THE JAPAN FUND, INC.
Annual Report
December 31, 1994
A pure no-load(tm) mutual fund
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
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 9
Itemized list of your Fund's portfolio holdings
Financial Statements 13
Financial Highlights 16
Notes to Financial Statements 17
Report of Independent Accountants 23
Tax Information 24
Officers and Directors 26
How to Contact The Japan Fund Back cover
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
As you are all aware, after the close of The Japan Fund's fiscal year,
a major earthquake hit the Kobe area. The economic and investment market
implications of this tragic event are significant, and we are enclosing a
special letter to discuss the ramifications.
In a difficult year for the financial markets, positive investment
returns were especially welcome. We are pleased to report that The Japan
Fund provided a 10.03% total return for the 12 months ended December 31,
1994. The Fund's performance reflected an increase in share price from
$10.33 a year ago to $10.50 on December 31, 1994, and reinvested
distributions of $0.85 per share. By comparison, the Tokyo Stock Price
Index (TOPIX), your Fund's benchmark, posted a dollar-based total return of
21.96%, roughly half of which were gains resulting from appreciation of the
Japanese yen.
Several factors hampered the Fund's performance relative to the
TOPIX_key among them was a comparatively small exposure to cyclical
industries, which led the Japanese market rally in 1994. The Fund also
maintained a heavy weighting relative to the TOPIX in consumer growth- and
service-oriented companies, both of which underperformed significantly in
1994 after rewarding the Fund with three years of healthy performance. In
addition, the Fund's reduced exposure to the yen inhibited returns during
the year. Concerned that the yen had become overvalued relative to the U.S.
dollar, we converted approximately 40% of the Fund's yen exposure back to
U.S. dollars, primarily through forward currency contracts. Designed to
help protect gains when the yen declines, our hedging strategy limited the
Fund's participation in the currency's appreciation last year.
1994_An Eventful Year
A number of noteworthy developments marked the environment for
Japanese investments during the past year.
First, the Japanese stock market rebounded sharply during the year's
first half, driven by purchases from non-Japanese investors who believed
economic recovery was on its way. The best-performing market segments
included economically sensitive industries such as machinery, paper, steel,
shipping, rubber, transportation, textiles, and chemicals.
<PAGE>
The Japan Fund, Inc.
Performance Update as of December 31, 1994
- - - - - -----------------------------------------------------------------
Growth of a $10,000 Investment
- - - - - -----------------------------------------------------------------
The Japan Fund, Inc.
- - - - - ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - - - - --------- ------- ---------- -------
1 Year $11,003 10.03% 10.03%
5 Year $ 9,768 -2.32% -0.47%
10 Year $42,701 327.01% 15.62%
TOPIX
- - - - - --------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - - - - --------- ------- ---------- -------
1 Year $12,196 21.96% 21.96%
5 Year $ 8,109 -18.91% -4.10%
10 Year $46,085 360.85% 16.50%
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 December 31
The Japan Fund, Inc.
Year Amount
- - - - - ----------------------
84 10000
85 13889
86 24659
87 32798
88 39162
89 43714
90 36562
91 37700
92 31387
93 38807
94 42701
TOPIX
Year Amount
- - - - - ----------------------
84 10000
85 14501
86 27212
87 39954
88 53217
89 56831
90 36440
91 39500
92 30450
93 37785
94 46085
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 December 31
- - - - - ----------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
-------------------------------------------------------------------------------
Net Asset Value... $15.53 $20.28 $16.97 $16.24 $14.27 $10.76 $10.69 $ 8.90 $10.33 $10.50
Income Dividends.. $ .07 $ .02 $ .20 $ .02 $ .08 $ .09 $ -- $ -- $ .28 $ --
Capital Gains
Distributions..... $ 1.36 $ 4.67 $ 9.08 $ 3.88 $ 3.59 $ 1.10 $ .41 $ -- $ .39 $ .85
Fund Total
Return (%)........ 38.89 77.54 33.01 19.40 11.63 -16.36 3.11 -16.74 23.64 10.03
Index Total
Return (%)........ 45.00 87.65 46.82 33.19 6.79 -35.88 8.39 -22.92 24.07 21.96
</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.
Portfolio Summary as of December 31, 1994
- - - - - ---------------------------------------------------------------------------
Diversification
- - - - - ---------------------------------------------------------------------------
Common Stocks 97%
Cash Equivalents 3%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- - - - - --------------------------------------------------------------------------
Sectors (Excludes 3% Cash Equivalents)
- - - - - --------------------------------------------------------------------------
Manufacturing 29%
Consumer Discretionary 18%
Financial 12%
Durables 10%
Metals & Minerals 9%
Service Industries 5%
Technology 5%
Consumer Staples 4%
Construction 2%
Other 6%
----
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. Canon Inc.
Leading producer of visual image and information equipment
3. Kyocera Corp.
Leading ceramic package manufacturer
4. Sumitomo Metal Industries, Ltd.
Leading integrated crude steel producer
5. Shohkoh Fund & Co., Ltd.
Finance company for small and medium-sized firms
6. SMC Corp.
Leading maker of pneumatic equipment
7. Hitachi Metals, Ltd.
Major producer of high-quality specialty steels
8. Nissen Co., Ltd.
Mail order women's apparel distributor
9. Keyence Corp.
Specialized manufacturer of sensors
10. Japan Associated Finance Co.
Venture capital company
For more complete details about the Fund's Investment Portfolio,
see page 9.
A monthly investment portfolio summary is available upon request.
<PAGE>
After peaking in June, however, the Japanese market drifted lower as
foreign buying eased. At the same time, rising bond yields and skepticism about
the strength of the fledgling economic recovery kept domestic investors on the
sidelines.
Second, as mentioned earlier, the yen appreciated significantly
throughout the year, from 111 yen to the U.S. dollar last January to a
record high of 96 in early November. The yen finished the year at 99 to the
dollar. The historically large inflow of foreign investments into Japanese
equities early in the year, combined with a continued avoidance of foreign
currency investments by Japanese institutions and Japan's large trade
surplus, appear to have supported the most recent round of yen
appreciation.
Third, long-term interest rates in Japan rose from 3% last January to
4.7% in October (as measured by 10-year Japanese government bond yields).
Japan's strongly deflationary environment ordinarily would be favorable for
bonds. But investors sold Japanese bonds in response to global bond market
weakness and increasing evidence of an economic recovery in Japan.
Strategic Portfolio Changes
During 1994, Japan's best performing stocks shifted from those with
defensive or secular growth characteristics to cyclicals offering favorable
prospects for turnaround and recovery. To take advantage of this change, we
took several major steps to reallocate the portfolio.
As cyclical stocks rallied almost across the board, we strategically
increased the Fund's economically-sensitive holdings. To determine
selections, we sought companies that are competitive on a global scale. We
expect structural changes in distribution networks, the weakening of
traditional business relationships, and the yen's strength to create an
unfavorable environment for companies operating solely in the domestic
market. Additionally, we favored companies that have demonstrated
management initiative through restructuring and the reduction of fixed
costs, such as personnel and depreciation. Finally, in keeping with our
fundamental investment approach, we carefully selected stocks whose prices
were compelling given the underlying companies' estimated earnings over the
next three to four years.
Putting our strategy to work, the Fund established a major position in
the steel industry, with stocks such as Nisshin Steel, Sumitomo Metal,
Hitachi Metal, and Kawasaki Steel. These companies are all undergoing
aggressive restructuring and are global leaders in their respective
businesses _ Nisshin in stainless steel, Sumitomo in stainless and seamless
pipes, and Hitachi in high-grade specialty steel.
The Fund also increased its investments in the machinery sector,
another area that benefited strongly from global economic activity in 1994.
Recent investments include NSK, a global leader in ball bearings and
autoparts; Komori, one of the world's leading offset printing machinery
manufacturers; and Hitachi Construction Machinery, a global leader in
hydraulic excavators.
To enable the portfolio to take advantage of strength in Japanese
over-the-counter (OTC) stocks, the Fund's upper limit for owning
small-company stocks was increased in September from 20% of the portfolio
to 30%. In dollar terms, Japanese OTC stocks surged 37.49% in 1994, far
outstripping the TOPIX. Several of these stocks were among the Fund's
largest holdings, including JAFCO, a pioneer and leader among Japanese
venture capital companies, Shohkoh Fund, a provider of short-term
noncollateralized loans to small- and medium-sized companies, and THK, the
world's leading manufacturer of linear motion mechanical components.
As interest rates rose in 1994 on the expectation of economic
recovery, interest-rate-sensitive and other defensive stocks lost ground.
Affected industries included electric power and gas, metal products,
financials, construction, food, insurance, and pharmaceuticals. Stocks in
the retail and service industries, which were instrumental in supporting
the Fund's performance during the last four years, didn't fare much better.
We stuck with select holdings in these groups based on their attractive
longer-term business prospects. But we pared back significantly in areas we
believed were losing fundamental attractiveness _ housing, insurance, and
pharmaceuticals, for instance.
Currently, opportunities are developing in Japan's CATV (cable
television) industry, an industry still in its infancy. Recent deregulation
is expected to induce consolidation, expand services, and accelerate market
penetration. Our holdings of Itochu and Sumitomo Corporations, the two
largest players in the Japanese CATV industry, reflect our belief that the
valuation of the CATV enterprises and their growth potential remain
under-appreciated by the Japanese marketplace. Other opportunities are
developing in the area of industrial garbage processing. Fund holdings of
dump truck makers such as ShinMaywa and Kyokuto Kaihatsu are benefiting not
only from a recovery in dump truck sales, but a longer-term growth trend in
garbage-processing equipment.
Outlook
As always, we continue to emphasize a bottom-up stock selection
process based on extensive field research of individual companies. At the
same time, we also maintain a broad top-down perspective, which centers
around independent fundamental analysis.
In this regard, we believe many of the building blocks are in place
for The Japan Fund to benefit from important developments in the Japanese
economy: greater competition from imports, deregulation in many industries
such as finance and telecommunications, and the growth of new industries
such as non-bank finance and multimedia. Further, evidence increasingly
suggests a modest economic recovery and growth in corporate earnings, while
inflation remains contained, setting a favorable backdrop for Japanese
equity investments in 1995. While the yen's future direction remains a
critical variable for the recovery, we continue to believe that the yen
will likely weaken as Japan's trade surplus contracts and investment
capital again begins flowing out of the country. Our strategy of hedging
against the risk of yen depreciation therefore remains in place.
Thank you for your continued investment in The Japan Fund.
Sincerely,
/s/Douglas M. Loudon /s/Robert G. Stone, Jr.
Douglas M. Loudon Robert G. Stone, Jr.
President Chairman
The Japan Fund:
A Team Approach to Investing
The Japan Fund 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. They are supported by Scudder's large staff
of economists, research analysts, traders, and other investment specialists
who work in our offices across the United States and abroad. We believe our
team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.
Lead Portfolio Manager Seung Kwak assumed responsibility for the
Fund's investment strategy and daily operation in 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
strategy. Ms. Allan has contributed her expertise to the management of the
Fund since she joined Scudder in 1987 and has numerous years of Pacific
Basin research and investing experience.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of December 31, 1994
- - - - - ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- - - - - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1% COMMERCIAL PAPER
-------------------------------------------------------------------
11,446,000 American Express Credit Corp., 1/3/95 . 11,442,293
8,323,000 CIT Group Holdings Inc., 1/3/95 . . . . 8,320,203
-----------
TOTAL COMMERCIAL PAPER (Cost $19,762,496) 19,762,496
-----------
96.9% COMMON STOCKS
-------------------------------------------------------------------
Shares
-------------------------------------------------------------------
CONSUMER DISCRETIONARY 17.8%
Department &
Chain Stores 1.8% 37,000 Fast Retailing Co., Ltd. . . . . . . . 4,047,165
142,000 Ito-Yokado Co., Ltd. . . . . . . . . . 7,595,183
-----------
11,642,348
-----------
Home Furnishings 0.6% 92,000 Nitori Co., Ltd. . . . . . . . . . . . 3,785,248
-----------
Recreational Products 1.4% 129,000 Sankyo Co., Ltd. . . . . . . . . . . . 8,673,357
-----------
Restaurants 4.0% 400,000 Aiya Co., Ltd. . . . . . . . . . . . . 7,425,991
68,600 Genki Sushi Co., Ltd . . . . . . . . . . 1,996,387
230,000 Skylark Co., Ltd . . . . . . . . . . . . 4,385,349
413,000 Ten Allied Co., Ltd . . . . . . . . . . 11,604,616
-----------
25,412,343
-----------
Specialty Retail 10.0% 49,000 Bunkyodo Co., Ltd. . . . . . . . . . . 2,016,056
238,600 Cox Co., Ltd . . . . . . . . . . . . . . 4,726,482
143,750 Hasegawa Co., Ltd . . . . . . . . . . . 2,510,035
208,000 Kato Denki Co., Ltd . . . . . . . . . . 5,635,725
143,700 Ministop Co., Ltd . . . . . . . . . . . 4,225,198
558,000 Nissen Co., Ltd . . . . . . . . . . . . 17,246,764
281,200 Royal Ltd . . . . . . . . . . . . . . . 11,005,319
104,000 Shimamura Co., Ltd . . . . . . . . . . . 5,218,264
116,900 Simree Co., Ltd . . . . . . . . . . . . 1,560,231
93,000 Tsutsumi Jewelry Co., Ltd . . . . . . . 8,492,725
-----------
62,636,799
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
THE JAPAN FUND, INC.
- - - - - -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER STAPLES 4.3%
Consumer Electronic &
Photographic Products 3.5% 340,000 Pioneer Electronics Corp. . . . . . . . . . 8,188,660
243,400 Sony Corp. (ADR) . . . . . . . . . . . . . 13,660,825
----------
21,849,485
----------
Food & Beverage 0.8% 273,000 Rock Field Co., Ltd. . . . . . . . . . . . 5,369,594
----------
COMMUNICATIONS 2.1%
Telephone/Communications 1,505 DDI Corp. . . . . . . . . . . . . . . . . . 12,988,460
----------
FINANCIAL 11.6%
Other Financial Companies 105,000 Japan Associated Finance Co. . . . . . . . 16,332,163
501,876 Nichiei Co., Ltd. . . . . . . . . . . . . . 32,232,879
59,800 Sanyo Shinpan Finance Co., Ltd. . . . . . . 5,766,964
89,900 Shohkoh Fund & Co., Ltd. . . . . . . . . . 18,584,446
----------
72,916,452
----------
MEDIA 2.1%
Broadcasting & Entertainment 250,000 Horipro Inc. . . . . . . . . . . . . . . . . 6,171,601
120,277 Sony Music Entertainment (Japan) Inc. . . . 6,759,169
----------
12,930,770
----------
SERVICE INDUSTRIES 5.2%
Miscellaneous Commercial
Services 1,463,000 Itochu Corp. . . . . . . . . . . . . . . . 10,423,783
95,000 Secom Co., Ltd. . . . . . . . . . . . . . . 5,910,687
26,000 Softbank Corp. . . . . . . . . . . . . . . 5,740,090
1,072,000 Sumitomo Corp. . . . . . . . . . . . . . . 10,972,805
----------
33,047,365
----------
DURABLES 9.6%
Aerospace 0.4% 234,000 JAMCO Corp. . . . . . . . . . . . . . . . . 2,489,112
----------
Automobiles 7.8% 654,000 Bridgestone Corp. . . . . . . . . . . . . . 10,238,234
428,000 Kyokuto Kaihatsu Kogyo Co., Ltd. . . . . . . 12,111,992
262,000 Ogura Clutch Co., Ltd. . . . . . . . . . . 3,891,219
966,000 ShinMaywa Industries, Ltd. . . . . . . . . 9,887,807
1,074,000 Suzuki Motor Corp. . . . . . . . . . . . . 12,609,935
----------
48,739,187
----------
Construction/Agricultural
Equipment 1.3% 636,000 Hitachi Construction Machinery Co., Ltd. . . 8,360,863
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - - - - ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Telecommunications
Equipment 0.1% 31,000 Japan Radio Co., Ltd. . . . . . . . . . 460,411
-----------
MANUFACTURING 28.5%
Chemicals 2.4% 1,437,000 Nippon Shokubai Corp., Ltd. . . . . . . 13,987,858
82,000 Showa Highpolymer Co., Ltd. . . . . . . 822,880
----------
14,810,738
----------
Diversified Manufacturing 1.3% 571,000 Sumitomo Electric Industries, Ltd. . . 8,136,678
----------
Electrical Products 6.9% 1,296,000 Hitachi Ltd. . . . . . . . . . . . . . 12,862,459
152,000 Mabuchi Motor Co., Ltd . . . . . . . . . 11,440,040
639,000 Matsushita Electrical Industrial
Co., Ltd . . . . . . . . . . . . . . . 10,516,407
1,169,000 Toshiba Corp . . . . . . . . . . . . . . 8,481,555
----------
43,300,461
----------
Hand Tools 0.0% 9,000 Asahi Diamond Industrial Co., Ltd. . . 151,722
----------
Industrial Specialty 0.4% 83,000 Oiles Corp. . . . . . . . . . . . . . . 2,332,163
----------
Machinery/Components/
Controls 13.7% 51,000 Amano Corp. . . . . . . . . . . . . . . 757,451
147,500 Keyence Corp . . . . . . . . . . . . . . 16,726,041
343,000 Komori Corp . . . . . . . . . . . . . . 9,190,266
1,181,000 NGK Spark Plug Co., Ltd . . . . . . . . 15,525,439
1,345,000 NSK Ltd . . . . . . . . . . . . . . . . 10,662,820
318,900 SMC Corp . . . . . . . . . . . . . . . . 18,145,138
613,000 THK Co., Ltd . . . . . . . . . . . . . . 15,501,857
----------
86,509,012
----------
Office Equipment/Supplies 3.8% 1,414,000 Canon Inc. . . . . . . . . . . . . . . 23,980,532
----------
TECHNOLOGY 4.6%
Computer Software 0.3% 35,000 PCA Corp. . . . . . . . . . . . . . . . 2,142,499
Electronic Components/ ----------
Distributors 3.3% 279,000 Kyocera Corp. . . . . . . . . . . . . . 20,690,517
Electronic Data ----------
Processing 1.0% 622,000 Fujitsu Ltd. . . . . . . . . . . . . . 6,304,265
ENERGY 0.1% ----------
Engineering 36,000 JGC Corp. . . . . . . . . . . . . . . . 614,150
METALS AND MINERALS 9.2% ----------
Steel & Metals 1,419,000 Hitachi Metals, Ltd . . . . . . . . . . 17,372,604
1,588,000 Kawasaki Steel Corp . . . . . . . . . . 6,645,218
2,978,000 Nisshin Steel Co., Ltd . . . . . . . . . 15,002,067
5,743,000 Sumitomo Metal Industries, Ltd . . . . . 18,615,043
----------
57,634,932
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
THE JAPAN FUND, INC.
- - - - - -------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSTRUCTION 1.8%
Building Materials 0.1% 24,000 Toyo Exterior Co., Ltd. . . . . . . . . . . . 652,684
-----------
Homebuilding 1.7% 88,000 Eyeful Home Technology Inc. . . . . . . . . . 2,693,427
228,000 Hosoda Corp. . . . . . . . . . . . . . . . . 3,363,372
295,000 Sumitomo Forestry Co., Ltd. . . . . . . . . . 4,736,578
-----------
10,793,377
-----------
TOTAL COMMON STOCKS (Cost $568,054,352) . . . 609,355,524
-----------
- - - - - -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $587,816,848)(a) . . . . . . . . . . 629,118,020
===========
<FN>
(a) The cost for federal income tax purposes was $608,072,384. At December 31, 1994, net unrealized
appreciation for all securities based on tax cost was $21,045,636. This consisted of aggregate
gross unrealized appreciation for all securities in which there was an excess of market value
over tax cost of $49,830,443 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value of $28,784,807.
At December 31, 1994, the outstanding written option was as follows (Note A):
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(JPY) Expiration Strike Market
Call Option (000's) Date Price Value ($)
----------- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Yen
(Premium received $1,861,822) . . . . 4,177,500 2/24/95 JPY103.55 2,088,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - - - - ------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
- - - - - ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $587,816,848)
(Note A) . . . . . . . . . . . . . . . . . . . . . . . . $629,118,020
Foreign currency holdings, at market (identified
cost $2,023,999)(Note A) . . . . . . . . . . . . . . . . 2,005,360
Forward foreign currency exchange contracts to buy,
at market (contract cost $1,695,564) (Notes A and E) . . 1,697,904
Receivable on forward foreign currency exchange
contracts to sell (Notes A and E) . . . . . . . . . . . 157,230,491
Receivable on investments sold . . . . . . . . . . . . . . 7,302,616
Receivable on fund shares sold . . . . . . . . . . . . . . 1,655,024
Dividends and interest receivables . . . . . . . . . . . . 225,286
Other assets . . . . . . . . . . . . . . . . . . . . . . . 5,551
------------
Total assets . . . . . . . . . . . . . . . . . . . . . . $799,240,252
LIABILITIES
Payable for fund shares redeemed . . . . . . . . . . . . . $ 16,198,586
Payable for investments purchased . . . . . . . . . . . . . 4,084,082
Due to custodian bank . . . . . . . . . . . . . . . . . . . 4,975,758
Accrued management fee (Note C) . . . . . . . . . . . . . . 366,607
Other accrued expenses (Note C) . . . . . . . . . . . . . . 507,846
Written option, at market (premium received
$1,861,822) (Note A) . . . . . . . . . . . . . . . . . . 2,088,750
Payable on closed forward foreign currency
exchange contracts (Note A) . . . . . . . . . . . . . . 17,748,535
Payable for forward foreign currency exchange
contracts to buy (Notes A and E) . . . . . . . . . . . . 1,695,564
Payable for forward foreign currency exchange
contracts to sell, at market (contract
cost $157,230,491) (Notes A and E) . . . . . . . . . . . 165,867,271
-------------
Total liabilities . . . . . . . . . . . . . . . . . . 213,532,999
------------
Net assets, at market value . . . . . . . . . . . . . . . . $585,707,253
============
NET ASSETS
Net assets consist of:
Accumulated distributions in excess of net
investment income . . . . . . . . . . . . . . . . . . $(11,758,799)
Unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . 41,301,172
Options . . . . . . . . . . . . . . . . . . . . . . . (226,928)
Foreign currency related transactions . . . . . . . . (8,668,944)
Accumulated net realized gain . . . . . . . . . . . . . 5,671,452
Capital stock . . . . . . . . . . . . . . . . . . . . . 18,593,152
Additional paid-in capital . . . . . . . . . . . . . . . 540,796,148
------------
Net assets, at market value . . . . . . . . . . . . . . . . $585,707,253
============
NET ASSET VALUE, offering and redemption price per
share ($585,707,253 -:-55,779,456 outstanding
shares of capital stock, $.333 par value,
600,000,000 shares authorized) . . . . . . . . . . . . . $10.50
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
THE JAPAN FUND, INC.
- - - - - -----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- - - - - -----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994
- - - - - -----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of withholding taxes of $540,648) . . . . $ 3,134,824
Interest (net of withholding taxes of $2,765) . . . . . . 1,326,307
-----------
4,461,131
Expenses:
Management fee (Note C) . . . . . . . . . . . . . . . . . $ 4,773,356
Shareholder and Transfer Agent services (Note C) . . . . 1,072,511
Officers and directors fees and expenses (Notes C & D) . 198,619
Custodian fees . . . . . . . . . . . . . . . . . . . . . 470,400
Printing . . . . . . . . . . . . . . . . . . . . . . . . 264,135
Auditing and accounting services . . . . . . . . . . . . 106,150
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . 38,446
Federal registration . . . . . . . . . . . . . . . . . . 14,762
State registration . . . . . . . . . . . . . . . . . . . 95,787
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 26,761 7,060,927
--------------------------
Net investment loss . . . . . . . . . . . . . . . . . . . (2,599,796)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . 58,018,296
Options . . . . . . . . . . . . . . . . . . . . . . . 1,759,997
Foreign currency related transactions . . . . . . . . (17,752,808) 42,025,485
----------
Net unrealized appreciation (depreciation) during
the period on:
Investments . . . . . . . . . . . . . . . . . . . . . 11,153,602
Options . . . . . . . . . . . . . . . . . . . . . . . (226,928)
Foreign currency related transactions . . . . . . . . (8,662,240) 2,264,434
--------------------------
Net gain on investment transactions . . . . . . . . . . . 44,289,919
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $41,690,123
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - - - - -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - - - - -------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- - - - - -------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment loss . . . . . . . . . . . . . . $ (2,599,796) $ (2,446,967)
Net realized gain from investment transactions. 42,025,485 51,954,231
Net unrealized appreciation on investment
transactions during the period . . . . . . . 2,264,434 46,281,578
------------ ------------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . . 41,690,123 95,788,842
------------ ------------
Distributions to shareholders:
In excess of net investment income ($.28 per
share for December 31, 1993) . . . . . . . . -- (12,112,180)
------------ ------------
From net realized gains ($.80 and $.39 per
share, respectively) . . . . . . . . . . . (42,020,462) (16,848,042)
------------ ------------
In excess of net realized gains ($.05 per
share for December 31, 1994) . . . . . . . . (2,360,903) --
------------ ------------
Fund share transactions:
Proceeds from shares sold . . . . . . . . . . . 521,023,226 292,059,002
Net asset value of shares issued to
shareholders in reinvestment of
distributions . . . . . . . . . . . . . . . 37,569,251 23,722,426
Cost of shares redeemed . . . . . . . . . . . . (441,092,468) (320,398,596)
------------ ------------
Net increase (decrease) in net assets from
Fund share transactions . . . . . . . . . . 117,500,009 (4,617,168)
------------ ------------
INCREASE IN NET ASSETS . . . . . . . . . . . . 114,808,767 62,211,452
Net assets at beginning of period . . . . . . . 470,898,486 408,687,034
------------ ------------
NET ASSETS AT END OF PERIOD (including
accumulated distributions in excess of net
investment income of $(11,758,799) and
$(10,656,633), respectively) . . . . . . . . $585,707,253 470,898,486
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period . . . 45,596,062 45,899,642
------------ ------------
Shares sold . . . . . . . . . . . . . . . . . . 44,011,661 25,773,439
Shares issued to shareholders in reinvestment
of distributions . . . . . . . . . . . . . . 3,602,037 2,307,731
Shares redeemed . . . . . . . . . . . . . . . . (37,430,304) (28,384,750)
------------ ------------
Net increase (decrease) in Fund shares. . . . . 10,183,394 (303,580)
------------ ------------
Shares outstanding at end of period . . . . . . 55,779,456 45,596,062
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
THE JAPAN FUND, INC.
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>
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.
</TABLE>
<PAGE>
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. When the Fund writes (sells) an option, an amount equal to the premium
received is included in the Fund's Statement of Assets and Liabilities as an
asset and as an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current market value of the option
written. The current market value of an option is the last price on the
principal exchange on which such option is traded or, in the absence of a sale,
the mean between the last bid and offering prices. When a written option
expires on its stipulated expiration date or a Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of a
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying
<PAGE>
THE JAPAN FUND, INC.
- - - - - --------------------------------------------------------------------------------
security or currency and the liability related to such option is extinguished.
When a written call option is exercised, the Fund realizes a gain or loss from
the sale of the underlying security or currency and the proceeds from such sale
are increased by the premium received. When a written put option is exercised,
the amount of the premium originally received reduces the cost of the security
or currency which the Fund purchases upon exercise of the option.
The premium paid by the Fund for the purchase of an option is included in the
Fund's Statement of Assets and Liabilities as an investment and subsequently
marked-to-market to reflect the current market value of the option. If an
option which the Fund has purchased expires on the stipulated expiration date,
the Fund realizes a loss in the amount of the cost of the option. If the Fund
enters into a closing sale transaction, it realizes a gain or loss, depending
on whether the proceeds from the sale are greater or less than the cost of the
option.
If the Fund exercises a purchased put option, it realizes a gain or loss from
the sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. If the Fund exercises a purchased
call option, the cost of the security will be increased by the premium
originally paid.
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 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- - - - - --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the Fund
may enter into forward foreign currency exchange contracts ("contracts").
Additionally, the Fund may enter into contracts to hedge certain other foreign
currency denominated assets. Contracts are recorded at market value. During the
period, to hedge a portion of the Fund's Japanese yen exposure, the Fund
entered into yen forward exchange contracts. Certain risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts. Realized and unrealized gains and losses
arising from such transactions are included in net realized and unrealized gain
(loss) from foreign currency related transactions. Purchases and sales of
forward foreign currency contracts having the same settlement date and broker
are offset and any realized gain (loss) is recognized on the date of offset,
otherwise gain (loss) is recognized on the settlement date.
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% of the 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 and
passive foreign investment companies. As a result, net
<PAGE>
THE JAPAN FUND, INC.
- - - - - ------------------------------------------------------------------------------
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.
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 year ended December 31, 1994, purchases and sales of investment
securities (excluding short-term investments) aggregated $552,205,784 and
$471,312,014, respectively.
Transactions in written options for the year ended December 31, 1994 are
summarized as follows:
<TABLE>
<CAPTION>
OPTIONS ON CURRENCIES
-----------------------------------------
PREMIUMS
JAPANESE YEN RECEIVED ($)
-----------------------------------------
<S> <C> <C>
Beginning of Period . . -- --
Written . . . . . . . . Y12,885,650,000 $3,197,800
Closed . . . . . . . . (1,000,000,000) (445,678)
Expired . . . . . . . . (7,708,150,000) (890,300)
--------------- ----------
End of Period . . . . . Y 4,177,500,000 $1,861,822
=============== ==========
</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 annual
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- - - - - --------------------------------------------------------------------------------
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 year ended December 31, 1994, the
fee pursuant to the Management Agreement amounted to $4,773,356, which was
equivalent to an annual effective rate of .73% of the Fund's average daily net
assets. The Management Agreement also provides that if the 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. The Adviser agrees to pay NICAM a fee equal to an annual
rate of 0.15% of the first $700,000,000 of the Fund's average daily net assets
and 0.14% of such net assets in excess of $700,000,000 computed and accrued
daily and paid monthly. For the year ended December 31, 1994 the fee pursuant
to the Research Agreement amounted to $975,256.
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 year ended December 31, 1994, the amount charged to the Fund by SSC
aggregated $870,278, of which $70,123 is unpaid at December 31, 1994.
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 year ended December 31, 1994, the Officers and Directors fees
aggregated $143,619.
During the year ended December 31, 1994, there were $60,488 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
<PAGE>
THE JAPAN FUND, INC.
- - - - - --------------------------------------------------------------------------------
period of 120 months by the Fund based on the individual's final year basic
Directors fees and length of service. For the year ended December 31, 1994,
Directors' retirement benefits amounted to $55,000. At December 31, 1994, the
Fund has accrued $137,703 for such benefits.
<TABLE>
<CAPTION>
E. COMMITMENTS
- - - - - --------------
As of December 31, 1994 the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized depreciation of
$8,634,440.
NET UNREALIZED
APPRECIATION
SETTLEMENT (DEPRECIATION)
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE (U.S.$)
- - - - - ----------------------- -------------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
USD 519,711 JPY 52,042,882 1/4/95 2,546
USD 320,031 JPY 31,881,482 1/5/95 (96)
USD 855,822 JPY 85,271,783 1/6/95 (110)
JPY 9,321,743 USD 92,987 1/4/95 (558)
JPY 2,008,294 USD 20,005 1/5/95 (149)
JPY 463,997,831 USD 4,651,919 1/5/95 (4,355)
JPY 245,791,474 USD 2,465,580 1/6/95 (968)
JPY 7,936,500,000 USD 75,000,000 1/25/96 (8,970,620)
JPY 6,914,737,500 USD 75,000,000 7/5/96 339,870
----------
(8,634,440)
==========
</TABLE>
<PAGE>
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 December 31, 1994, 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 December 31, 1994 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.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 1, 1995
<PAGE>
THE JAPAN FUND, INC.
TAX INFORMATION
- - - - - -----------------------------------------------------------------------------
For its fiscal year ended December 31, 1994, the total amount of income
received by the Fund from sources within foreign countries and possessions of
the United States was $.01 per share (representing a total of $543,413). The
total amount of taxes paid by the Fund to such countries was $.01 per share
(representing a total of $543,413).
The Fund paid distributions of $.85 per share from net long-term capital gains
during its fiscal year ended December 31, 1994. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $57,023,588 as capital gains
dividends for its fiscal year ended December 31, 1994.
<PAGE>
OFFICERS AND DIRECTORS
Robert G. Stone, Jr.
Chairman of the Board and Director
Chairman of the Board, Kirby Corporation
Douglas M. Loudon
President
Managing Director, Scudder, Stevens & Clark, Inc.
Elizabeth J. Allan
Vice President
Principal, Scudder, Stevens & Clark, Inc.; Vice President, Scudder New
Asia Fund, Inc.
William E. Holzer
Vice President
Managing Director, Scudder, Stevens & Clark, Inc.; President, Scudder
Global Fund; Vice President, Scudder International Fund, Inc.
Thomas W. Joseph
Vice President
Principal, Scudder, Stevens & Clark, Inc.; Vice President, Treasurer &
Director, Scudder Investor Services, Inc.; President, Scudder
Insurance Agency, Inc.
Seung Kwak
Vice President
Managing Director, Scudder, Stevens & Clark, Inc.
Edward J. O'Connell
Vice President
Principal, Scudder, Stevens & Clark, Inc.
Miyuki Wakatsuki
Vice President
Manager, Nikko International Capital Management Co., Ltd.
Gina Provenzano
Vice President and Treasurer
Vice President, Scudder, Stevens & Clark, Inc.
Kathryn L. Quirk
Vice President and Secretary
Managing Director, Scudder, Stevens & Clark, Inc.
Thomas F. McDonough
Assistant Secretary
Principal, Scudder, Stevens & Clark, Inc.
Pamela A. McGrath
Assistant Treasurer
Principal, Scudder, Stevens & Clark, Inc.
William L. Givens
Director
President, Twain Associates
William H. Gleysteen, Jr.
Director
President, The Japan Society, 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
Henry Rosovsky
Director
Professor, Harvard University; Director, Corning Inc., Paine Webber
Group
O. Robert Theurkauf
Director
Advisory Managing Director, Scudder, Stevens & Clark, Inc.
Shoji Umemura
Director
Chairman, The Nikko Securities Co., Ltd.; Vice Chairman, Japan
Securities Dealers Association; Director, The Securities Analysts
Association of Japan; Adviser, Japan Association of Corporate
Executives; Executive Director, Federation of Economic Organizations,
Japan Federation of Employers Association; Governor, Board of
Governors, Tokyo Stock Exchange; Governor, Board of Governors,
Association of Tokyo Stock Exchange Regular Members; Adviser, Tokyo
Chamber of Commerce and Industry; Vice President, Japan-Korea Economic
Association; Member, Board of Trustees, Waseda University; Chairman,
Congregation, Waseda University
Hiroshi Yamanaka
Director
Adviser to the Board, The Meiji Mutual Life Insurance Company;
Lifetime Executive Director, Japan Committee for Economic Development;
Vice Chairman, The Security Analysts Association of Japan; Doctor of
Commerce, Chuo University; Auditor, Bank of Tokyo, Ltd.; Director,
Kirin Brewery Co., Ltd., Nikon Corp.; Governor, Board of Governors,
Tokyo Stock Exchange
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
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
