THE JAPAN FUND, INC.
Annual Report
December 31, 1995
A pure no-load(TM) mutual fund
Scudder, Stevens & Clark, Inc.
Investment Manager
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
83-6-26
MIS69A
<PAGE>
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 14
Financial Highlights 17
Notes to Financial Statements 18
Report of Independent Accountants 25
Tax Information 26
Officers and Directors 26
How to Contact The Japan Fund Back cover
2
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
The past year continued to test the stamina of investors in Japanese
stocks, yet rewarded their patience. After declining for months, stocks finally
reversed course midway through The Japan Fund's fiscal year ended December 31,
1995.
The Fund's total return (as measured in U.S. dollars) for the 12-month
fiscal period was -9.07%, reflecting the reinvestment of an $0.11 per share
capital gain distribution and a drop in the Fund's share price to $9.44 on
December 31, 1995 from $10.50 a year ago. These results conceal the
progressively better investment conditions that prevailed in the final six
months of the Fund's fiscal year: From June 30 through the end of 1995, the Fund
generated an 11.85% total return.
The unmanaged Tokyo Stock Price Index (TOPIX)--by and large comprising the
stocks of large companies--declined 1.29% for the fiscal year in dollar terms.
Reflecting the divergent performance of large and small stocks in 1995, the
unmanaged Tokyo Stock Exchange Second Section Index and the unmanaged OTC Index,
which are indices of smaller stocks, produced weaker -5.89% and -18.95%
dollar-based returns, respectively. As an actively managed portfolio, the Fund
enjoys the flexibility to invest in companies of varying sizes, providing they
meet our strict criteria for investment. Small-company stocks occupied an
appreciable portion of the portfolio throughout the year, as did stocks in
industries sensitive to changes in the economy. Despite the challenging
investment conditions, we maintained these holdings because we believe that they
are fundamentally attractive and should do well as the Japanese economy
recovers.
Market Conditions Recover in Latter Half of 1995
The market environment in Japan was struck by a succession of unfortunate
events in the early months of 1995. Among them were the tragic earthquake in the
city of Kobe--one of Japan's key economic ports--and the downfall of a venerable
British institution--Barings Bank--due to trading losses in Asia. Meanwhile, the
yen's continued strength earlier in the year depressed economic activity. The
currency surged from 100 yen to the U.S. dollar at the start of the year to a
peak of 79.75 yen to the dollar in April. The strong yen not only hindered
corporate profits, but also darkened consumer and market sentiment. Not
surprisingly, Japanese stocks reflected these woes, with stock prices bottoming
in June.
3
<PAGE>
THE JAPAN FUND, INC.
PERFORMANCE UPDATE as of December 31, 1995
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
THE JAPAN FUND, INC.
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $ 9,093 -9.07% -9.07%
5 Year $10,620 6.20% 1.21%
10 Year $27,958 179.58% 10.83%
TOPIX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $ 9,871 -1.29% -1.29%
5 Year $12,483 24.83% 4.53%
10 Year $31,370 213.70% 12.10%
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
- ----------------------
85 $10,000
86 $17,754
87 $23,615
88 $28,197
89 $31,475
90 $26,325
91 $27,145
92 $22,599
93 $27,942
94 $30,745
95 $27,958
TOPIX
Year Amount
- ----------------------
85 $10,000
86 $18,766
87 $27,553
88 $36,699
89 $39,191
90 $25,130
91 $27,240
92 $20,999
93 $26,057
94 $31,781
95 $31,370
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 witholding 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>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
--------------------------------------------------------------------------------
NET ASSET VALUE... $20.28 $16.97 $16.24 $14.27 $10.76 $10.69 $ 8.90 $10.33 $10.50 $ 9.44
INCOME DIVIDENDS.. $ .02 $ .20 $ .02 $ .08 $ .09 $ -- $ -- $ .28 $ -- $ --
CAPITAL GAINS
DISTRIBUTIONS..... $ 4.67 $ 9.08 $ 3.88 $ 3.59 $ 1.10 $ .41 $ -- $ .39 $ .85 $ .11
FUND TOTAL
RETURN (%)........ 77.54 33.01 19.40 11.63 -16.36 3.11 -16.74 23.64 10.03 -9.07
INDEX TOTAL
RETURN (%)........ 87.65 46.82 33.19 6.79 -35.88 8.39 -22.92 24.07 21.96 -1.29
</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 December 31, 1995
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Equity Securities 92%
Cash Equivalents 6%
Other 2%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
SECTORS (Excludes 6% Cash Equivalents)
- --------------------------------------------------------------------------
Manufacturing 34%
Financial 14%
Metals & Minerals 12%
Consumer Discretionary 10%
Durables 8%
Service Industries 7%
Consumer Staples 4%
Technology 3%
Construction 3%
Other 5%
----
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. SMC CORP.
Leading maker of pneumatic equipment
3. JAPAN ASSOCIATED FINANCE CO.
Venture capital company
4. NIPPON ELECTRIC GLASS CO., LTD.
Leading manufacturer of cathode-ray tube glass
5. CANON INC.
Leading producer of visual image and information equipment
6. BRIDGESTONE CORP.
Leading automobile tire manufacturer
7. KAWASAKI STEEL CORP.
Major integrated steelmaker
8. SUMITOMO METAL INDUSTRIES, LTD.
Leading integrated crude steel producer
9. MATSUSHITA ELECTRICAL INDUSTRIAL CO,. LTD.
Consumer electronic products manufacturer
10. HITACHI METALS, LTD.
Major producer of high-quality specialty steels
- -----------------------------------------------------------------------
For more complete details about the Fund's Investment Portfolio,
see page 9.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.
5
<PAGE>
By contrast, the second half of the year saw a confluence of positive
developments. In July, the yen began to weaken, acting as a catalyst for the
economic recovery currently unfolding in Japan. By late September, the yen had
fallen to 104 yen to the dollar. Japanese authorities also did their share in
helping to restore investor confidence. The Bank of Japan cut the discount rate
to 0.5%, the lowest level ever, and lower than the prevailing average dividend
yield of equities. The central bank also began purchasing government bonds to
encourage the growth of money supply. And the government's subsequent
announcement of a massive 14.2 trillion yen fiscal package is expected to help
breathe life back into the economy.
Prospects for Japanese corporations have taken a positive turn as the
government's relaxation of taxes on stock dividends paved the way for
corporations to buy back their outstanding shares. Further, companies have
started to revise their earnings forecasts upward as economic prospects
improved.
Keeping An Eye On Value While Pursuing Growth
As always, shaping the Fund's portfolio strategy centers around a
comprehensive research process. While we routinely evaluate structural and
cyclical changes underway in Japan, ultimately, it is intensive stock-by-stock
analysis that defines our investment approach. Leading companies with top or
growing market share, above-average earnings growth, and healthy balance sheets
are typical of the Fund's current investments.
During the past year, this stock-driven approach resulted in a portfolio
whose profile looked distinctly different from that of major market benchmarks.
Falling stock prices had created opportunities to take advantage of values in
the marketplace--that is, investments in large and small companies whose stocks
were priced below what our research indicates is their intrinsic worth.
This dual focus on growth and value reinforced our conviction in certain
holdings. Among these were carefully selected small growth companies showing
signs of becoming tomorrow's blue chips--Nichiei, SMC, and THK, for example. The
performance of these stocks--along with small stocks as a group--fell short of
that of larger-company stocks during the first half of 1995, when the outlook
for economic recovery remained clouded. But believing these holdings stood to
serve the Fund well over the longer term, we retained them in the portfolio. As
it turned out, this decision contributed to Fund performance as the year drew
on.
6
<PAGE>
We also continued to hold other investments that we felt would emerge
unscathed from the tough conditions--global technology companies, for instance,
such as Canon, Fujitsu, and Matsushita Electrical Industrial. Companies that
were restructuring themselves to be well positioned once economic recovery took
hold also numbered among core holdings. Examples include select steel and
trading companies that have reworked their businesses to become more
competitively fit. These restructured investments performed well as the economy
began to reawaken--and they likely will enhance Fund performance further as
economic and market conditions continue to improve.
By contrast, we found that several holdings no longer merited a place in
the Fund. We pared back some retail and restaurant holdings, a process begun
over a year ago. While many of these stocks had performed well for the Fund in
earlier years, their future prospects had dimmed under adverse conditions.
Deflation and the increasingly competitive market climate hurt companies such as
Ten Allied, Skylark, Nissen, and Ministop.
From the sale of these stocks, we directed proceeds to a number of new
investments. We favored cash-rich companies from varying industries,
particularly those generating steady cash flow, such as Takeda Chemical, East
Japan Railway, and Banyu Pharmaceutical. Several construction-related companies
also held promise, given expectations for recovery in private construction
orders during the coming year. Among these new additions were Takasago Thermal
Engineering, Sekisui Chemical, Matsushita Electric Works, and Kansai Sekiwa Real
Estate.
Meanwhile, shaping the Fund's currency strategy proved to be a
balancing act between guarding against yen weakening and benefiting from yen
strengthening. Hence, we designed a currency strategy emphasizing the use of
options to enable the portfolio to benefit from a rising yen while also
defending the Fund against major weakness. On balance, these strategies
contributed a net gain of approximately 0.68% to the Fund's 1995 performance.
7
<PAGE>
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. Eileen O. Gerspach, Portfolio Manager, also helps set the Fund's
general investment strategy. Ms. Gerspach, who joined the team in May 1995, has
worked in the investment industry since 1984 and has nine years of experience as
a portfolio manager.
Outlook
Recent improvements in the economic landscape have set the stage for an
improved market environment in the year ahead. There are many positive signs.
The government is acting to resolve problems surrounding the insolvency issues
besetting major banks, and corporate profits are improving. Renewed domestic
demand should help absorb some of the excess inventory that has accumulated, and
fuel a recovery in industrial production. Further, deflationary pressures may be
abating, demonstrated by the reversal of the yen midway through 1995. Seasonal
factors could prompt the yen to strengthen temporarily in the spring. Still, the
currency may fall further, as long as the Japanese trade surplus--a fundamental
force behind a strong yen--continues to fall sharply.
Other heartening signs include the prospect that domestic assets may flow
back to Japanese stocks. Japanese households and institutions are holding
historically large proportions of cash compared to their holdings of equities.
Under the currently low interest rate environment, investors may shift money to
stocks as the market rally revives investor confidence.
In the last two years, we have completed much of the groundwork to
reposition The Japan Fund to take advantage of renewal and recovery in Japan. As
the Japanese economy continues to emerge from a historically long economic
downturn, we believe that many of these investments should distinguish
themselves on the basis of the strengths found in the best Japanese companies:
Vision, resourcefulness, adaptability, competitiveness, and growth.
Thank you for your continued interest in The Japan Fund.
Sincerely,
/s/Douglas M. Loudon /s/Henry Rosovsky
Douglas M. Loudon Henry Rosovsky
President Chairman
8
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of December 31, 1995
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2.4% REPURCHASE AGREEMENTS
-----------------------------------------------------------------------------
13,744,000 Repurchase Agreement with Donaldson,
Lufkin & Jenrette dated 12/29/95 at 5.85%
to be repurchased on 1/2/95 at $13,752,934
collateralized by a $12,947,000 U.S. Treasury
Note, 7.875%, 4/15/98 (Cost $13,744,000) ........... 13,744,000
----------
-----------------------------------------------------------------------------
3.4% COMMERCIAL PAPER
-----------------------------------------------------------------------------
6,000,000 Kimberly-Clark Corp., 5.59%, 1/31/96 ................ 5,972,081
14,000,000 New Center Asset Trust, 5.71%, 1/17/96 .............. 13,964,440
----------
TOTAL COMMERCIAL PAPER (Cost $19,936,521) 19,936,521
----------
-----------------------------------------------------------------------------
1.0% CONVERTIBLE BONDS
-----------------------------------------------------------------------------
MANUFACTURING
Industrial
Specialty JPY 544,000,000 Nippon Electric Glass Co., Ltd., 2%, 3/29/02
(Cost $6,024,854) .................................. 6,074,845
----------
-----------------------------------------------------------------------------
91.1% COMMON STOCKS
-----------------------------------------------------------------------------
Shares
CONSUMER
DISCRETIONARY 9.5%
Department &
Chain Stores 2.0% 110,000 Fast Retailing Co., Ltd. ............................ 5,465,375
100,000 Ito-Yokado Co., Ltd. ................................ 6,159,806
----------
11,625,181
----------
Home Furnishings 0.4% 96,000 Nitori Co., Ltd. (b) ................................ 2,696,368
----------
Recreational
Products 2.6% 224,000 Bandai Co., Ltd. .................................... 9,176,949
145,000 Square Co., Ltd. .................................... 5,940,436
----------
15,117,385
----------
Restaurants 0.4% 92,460 Genki Sushi Co., Ltd. ............................... 2,238,741
----------
Specialty Retail 4.1% 36,700 Bunkyodo Co., Ltd. .................................. 835,303
146,000 Kato Denki Co., Ltd. ................................ 3,789,637
353,640 Royal Ltd. .......................................... 11,816,542
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
THE JAPAN FUND, INC.
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
91,400 Shimamura Co., Ltd. ................................. 3,532,068
73,900 Tsutsumi Jewelry Co., Ltd. .......................... 3,700,368
----------
23,673,918
----------
CONSUMER STAPLES 3.8%
Consumer
Electronic &
Photographic
Products 1.1% 332,000 Pioneer Electronics Corp. ............................ 6,077,288
----------
Food & Beverage 2.7% 232,000 Ariake Japan Co., Ltd. ............................... 7,976,755
135,000 Jusco Co., Ltd. ...................................... 3,517,191
273,000 Rock Field Co., Ltd. (b) ............................. 4,256,949
----------
15,750,895
----------
HEALTH 2.1%
Pharmaceuticals 629,000 Banyu Pharmaceutical Co., Ltd ........................ 7,736,852
257,000 Takeda Chemical Industries, Ltd. ..................... 4,231,477
----------
11,968,329
----------
COMMUNICATIONS 0.2%
Telephone/
Communications 124 DDI Corp. ............................................ 960,775
----------
FINANCIAL 12.6%
Other Financial
Companies 12.3% 188,000 Japan Associated Finance Co. ......................... 19,846,973
501,876 Nichiei Co., Ltd. .................................... 37,428,041
116,000 Sanyo Shinpan Finance Co., Ltd. ...................... 9,549,637
26,100 Shohkoh Fund & Co., Ltd. ............................. 4,904,019
----------
71,728,670
----------
Real Estate 0.3% 93,000 Kansai Sekiwa Real Estate, Ltd. ...................... 1,666,344
----------
MEDIA 1.2%
Broadcasting &
Entertainment 285,000 Horipro Inc. ......................................... 3,809,201
63,277 Sony Music Entertainment (Japan) Inc. ................ 3,309,402
----------
7,118,603
----------
SERVICE INDUSTRIES 6.6%
Miscellaneous
Commercial Services 17,600 Aucnet Inc. .......................................... 852,300
1,303,000 Itochu Corp. ......................................... 8,770,799
139,000 Secom Co., Ltd. ...................................... 9,666,053
877,000 Sumitomo Corp. ....................................... 8,918,644
</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>
576,000 Takasago Thermal Engineering Co., Inc. ............... 10,320,581
----------
38,528,377
----------
DURABLES 7.0%
Automobiles 1,089,000 Bridgestone Corp. .................................... 17,297,433
76,000 FCC Co., Ltd. ........................................ 2,679,322
571,100 Kyokuto Kaihatsu Kogyo Co., Ltd. ..................... 11,615,593
1,137,000 ShinMaywa Industries, Ltd. ........................... 9,382,315
----------
40,974,663
----------
MANUFACTURING 30.5%
Chemicals 1.3% 55,000 Nippon Shokubai Corp., Ltd. .......................... 538,015
476,000 Sekisui Chemical Co., Ltd. ........................... 7,007,458
----------
7,545,473
----------
Diversified
Manufacturing 0.4% 211,000 Sumitomo Electric Industries, Ltd. ................... 2,534,044
----------
Electrical
Products 4.8% 927,000 Hitachi Ltd. ......................................... 9,337,337
16,000 Mabuchi Motor Co., Ltd. .............................. 994,867
942,000 Matsushita Electrical Industrial Co., Ltd. ........... 15,327,458
301,000 Toshiba Corp. ........................................ 2,358,441
----------
28,018,103
----------
Hand Tools 0.4% 162,430 Asahi Diamond Industrial Co., Ltd. ................... 2,281,099
---------
Industrial
Specialty 3.1% 114,000 Mirai Industry Co., Ltd. ............................. 2,716,126
658,000 NHK Spring Co., Ltd. ................................. 3,313,898
621,000 Nippon Electric Glass Co., Ltd. ...................... 11,788,475
----------
17,818,499
----------
Machinery/
Components/
Controls 14.0% 112,500 Keyence Corp. ........................................ 12,966,102
474,000 Komori Corp. ......................................... 11,936,077
957,000 Mitsubishi Heavy Industries, Ltd. .................... 7,628,194
843,000 NGK Spark Plug Co., Ltd. ............................. 10,614,044
303,000 NSK Ltd. ............................................. 2,200,969
295,700 SMC Corp. ............................................ 21,393,501
514,600 THK Co., Ltd. ........................................ 14,653,017
----------
81,391,904
----------
Office Equipment/
Supplies 6.5% 970,000 Canon Inc. ........................................... 17,568,039
989,000 Ricoh Co., Ltd. ...................................... 10,823,923
113,900 Riso Kagaku Corp. .................................... 9,608,416
----------
38,000,378
----------
</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>
TECHNOLOGY 2.4%
Electronic
Components/
Distributors 1.5% 116,000 Kyocera Corp. ........................................ 8,617,143
-----------
Electronic Data
Processing 0.9% 472,000 Fujitsu Ltd. ......................................... 5,257,143
-----------
METALS & MINERALS 11.5%
Precious Metals 1.9% 1,255,000 Sumitomo Metal Mining Co., Ltd. ...................... 11,279,806
-----------
Steel & Metals 9.6% 1,207,000 Hitachi Metals, Ltd. ................................. 15,080,194
4,456,000 Kawasaki Steel Corp. ................................. 15,536,659
2,360,000 Nisshin Steel Co., Ltd. .............................. 9,531,429
5,094,000 Sumitomo Metal Industries, Ltd.* ..................... 15,442,344
-----------
55,590,626
-----------
CONSTRUCTION 2.4%
Building Materials 1.4% 758,000 Matsushita Electric Works, Inc.. ..................... 8,002,131
-----------
Homebuilding 0.3% 21,000 Eyeful Home Technology Inc. .......................... 262,373
215,000 Hosoda Corp. ......................................... 1,645,036
-----------
1,907,409
-----------
Miscellaneous 0.7% 205,000 Maeda Road Construction Co., Ltd. .................... 3,792,252
-----------
TRANSPORTATION 1.3%
Railroads 1,564 East Japan Railway Co. ............................... 7,604,143
-----------
TOTAL COMMON STOCKS (Cost $516,946,612) ............... 529,765,690
-----------
-----------------------------------------------------------------------------
2.1% PURCHASED OPTIONS
-----------------------------------------------------------------------------
Principal
Amount
-----------------------------------------------------------------------------
JPY 11,000,000,000 Put on Japanese Yen, strike price
JPY 101.9, expiration date 10/17/96 ........ 4,202,000
JPY 11,000,000,000 Put on Japanese Yen, strike price
JPY 102.59, expiration date 12/18/96 ....... 4,136,000
JPY 11,000,000,000 Put on Japanese Yen, strike price
JPY 102.68, expiration date 1/16/97 ....... 3,685,000
-----------
TOTAL PURCHASED OPTIONS (Cost $6,446,016) ............. 12,023,000
-----------
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $563,098,003) (a) ............................... 581,544,056
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security
(a) The cost for federal income tax purposes was $581,168,570. At December 31,
1995, net unrealized appreciation for all securities based on tax cost was
$375,486. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$30,669,096 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $30,293,610.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors. The cost of these securities at December 31, 1995 aggregated
$8,732,109. See Note A of the Notes to Financial Statements.
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
- ---------------------------------------------------------------------------------------------
December 31, 1995
- ---------------------------------------------------------------------------------------------
<CAPTION>
ASSETS
<S> <C> <C>
Investments, at market (identified cost $563,098,003)
(Note A) .................................................. $ 581,544,056
Cash ........................................................ 887
Foreign currency holdings, at market (identified
cost $2,117,635)(Note A) .................................. 2,110,090
Receivable on fund shares sold .............................. 730,116
Dividends and interest receivables .......................... 140,307
Receivable on investments sold .............................. 122,999
Other assets ................................................ 5,551
-------------
Total assets .............................................. $ 584,654,006
LIABILITIES
Payable for investments purchased .............. $ 5,436,795
Payable for fund shares redeemed ............... 3,081,429
Accrued management fee (Note C) ................ 336,671
Other accrued expenses (Note C) ................ 601,920
Payable on closed forward currency
exchange contracts (Note A) ................. 26,393,018
-----------
Total liabilities ...................................... 35,849,833
-------------
Net assets, at market value ................................. $ 548,804,173
=============
NET ASSETS
Net assets consist of:
Undistributed net investment income ....................... $ 10,531,476
Net unrealized appreciation (depreciation) on:
Investments ............................................ 18,446,053
Foreign currency related transactions .................. (197)
Accumulated net realized loss ............................. (52,013,581)
Capital stock ............................................. 19,379,820
Additional paid-in capital ................................ 552,460,602
-------------
Net assets, at market value ................................. $ 548,804,173
=============
NET ASSET VALUE, offering and redemption price per
share ($548,804,173/58,139,460 outstanding
shares of capital stock, $.333 par value,
600,000,000 shares authorized) $9.44
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
- -------------------------------------------------------------------------------------
<CAPTION>
INVESTMENT INCOME
Income:
<S> <C> <C>
Dividends (net of withholding taxes of $525,179) ..... $ 3,004,295
Interest (net of withholding taxes of $3,093) ........ 1,982,854
------------
4,987,149
Expenses:
Management fee (Note C) .............................. $ 3,840,792
Shareholder and Transfer Agent services (Note C) ..... 998,363
Officers and directors fees and expenses (Notes C & D) 189,087
Custodian fees ....................................... 431,686
Printing ............................................. 290,889
Legal ................................................ 252,251
Auditing and accounting services ..................... 109,650
Federal and state registration ....................... 42,721
Other ................................................ 57,165 6,212,604
----------------------------
Net investment loss .................................. (1,225,455)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized loss from:
Investments ....................................... (21,046,440)
Options ........................................... (1,298,631)
Foreign currency related transactions ............. (9,521,339) (31,866,410)
Net unrealized appreciation (depreciation) ------------
during the period on:
Investments ....................................... (22,855,119)
Written options ................................... 226,928
Foreign currency related transactions ............. 8,668,747 (13,959,444)
----------------------------
Net loss on investment transactions .................. (45,825,854)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . $(47,051,309)
============
</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>
YEARS ENDED DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- --------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment loss ........................... $ (1,225,455) $ (2,599,796)
Net realized gain (loss) from investment
transactions ................................ (31,866,410) 42,025,485
Net unrealized appreciation (depreciation) on
investment transactions during the period .... (13,959,444) 2,264,434
------------- -------------
Net increase (decrease) in net assets resulting
from operations ............................. (47,051,309) 41,690,123
------------- -------------
Distributions to shareholders:
From net realized gains ($.80 per
share for December 31, 1994) ................ -- (42,020,462)
------------- -------------
In excess of net realized gains ($.11 and $.05
per share, respectively) .................... (5,803,249) (2,360,903)
------------- -------------
Fund share transactions:
Proceeds from shares sold ..................... 330,312,663 521,023,226
Net asset value of shares issued to
shareholders in reinvestment of
distributions ............................... 4,957,881 37,569,251
Cost of shares redeemed ..................... (319,319,066) (441,092,468)
------------- -------------
Net increase in net assets from
Fund share transactions ..................... 15,951,478 117,500,009
------------- -------------
INCREASE (DECREASE) IN NET ASSETS ............. (36,903,080) 114,808,767
Net assets at beginning of period ............. 585,707,253 470,898,486
------------- -------------
NET ASSETS AT END OF PERIOD (including
undistributed net investment income
of $10,531,476 and accumulated
distributions in excess
of net investment income of
$(11,758,799), respectively) ................ $ 548,804,173 $ 585,707,253
============= =============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ..... 55,779,456 45,596,062
------------- -------------
Shares sold ................................... 37,050,849 44,011,661
Shares issued to shareholders in
reinvestment of distributions ............... 559,580 3,602,037
Shares redeemed ............................... (35,250,425) (37,430,304)
------------- -------------
Net increase in Fund shares ................... 2,360,004 10,183,394
------------- -------------
Shares outstanding at end of period ........... 58,139,460 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.
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------
1995 1994(a) 1993(a) 1992 1991 1990 1989 1988 1987 1986(a)
------------------------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (loss) ........ (.01) (.05) (.05) (.05) (.03) .09 .04 .04 .16 .10
Net realized and
unrealized gain (loss)
on investments ....... (.94) 1.07 2.15 (1.74) .37 (2.41) 1.66 3.13 5.81 9.34
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ............ (.95) 1.02 2.10 (1.79) .34 (2.32) 1.70 3.17 5.97 9.44
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment
income ............... -- -- -- -- -- (.09) (.08) (.02) (.20) (.02)
In excess of net
investment income .... -- -- (.28) -- -- -- -- -- -- --
From net realized
gains on investment
transactions ......... -- (.80) (.39) -- (.41) (1.10) (3.59) (3.88) (9.08) (4.67)
In excess of net
realized gains ....... (.11) (.05) -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions ... (.11) (.85) (.67) -- (.41) (1.19) (3.67) (3.90) (9.28) (4.69)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ......... $ 9.44 $10.50 $10.33 $ 8.90 $10.69 $10.76 $14.27 $16.24 $16.97 $20.28
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) ........ (9.07) 10.03 23.64 (16.74) 3.11 (16.36) 11.63 19.40 33.01 77.54
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions) .... 549 586 471 409 335 313 401 404 394 584
Ratio of operating
expenses to average
daily net assets (%) ... 1.21 1.08 1.25 1.42 1.26 1.05 1.02 1.01 .90 .70
Ratio of net investment
income to average
daily net assets (%) ... (.24) (.40) (.47) (.31) (.15) .72 .34 .28 .41 .51
Portfolio turnover rate (%) 69.9 74.3 81.7 47.0 46.4 52.7 60.4 38.8 34.0 38.2
<FN>
(a) Per share amounts have been calculated using weighted average shares
outstanding.
</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. Securities valued in good
faith by the valuation committee of the Board of Directors at fair value
amounted to $6,953,317 (1.27% of net assets) and have been noted in the
investment portfolio as of December 31, 1995.
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. 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.
At December 31, 1995, the Fund had a net tax basis capital loss carryforward of
approximately $23,266,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until December 31,
2003, the expiration date. In addition, from November 1, 1995 through December
31, 1995, the Fund incurred approximately $1,685,000 of net realized capital
losses. As permitted by tax regulations, the Fund intends to elect to defer
these losses and treat them as arising in the fiscal year ended December 31,
1996.
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. Earnings
and profits distributed to shareholders on redemption of Fund shares ("tax
equalization") may be utilized by the Fund, to the extent permissible, as part
of the Fund's dividends paid deduction on its federal income tax return.
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, passive foreign investment companies, and certain
securities sold at a loss. As a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from
21
<PAGE>
- --------------------------------------------------------------------------------
THE JAPAN FUND, INC.
- --------------------------------------------------------------------------------
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, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $352,815,732 and
$376,852,354, respectively.
Transactions in written options for the year ended December 31, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
OPTIONS ON CURRENCIES
----------------------------
PREMIUMS
JAPANESE YEN RECEIVED ($)
-----------------------------
<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
22
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
monthly. For the year ended December 31, 1995, the fee pursuant to the
Management Agreement amounted to $3,840,792, which was equivalent to an annual
effective rate of 0.75% 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. 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. On December 31, 1995, the research contract with
NICAM terminated. For the year ended December 31, 1995 the fee pursuant to the
Research Agreement amounted to $512,970.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended December 31, 1995, the amount charged to the Fund by SSC aggregated
$779,092, of which $61,459 is unpaid at December 31, 1995.
The Fund pays each of its Officers and Directors not affiliated with the Adviser
an annual fee plus specified amounts for attended board and committee meetings.
For the year ended December 31, 1995, the Officers and Directors fees aggregated
$145,087.
During the year ended December 31, 1995, there were $186,917 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 year
ended December 31, 1995, Directors' retirement benefits amounted to
23
<PAGE>
THE JAPAN FUND, INC.
- --------------------------------------------------------------------------------
$44,000. At December 31, 1995, the Fund has accrued $162,007 for such benefits.
E. LINE OF CREDIT
- --------------------------------------------------------------------------------
The Fund and several affiliated Funds ("The Participants") share in a $500
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the agreement. In addition, the
Fund also maintains an uncommitted line of credit.
24
<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, 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 December 31, 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
February 7, 1996
25
<PAGE>
THE JAPAN FUND, INC.
TAX INFORMATION
For its fiscal year ended December 31, 1995, 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 $528,125). The
total amount of taxes paid by the Fund to such countries was $.01 per share
(representing a total of $528,125).
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
26
<PAGE>
THE JAPAN FUND, INC.
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
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
