This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
83-6-85
MIS69S
THE JAPAN FUND, INC.
Semiannual Report
June 30, 1995
A pure no-load(TM) mutual fund
Scudder, Stevens & Clark, Inc.
Investment Manager
<PAGE>
THE JAPAN FUND, INC.
CONTENTS
Portfolio Management Discussion 3
Reviews the period's investing strategies, financial markets,
and economic conditions
Performance Update 4
Portfolio Summary 5
Investment Portfolio 10
Itemized list of your Fund's portfolio holdings
Financial Statements 14
Financial Highlights 17
Notes to Financial Statements 18
Report of Independent Accountants 24
Officers and Directors 26
How to Contact The Japan Fund Back cover
2
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Dear Shareholders,
The first six months of 1995 brought little cheer for investors in
Japanese stocks. The unmanaged Tokyo Stock Price Index (TOPIX), a broad measure
of the Japanese market, posted a -23.23% total return in yen terms. Translated
into U.S. dollars, the return was somewhat better at -9.38%, as part of the
market's declines were offset by the tenacious strength of the yen. But the
yen's strength also contributed to the period's inhospitable investment
conditions, as did the catastrophic earthquake in Kobe and the negative market
response throughout the Pacific region following the large trading losses in
Japanese equities at Barings Securities. Meanwhile, earnings and economic
forecasts for 1995 were revised downward as asset and product prices continued
to fall during the period.
Against this backdrop, The Japan Fund generated a -18.70% total return
for the six-month period ended June 30, 1995, reflecting the reinvestment of an
$0.11 per share long-term capital gain distribution, and a decline in the Fund's
share price to $8.44 on June 30, from $10.50 six months ago. Among the
portfolio's hardest-hit investments were its smaller-company stock holdings. As
a group, these stocks tend to underperform their larger-company counterparts
during economic downturns (as evidenced by the OTC Index, which declined 30% in
yen terms), but tend to gain more during upturns. Further, some of the Fund's
investments in larger consumer-oriented companies fell out of favor, victims of
deflationary pressures in Japan. Despite these disappointments, we remain
committed to many of your Fund's smaller- and medium-sized company investments,
as well as the portfolio's economically-sensitive holdings, in the belief that
these stocks are attractively valued at current levels based on their long-term
prospects.
The Financial Landscape in Japan
Several obstacles continue to hinder Japan's return to economic health.
Many Japanese banks suffer from bad real-estate loans, and real-estate prices
are still falling. Given the deflation of land prices, major real-estate
companies have changed the way they assess the value of land. They no longer
assume an underlying inflation rate but are reemphasizing valuation purely based
on rental income. Equally significant are the efforts of Japanese financial
institutions -- life insurance companies, for example -- to restructure their
balance sheets by reducing stocks in their portfolios. This move away from
3
<PAGE>
The Japan Fund, Inc.
Performance Update as of June 30, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
The Japan Fund, Inc.
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $ 7,271 -27.29% -27.29%
5 Year $ 8,141 -18.59% -4.03%
10 Year $33,496 234.96% 12.85%
TOPIX
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $ 8,373 -16.27% -16.27%
5 Year $ 9,496 -5.04% -1.03%
10 Year $36,531 265.31% 13.82%
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended June 30
The Japan Fund, Inc.
Year Amount
- ----------------------
85 10000
86 20106
87 29547
88 33603
89 34673
90 41143
91 38388
92 30658
93 39407
94 46069
95 33496
TOPIX
Year Amount
- ----------------------
85 10000
86 20194
87 34045
88 40288
89 42241
90 38468
91 33130
92 24808
93 38187
94 43628
95 36531
The Tokyo Stock Exchange Stock Price Index (TOPIX) is an
unmanaged capitalization weighted measure (adjusted in U.S.
dollars) of all shares listed on the first section of the
Tokyo Stock Exchange. Index returns assume dividends reinvested
net of withholding tax and, unlike Fund returns, do not
reflect any fees or expenses.
- -------------------------------------------------------------------
Returns and Per Share Information
- -------------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods ended June 30
- ----------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
-------------------------------------------------------------------------------
Net Asset Value... $20.61 $22.83 $17.55 $14.76 $13.01 $11.51 $ 9.01 $11.57 $12.71 $ 8.44
Income Dividends.. $ .06 $ .06 $ .14 $ .04 $ .06 $ .09 $ -- $ .01 $ .27 $ --
Capital Gains
Distributions..... $ 1.67 $ 4.74 $ 7.80 $ 3.55 $ 4.24 $ .52 $ .21 $ -- $ .39 $ .96
Fund Total
Return (%)........ 101.06 46.96 13.73 3.18 18.66 -6.69 -20.14 28.54 16.91 -27.29
Index Total
Return (%)........ 101.93 68.59 18.33 4.84 -8.94 -13.88 -25.13 53.93 14.25 -16.27
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
4
<PAGE>
Portfolio Summary as of June 30, 1995
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Common Stocks 88%
Cash Equivalents 12%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Sectors (Excludes 12% Cash Equivalents)
- --------------------------------------------------------------------------
Manufacturing 31%
Metals & Minerals 14%
Consumer Discretionary 13%
Financial 12%
Service Industries 8%
Durables 6%
Consumer Staples 4%
Construction 2%
Transportation 2%
Other 8%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Ten Largest Equity Holdings
- --------------------------------------------------------------------------
1. Nichiei Co., Ltd.
Finance company for small and medium-sized firms
2. Japan Associated Finance Co.
Venture capital company
3. SMC Corp.
Leading maker of pneumatic equipment
4. Hitachi Metals, Ltd.
Major producer of high-quality specialty steels
5. Hitachi Ltd.
General electronics manufacturer
6. Matsushita Electrical Industrial Co., Ltd.
Consumer electronic products manufacturer
7. Sumitomo Metal Industries, Ltd.
Leading integrated crude steel producer
8. Canon Inc.
Leading producer of visual image and information equipment
9. Nisshin Steel Co., Ltd.
Blast furnace steelmaker
10. Royal Ltd.
Wholesaler and retailer of automobile equipment and parts
For more complete details about the Fund's Investment Portfolio,
see page 10.
A monthly investment portfolio summary is available upon request.
5
<PAGE>
THE JAPAN FUND, INC.
- --------------------------------------------------------------------------------
stocks reverses two decades of aggressive expansion in so-called policy
investments -- that is, investments in the stocks of clients. In recent months,
stock investments have not provided income-oriented insurance companies a stream
of income sufficient to meet their needs. Even worse, the declining market has
swept away unrealized gains on stocks, elevating the risk of principal losses.
To survive the tougher operating environment, older Japanese corporations, such
as the steel companies, also have sold stocks. These factors have resulted in an
oversupply of stocks in the marketplace, which has exacerbated the market's
recent weakness.
Fortunately, a number of encouraging developments may yet inject life
into the Japanese stock market. For example, the Japanese government recently
made it more attractive for companies to buy back shares from investors, thus
helping to absorb some of the heavy selling by the financial institutions. Share
buybacks were prohibited until last October, when the government formally
sanctioned the practice. Stiff tax policies, however, discouraged companies from
engaging in buyback activity. Acknowledging the tax impediment, the government
plans to freeze the punitive taxes for two to three years beginning in 1996.
Already, several major corporations have expressed interest in taking advantage
of this opportunity.
Other grounds for optimism: Many leading Japanese companies have begun
to revisit their dividend policies with an eye toward allowing dividends to grow
in line with corporate earnings. This change, a radical departure from the
historical practice at most Japanese corporations, could coax both individual
investors and income-oriented Japanese financial institutions back to stocks.
Traditionally, dividends were paid as a percentage of par value -- a constant
stock value -- and generally failed to keep pace with earnings growth. These
dividend discussions suggest that many Japanese stocks are beginning to be
viewed as more mature, income-generating instruments. Previously, most were
considered pure growth stocks, characterized by the underlying corporation's
tendency to retain any accumulated wealth to invest in future growth.
A prospective reduction in the corporate earnings tax could also aid
the financial markets. Today, Japan's effective tax rate on corporate earnings
is approximately 50%, much higher than in other developed economies. Reducing
this tax would invariably improve the financial health of many corporations and
6
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
possibly lead to better performance in the stock market. One caveat, however, is
that these proposals are at a preliminary stage and must still contend with the
Ministry of Finance, which is keen on maintaining its tax revenues.
Portfolio Strategy
From a fundamental standpoint, the Fund's investment strategy remained
essentially unchanged during the six-month period. We continued to invest on a
stock-by-stock basis, focusing on sound companies we would favor any market
environment.
During the six months, the changing structure of the Japanese financial
system and equity ownership accentuated our interest in stocks of select
cash-rich and cash-generative companies, specifically those selling at
relatively low prices. These companies are well-positioned to take advantage of
the government's incentive for buying back shares and may choose to raise
dividends on their stocks. A shrinking equity base achieved through stock
buyback would enable measures like return-on-equity and earnings-per-share to
increase -- even if earnings were to remain static. Among the cash-rich
companies added were Takasago Thermal Engineering, a leader in construction
engineering; Daiichi Pharmaceutical, a major drug firm; and Maeda Road, a major
road-paving company.
Meanwhile, the Fund sold retail and other consumer-driven companies,
such as Skylark and Nissen. Retail companies had contributed strongly to
performance during the past five years but have since become vulnerable to
deflation and increased competition among chain stores.
In view of the extreme fluctuation in the dollar/yen exchange rate,
currency strategy also factored prominently during the period. At the end of
December, the Fund's exposure to the yen was only 60% of the portfolio. The
remaining 40% was effectively converted to U.S. dollars through currency hedging
strategies designed to protect the Fund from losses in the event of yen
weakening. By February, however, it had become increasingly clear that any
immediate weakening of the yen would be challenged by the flurry of negative
events besetting the marketplace. As a result, we removed the hedges,
dramatically boosting yen exposure to more than 90% of the Fund. And because the
currency subsequently rose to new heights, this strategy helped soften the blows
of falling stock prices during the remainder of the period. All told, our
7
<PAGE>
THE JAPAN FUND, INC.
- --------------------------------------------------------------------------------
defensive currency strategy set performance back by approximately 1% during the
period.
Elsewhere, a number of investment themes were evident in the portfolio
during the period. For example, stocks of smaller- to medium-sized companies
continue to constitute a major portion of the portfolio, given the attractive
selection of owner-operated, entrepreneurial growth companies. We favored
companies with strong franchises exhibiting the potential for sustained growth.
Many of the period's top holdings, in fact, fit this description including
Nichiei, a finance company; SMC, a leading manufacturer of pneumatic equipment;
and Royal Ltd., a wholesaler and retailer of automobile parts and equipment.
The multimedia revolution is another theme captured in the portfolio.
Global companies valued at internationally competitive levels form the core of
these investments. Household names such as Canon, the leading producer of visual
image and information equipment; and Hitachi Ltd., a general electronics
manufacturer, number among your Fund's top ten holdings.
Finally, the portfolio also provides glimpses of the corporate
restructuring trend. Many of the larger, older Japanese companies, such as
Sumitomo Metal Industries and Kawasaki Steel, have restructured to adapt to the
evolving market climate. As economic recovery takes hold, we believe the efforts
of these companies to reshape their businesses will prove beneficial to stock
market performance.
Outlook
The rough ride Japanese stocks endured during the period is
indisputable. Looking forward, however, we believe that a portfolio of Japanese
investments grounded in the rigorous research of individual companies can reward
investors over time. In addition to the heartening developments discussed
earlier, we also anticipate an acceleration in the number of new Japanese
equities coming to market, which may result in opportunities to invest in
younger companies at more aggressive stages of growth. Meanwhile, we will keep a
sharp eye on currency relationships through the study of such indicators as the
monthly adjustment in Japan's current account -- a measure of trade. Japan's
trade surplus, in our view, will likely shrink in the coming quarters, paving
the way for yen depreciation -- at least in the short run. Currently, the Fund
can participate substantially in any continued yen strength because its currency
8
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
hedge position is minimal. However, we have structured the hedge so that the
protection would increase if the yen weakens dramatically.
Thank you for your continued investment in The Japan Fund.
Sincerely,
/s/Douglas M. Loudon
Douglas M. Loudon Henry Rosovsky
President Chairman
9
<PAGE>
<TABLE>
THE JAPAN FUND, INC.
INVESTMENT PORTFOLIO as of June 30, 1995
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4.6% REPURCHASE AGREEMENT
-------------------------------------------------------------------------------
23,705,000 Repurchase Agreement with Salomon
Brothers dated 6/30/95 at 6.125% to be
repurchased on 7/3/95 at $23,717,099
collateralized by a $19,483,000 U.S. Treasury
Note, 8.5%, 2/15/20 (Cost $23,705,000)........... 23,705,000
----------
7.0% COMMERCIAL PAPER
-------------------------------------------------------------------------------
8,400,000 CIESCO, 5.90%, 8/3/95................................ 8,354,570
10,000,000 Ford Motor Credit Co., 5.87%, 7/20/95 ............... 9,969,019
10,000,000 General Electric Capital Corp., 5.95%, 7/12/95...... 9,981,819
7,900,000 Household Finance Corp., 5.95%, 7/5/95............... 7,900,000
----------
TOTAL COMMERCIAL PAPER (Cost $36,205,408)............ 36,205,408
----------
88.2% COMMON STOCKS
-------------------------------------------------------------------------------
Shares
-------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 11.3%
Department &
Chain Stores 1.7% 32,000 Fast Retailing Co., Ltd. ............................ 2,729,750
117,000 Ito-Yokado Co., Ltd. ................................ 6,170,609
----------
8,900,359
----------
Home Furnishings 0.5% 96,000 Nitori Co., Ltd. .................................... 2,593,829
----------
Recreational Products 0.5% 63,000 Square Co., Ltd. .................................... 2,356,321
----------
Restaurants 2.2% 307,000 Aiya Co., Ltd. ...................................... 3,694,649
89,460 Genki Sushi Co., Ltd. .............................. 2,074,083
341,340 Ten Allied Co., Ltd. ................................ 5,759,143
----------
11,527,875
----------
Specialty Retail 6.4% 63,700 Bunkyodo Co., Ltd. .................................. 2,085,629
90,600 Cox Co., Ltd. ....................................... 855,171
76,787 Hasegawa Co., Ltd. .................................. 905,988
183,000 Kato Denki Co., Ltd. ................................ 4,426,288
120,670 Ministop Co., Ltd. .................................. 2,875,977
337,640 Royal Ltd. .......................................... 11,951,153
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
132,400 Shimamura Co., Ltd. ......................... 4,686,449
48,500 Simree Co., Ltd. ............................ 188,838
107,700 Tsutsumi Jewelry Co., Ltd. .................. 4,904,985
----------
32,880,478
----------
CONSUMER STAPLES 3.6%
Consumer Electronic &
Photographic Products 2.2% 340,000 Pioneer Electronics Corp. ................... 5,776,650
118,600 Sony Corp. (ADR)............................. 5,752,100
----------
11,528,750
----------
Food & Beverage 1.4% 75,000 Ariake Japan Co., Ltd. ...................... 3,097,162
273,000 Rock Field Co., Ltd. ........................ 4,155,153
----------
7,252,315
----------
HEALTH 0.5%
Pharmaceutical 162,000 Daiichi Pharmaceutical Co., Ltd. ............ 2,370,126
----------
COMMUNICATIONS 1.6%
Telephone/Communications 1,053 DDI Corp. ................................... 8,448,351
----------
FINANCIAL 10.7%
Other Financial Companies 190,000 Japan Associated Finance Co. ................ 17,351,189
501,876 Nichiei Co., Ltd. ........................... 30,969,400
90,000 Sanyo Shinpan Finance Co., Ltd. ............. 6,583,682
----------
54,904,271
----------
MEDIA 1.8%
Broadcasting & Entertainment 285,000 Horipro Inc. ................................ 4,707,687
102,277 Sony Music Entertainment (Japan) Inc. ....... 4,332,186
----------
9,039,873
----------
SERVICE INDUSTRIES 7.0%
Miscellaneous Commercial
Services 1,478,000 Itochu Corp. ................................ 8,632,057
106,000 Secom Co., Ltd. ............................. 6,666,037
37,000 Softbank Corp. .............................. 6,068,079
1,033,000 Sumitomo Corp. .............................. 9,409,191
317,000 Takasago Thermal Engineering Co., Inc. ...... 4,974,456
----------
35,749,820
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
THE JAPAN FUND, INC.
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DURABLES 4.9%
Aerospace 0.1% 48,000 JAMCO Corp. ................................... 328,476
----------
Automobiles 4.8% 252,000 Bridgestone Corp. .............................. 3,716,595
17,000 FCC Co., Ltd. .................................. 477,376
98,000 Futaba Industrial Co., Ltd. .................... 1,595,658
500,100 Kyokuto Kaihatsu Kogyo Co., Ltd. ............... 10,561,961
17,000 Ogura Clutch Co., Ltd. ......................... 184,532
1,014,000 ShinMaywa Industries, Ltd. ..................... 8,506,330
----------
25,042,452
----------
MANUFACTURING 27.7%
Chemicals 1.0% 565,000 Nippon Shokubai Corp., Ltd. .................... 4,993,039
----------
Diversified Manufacturing 1.8% 775,000 Sumitomo Electric Industries, Ltd. ............. 9,235,443
----------
Electrical Products 8.6% 1,625,000 Hitachi Ltd. ................................... 16,201,109
140,000 Mabuchi Motor Co., Ltd. ........................ 9,646,629
1,012,000 Matsushita Electrical Industrial Co., Ltd. ..... 15,761,194
424,000 Toshiba Corp. .................................. 2,686,426
----------
44,295,358
----------
Hand Tools 0.8% 317,430 Asahi Diamond Industrial Co., Ltd. ............. 3,895,076
----------
Industrial Specialty 0.6% 765,000 NHK Spring Co., Ltd. ........................... 3,195,210
----------
Machinery/Components/
Controls 12.2% 92,500 Keyence Corp. .................................. 10,368,120
426,000 Komori Corp. ................................... 8,695,416
754,000 NGK Spark Plug Co., Ltd. ....................... 8,362,456
1,365,000 NSK Ltd. ...................................... 7,875,465
289,900 SMC Corp. ...................................... 16,657,578
592,600 THK Co., Ltd. .................................. 10,907,392
----------
62,866,427
----------
Office Equipment/Supplies 2.7% 854,000 Canon Inc. ..................................... 13,905,020
----------
TECHNOLOGY 2.0%
Electronic Components/
Distributors 1.4% 90,000 Kyocera Corp. .................................. 7,411,952
----------
Electronic Data Processing 0.6% 298,000 Fujitsu Ltd. ................................... 2,971,034
----------
ENERGY 0.4%
Engineering 187,000 JGC Corp. ...................................... 1,820,247
----------
METALS AND MINERALS 12.6%
Precious Metals 2.2% 1,501,000 Sumitomo Metal Mining Co., Ltd. ................ 11,086,378
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Steel & Metals 10.4% 1,448,000 Hitachi Metals, Ltd. ........................ 16,247,395
3,073,000 Kawasaki Steel Corp. ........................ 10,079,571
3,338,000 Nisshin Steel Co., Ltd. ..................... 12,248,457
5,759,000 Sumitomo Metal Industries, Ltd. ............. 15,016,683
-----------
53,592,106
-----------
CONSTRUCTION 2.0%
Homebuilding 0.6% 88,000 Eyeful Home Technology Inc. ................. 1,266,710
215,000 Hosoda Corp. ................................ 1,965,961
-----------
3,232,671
-----------
Miscellaneous 1.4% 382,000 Maeda Road Construction Co., Ltd. ........... 7,391,658
-----------
TRANSPORTATION 2.1%
Marine Transportation 0.7% 634,000 Nippon Yusen K.K. ........................... 3,553,185
-----------
Railroads 1.4% 1,370 East Japan Railway Co. ...................... 7,031,445
-----------
TOTAL COMMON STOCKS (Cost $505,256,553)...... 453,399,545
-----------
0.2% PURCHASED OPTIONS
--------------------------------------------------------------------------------
Principal
Amount
--------------------------------------------------------------------------------
JPY 11,000,000,000 Put on Japanese Yen, strike price
JPY 101.9, expiration date 10/17/96...... 297,000
JPY 11,000,000,000 Put on Japanese Yen, strike price
JPY 102.59, expiration date 12/18/96..... 330,000
JPY 11,000,000,000 Put on Japanese Yen, strike price
JPY 102.68, expiration date 1/16/97...... 330,000
-----------
TOTAL PURCHASED OPTIONS (Cost $6,446,017).... 957,000
-----------
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $571,612,978) (a).................. 514,266,953
===========
<FN>
(a) The cost for federal income tax purposes was $587,972,026. At June 30, 1995, net unrealized depreciation
for all securities based on tax cost was $73,705,073. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market value over tax cost of $14,635,337
and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost
over market value of $88,340,410.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
THE JAPAN FUND, INC.
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------------
JUNE 30, 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $571,612,978)
(Note A)........................................... $514,266,953
Cash.................................................. 309
Foreign currency holdings, at market (identified
cost $1,444,553)(Note A)........................... 1,444,553
Receivable on fund shares sold ....................... 3,482,901
Dividends and interest receivables.................... 1,653,227
Receivable on investments sold ....................... 133,029
Other assets.......................................... 6,419
------------
Total assets ...................................... $520,987,391
LIABILITIES
Payable for investments purchased..................... $ 4,399,108
Payable for fund shares redeemed...................... 3,150,017
Accrued management fee (Note C)....................... 285,326
Other accrued expenses (Note C)....................... 502,979
Payable on closed forward foreign currency
exchange contracts (Note A)........................ 26,393,018
-----------
Total liabilities............................... 34,730,448
------------
Net assets, at market value........................... $486,256,943
============
NET ASSETS
Net assets consist of:
Accumulated distributions in excess of net
investment income............................... $(12,288,262)
Net unrealized appreciation (depreciation) on:
Investments..................................... (57,346,025)
Foreign currency related transactions........... 49,739
Accumulated net realized loss...................... (14,304,152)
Capital stock...................................... 19,199,156
Additional paid-in capital......................... 550,946,487
------------
Net assets, at market value........................... $486,256,943
============
NET ASSET VALUE, offering and redemption price per
share ($486,256,943 / 57,597,468 outstanding
shares of capital stock, $.333 par value,
600,000,000 shares authorized)..................... $8.44
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of withholding taxes of $293,744)......... $ 1,716,270
Interest................................................. 811,593
-------------
2,527,863
Expenses:
Management fee (Note C).................................. $ 1,824,337
Shareholder and Transfer Agent services (Note C)......... 501,902
Officers and directors fees and expenses (Notes C & D)... 89,764
Custodian fees........................................... 221,378
Printing................................................. 155,404
Auditing and accounting services......................... 55,300
Legal.................................................... 156,736
Federal and state registration........................... 34,333
Other.................................................... 18,172 3,057,326
----------------------------
Net investment loss...................................... (529,463)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized loss from:
Investments.......................................... (3,430,031)
Options.............................................. (1,298,634)
Foreign currency related transactions................ (9,443,690) (14,172,355)
------------
Net unrealized appreciation (depreciation) during
the period on:
Investments.......................................... (98,647,197)
Written options...................................... 226,928
Foreign currency related transactions................ 8,718,683 (89,701,586)
----------------------------
Net loss on investment transactions...................... (103,873,941)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $(104,403,404)
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
THE JAPAN FUND, INC.
- -------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment loss............................. $ (529,463) $ (2,599,796)
Net realized gain (loss) from investment
transactions................................ (14,172,355) 42,025,485
Net unrealized appreciation (depreciation) on
investment transactions during the period... (89,701,586) 2,264,434
------------- -------------
Net increase (decrease) in net assets resulting
from operations............................. (104,403,404) 41,690,123
------------- -------------
Distributions to shareholders:
From net realized gains ($.11 and $.80 per
share, respectively) ....................... (5,803,249) (42,020,462)
------------- -------------
In excess of net realized gains ($.05 per
share for December 31, 1994)................ -- (2,360,903)
------------- -------------
Fund share transactions:
Proceeds from shares sold....................... 154,671,951 521,023,226
Net asset value of shares issued to
shareholders in reinvestment of
distributions............................... 4,957,881 37,569,251
Cost of shares redeemed......................... (148,873,489) (441,092,468)
------------- -------------
Net increase in net assets from
Fund share transactions..................... 10,756,343 117,500,009
------------- -------------
INCREASE (DECREASE) IN NET ASSETS............... (99,450,310) 114,808,767
Net assets at beginning of period............... 585,707,253 470,898,486
------------- -------------
NET ASSETS AT END OF PERIOD (including
accumulated distributions in excess of net
investment income of $(12,288,262) and
$(11,758,799), respectively)................ $ 486,256,943 $ 585,707,253
============= =============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period....... 55,779,456 45,596,062
------------- -------------
Shares sold..................................... 17,643,370 44,011,661
Shares issued to shareholders in reinvestment
of distributions............................ 559,580 3,602,037
Shares redeemed................................. (16,384,938) (37,430,304)
------------- -------------
Net increase in Fund shares..................... 1,818,012 10,183,394
------------- -------------
Shares outstanding at end of period............. 57,597,468 55,779,456
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout each period and other
performance information derived from the financial statements.
<CAPTION>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30, -----------------------------------------------------------------------------------
1995(a) 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> <C>
Net asset value,
beginning of
period............... $ 10.50 $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)....... (.01) (.05) (.05) (.05) (.03) .09 .04 .04 .16 .10 .08
Net realized and
unrealized gain
(loss) on
investments......... (1.94) 1.07 2.15 (1.74) .37 (2.41) 1.66 3.13 5.81 9.34 4.28
------- ------ ------ ------- ------ ------- ------ ------ ------ ------ ------
Total from
investment
operations.......... (1.95) 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) -- -- -- -- -- -- -- --
From net realized
gains on
investment
transactions........ (.11) (.80) (.39) -- (.41) (1.10) (3.59) (3.88) (9.08) (4.67) (1.36)
In excess of net
realized gains...... -- (.05) -- -- -- -- -- -- -- -- --
------- ------ ------ ------- ------ ------- ------ ------ ------ ------ ------
Total distributions.... (.11) (.85) (.67) -- (.41) (1.19) (3.67) (3.90) (9.28) (4.69) (1.43)
------- ------ ------ ------- ------ ------- ------ ------ ------ ------ ------
Net asset value,
end of period.......... $ 8.44 $10.50 $10.33 $ 8.90 $10.69 $ 10.76 $14.27 $16.24 $16.97 $20.28 $15.53
======= ====== ====== ======= ====== ======= ====== ====== ====== ====== ======
TOTAL RETURN (%).......... (18.70)** 10.03 23.64 (16.74) 3.11 (16.36) 11.63 19.40 33.01 77.54 38.89
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions).... 486 586 471 409 335 313 401 404 394 584 360
Ratio of operating
expenses to average
daily net assets (%)... 1.27* 1.08 1.25 1.42 1.26 1.05 1.02 1.01 .90 .70 .64
Ratio of net investment
income to average
daily net assets (%)... (.22)* (.40) (.47) (.31) (.15) .72 .34 .28 .41 .51 .63
Portfolio turnover
rate (%)............... 66.7* 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.
* Annualized ** Not annualized
</FN>
</TABLE>
17
<PAGE>
THE JAPAN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The Japan Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. The policies described below are followed consistently by the Fund in
the preparation of its financial statements in conformity with generally
accepted accounting principles.
SECURITY VALUATION. Portfolio securities which are traded on an exchange are
valued at the most recent sale price reported on the exchange on which the
security is traded most extensively. If no sale occurred, the security is then
valued at the calculated mean between the most recent bid and asked quotations.
If there are no such bid and asked quotations, the most recent bid quotation is
used. Securities traded in the over-the-counter market are valued at the most
recent sale price on such market. If no sale occurred in the over-the-counter
market, the security is then valued at the calculated mean between the most
recent bid and asked quotations. If there are no such bid and asked quotations,
the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors.
OPTIONS. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or
sell to (put option), the writer a designated instrument at a specified price
within a specified period of time. Certain options, including options on
indices, will require cash settlement by the Fund if the option is exercised.
During the period, the Fund purchased put options on currencies as a hedge
against potential adverse price movements in the value of portfolio assets.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
If the Fund writes an option and the option expires unexercised, the Fund will
realize income, in the form of a capital gain, to the extent of the amount
received for the option (the "premium"). If the Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call
or purchased put option is adjusted for the amount of option premium. If a
written put or purchased call option is exercised the Fund's cost basis of
the acquired security or currency would be the exercise price adjusted for
the amount of the option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options
are valued using dealer supplied quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an
increase in the market value of the underlying security or currency above the
exercise price. When the Fund writes a put option it accepts the risk of a
decline in the market value of the underlying security or currency below the
exercise price. Over-the-Counter options have the risk of the potential
inability of counterparties to meet the terms of their contracts. The Fund's
maximum exposure to purchased options is limited to the premium initially paid.
In addition, certain risks may arise upon entering into option contracts
including the risk that an illiquid secondary market will limit the Fund's
ability to close out an option contract prior to the expiration date and, that
a change in the value of the option contract may not correlate exactly with
changes in the value of the securities or currencies hedged.
19
<PAGE>
THE JAPAN FUND, INC.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities
at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the daily rates of exchange
prevailing on the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract (forward contract) is a commitment to purchase or sell a
foreign currency at the settlement date at a negotiated rate. During the
period, the Fund utilized forward contracts as a hedge in connection with
portfolio purchases and sales of securities denominated in foreign currencies
and as a hedge against changes in exchange rates relating to foreign currency
denominated assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
FEDERAL INCOME TAXES. No provision for United States income taxes has been
made since it is the Fund's policy to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies. Accordingly, the
Fund distributes 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% on dividends and 10% on interest. There is currently no Japanese
tax on capital gains.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences primarily relate to investments in forward contracts, foreign
denominated investments, and passive foreign investment companies. As a result,
net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund. The Fund uses the identified cost method for
determining realized gain or loss on investments for both financial and federal
income tax reporting purposes.
21
<PAGE>
THE JAPAN FUND, INC.
- --------------------------------------------------------------------------------
OTHER. Investment security transactions are accounted for on a trade-date
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on an accrual basis. Acquisition
discount and original issue discount are accreted for both tax and financial
reporting purposes.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
For the six months ended June 30, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $162,288,441 and
$221,711,592, respectively.
<TABLE>
Transactions in written options for the six months ended June 30, 1995 are
summarized as follows:
<CAPTION>
OPTIONS ON CURRENCIES
-----------------------------------
PREMIUMS
JAPANESE YEN RECEIVED ($)
-----------------------------------
<S> <C> <C>
Beginning of Period......... 4,177,500,000 1,861,822
Exercised .................. (4,177,500,000) (1,861,822)
-------------- -----------
End of Period............... -- $ --
============== ===========
</TABLE>
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Investment Management Agreement (the "Management Agreement") with
Scudder, Stevens & Clark, Inc. (the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objective, policies,
and restrictions. The Adviser determines the securities, instruments, and
other contracts relating to investments to be purchased, sold or entered into
by the Fund. In addition to portfolio management services, the Adviser provides
certain administrative services in accordance with the Management Agreement.
The Fund agrees to pay the Adviser a fee equal to an annual rate of 0.85% of
the first $100,000,000 of the Fund's average daily net assets, 0.75% of the
next $200,000,000 of such assets, 0.70% of the next $300,000,000 of such assets
and 0.65% of such net assets in excess of $600,000,000 computed and accrued
daily and paid monthly. For the six months ended June 30, 1995, the fee
pursuant to the Management Agreement amounted to $1,824,337, which was
equivalent to an annual effective rate of .76% of the Fund's average daily net
assets. The Management Agreement also provides that if the
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Fund's expenses, exclusive of taxes, interest and extraordinary expenses, exceed
specified limits, such excess, up to the amount of the management fee, will be
paid by the Adviser.
Under the Research Agreement, (the "Research Agreement") between the Adviser
and The Nikko International Capital Management Co., Ltd. ("NICAM"), an
affiliate of The Nikko Securities Co., Ltd., NICAM provides information,
investment recommendations, advice and assistance for use by the Adviser in
advising the Fund. Effective January 1, 1995, the Adviser agreed to pay NICAM a
fee equal to an annual rate of 0.10% of the Fund's average daily net assets
computed and accrued daily and paid monthly. For the six months ended June 30,
1995 the fee pursuant to the Research Agreement amounted to $242,762.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the six months ended June 30, 1995, the amount charged to the Fund by SSC
aggregated $396,504, of which $65,526 is unpaid at June 30, 1995.
The Fund pays each of its Officers and Directors not affiliated with the
Advisor an annual fee plus specified amounts for attended board and committee
meetings. For the six months ended June 30, 1995, the Officers and Directors
fees aggregated $71,137.
During the six months ended June 30, 1995, there were $67,559 in commissions
paid or accrued by the Fund to The Nikko Securities Co., Ltd.
D. DIRECTORS' RETIREMENT BENEFITS
- --------------------------------------------------------------------------------
Under a retirement program, which became effective January 1, 1992, independent
members of the Board of Directors who meet certain criteria become eligible
to participate in a defined benefit retirement program. Under this program
monthly payments will be made for a period of 120 months by the Fund based
on the individual's final year basic Directors fees and length of service.
For the six months ended June 30, 1995, Directors' retirement benefits amounted
to $18,627. At June 30, 1995, the Fund has accrued $149,165 for such benefits.
23
<PAGE>
THE JAPAN FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF THE JAPAN FUND, INC.:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Japan Fund, Inc. (the "Fund")
at June 30, 1995, the results of its operations, the changes in its net assets
and the financial highlights for each of the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at June 30, 1995 by
correspondence with the custodian and brokers and the application of
alternative procedures where confirmations from brokers were not received,
provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts PRICE WATERHOUSE LLP
August 2, 1995
24
<PAGE>
(This page intentionally left blank.)
25
<PAGE>
OFFICERS AND DIRECTORS
- --------------------------------------------------------------------------------
Henry Rosovsky
Chairman of the Board and Director
Professor, Harvard University; Director, Corning Inc., Paine Webber Group
Douglas M. Loudon*
President
William L. Givens
Director
President, Twain Associates
William H. Gleysteen, Jr.
Director
President, The Japan Society, Inc.
Nobuo Ishizaka
Director
Non-executive Director, Atlas Copco, Kaigai Bussan K.K., HFI Food, Inc.
John F. Loughran
Director
Senior Adviser for Asia Pacific to J.P. Morgan & Co., Inc.
William V. Rapp
Director
Senior Research Fellow Columbia University; Visiting Lecturer, University of
Victoria; Managing Director, Rue Associates
O. Robert Theurkauf*
Director
Shoji Umemura
Director
Chairman, The Nikko Securities Co., Ltd.; Vice Chairman, Japan Securities
Dealers Association; Governor, Board of Governors, Tokyo Stock Exchange,
Association of Tokyo Stock Exchange Regular Members; Director, The
Securities Analysts Association of Japan; Executive Director, Federation of
Economic Organizations, Japan Federation of Employers Association; Advisor,
Japan Association of Corporate Executives; Advisor, Tokyo Chamber of
Commerce and Industry; Vice Chairman, Japan-Korea Economic Association;
Member, Board of Trustees, Waseda University; Chairman, Congregation, Waseda
University
Hiroshi Yamanaka
Director
Advisor to the Board, The Meiji Mutual Life Insurance Company; Lifetime
Executive Director, Japan Association of Corporate Executives; Vice
Chairman, The Security Analysts Association of Japan; Governor, Board of
Governors, Tokyo Stock Exchange; Auditor, Bank of Tokyo, Ltd.; Director,
Kirin Brewery Co., Ltd., Nikon Corp.; Doctor of Commerce, Chuo University
26
<PAGE>
THE JAPAN FUND, INC.
- --------------------------------------------------------------------------------
Elizabeth J. Allan*
Vice President
William E. Holzer*
Vice President
Thomas W. Joseph*
Vice President
Seung Kwak*
Vice President
Edward J. O'Connell*
Vice President
Miyuki Wakatsuki
Vice President
Manager, Nikko International Capital Management Co., Ltd.
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
Director, Daiwa Bank Trust Co., Yasuda Fire & Marine Insurance Co. of
America, Pacific Forum, Farfield Maxwell, Ltd; Member, Advisory Council,
East Asian Studies, Princeton University; Honorary Director, Japan Society,
U.S.-Asia Institute, Radix Ventures, Inc.
Allan Comrie
Former Director, The Japan Fund, Inc.
Jonathan Mason
Former Chairman of the Board and Director, The Japan Fund, Inc.
James W. Morley
Professor of Political Science Emeritus, Columbia University
Robert G. Stone, Jr.
Former Chairman of the Board and Director, The Japan Fund, Inc.
Chairman of the Board, Kirby Corporation
* Scudder Stevens & Clark, Inc.
27
<PAGE>
You can call toll free (1-800-343-2890) anytime day or night and get access to
automated information regarding transactions in your account as well as The
Japan Fund's share price. By using your touch-tone telephone and providing the
necessary information (including your account number), you can receive daily
updates from this computerized system.
We remind all shareholders that the Fund offers a free dividend reinvestment
program. You can obtain additional information about this feature and arrange to
have all dividends and capital gain distributions reinvested in additional Fund
shares by calling The Japan Fund Service Center at 1-800-53-JAPAN
(1-800-535-2726). The Fund typically distributes capital gains twice a year
(December and March).
HOW TO CONTACT US:
1-800-53-JAPAN
1-800-535-2726
(Outside the U.S. call 617-439-4640)
The Japan Fund
Shareholder Service Center
Two International Place
Boston, MA 02110
Scudder, Stevens & Clark, Inc.
Investment Manager
