This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
(logo)
(logo)
THE JAPAN FUND, INC.
Annual Report
December 31, 1998
A pure no-load(TM) mutual fund
Scudder Kemper Investments, Inc.
Investment Manager
<PAGE>
THE JAPAN FUND, INC.
CONTENTS
Portfolio Management Discussion ............................... 3
Reviews the period's investing strategies, financial markets,
and economic conditions
Performance Update ............................................. 7
Portfolio Summary ............................................. 8
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 ............................. 23
Tax Information ............................................... 24
Stockholder Meeting Results ................................... 25
Officers and Directors ........................................ 27
How to Contact The Japan Fund ............................Back cover
2
<PAGE>
THE JAPAN FUND, INC.
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
In a year when many global equity markets encountered stormy weather,
Japanese stocks continued to flounder because of a weakening economy and ongoing
problems in the banking sector. Despite this difficult environment, The Japan
Fund posted a stellar 24.29% return for the twelve months ended December 31,
outpacing the 7.71% U.S. dollar return of the Topix (Tokyo Stock Exchange Price
Index). Compared to its peers, the Fund was ranked third out of 34 Japanese
funds tracked by Lipper Analytical Services^1 in the period, beating the 8.17%
average return of comparable funds by a wide margin. We believe that this strong
relative performance can be attributed to a strategy of managing risk, seeking
"quality value," and positioning the Fund to withstand continued difficulties in
the macroeconomic environment.
Investment Environment
Although some bright spots began to emerge in 1998, conditions for Japanese
stocks remained generally unfavorable. For most of the year, the continued
deterioration of the economy weighed heavily on market performance. Projections
for growth were consistently revised downward as consumers' tendency to save
rather than spend inhibited the government's efforts to get the economy back on
track. On the corporate level, further reductions in capital spending helped to
push the unemployment rate to a record high of 4.4%. The poor economic health of
Japan's neighbors has exacerbated the problem by softening demand for exports
and flooding the region with excess supply. As a consequence, Japan is suffering
from a harmful deflationary trend that even a large-scale monetary stimulus has
so far been unable to reverse. Similarly, government attempts to boost the
economy by using fiscal stimuli, such as public works spending, have so far
provided only a minimal benefit.
In reaction to this negative environment, the value of the yen plunged in
the first half of the year, before reversing dramatically after August. The
currency, which began the year at
- --------------------------------------------------------------------------------
^1 The 1-, 5-, and 10-year average annual returns for the period ended
December 31, 1998, were 24.29%, -1.05%, and -.62%, respectively. In the
rankings calculated by Lipper Analytical Services, the Fund finished third
out of 34 comparable funds for one year, second out of 9 funds for five
years, and second out of three funds for ten years. Past performance is not
indicative of future results.
3
<PAGE>
THE JAPAN FUND, INC.
PORTFOLIO MANAGEMENT DISCUSSION
130.58 (Y)/$, fell to a low of 147.26 (Y)/$, and closed the year at 113.60
(Y)/$. As a result, Fund shareholders benefited from the increase in the U.S.
dollar value of the Fund's holdings. While short-term currency movements can
have a significant impact on the Fund's share price, we did not seek to hedge or
make bets on the exchange rate. Instead, we strive to mitigate currency risk
through diversification and superior individual stock selection.
Mixed Progress in the Private Sector
The poor condition of the banking sector, which is the fundamental reason
for the extended duration of Japan's crisis, continues to plague the economy. In
the ongoing process of writing off bad loans and taking write-downs on their
equity holdings, banks have been forced to shrink their loan base in kind. As
they recall loans or become more stringent in issuing new loans, borrowers'
ability to finance new purchases and investments is curtailed, thereby
perpetuating the "liquidity crunch" that has paralyzed the economy. While the
government has earmarked 60 trillion yen to recapitalize the banking system, the
percentage of these funds that will actually be allocated for this purpose when
it is time to implement this rescue plan in 1999 is uncertain.
The most encouraging development in Japan has been the willingness of
public companies to undertake the difficult process of restructuring.
Traditionally, Japanese businesses have operated under a set of rules
characterized by archaic accounting practices, low returns on capital, and an
emphasis on lifetime employment at the expense of shareholder interests. Spurred
by the weak economy, managements are now much more receptive to the philosophy
of maximizing shareholder returns through restructuring and share buybacks. The
paradigm shift in Japanese corporate management has gained momentum in 1998, as
some of the largest and most traditional companies, such as Tokyo Electric
Power, Toshiba, Sumitomo Bank, and Nippon Steel have begun to focus on asset
efficiency, returns, and shareholder value. The unraveling of cross-holdings and
the rising number of joint ventures with foreign companies are also highly
positive signs for the future. Although a large number of firms are still mired
in the old ways of doing business, many Japanese corporations have finally
started to retool for the new global economy.
4
<PAGE>
THE JAPAN FUND, INC.
PORTFOLIO MANAGEMENT DISCUSSION
Investment Strategy
Our strategy is to invest in well managed companies that are positioned for
positive change. By focusing on stocks that have been able to generate growth
internally, we have been able to mitigate the fluctuations associated with
exogenous macroeconomic factors. In order to minimize such risks, we have
emphasized scenario risk management, which we utilize to position the Fund
against unexpected changes in the investment environment, and valuation risk
control, which we employ to determine sector weightings and price targets. When
selecting individual companies, we seek "quality value," which describes a firm
whose stock price is low despite the existence of a catalyst for strong future
growth. Specifically, we focus on companies with progressive managements, large
cash reserves, secure balance sheets, strong competitive positions, and
favorable measures of valuation. In order to further reduce risk, we diversify
the portfolio among global companies that are demonstrating a focus on
shareholder orientation, future blue chips that are expected to generate returns
through their long growth horizons, and domestic value stocks, for which the
pertinent issues are an improving business focus, capital efficiency, and
shareholders' increasing share of the corporate wealth.
In 1998, these criteria prompted us to emphasize the service and
pharmaceutical sectors, which held up relatively well even when the broader
market was falling in the third quarter. These industries are characterized by
significant free cash flow generation, internally driven growth, and attractive
valuations. The majority of the companies in the banking sector, conversely, are
strapped for cash and reliant upon public funds to maintain operations, causing
us to avoid this sector entirely. While the Fund owns a large position in
financial stocks, all of these holdings are in investment banks and non-banks.
We have also taken steps to reduce exposure to the U.S. economy by
underweighting automobile stocks and cutting back on technology companies that
are sensitive to U.S. demand.
The Fund's strategy is illustrated by its holding in Nidec, a manufacturer
of small motor technology that is used in hard disk drives in servers and
personal computers. The lowest cost producer in its sector, Nidec is leveraging
its technological expertise to enter other markets for small motors, such as
automobiles and consumer electronics. Its strong balance sheet and diversified
5
<PAGE>
THE JAPAN FUND, INC.
PORTFOLIO MANAGEMENT DISCUSSION
operations should allow it to perform well even if the economy continues to
flounder. By virtue of its sound strategy and potential for strong growth, we
have placed Nidec in the "future blue chip" category.
Toshiba, the number 11 holding in The Japan Fund, demonstrates our focus on
companies with catalysts for significant future earnings growth. Toshiba is well
positioned as the number one producer of notebook PC's in the world, but more
importantly, it is poised to capitalize on this position following the
restructuring that has been undertaken by the new management team. By closing or
merging unprofitable segments and choosing to make shareholder interests its
primary concern, Toshiba's management is demonstrating a commitment to
streamlining the company so it may better compete in the new economy. We expect
this focus to translate into significantly stronger earnings growth in the next
two to three years.
Outlook
Looking forward to the year ahead, our underlying investment thesis on
Japan remains largely unchanged. We believe that the Japanese stock market
offers a considerable value potential from sales, assets, and cashflow
viewpoints, and that the shift in managements' approach to profit and
shareholder orientation will be the catalyst for unlocking value. Although
macroeconomic issues such as deflationary pressure, yen volatility, and a
possible U.S. slowdown continue to present risks to the Japanese equity market,
the possibility exists that these events have been largely discounted into stock
prices. In this environment, we will continue to position the Fund to benefit
from companies that offer quality value. Although the economic outlook for 1999
remains uncertain, we believe that significant opportunities exist in companies
whose management teams have recognized the need for fundamental change.
Sincerely,
/s/Lynn Birdsong /s/Henry Rosovsky
Lynn Birdsong, Henry Rosovsky,
President Chairman
The Japan Fund:
A Team Approach to Investing
The Japan Fund is managed by a team of Scudder Kemper Investments, Inc.
(the "Adviser") professionals, each of whom plays an important role in the
Fund's management process. Team members work together to develop investment
strategies and select securities for the Fund's portfolio. They are supported by
the Adviser'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 our 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 the Adviser 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 the
Adviser in 1987 and has 16 years of Pacific Basin research and investing
experience.
6
<PAGE>
THE JAPAN FUND, INC.
PERFORMANCE UPDATE as of December 31, 1998
- -------------------------------------
The Japan Fund, Inc.
- -------------------------------------
Total Return
Period Growth ------------------
Ended of Cumu- Average
12/31/98 $10,000 lative Annual
- -------------------------------------
1 Year $12,429 24.29% 24.29%
5 Year $ 9,484 -5.16% -1.05%
10 Year $ 9,398 -6.02% -.62%
- -------------------------------------
- -------------------------------------
TOPIX
- -------------------------------------
Total Return
Period Growth ------------------
Ended of Cumu- Average
12/31/98 $10,000 lative Annual
- -------------------------------------
1 Year $10,771 7.71% 7.71%
5 Year $ 7,789 -22.11% -4.87%
10 Year $ 5,530 -44.70% -5.75%
- -------------------------------------
- ------------------------------
GROWTH OF A $10,000 INVESTMENT
- ------------------------------
Yearly Periods ended December 31
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
TOPIX The Japan Fund, Inc.
----- --------------------
'88 $10,000 $10,000
'89 10,680 11,163
'90 6,848 9,336
'91 7,423 9,627
'92 5,722 8,015
'93 7,100 9,910
'94 8,659 10,904
'95 8,547 9,915
'96 7,136 8,833
'97 5,135 7,561
'98 5,530 9,398
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
are reinvested net of withholding tax and, unlike Fund returns, do not reflect
any fees or expenses.
- ---------------------------------
RETURNS AND PER SHARE INFORMATION
- ---------------------------------
Yearly periods ended December 31
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value ........ $14.27 $10.76 $10.69 $ 8.90 $10.33 $10.50 $ 9.44 $ 8.33 $ 6.77 $ 8.33
Income Dividends ....... $ .08 $ .09 $ -- $ -- $ .28 $ -- $ -- $ .08 $ .37 $ .08
Capital Gains
Distributions .......... $ 3.59 $ 1.10 $ .41 $ -- $ .39 $ .85 $ .11 $ -- $ -- $ --
Fund Total Return (%) .. 11.63 -16.36 3.11 -16.74 23.64 10.03 -9.07 -10.92 -14.40 24.29
Index Total Return (%) . 6.79 -35.88 8.39 -22.92 24.07 21.96 -1.29 -16.51 -28.05 7.71
</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.
7
<PAGE>
THE JAPAN FUND, INC.
PORTFOLIO SUMMARY as of December 31, 1998
- ----------------
Asset Allocation
- ----------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Equity Holdings 95%
Cash Equivalents 5%
-----
100%
=====
The Fund remains almost fully invested in Japanese equities.
- -----------------------------------------------------
Sector Diversification (Excludes 5% Cash Equivalents)
- -----------------------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Manufacturing 18%
Consumer Discretionary 15%
Technology 13%
Service Industries 13%
Financial 9%
Consumer Staples 7%
Communications 7%
Construction 7%
Health 5%
Other 6%
-----
100%
=====
Our focus on companies with strong cash flows led us to
underweight financial stocks and increase our positions in
the service and pharmaceutical sectors.
- ----------------------------------------------
Ten Largest Equity Holdings (32% of Portfolio)
- ----------------------------------------------
1. Shimano Inc. Top global producer of bicycle parts
2. Nidec Corp. Top global manufacturer of small-scale motors for hard disc
drives
3. Fujitsu Support and Service Inc. Provider of information services and
support for computer network systems
4. Benesse Corp. Provider of educational services, publisher of software
5. Yamanouchi Pharmaceutical Co., Ltd. Leading manufacturer of ethical drugs
6. York-Benimaru Co., Ltd. Regional chain store operator
7. NTT Mobile Communication Network, Inc. Provider of various
telecommunication services and equipment
8. Fujitsu Ltd. Leading manufacturer of computers
9. Nikko Securities Co., Ltd. Leading securities broker and dealer
10. Nippon Telegraph & Telephone Corp. Leading telecommunications company
Top holdings reflect an emphasis on companies whose stock
prices are low despite strong fundamentals.
- --------------------------------------------------------------------------------
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.
8
<PAGE>
THE JAPAN FUND, INC.
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
Principal Market
Amount (b) Value ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS 2.3%
- --------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 12/31/98 at 5% to
be repurchased on 1/4/1999 at $8,007,446 collateralized by a $5,541,000 U.S.
Treasury Bond, 8.875%, 2/15/2019 (Cost $8,003,000) ......................................... 8,003,000 8,003,000
------------
SHORT TERM NOTES 2.0%
- --------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 3.57%*, 1/4/1999 (Cost $7,107,216) ........................... 7,110,000 7,110,000
------------
U. S. GOVERNMENT & AGENCIES 0.4%
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bill, 1/7/1999 (Cost $1,348,832) ................................................. 1,350,000 1,348,832
------------
CONVERTIBLE BONDS 1.1%
- --------------------------------------------------------------------------------------------------------------------------------
Manufacturing 0.4%
Office Equipment/Supplies 0.4%
Ricoh Co., Ltd., 1.5%, 3/29/2002 ............................................................JPY 123,000,000 1,247,100
------------
Technology 0.7%
Electronic Data Processing 0.6%
Fujitsu Ltd., 1.95%, 3/31/2003 ..............................................................JPY 162,000,000 2,194,811
------------
Semiconductors 0.1%
Tokyo Electron Ltd., 0.9%, 9/30/2003 ........................................................JPY 16,000,000 194,103
------------
Total Convertible Bonds (Cost $3,235,872) 3,636,014
------------
COMMON STOCKS 94.2%
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares
------------
<S> <C> <C>
Consumer Discretionary 13.8%
Department & Chain Stores 2.9%
York-Benimaru Co., Ltd. ........................................................................ 316,400 10,058,231
------------
Home Furnishings 0.5%
Sangetsu Co., Ltd. ............................................................................. 108,000 1,616,222
------------
Recreational Products 5.3%
Bandai Co., Ltd. ............................................................................... 223,000 2,172,142
Nintendo Co., Ltd. ............................................................................. 33,600 3,257,947
Shimano Inc. ................................................................................... 507,000 13,086,912
------------
18,517,001
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
THE JAPAN FUND, INC.
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Restaurants 1.3%
Genki Sushi Co., Ltd. (c) ...................................................................... 92,000 1,026,477
Yoshinoya D&C Co., Ltd. ........................................................................ 320 3,485,345
------------
4,511,822
------------
Specialty Retail 3.8%
Fast Retailing Co., Ltd. ....................................................................... 168,300 2,977,627
Senshukai ...................................................................................... 754,000 5,454,866
Shimachu Co., Ltd. ............................................................................. 245,300 4,887,320
------------
13,319,813
------------
Consumer Staples 6.8%
Consumer Electronic & Photographic Products 0.8%
Fuji Photo Film Co., Ltd. ...................................................................... 72,000 2,677,765
------------
Food & Beverage 2.6%
Fujicco Co., Ltd. .............................................................................. 285,000 4,744,532
Rock Field Co., Ltd. ........................................................................... 217,000 4,227,398
------------
8,971,930
------------
Package Goods/Cosmetics 2.3%
Uni-Charm Co., Ltd. ............................................................................ 171,000 8,025,325
------------
Textiles 1.1%
Gunze, Ltd. .................................................................................... 1,678,000 4,041,583
------------
Health 5.0%
Medical Supply & Specialty 1.4%
Terumo Corporation ............................................................................. 199,000 4,687,328
------------
Pharmaceuticals 3.6%
Yamanouchi Pharmaceutical Co., Ltd. ............................................................ 390,000 12,570,619
------------
Communications 6.4%
Telephone/Communications
Hikari Tsushin, Inc. ........................................................................... 56,700 3,489,463
NTT Mobile Communication Network, Inc. ......................................................... 244 10,046,932
Nippon Telegraph & Telephone Corp. ............................................................. 1,129 8,717,684
------------
22,254,079
------------
Financial 8.5%
Other Financial Companies
Daiwa Securities Co., Ltd. ..................................................................... 2,495,000 8,528,026
Jafco Co., Ltd. ................................................................................ 156,000 4,227,043
Nichiei Co., Ltd. .............................................................................. 8,500 677,411
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
THE JAPAN FUND, INC.
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nikko Securities Co., Ltd. ..................................................................... 3,283,000 9,157,398
Orix Corp. ..................................................................................... 83,000 6,203,135
Shohkoh Fund & Co., Ltd. ....................................................................... 1,980 638,201
------------
29,431,214
------------
Service Industries 12.1%
Environmental Services 1.2%
Sanix Inc. ..................................................................................... 177,500 4,322,368
------------
Miscellaneous Commercial Services 5.7%
Fujitsu Support and Service Inc. ............................................................... 179,000 12,918,179
Secom Co., Ltd. ................................................................................ 84,000 6,962,189
------------
19,880,368
------------
Printing/Publishing 5.2%
Benesse Corp. .................................................................................. 235,300 12,730,745
Toppan Forms Co., Ltd. ......................................................................... 291,000 5,179,403
------------
17,910,148
------------
Durables 2.5%
Automobiles 0.5%
ShinMaywa Industries, Ltd. ..................................................................... 1,010,000 1,815,549
------------
Telecommunications Equipment 2.0%
Matsushita Communication Industrial Co., Ltd. .................................................. 145,000 6,843,620
------------
Manufacturing 17.0%
Chemicals 1.6%
Shin-Etsu Chemical Co., Ltd. ................................................................... 237,000 5,708,315
------------
Containers & Paper 1.2%
Hokuetsu Paper Mills, Ltd. ..................................................................... 916,000 4,242,168
------------
Electrical Products 2.4%
Toshiba Corp. .................................................................................. 1,364,000 8,128,681
------------
Industrial Specialty 6.2%
Asahi Glass Co., Ltd. .......................................................................... 1,084,000 6,728,805
NHK Spring Co., Ltd. ........................................................................... 1,934,000 7,278,403
NTN Corp. ...................................................................................... 804,000 2,591,481
Teijin Ltd. .................................................................................... 1,312,000 4,833,012
------------
21,431,701
------------
Machinery/Components/Controls 1.4%
Minebea Co., Ltd. .............................................................................. 319,000 3,655,238
NSK Ltd. ....................................................................................... 353,000 1,319,100
------------
4,974,338
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
THE JAPAN FUND, INC.
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Office Equipment/Supplies 4.2%
Canon Chemicals, Inc. .......................................................................... 425,700 4,335,031
Canon Inc. ..................................................................................... 216,000 4,619,145
Ricoh Co., Ltd. ................................................................................ 612,000 5,646,896
------------
14,601,072
------------
Technology 11.6%
Diverse Electronic Products 2.0%
Matsushita Electric Industrial Co., Ltd. ....................................................... 384,000 6,797,273
------------
Electronic Components/Distributors 5.5%
Murata Manufacturing Co., Ltd. ................................................................. 148,000 6,146,462
Nidec Corp. .................................................................................... 105,700 12,944,576
------------
19,091,038
------------
Electronic Data Processing 2.2%
Fujitsu Ltd. ................................................................................... 572,000 7,622,952
------------
Semiconductors 1.9%
Tokyo Electron Ltd. ............................................................................ 171,000 6,495,971
------------
Construction 6.2%
Building Materials 2.3%
Sumitomo Osaka Cement Co., Ltd. ................................................................ 1,607,000 3,002,541
Taiheiyo Cement Corp. .......................................................................... 1,998,000 5,006,942
------------
8,009,483
------------
Homebuilding 3.9%
Daito Trust Construction Co., Ltd. ............................................................. 723,500 6,272,084
Sekisui House, Ltd. ............................................................................ 694,000 7,343,753
------------
13,615,837
------------
Utilities 4.3%
Electric Utilities
Kyushu Electric Power Co. ...................................................................... 392,700 7,476,357
Tokyo Electric Power Co. ....................................................................... 303,100 7,488,259
------------
14,964,616
------------
Total Common Stocks (Cost $320,682,138) 327,138,430
------------
- --------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $340,377,058) (a) ................................... $347,236,276
============
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
THE JAPAN FUND, INC.
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $341,278,588. At December
31, 1998, net unrealized appreciation for all securities based on tax
cost was $5,957,688. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $54,526,266 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $48,568,578.
(b) Principal amount stated in U.S. dollars unless otherwise noted.
(c) Securities valued in good faith by the Valuation Committee of the Board
of Directors at fair value amounted to $1,026,477 (.30% of net assets).
Their values have been estimated by the Board of Directors in the absence
of readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at December 31, 1998 aggregated $2,152,392. These
securities may also have certain restrictions as to resale.
Currency Abbreviations
----------------------------------------------------------------------------
JPY Japanese Yen
* Annualized yield at time of purchase, not a coupon rate. (Unaudited)
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
THE JAPAN FUND, INC.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investments, at market (identified cost $340,377,058) ............... $ 347,236,276
Cash ................................................................ 1,089
Foreign currency holdings, at market (identified
cost $494,363) .................................................. 502,635
Receivable for investments sold ..................................... 1,233,820
Receivable for fund shares sold ..................................... 1,090,989
Dividends and interest receivable ................................... 78,698
Other assets ........................................................ 8,017
----------------
Total assets ........................................................ 350,151,524
Liabilities
Payable for fund shares redeemed .................................... 2,242,070
Accrued management fee .............................................. 223,322
Other payables and accrued expenses ................................. 560,491
----------------
Total liabilities ................................................... 3,025,883
----------------
Net assets, at market value ......................................... $ 347,125,641
================
Net Assets
Net assets consist of:
Accumulated distributions in excess of net investment income ........ $ (256,142)
Net unrealized appreciation (depreciation) on:
Investments ..................................................... 6,859,218
Foreign currency related transactions ........................... 15,072
Accumulated net realized loss ....................................... (64,292,005)
Paid-in capital ..................................................... 404,799,498
----------------
Net assets, at market value ......................................... $ 347,125,641
================
Net asset value, offering and redemption price per share
($347,125,641 / 41,668,266 outstanding shares of capital
stock, $.333 par value, 600,000,000 shares authorized) .......... $8.33
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
THE JAPAN FUND, INC.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
Income:
Dividends (net of withholding taxes of $384,508) ............................ $ 2,229,115
Interest (net of withholding taxes of $5,990) ............................... 1,183,844
--------------
3,412,959
Expenses:
Management fee .............................................................. 2,385,341
Shareholder and Transfer Agent services ..................................... 602,330
Directors fees and expenses ................................................. 206,665
Custodian and accounting fees ............................................... 265,920
Reports to shareholders ..................................................... 158,821
Legal ....................................................................... 85,582
Auditing .................................................................... 64,500
Registration fees ........................................................... 46,439
Other ....................................................................... 24,766
--------------
3,840,364
--------------
Net investment income (loss) ................................................ (427,405)
--------------
Net realized and unrealized gain (loss) on investment
transactions
Net realized gain (loss) from:
Investments ................................................................. (22,454,026)
Futures ..................................................................... (234,174)
Foreign currency related transactions ....................................... (90,594)
--------------
(22,778,794)
--------------
Net unrealized appreciation (depreciation) during the period on:
Investments ................................................................. 93,976,203
Foreign currency related transactions ....................................... (4,858)
--------------
93,971,345
--------------
Net gain (loss) on investment transactions .................................. 71,192,551
--------------
Net increase (decrease) in net assets resulting from
operations ............................................................... $ 70,765,146
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
THE JAPAN FUND, INC.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ............................ (427,405) $ (1,459,070)
Net realized gain (loss) from investment
transactions ........................................ (22,778,794) 21,214,707
Net unrealized appreciation (depreciation) on
investment transactions during the period ........... 93,971,345 (56,888,094)
--------------- ---------------
Net increase (decrease) in net assets resulting
from operations ..................................... 70,765,146 (37,132,457)
--------------- ---------------
Distributions to shareholders:
In excess of net investment income ...................... (3,176,155) (14,966,112)
--------------- ---------------
Total distributions to shareholders ..................... (3,176,155) (14,966,112)
--------------- ---------------
Fund share transactions:
Proceeds from shares sold ............................... 657,707,572 359,886,210
Net asset value of shares issued to shareholders
in reinvestment of distributions ..................... 2,709,032 12,571,505
Cost of shares redeemed ................................. (646,061,885) (441,141,177)
--------------- ---------------
Net increase (decrease) in net assets from Fund
share transactions .................................. 14,354,719 (68,683,462)
--------------- ---------------
Increase (decrease) in net assets ....................... 81,943,710 (120,782,031)
Net assets at beginning of period ....................... 265,181,931 385,963,962
--------------- ---------------
Net assets at end of period (including
accumulated distributions in excess of net
investment income of $256,142 and
undistributed net investment income of
$2,596,688, respectively) ........................... $347,125,641 $265,181,931
=============== ===============
Other Information
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ............... 39,174,523 46,358,011
--------------- ---------------
Shares sold ............................................. 90,183,280 43,064,968
Shares issued to shareholders in reinvestment of
distributions ....................................... 367,077 1,805,563
Shares redeemed ......................................... (88,056,614) (52,054,019)
--------------- ---------------
Net increase (decrease) in Fund shares .................. 2,493,743 (7,183,488)
--------------- ---------------
Shares outstanding at end of period ..................... 41,668,266 39,174,523
=============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
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.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------
1998(a) 1997(a) 1996(a) 1995 1994(a)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......................... $ 6.77 $ 8.33 $ 9.44 $ 10.50 $ 10.33
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) .................................. (.01) (.03) (.03) (.01) (.05)
Net realized and unrealized gain (loss) on investments ........ 1.65 (1.16) (1.00) (.94) 1.07
-------- -------- -------- -------- --------
Total from investment operations .............................. 1.64 (1.19) (1.03) (.95) 1.02
-------- -------- -------- -------- --------
Less distributions:
In excess of net investment income ............................ (.08) (.37) (.08) -- --
From net realized gains on investment transactions ............ -- -- -- -- (.80)
In excess of net realized gains ............................... -- -- -- (.11) (.05)
-------- -------- -------- -------- --------
Total distributions ........................................... (.08) (.37) (.08) (.11) (.85)
-------- -------- -------- -------- --------
Net asset value, end of period ................................ $ 8.33 $ 6.77 $ 8.33 $ 9.44 $ 10.50
======== ======== ======== ======== ========
Total Return (%) .............................................. 24.29 (14.40) (10.92) (9.07) 10.03
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................ 347 265 386 549 586
Ratio of operating expenses to average daily net assets (%) ... 1.26 1.21 1.16 1.21 1.08
Ratio of net investment income (loss) to average daily net
assets (%) .................................................. (.14) (.38) (.34) (.24) (.40)
Portfolio turnover rate (%) ................................... 90.4 96.4 72.6 69.9 74.3
</TABLE>
(a) Based on monthly average shares outstanding during the period.
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 an open-end management investment company. The Fund's
financial statements are prepared in accordance with generally accepted
accounting principles which require the use of management estimates. The
policies described below are followed consistently by the Fund in the
preparation of its financial statements.
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, whose 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.
Money market instruments purchased with an original 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.
Futures Contracts. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the period, the
Fund purchased securities index futures as a temporary substitute for purchasing
selected investments.
Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund each day,
dependent on the daily fluctuations in the value of the underlying security, and
are recorded for financial reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction, the Fund will realize a gain
or loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy. Futures contracts are valued at the most
recent settlement price.
Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may not correlate exactly with changes in the
18
<PAGE>
THE JAPAN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
value of the securities or currencies hedged. When utilizing futures contracts
to hedge, the Fund gives up the opportunity to profit from favorable price
movements in the hedged positions during the term of the contract.
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.
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.
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, as amended, applicable to regulated investment companies. Under the United
States-Japan tax treaty, Japan imposes a
19
<PAGE>
THE JAPAN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
withholding tax of 15% on dividends and 10% on interest. There is currently no
Japanese tax on capital gains.
At December 31, 1998, the Fund had a net tax basis capital loss carryforward of
approximately $59,392,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until December 31,
2003 ($23,266,000), December 31, 2004 ($7,417,000), December 31, 2005
($5,135,000) and December 31, 2006 ($23,574,000), the respective expiration
dates, whichever occurs first. In addition, from November 1, 1998 through
December 31, 1998, the Fund incurred approximately $4,002,000 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 ending December
31, 1999.
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 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, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated $259,538,234 and
$257,367,518, respectively.
The aggregate face value of futures contracts opened and closed during the year
ended December 31, 1998 was $81,950,664.
20
<PAGE>
THE JAPAN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
C. Related Parties
- --------------------------------------------------------------------------------
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or 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 Agreement. The Fund agrees to pay
the Adviser a fee equal to an annual rate of 0.85% of the first $100,000,000 of
the Fund's average daily net assets, 0.75% of the next $200,000,000 of such
assets, 0.70% of the next $300,000,000 of such assets and 0.65% of such net
assets in excess of $600,000,000 computed and accrued daily and paid monthly.
For the year ended December 31, 1998, the fee pursuant to these agreements
amounted to $2,385,341, of which $223,322 is unpaid at December 31, 1998. This
was equivalent to an annual effective rate of .78% of the Fund's average daily
net assets.
Effective September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner
of the Adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, the Fund's Agreement with Scudder Kemper was deemed to have been
assigned and, therefore, terminated. In December 1998, the Board of Directors
and the shareholders of the Fund approved a new investment management agreement
with Scudder Kemper, which is substantially identical to the former Agreement,
except for the dates of execution and termination.
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, 1998, the amount charged to the Fund by SSC aggregated
$449,440, of which $36,929 is unpaid at December 31, 1998.
The Fund pays each of its Directors not affiliated with the Adviser an annual
fee plus specified amounts for attended board and committee meetings. For the
year ended December 31, 1998, the Directors fees and expenses aggregated
$152,174, of which $8,436 is unpaid at December 31, 1998.
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, 1998, Directors' retirement benefits amounted to $54,491. At
December 31, 1998, the Fund has accrued $253,394 for such benefits.
21
<PAGE>
THE JAPAN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
E. Lines of Credit
- --------------------------------------------------------------------------------
The Fund and several other Scudder Funds (the "Participants") share in a $850
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.
22
<PAGE>
THE JAPAN FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Directors of The Japan Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, 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, 1998, the results of its operations, the changes in its net
assets, and the financial highlights for 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, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 17, 1999
23
<PAGE>
THE JAPAN FUND, INC.
TAX INFORMATION (Unaudited)
The Fund paid foreign taxes of $390,497 and earned $390,497 of foreign source
income during the year ended December 31, 1998. Pursuant to section 853 of the
Internal Revenue Code, the Fund designates $0.01 per share as foreign taxes paid
and $0.01 per share as income earned from foreign sources for the year ended
December 31, 1998.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
24
<PAGE>
THE JAPAN FUND, INC.
STOCKHOLDER MEETING RESULTS
A Special Meeting of Stockholders (the "Meeting") of The Japan Fund, Inc. (the
"Fund") was held on December 11, 1998, at the offices of Scudder Kemper
Investments, Inc., Two International Place, Boston, Massachusetts 02110. At the
Meeting the following matters were voted upon by the stockholders (the resulting
votes for each matter are presented below).
1. To elect Directors of the Fund.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Peter Booth 21,642,873 1,184,699
William L. Givens 21,638,643 1,188,929
William H. Gleysteen, Jr. 21,608,638 1,218,934
Thomas M. Hout 21,670,706 1,156,866
John F. Loughran 21,670,218 1,157,354
Yoshihiko Miyauchi 21,490,110 1,337,462
William V. Rapp 21,652,136 1,175,436
Henry Rosovsky 21,634,052 1,193,520
Takeo Shiina 21,672,774 1,154,798
O. Robert Theurkauf 21,682,704 1,144,868
Hiroshi Yamanaka 21,608,041 1,219,531
2. To approve a new Investment Management Agreement for the Fund with Scudder
Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
21,312,849 789,542 725,181 0
25
<PAGE>
THE JAPAN FUND, INC.
STOCKHOLDER MEETING RESULTS
3. To approve the revision of the Fund's fundamental lending policy.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
15,803,504 1,534,953 976,070 4,513,045
4. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants for the Fund for the Fund's current fiscal year.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
21,703,970 451,329 672,273
- --------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
26
<PAGE>
THE JAPAN FUND, INC.
OFFICERS AND DIRECTORS
Henry Rosovsky
Chairman of the Board and
Director
Professor Emeritus, Harvard
University; Professor, Geyser
University; Director, Corning
Inc., Paine Webber Group
Lynn Birdsong*
President
Peter Booth
Director
Senior Vice President;
Corning Incorporated
William L. Givens
Director
President, Twain Associates
William H. Gleysteen, Jr.
Director
Consultant; Guest Scholar,
Brookings Institute
Thomas M. Hout
Director
Vice President and Director,
Boston Consulting Group
John F. Loughran
Director
Director, The Finisterre Fund
Yoshihiko Miyauchi
Director
President and CEO, ORIX
Corporation
William V. Rapp
Director
Academic Director,
International Relations, Yale
University; Senior Research
Associate, Columbia
University; Managing
Director, Rue Associates
Takeo Shiina
Director
Chairman, President and
CEO, IBM Japan, Ltd.
O. Robert Theurkauf*
Director
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, The Bank of
Tokyo-Mitsubishi, Ltd., The
Mitsubishi Foundation,
Mitsubishi Research Institute;
Director, Kirin Brewery Co.,
Ltd., Seijo Gakuen; Doctor of
Commerce, Chuo University
Elizabeth J. Allan*
Vice President
William E. Holzer*
Vice President
Thomas W. Joseph*
Vice President
Seung Kwak*
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
John R. Hebble*
Assistant Treasurer
Thomas F. McDonough*
Assistant Secretary
HONORARY DIRECTORS
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 Emeritus and Director, Kirby
Corporation
Shoji Umemura
Former Director of The Japan Fund, Inc.
Board Counselor, The Nikko Securities Co., Ltd.; Counselor, Tokyo Stock
Exchange; Advisor, Japan Securities Dealers Association, Association of Tokyo
Stock Exchange Regular Members; Director, The Securities Analysts Association
of Japan; Advisor, Japan Association of Corporate Executives; Associate
Advisor, Tokyo Chamber of Commerce and Industry; Vice President, Japan-Korea
Economic Association; Member, Executive Board, Waseda University; Chairman,
Congregation, Waseda University
* Scudder Kemper Investments, Inc.
27
<PAGE>
(logo)
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 617-295-1000)
The Japan Fund
Shareholder Service Center
Two International Place
Boston, MA 02110
Scudder Kemper Investments, Inc.
Investment Manager
