund intends to distribute any dividends from its net investment income
and net realized capital gains after utilization of capital loss carryforwards,
if any, in December to prevent application of a federal excise tax. An
additional distribution may be made within three months of the Fund's fiscal
year end, if necessary. Any dividends or capital gain distributions declared in
October, November or December with a record date in such a month and paid during
the following January will be treated by shareholders for federal income tax
purposes as if received on December 31 of the calendar year declared. According
to your preference, you may receive distributions in cash or have them
reinvested in additional shares of the Fund. If your investment is in the form
of a retirement plan, all dividends and capital gain distributions will be
reinvested in your account.
All dividends from net investment income are taxable to shareholders as
ordinary income. Differences between dividend distributions reported to
shareholders for tax purposes and actual distributions received by shareholders
as either cash or additional shares may reflect the Fund's payment of
withholding taxes imposed by Japan on dividends and interest under the tax
convention between the United States and Japan. Such payments to Japan are
considered distributions to shareholders for tax purposes. Subject to applicable
limitations, such amounts may be claimed as a foreign tax credit by shareholders
or may be deducted by shareholders in computing their federal taxable income.
For further information, please refer to the section "Taxes" in the Fund's
Statement of Additional Information. Long-term capital gain distributions, if
any, are taxable as long-term capital gain regardless of the length of time you
have owned your shares. Distributions of short-term capital gain are taxable as
ordinary income.
The Fund sends you detailed tax information about the amount and type of
its distributions each year.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. Total return is the change in value of
an investment in the Fund for a specified period. Average annual total return
refers to the average annual compound rate of return of an investment in the
Fund assuming the investment has been held for one year, five years and ten
years, as of a stated ending date. Cumulative total return represents the
cumulative change in value of an investment in the Fund for various periods. All
types of total return calculations assume that all dividends and capital gains
distributions during the period were reinvested in shares of the Fund. Capital
change measures return from capital, including reinvestment of any capital gain
distributions but not reinvestment of dividends. Performance will vary based
upon, among other things, changes in market conditions and expenses.
Fund organization
The Fund, which was incorporated under the laws of the State of Maryland in
1961, is an open-end, diversified management investment company registered under
the Investment Company Act of 1940 (the "1940 Act"). The Fund's activities are
supervised by its Board of Directors. At the time of any election, shareholders
have one vote for each share held. The Fund is not required to and has no
current intention to hold annual shareholder meetings, although special meetings
may be called for purposes such as electing or removing Directors, changing
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<PAGE>
fundamental policies or approving an investment advisory contract. Shareholders
will be assisted in communicating with other shareholders in connection with
removing a Director as if Section 16(c) of the 1940 Act were applicable. From
the date of the Fund's initial public offering in 1962 until August 14, 1987,
the Fund operated as a closed-end, diversified management investment company.
Investment advise
In making investment decisions, the Fund retains Scudder, Stevens & Clark,
Inc. to provide management services and investment advice. The Adviser, one of
the nation's most experienced investment management firms, makes investment
decisions and manages the daily business affairs of the Fund in accordance with
the Fund's investment objective and policies and guidelines established by the
Fund's Board of Directors.
The address of Scudder, Stevens & Clark, Inc. is 345 Park Avenue, New York,
New York 10154.
The Nikko International Capital Management Co., Ltd. ("NICAM"), an
indirectly controlled affiliate of The Nikko Securities Co., Ltd., one of
Japan's leading securities companies, provides information and investment advice
to the Adviser for the benefit of the Fund.
NICAM is engaged in the investment counseling and management business and
provides economic research, business information and securities analysis to a
variety of Japanese and international clients, including investors interested in
Japanese and other Far Eastern securities, and companies interested in
international direct investments and joint ventures or in raising funds in
international capital markets. The address of NICAM is 17-9,
Nihonbashi-Hakozakicho, Chuo-ku, Tokyo 103, Japan.
The Adviser received investment advisory and management fees for services
rendered to the Fund which totalled 0.73% of the Fund's net assets during the
fiscal year ended December 31, 1994. The investment advisory and management fees
are graduated so that increases in the Fund's net assets may result in a lower
average fee rate and decreases in a Fund's net assets may result in a higher
average fee rate.
NICAM received fees from the Adviser for services rendered for the benefit
of the Fund which totalled 0.15% of the Fund's net assets during the fiscal year
ended December 31, 1994. This fee paid to NICAM was also graduated, and at a
special meeting on December 21, 1993, shareholders approved a new Research
Agreement between the Adviser and NICAM, and ratified their approval on July 22,
1994, which restructured the fee payable to NICAM to 0.10% of average daily net
assets, payable monthly during the fiscal year 1995. On December 31, 1995, the
research contract with NICAM will terminate.
The Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment services.
Transfer agent, dividend-paying and shareholder service agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts
02107-2291, a wholly-owned subsidiary of Scudder, Stevens & Clark, Inc., is the
transfer and dividend-paying agent.
The Japan Fund Service Center, Two International Place, Boston,
Massachusetts 02110-4103, is a special division of Scudder Service Corporation.
The Japan Fund Service Center is the shareholder service agent for the Fund and
also provides subaccounting and recordkeeping services for shareholder accounts
in certain retirement and employee benefit plans. For telephone numbers and
addresses, please refer to the section "How to contact The Japan Fund."
Distributor
Scudder Investor Services, Inc., a wholly-owned subsidiary of the
Adviser, is the Fund's principal underwriter. Scudder Investor Services,
Inc. confirms, as agent, all purchases of shares of the Fund.
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<PAGE>
Custodian and sub-custodian
Brown Brothers Harriman & Co. is the Fund's custodian, and Sumitomo
Trust & Banking Co. (Tokyo Office) is the Fund's sub-custodian.
Purchases and redemptions
Note: All addresses and telephone numbers can be found under "How to
contact The Japan Fund."
Opening an account ($1,000 minimum)
By check
Checks should be made payable to "The Japan Fund, Inc." in the amount of
$1,000 or more (retirement plan minimums are less--see appropriate plan
literature) and mailed with a completed and signed application to "The Japan
Fund Service Center."
By wire
Under most circumstances, it is possible to open an account by wire. Please
call 1-800-53-JAPAN for an account number and further information.
By exchange from a Scudder fund
You can open a new Japan Fund account at no cost by exchanging shares with
a value of $1,000 or more from another fund in the Scudder Family of Funds. Your
new Japan Fund account will have the same registration and address as your
existing account. Please call 1-800-53-JAPAN for information on the transfer of
special account features.
To exchange by mail or fax, send a letter to "The Scudder Funds" or fax to
1-800-821-6234. Include the name of the Scudder fund from which you are
exchanging, the account name(s) and address, the account number, the dollar
amount or number of shares to be exchanged into your Japan Fund account. Sign
your name(s) exactly as it appears on your account statement. Please also
provide your daytime phone number. The exchange requirements for corporations,
other organizations, trusts, fiduciaries, institutional investors and retirement
plans may differ from those of individual accounts. Please call 1-800-53-JAPAN
for more information.
Making additional investments
Note: Scudder retirement plans have similar or lower minimums for
additional investments.
By check ($100 minimum)
Send a check to "The Japan Fund, Inc." for $100 or more with the tear-off
stub from your Japan Fund account statement or with a letter of instruction
including the Fund name and your account number.
By wire ($100 minimum)
Follow the instructions described under "Opening an account--By wire."
By exchange from a Scudder fund ($100 minimum)
Follow the instructions described under "Opening an account--By
exchange from a Scudder fund."
You can also make exchanges among your Scudder Fund accounts on SAIL, the
Scudder Automated Information Line, if you have requested an authorization to do
so. Call 1-800-53-JAPAN for more details.
Automatic Investment Plan ($50 minimum)
You may arrange to make regular investments through automatic deductions
from your checking account. Please call 1-800-53-JAPAN for more information and
an application.
By telephone order ($2,500 minimum)
Existing shareholders may purchase shares at a certain day's price by
calling The Japan Fund Service Center before the close of the New York Stock
Exchange (the "Exchange") (normally 4 p.m. eastern time) on that day. Orders
must be for $2,500 or more and cannot be for an amount greater than four times
the value of your account at the time the order is placed. A confirmation with
complete purchase information is sent shortly after your order is received. You
16
<PAGE>
must include with your payment the order number given at the time the order is
placed. If payment by check or federal reserve wire is not received within three
business days, the order is subject to cancelation and the shareholder will be
responsible for any loss to the Fund resulting from this cancelation. Telephone
orders are not available for shares held in Scudder IRA accounts and most other
Scudder Retirement Plans.
Non-certificated shares
Due to the desire of Fund management to afford ease of redemption,
ownership in the Fund is on a non-certificated basis. If you currently hold
certificates for shares of the Fund (either directly or through your broker) and
want to continue your investment in the Fund, you may do so either by continuing
to hold such certificates or, for your convenience, by surrendering them to the
Fund's transfer agent who will hold them for your account in non-certificated
form. Surrendering your certificates for Japan Fund shares to the Fund's
transfer agent may be convenient for you because in doing so (1) you will be
relieved of safekeeping of the certificates (the transfer agent will do it for
you), (2) you will have the option to avail yourself of the various shareholder
services offered by the Scudder Family of Funds (e.g., exchange from one fund
into another) and (3) you will receive regular reports of your share total,
including additional shares added to your account as a result of the
reinvestment of dividends and capital gains distributions.
Converting your certificated Fund shares into non-certificated form is not
a taxable event, nor does such conversion alter your tax cost of shares or your
ownership interest and rights in the Fund.
If you want additional information on surrendering your certificated shares
and establishing an open account, please write or call The Japan Fund Service
Center.
Selling fund shares (redemptions)
Shares are redeemable at the option of the shareholder at net asset value
next determined after receipt of a redemption request in good order.
IF YOU HOLD CERTIFICATES FOR JAPAN FUND SHARES, YOU MUST SURRENDER SUCH
CERTIFICATES TO THE FUND'S TRANSFER AGENT PRIOR TO REDEMPTION. Call or write The
Japan Fund Service Center for information on redemption of certificated shares.
If you hold Japan Fund shares in non-certificated form, you may redeem your
shares according to the following instructions.
By telephone
This is the quickest and easiest way to sell Japan Fund shares. You may
redeem any amount to your pre-designated bank account, and up to $50,000 to your
address of record. If you elected telephone redemption to your bank on your
application, you can call to request that federal funds be sent to your
authorized bank account. If you did not elect telephone redemption to your bank
on your application, call 1-800-53-JAPAN for more information.
Redemption proceeds will be wired to your bank unless otherwise requested.
If your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.
You can also make redemptions from your Japan Fund account on SAIL, the
Scudder Automated Information Line, if you have requested an authorization to do
so. Call 1-800-53-JAPAN for more details.
Telephone redemption is not available for shares held in Scudder IRA
accounts and most other Scudder retirement plan accounts.
In the event you are unable to reach the Fund by telephone, you should
write to the Fund following the instructions described below under "By mail or
fax."
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<PAGE>
By mail or fax
To redeem shares by mail or fax, send a letter to "The Japan Fund Service
Center" or fax to 1-800-821-6234 and include the account name(s) and address,
the account number, and the dollar amount or number of shares you wish to
redeem. Sign your name(s) exactly as it appears on your account statement.
Please also provide your daytime phone number.
Signature guarantees
For your protection and to prevent fraudulent redemptions, on written
redemption requests in excess of $50,000 we require an original signature and an
original signature guarantee for each person in whose name the account is
registered. (The Fund reserves the right, however, to require a signature
guarantee for all redemptions.) You can obtain a signature guarantee from most
banks, credit unions or savings associations, or from broker/dealers, municipal
securities broker/dealers, government securities broker/dealers, national
securities exchanges, registered securities associations, or clearing agencies
deemed eligible by the Securities and Exchange Commission. Signature guarantees
by notaries public are not acceptable. Redemption requirements for corporations,
other organizations, trusts, fiduciaries, agents, institutional investors and
retirement plans may be different from those for regular accounts. For more
information call 1-800-53-JAPAN.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and
the right to redeem by telephone up to $50,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be wired
to a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.
Automatic Withdrawal Plan
If the value of your account is $10,000 or more, you may arrange to receive
automatic periodic cash payments. Please call or write The Japan Fund Service
Center for more information and an application.
Redemption-in-kind
The Fund has filed an election pursuant to Rule 18f-1 under the 1940 Act
with the Securities and Exchange Commission pursuant to which the Fund would be
obligated, in the event its Board of Directors determines to make redemption
payments in portfolio securities, to satisfy redemption requests by any one
shareholder of record during any 90-day period solely in cash up to the lesser
of $250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Accordingly, in the event the Fund's management makes such a determination,
the Fund may honor any request for redemption or repurchase order by making
payment in readily marketable securities chosen by the Fund and valued as they
are for purposes of computing the Fund's net asset value, subject to the Fund's
obligation to pay cash as described above. The tax consequences to a redeeming
shareholder are the same whether the shareholder receives cash or securities in
payment for his shares.
If redemption payment is made in portfolio securities, the redeeming
shareholder will incur brokerage commissions and Japanese sales taxes in
converting those securities into cash. In addition, the conversion of securities
into cash may expose the shareholder to stock-market risk and currency exchange
risk.
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<PAGE>
If you receive portfolio securities upon redemption of your Fund shares,
you may request that such securities either (1) be delivered to you or your
designated agent or (2) be liquidated on your behalf and the proceeds of such
liquidation (net of any brokerage commissions and Japanese sales taxes) remitted
to you.
Please write or call The Japan Fund Service Center for further information.
Transaction information
Purchases by check
Checks are invested in full and fractional shares. If you purchase shares
with a check that does not clear, your purchase will be cancelled and you will
be subject to any losses or fees incurred in the transaction. Checks must be
drawn on or payable through a U.S. bank. If you purchase shares by check and
redeem them within seven business days of purchase, the Fund may hold redemption
proceeds until the purchase check has cleared which may take up to seven
business days or more. If you purchase shares by federal funds wire, you may
avoid this delay. Redemption requests by telephone, including exchanges, prior
to the expiration of the seven-day period will not be accepted.
Share price
Purchases and redemptions, including exchanges, are made at net asset
value. The Fund's custodian, Brown Brothers Harriman & Co., determines net asset
value per share as of the close of regular trading on the Exchange, normally 4
p.m. eastern time, on each day the Exchange is open for trading. Net asset value
per share is calculated by dividing the market value of total Fund assets, less
all liabilities, by the total number of shares outstanding.
Market value of Fund assets is determined using the last reported sale
price on the stock exchange on which the trading volume for Fund assets is
highest or, if such price is not available or is deemed out-of-date by the Board
of Directors, using the best information available to the Fund's custodian.
Where quotes on Fund assets are unavailable, such assets will be valued at their
fair value in good faith in accordance with procedures established by the Board
of Directors. In addition, money market investments with a remaining maturity of
less than 60 days will be valued by the amortized cost method.
The net asset value of the Fund is quoted daily in the financial pages of
leading newspapers under the heading "Japan Fund."
Processing time
All purchase and redemption requests received in good order by the Fund's
transfer agent in Boston by the close of regular trading on the Exchange are
executed at the net asset value per share calculated at the close of regular
trading that day.
Purchase and redemption requests received after the close of regular
trading on the Exchange will be executed the following business day.
If you wish to make a purchase of $500,000 or more, you should notify The
Japan Fund Service Center by calling 1-800-53-JAPAN.
The Fund will normally send your redemption proceeds within one business
day following the redemption request, but may take up to seven days (or longer
in the case of shares recently purchased by check).
Short-term trading
Purchases and sales should be made for long-term investment purposes only.
The Fund and Scudder Investor Services, Inc. each reserves the right to restrict
purchases of Fund shares (including exchanges) when a pattern of frequent
purchases and sales made in response to short-term fluctuations in the Fund's
share price appears evident.
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Tax information
It is the Fund's intent to comply with provisions of the Internal Revenue
Code applicable to regulated investment companies. Accordingly, the Fund intends
to distribute to shareholders substantially all of its taxable income less
earnings and profits (as defined for U.S. tax purposes) attributed to shares
redeemed. Under the United States-Japan tax treaty, Japan imposes a withholding
tax of 15% of dividends and 10% on interest.
A redemption of shares, including an exchange into a Scudder fund, is a
sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gain distributions and redemption and
exchange proceeds from accounts (other than those of certain exempt payees)
without a certified Social Security or tax identification number and certain
other certified information or upon notification from the IRS or a broker that
withholding is required. The Fund reserves the right to reject new account
applications without a certified Social Security or tax identification number.
The Fund also reserves the right, following 30 days' notice to shareholders, to
redeem all shares in accounts without a certified Social Security or tax
identification number. A shareholder may avoid involuntary redemption by
providing the Fund with a tax identification number during the 30-day notice
period.
Minimum balances
Shareholders should maintain a share balance worth at least $1,000. Scudder
retirement plans have similar or lower minimum share balance requirements. The
Fund reserves the right, following 60 days' written notice to shareholders, to
redeem all shares in sub-minimum accounts, including accounts of new investors,
where a reduction in value has occurred due to a redemption or exchange out of
the account. Reductions in value that result solely from market activity will
not trigger an involuntary redemption. The Fund will mail the proceeds of the
redeemed account to the shareholder. The shareholder may restore the share
balance to $1,000 or more during the 60-day notice period and must maintain it
at no lower than that minimum to avoid involuntary redemption.
Shareholders of record prior to August 14, 1987, will not be subject to the
$1,000 minimum share balance requirement.
Shareholder services
Fund statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund
reports, such as the Fund's Annual Report, may be mailed to your household (same
surname, same address). Please contact The Japan Fund Service Center at
1-800-53-JAPAN if you wish to receive additional shareholder reports.
Shareholder inquiries
Knowledgeable Japan Fund Service Specialists are committed to providing you
with ongoing, responsive service. They will answer questions about the Fund's
objective and investment characteristics.
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Investment flexibility
If you join the Scudder Family of Funds, you can exchange your Japan Fund
shares for shares of any of the Scudder funds and likewise exchange shares of
any of the Scudder funds for shares of The Japan Fund, Inc. any time at net
asset value by telephone or letter, free of charge. The money market, income,
growth, tax-free, and growth and income funds in the Scudder Family of Funds
have different investment objectives to meet varying goals. Maintaining accounts
in more than one fund in the Scudder Family of Funds enables you to design an
investment program for your particular needs. Telephone redemption and telephone
exchange are subject to termination and their terms are subject to change at any
time by the Fund or the transfer agent.
Experienced professional management
Your investment in the Fund is actively managed under the guidelines
established by the Fund's Board of Directors. Professional management is an
important advantage for investors who do not have the time or expertise to
invest directly in individual securities.
A team approach to investing
The Japan Fund, Inc. is managed by a team of Scudder investment
professionals, who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders and other investment specialists who
work in Scudder's offices across the United States and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.
Lead Portfolio Manager Seung Kwak has had responsibility for the Fund's
investment strategy and daily operations since 1994 and has been a member of the
portfolio management team since 1989. Mr. Kwak has directed our Tokyo-based
research effort since he joined Scudder in 1988. Elizabeth J. Allan, Portfolio
Manager, helps set the Fund's general investment strategies, and was responsible
for the Fund's investment strategy and daily operations from 1991 to 1994. Ms.
Allan has contributed her expertise to the management of the portfolio since she
joined Scudder in 1987 and has numerous years of Pacific Basin research and
investing experience. Eileen O. Gerspach, Portfolio Manager, helps set the
Fund's general investment strategies. Ms. Gerspach, who joined the team in May
1995, has worked in the investment industry since 1984 and has eight years of
experience as a portfolio manager.
SAIL(tm)-- Scudder Automated Information Line
For touchtone access to account information, prices and yields, or to
perform transactions in your existing Scudder fund accounts, shareholders can
call Scudder's Automated Information Line (SAIL) at 1-800-343-2890. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact The Japan Fund"
for the address.
Low minimum investment
The minimum initial investment for the Fund and for any of the Scudder
funds is $1,000. Scudder retirement plans have similar or lower minimum initial
investment requirements. You may add $100 or more to your account at any time.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in
additional Fund shares. Please call 1-800-53-JAPAN to request this feature.
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Tax-advantaged retirement plans
The Japan Fund, Inc. may be a good choice to help you meet your retirement
goals. Scudder Investor Services, Inc., underwriter of The Japan Fund, Inc.,
offers a variety of tax-advantaged retirement plans for individuals, businesses
and non-profit organizations. These flexible plans are designed for use with the
Scudder funds (except Scudder tax-free funds, which are inappropriate for such
plans) as pure no-load(tm) investment options to meet a broad range of
investment objectives. Using Scudder's retirement plans can help shareholders
save on current taxes while building their retirement savings.
* Scudder No-Fee IRAs. Tax-deferred retirement plans for anyone with earned
income. The maximum annual contribution is $2,000 per person. Many people
can deduct all or part of their contributions from their taxable income,
and all investment earnings accrue on a tax deferred basis. The Scudder
No-Fee IRA charges no annual custodial fee.
* 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications, and trustee services, as well as investment options.
* Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by
the plans. Plans may be adopted individually, or paired to maximize
contributions. These are sometimes known as Keogh plans.
* 403(b) Plans. Retirement Plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
* SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation.
* Scudder Horizon Plan. A no-load variable annuity that lets you build
assets by deferring taxes on your investment earnings. You can start
with $2,500 or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian
of these plans and is paid an annual fee for some of the above retirement plans.
For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please
call 1-800-225-2470.
For information about 401(k)s or 403(b)s, please call 1-800-323-6105. To
effect transactions in existing IRA, SEP-IRA, Profit Sharing or Pension Plan
accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life
Insurance Company (in New York State, Intramerica Life Insurance Company
[1802]. The contract is offered by Scudder Insurance Agency, Inc.
(in New York State, Nevada and Montana, Scudder Insurance Agency of New
York, Inc.). CNL, Inc. is the Principal Underwriter. Scudder Horizon Plan
is not available in all states.
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The Scudder Family of Funds
As a Japan Fund shareholder, you can receive information on the Scudder
Family of Funds if you wish to do so. This service is available wholly at the
option of the Japan Fund shareholder. The Scudder Family of Funds offers many
conveniences and services: free telephone exchanges and redemptions at any time
at net asset value, Scudder Funds Centers across the U.S., maintained by Scudder
Investor Services, Inc., for those shareholders who like to conduct business in
person and the Scudder Funds newsletter which reports periodically on the stock
and bond markets, and new Scudder investment products.
If you are interested, please contact a specialist at The Japan Fund
Service Center by calling 1-800-53-JAPAN.
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How to contact The Japan Fund
For investment information or questions about your account:
The Japan Fund Service Center
Two International Place
Boston, MA 02110-4103
1-800-53-JAPAN
(8 a.m.- 8 p.m. eastern time)
Before you phone, please be sure to have your account and Social Security
numbers in hand. Use the above address or phone number to ask about The Japan
Fund's investment characteristics or objective, operating procedures, to request
additional or interim account statements, or to get forms for privileges,
options, or services.
For making a transaction in an account:
The Japan Fund Service Center
P.O. Box 2291
Boston, MA 02107-2291
1-800-53-JAPAN
(8 a.m.- 8 p.m. eastern time)
Use this phone number for telephone exchange or redemption. Before you
phone, please be sure to have your account and Social Security numbers in hand.
Use this address for checks, redemptions, exchange or transfer requests, or
account maintenance instructions such as a change in address, reinvestment
option, bank account or Social Security number.
For account updates and price information:
If you would like an account update or current price information for The
Japan Fund, please call our 24-hour tape recording:
1-800-343-2890 #81 (SAIL Code)
For investment information on any of the funds in the Scudder Family of Funds:
If you have questions about the investment characteristics or objectives of
any of the funds in the Scudder Family of Funds, please call or write:
Scudder Investor Relations
Two International Place
Boston, MA 02110-4103
1-800-225-2470
(8 a.m.- 8 p.m. eastern time)
Directors and officers
Robert G. Stone, Jr., Chairman of the Board and Director
Douglas Loudon, President
William L. Givens, Director
William H. Gleysteen, Jr., Director
Nobuo Ishizaka, Director
John F. Loughran, Director
William V. Rapp, Director
Henry Rosovsky, Director
O. Robert Theurkauf, Director
Shoji Umemura, Director
Hiroshi Yamanaka, Director
Elizabeth J. Allan, Vice President
William E. Holzer, Vice President
Thomas W. Joseph, Vice President
Seung K. Kwak, Vice President
Edward J. O'Connell, Vice President
Miyuki Wakatsuki, Vice President
Gina Provenzano, Vice President and Treasurer
Kathryn L. Quirk, Vice President and Secretary
Thomas F. McDonough, Assistant Secretary
Pamela A. McGrath, Assistant Treasurer
Honorary Directors
Tristan E. Beplat
Allan Comrie
Jonathan Mason
James W. Morley
