<PAGE>
FARRELL ALPHA STRATEGIES
780 Third Avenue
38th Floor
New York, New York 10017
THE JAPAN ALPHA FUND
SEMI-ANNUAL REPORT
September 30, 1996
INVESTMENT ADVISOR
Farrell-Wako Global Investment Management, Inc.
780 Third Avenue, 38th Floor
New York, New York 10017
(212) 319-3944
UNDERWRITER
FPS Broker Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, Pennsylvania 19406
(610) 239-4700
LEGAL COUNSEL
Whitman Breed Abbott & Morgan
200 Park Avenue
New York, New York 10166
CUSTODIAN
Sumitomo Bank of New York Trust Company
2 World Financial Center, Tower B
225 Liberty Street, 35th Floor
New York, New York 10281
SHAREHOLDER SERVICES
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, Pennsylvania 19406
(800) 262-7751
(610) 239-4600
AUDITORS
Coopers & Lybrand, L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103
For Additional Information about The Japan Alpha Fund call:
(800) 262-7751
(610) 239-4600
<PAGE>
To our shareholders:
We are pleased to report for the third quarter of 1996.
After rising strongly from July 1995, the market in Japan pulled back. Over the
quarter the Nikkei 225 lost 5.8%, while the MSCI was down 5.7%. Our Japan Alpha
Strategy showed a loss of 6.19% over the quarter that was slightly more than the
MSCI and Nikkei Indexes. The Nikkei 225 is a more volatile index than the MSCI,
and these two indexes tend to show similar returns. Since inception of the
Japan Alpha in September 1992, the Nikkei 225 is up 8.05% annualized, while the
MSCI is up 8.30% annualized. The Japan Alpha Strategy has provided a return on
11.6% over the period, outperforming the Nikkei 225 by 3.5% and the MSCI by
3.3%.
Japan's real GDP growth fell at a 2.9% annual rate during the second quarter,
retracing only part of the first quarter's 12.2% surge. First quarter growth
was boosted by special favors - leap year and the positive impact from the
economic stimulus package. On a year-over year basis, growth slowed to a 3.9%
rate during the second quarter from 5.4% during the first. While growth
moderated in the second quarter, we expect the recovery to be sustained in 1997.
At the same time, there is no sign of inflation in Japan. Inflation at both the
wholesale and retail level is hovering around zero. Japan's GDP price deflator
recorded its first year-on-year gain in two years, but at .3% remains very low.
The monetary environment continues to be favorable with the discount rate at .5%
and money supply growing to provide liquidity. We do not expect the BOJ to
engineer a rate increase and jeopardize the recovery. Furthermore, the yen is
no longer placing a deflationary depressant on economy as it has weakened
significantly since last summer. Finally, the banking situation is improving
naturally as the current positioning of the yield curve is providing profit
opportunities to rebuild capital position. Correspondingly, banks have become
more aggressive in writing down bad debt and legislation to use public funds to
fill the financial gap is forthcoming. We expect economic growth to steadily
increase to a 3% rate by 1997.
At the same time, Japan represents an attractive market in a world context. In
comparison to the U.S. where the economic cycle is at a mature state, Japan is
in the early stages of a recovery. Since 1990, the market in Japan has declined
by 25%, while the U.S. market has appreciated by more than 100% over the same
period. We think that this contrary price action between the two major world
markets has shifted the relative value attractiveness toward the market in
Japan. Correspondingly, the trends in corporate earnings for the two companies
is now favoring companies in Japan. For the first time in a decade, there
should be a predominance of upward revisions to earnings for companies in Japan.
It also seems that Japan could be the only major economy in the world to
experience upgrades in 1996.
Longer range, we continue to think that the restructuring of industry in Japan
will become a wide-spread phenomenon. As happened in the U.S. in the 1980's, it
should provide a firm underpinning to the market in Japan over the balance of
the 1990's and beyond. A second favorable long term factor is the emergence of
a trend toward share repurchase programs by Japanese industrial corporations.
This began with an announcement to repurchase shares by several notable
corporations in last years' fourth quarter. Over time buybacks by these
companies and others should represent an important and potentially positive
change in the market's supply and demand framework.
The portfolio consists of 60 select Japanese equities that meet the parameters
of the adviser's proprietary valuation methodology and strict diversification
guidelines. Industries that appear especially attractive within the portfolio
include: Construction, Automobiles, Electric Power, and Electrical Equipment and
Electronics.
We continue to look forward to participating in the recovery and long term
growth of the market in Japan.
Sincerely,
/s/ James L. Farrell, Jr.
James L. Farrell, Jr.
Chairman and Portfolio Manager
Farrell-Wako Global Investment Management, Inc.
<PAGE>
<TABLE>
<CAPTION>
THE JAPAN ALPHA FUND
SCHEDULE OF INVESTMENTS (unaudited) September 30, 1996
-----------------------------------------------------------------------------------
Market
Shares Value
-------- --------
<S> <C> <C>
Equities - Japan 96.02%
Asahi Breweries, Ltd. ................... 6,000 $63,569
Ashikaga Bank, Ltd./1/ .................. 5,000 29,585
Casio Computer Co., Ltd. ................ 10,000 85,926
Chubu Electric Power Co., Inc. .......... 3,434 72,765
Chugai Pharmaceutical Co., Ltd. ......... 10,000 96,072
Dainippon Ink & Chemicals, Inc. ......... 13,000 56,377
East Japan Railway Co. .................. 18 86,949
Fanuc ................................... 2,200 80,988
Fuji Fire & Marine Insurance ............ 17,000 91,125
Fuji Heavy Industry ..................... 16,000 76,139
Gunze, Ltd. ............................. 15,000 86,869
Hokkaido Bank/1/ ........................ 23,000 67,942
Hokkaido Electric Power ................. 3,570 75,647
Inax .................................... 5,000 47,587
Itoham Foods ............................ 9,000 64,242
Japan Tobacco, Inc. ..................... 8 59,044
Kitz Corp./1/ ........................... 12,000 56,242
Komatsu Forklift Co., Ltd. .............. 14,000 92,516
Kubota Corp. ............................ 7,000 41,356
Lion Corp. .............................. 12,000 65,401
Makita Corp. ............................ 5,000 73,176
Maruetsu ................................ 10,000 80,718
Matsushita Electric Works ............... 7,000 69,136
Matsushita Refrigeration ................ 11,000 79,012
Mitsubishi Electric Corp. ............... 11,000 75,062
Mitsubishi Gas Chemical Co. ............. 21,000 89,562
Mitsubishi Motors Corp. ................. 10,000 84,489
Mitsui Petrochemical Industries ......... 6,000 41,805
Nichimen Corp. .......................... 10,000 43,277
Nihon Unisys ............................ 6,000 62,492
Nippon Paper Industries Co. ............. 11,000 65,383
Nippon Road ............................. 8,000 63,138
Nippon Synthetic Chemical ............... 15,000 78,249
Nippon Telegraph & Telephone Corp. ...... 12 88,350
Nishi-Nippon Railroad ................... 10,000 40,045
NTN Corp. ............................... 12,000 81,778
Oji Paper Co., Ltd./1/ .................. 11,000 83,457
Rengo Co., Ltd. ......................... 6,000 40,242
Ryobi, Ltd. ............................. 13,000 61,396
Ryoden Trading Co. ...................... 8,000 61,055
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE JAPAN ALPHA FUND
SCHEDULE OF INVESTMENTS (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
---------- -----------
<S> <C> <C>
Equities (continued)
Sankyo Aluminum Industry Co. ................................ 13,000 $ 70,851
Sanyo Special Steel Co. ..................................... 20,000 78,474
Sapporo Breweries ........................................... 10,000 92,480
Seino Transportation ........................................ 3,000 42,828
Sekisui House, Ltd. ......................................... 8,000 87,632
Sumitomo Rubber Industries .................................. 11,000 80,593
Sun Wave Industrial ......................................... 6,000 73,266
Tadano ...................................................... 11,000 100,741
Taisei Rotec Corp. .......................................... 13,000 82,990
Takara Standard ............................................. 8,000 78,294
Toho Gas .................................................... 24,000 78,222
Tohoku Electric Power ....................................... 1,717 37,308
Tokyo Ohka Kogyo ............................................ 2,000 50,819
Tokyo Tomin Bank ............................................ 1,000 53,872
Tokyu Construction Co. ...................................... 13,000 53,226
Toshiba Corp. ............................................... 12,000 83,071
Toyota Motor Corp. .......................................... 2,000 51,178
Unisia Jecs Corp. ........................................... 14,000 82,209
Yakult Honsha ............................................... 5,000 67,340
Yamamura Glass Co. .......................................... 14,000 74,164
Yodogawa Steel Works ........................................ 9,000 64,646
Yokohama Rubber Co., Ltd. ................................... 11,000 62,222
Yoshitomi Pharmaceutical .................................... 11,000 92,839
-----------
Total Equities - Japan
(Cost $4,799,869) ....................................... 4,397,428
-----------
Total Investments - 96.02%
(Cost $4,799,869*) ...................................... 4,397,428
-----------
Cash and Other Assets,
Less Liabilities - 3.98% ................................ 182,415
-----------
Net Assets - 100% .......................................... $ 4,579,843
===========
</TABLE>
/1/ Non-income producing security
* Cost for Federal income tax purposes is $4,799,869 and net unrealized
depreciation consists of:
<TABLE>
<S> <C>
Gross unrealized appreciation......................... $ 39,945
Gross unrealized depreciation......................... (442,386)
-----------
Net unrealized depreciation........................... $ (402,441)
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE JAPAN ALPHA FUND
STATEMENT OF ASSETS AND LIABILITIES (unaudited) September 30, 1996
- -----------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at market value (Cost $4,799,869) (Note 1) ............ $4,397,428
Foreign currency at market value (Cost $35,322) ................... 35,015
Cash .............................................................. 25,493
Dividends receivable .............................................. 14,894
Deferred organization costs (Note 1) .............................. 84,940
Reimbursement due from Advisor .................................... 33,072
Other assets ...................................................... 744
----------
TOTAL ASSETS ............................................ 4,591,586
LIABILITIES:
Payable to Advisor ............................................. 11,743
---------
TOTAL LIABILITIES ....................................... 11,743
---------
NET ASSETS:
Applicable to 516,228 shares; unlimited number of shares
of beneficial interest authorized without par value) ........... $4,579,843
==========
Net asset value and redemption price ($4,579,843 / 516,228 shares). $ 8.87
==========
NET ASSETS CONSIST OF:
Paid-in capital ................................................... 4,990,302
Accumulated net investment loss ................................... (37,258)
Accumulated realized gain on investments and foreign currency
related transactions............................................... 29,657
Net unrealized depreciation on investments and foreign currency
related transactions............................................... (402,858)
==========
NET ASSETS .............................................. $4,579,843
==========
</TABLE>
<PAGE>
THE JAPAN ALPHA FUND
STATEMENT OF OPERATIONS (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Six Months
Ended
INVESTMENT INCOME September 30, 1996
-------------------
<S> <C>
Dividends .......................................................... $ 20,469
Interest ........................................................... 229
-------------------
TOTAL INCOME.............................................. 20,698
-------------------
EXPENSES:
Registration fees .................................................. 30,813
Administration fees ................................................ 26,974
Investment advisory fees (Note 2) .................................. 23,583
Accounting fees .................................................... 18,904
Transfer agent fees ................................................ 10,251
Amortization of organization costs (Note 1) ........................ 10,245
Custodian fees ..................................................... 5,000
Distribution expense Class A (Note 2) .............................. 3,813
Directors' fees .................................................... 2,000
Legal fees ......................................................... 939
Insurance expense .................................................. 462
Miscellaneous fees ................................................. 705
-------------------
TOTAL EXPENSES ........................................... 133,689
Expenses reimbursed and waived by Advisor (Note 2) ....... (75,733)
-------------------
NET EXPENSES ............................................. 57,956
-------------------
NET INVESTMENT LOSS ................................................... (37,258)
-------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized gain on investments ................................... 31,728
Net realized loss on foreign currency related transactions ......... (2,071)
Net change in unrealized depreciation on investments and
foreign currency related transactions ............................ (221,889)
-------------------
Net realized and unrealized loss on investments and foreign
currency related transactions .................................... (192,232)
-------------------
Net decrease in net assets resulting from operations .................. $ (229,490)
===================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE JAPAN ALPHA FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six
Months Ended For the Period
September 30, April 18, 1995*
1996 through
(unaudited) March 31, 1996
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment loss ............................................................ $ (37,258) $ (71,167)
Net realized gain on investments ............................................... 31,728 43,632
Net realized loss on foreign currency related transactions ..................... (2,071) (148,954)
Net change in unrealized depreciation on investments and foreign
currency related transactions .............................................. (221,889) (180,969)
-------------- ----------------
Net decrease in net assets resulting from operations ........................... (229,490) (357,458)
-------------- ----------------
CAPITAL SHARE TRANSACTIONS (NOTE H):
Proceeds from shares issued in reorganization .................................. 0 5,114,658
Proceeds from shares issued due to exchange of Class A shares .................. 4,577,248 0
Proceeds from sale of shares ................................................... 7,696 65,251
Cost of shares from redemption of Class A shares ............................... (4,577,248) 0
Cost of shares repurchased ..................................................... (17,871) (3,043)
-------------- ----------------
Increase (decrease) in net assets derived from capital share transactions ...... (10,175) 5,176,866
-------------- ----------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ................................ (239,665) 4,819,408
-------------- ----------------
NET ASSETS:
Beginning of period ............................................................ 4,819,508 100
-------------- ----------------
End of period .................................................................. $ 4,579,843 $ 4,819,508
============== ================
</TABLE>
* Commencement of operations
<PAGE>
THE JAPAN ALPHA FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Farrell Alpha Strategies (the "Trust") is organized as a Delaware business trust
pursuant to a Trust Agreement dated April 6, 1995. The Trust is registered
under the Investment Company Act of 1940 (the "Act") as an open-end management
investment company. The Trust consists of a separate investment series called
The Japan Alpha Fund (the "Fund"). The Fund does not impose sales charges or
distribution fees. On July 14, 1995, pursuant to an Agreement and Plan of
Reorganization and Liquidation, the Trust acquired all of the assets of the
Japan Alpha Fund (the "Acquired Fund") of the Advisors' Inner Circle Fund, a
Massachusetts business trust. The acquisition was accomplished by a tax-free
exchange of 502,529 of the Class A Shares and 9,605 of the Class D Shares of the
Acquired Fund for the same amount of shares of the Fund. Shares of the Fund
were reissued to shareholders at the time of the reorganization. The net assets
of the Fund prior to and directly after the reorganization was $4,649,123,
including $230,630 of unrealized depreciation. The Fund assumed the prior
operating history of the Acquired Fund.
From April 18, 1995 (commencement of operations) to July 29, 1996, the Fund
offered two classes of shares, the Class A Shares and Class D Shares, which
varied with respect to sales charges, distribution costs, voting rights and
dividends. Shares of Class A were offered at net asset value per share plus a
maximum sales charge at the time of purchase of 2.75%. Shares of Class D were
not subject to a sales load or distribution fees, and therefore had lower
expenses than the Class A Shares.
The Board of Trustees determined that it was no longer in the best interest of
shareholders to maintain two classes of shares of the Fund and decided to
eliminate the Class A Shares and reduce the initial investment minimum of the
Class D Shares from $5,000 to $1,000. Accordingly, the Class A shareholders
were offered the option of either converting their Class A Shares to Class D
Shares based upon the relative net asset values of the two classes as part of a
one-time tax-free exchange privilege or redeeming their Class A Shares and
receiving full redemption benefits. All the Class A Shares were converted to
Class D Shares as of July 26, 1996, and on July 29, 1996 the Trust eliminated
the Class A Shares.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statement and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
A. Security Valuation: Foreign securities are valued as of the close of
trading on the primary exchange on which they trade. The value is then
converted to U.S. dollars using current exchange rates. Securities listed on
any national securities exchange are valued at their last sale price on the
exchange where the securities are principally traded or, if there has been no
sale on that date, at the mean between the last reported bid and asked prices.
The Nikkei Stock Average and the Morgan Stanley Capital International Japan
Index have been selected as the standards or benchmarks against which the
Fund's performance will be compared. Securities traded over-the-counter are
priced at the mean of the last bid and asked prices. Listed securities which
are traded by foreign investors in Japan in over-the-counter transactions are
valued at prices at which it is expected that such securities may be sold, as
determined in good faith by, or under the direction of, the Board of Trustees.
Securities are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board of
Trustees. Short-term investments having a maturity of 60 days or less are
valued at amortized cost, which the Board of Trustees believes represents fair
value. All other securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Board of Trustees. As of September 30, 1996, there were no
securities valued by the Board of Trustees.
<PAGE>
THE JAPAN ALPHA FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
The books and records of the Fund are maintained in U.S. dollars. Transactions
denominated in foreign currencies are recorded at the current prevailing
exchange rates. All assets and liabilities denominated in foreign currencies
are translated into U.S. dollars at the current exchange rate. Translation
gains or losses resulting from changes in the exchange rate during the
reporting period and realized gains and losses on the settlement of foreign
currency transactions are reported in the results of operations for the
current period. The Fund does not isolate that portion of gains and losses on
investments in equity securities which is due to changes in the foreign
exchange rate from that which is due to changes in market prices of equity
securities.
B. Risks Associated with Foreign Securities: Investments by the Fund in
securities of foreign issuers may involve investment risks different from
those of U.S. issuers, including possible political or economic instability of
the country of the issuer, the difficulty of predicting international trade
patterns, the possibility of currency exchange controls, possible imposition
of foreign withholding tax on the interest income payable on such instruments,
possible establishment of foreign controls, the possible seizure or
nationalization of foreign deposits or assets, or the adoption of other
foreign government restrictions that might adversely affect the foreign
securities held by the Fund. Foreign securities may also be subject to greater
fluctuations in price than securities of domestic corporations or the U.S.
government.
C. Federal Income Taxes: It is the policy of the Fund to continue to comply
with all requirements of the Internal Revenue Code (the "Code") applicable to
regulated investment companies and to distribute substantially all of its
taxable income to its shareholders. The Fund has met the requirements of the
Code applicable to regulated investment companies for the six months ended
September 30, 1996. Therefore, no provision has been made for Federal income
taxes.
D. Determination of Gains or Losses on Sales of Securities: Gains or losses on
the sale of securities are determined on the identified cost basis.
E. Organization Costs: Organization costs are being amortized on a straight-
line basis over five years from the Fund's commencement of operations.
F. Distributions to Shareholders: The Fund will distribute substantially all
of its net investment income annually in December. Any net gains realized from
the sale of portfolio securities and net gains realized from foreign currency
transactions are distributed at least once each year unless they are used to
offset losses carried forward from prior years. Distributions to shareholders
will be recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles.
G. Other: Securities transactions are accounted for on the date the securities
are purchased or sold. Interest income is recorded on the accrual basis and
dividend income on the ex-dividend date.
<PAGE>
THE JAPAN ALPHA FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
H. Capital Share Transactions: The Fund is authorized to issue an unlimited
number of shares of beneficial interest without par value. Transactions in
shares of beneficial interest reflects the conversion of Class A Shares for
Class D Shares on July 29, 1996, and were as follows:
<TABLE>
<CAPTION>
For the Six Months Ended
September 30, 1996 (unaudited)
------------------------------
Shares Amount
------ ------
<S> <C> <C>
Shares issued due to
exchange of Class A Shares for
Class D Shares.......... 501,297 $4,577,248
Shares sold............... 793 7,696
Shares redeemed due to
exchange of Class A Shares for
Class D Shares.......... (503,370) (4,577,248)
Other shares redeemed..... (1,904) (17,871)
---------- -----------
Net Decrease.............. (3,184) ($ 10,175)
========== ===========
</TABLE>
<TABLE>
<CAPTION>
For the Period April 18, 1995
through March 31, 1996
----------------------
Class A Shares Class D Shares
-------------- --------------
Shares Amount Shares Amount
------- ---------- ------- --------
<S> <C> <C> <C> <C>
Shares issued in
reorganization............ 502,529 $5,023,058 9,605 $ 91,600
Shares sold............... 469 4,051 7,138 61,200
Shares redeemed........... (5) (45) (334) (2,998)
------- ---------- ------ --------
Net Increase.............. 502,993 $5,027,064 16,409 $149,802
======= ========== ====== ========
</TABLE>
2. Advisory, Administration and Distribution Agreements
Farrell-Wako Global Investment Management, Inc. (the "Advisor"), a registered
investment advisor, provides the Fund with investment management services. As
compensation for these services, the Fund pays the Advisor a monthly fee which
is calculated daily by applying an annual rate of 0.98% to the average daily
net assets of the Fund. The Advisor has voluntarily agreed to waive its fees
and reimburse the Fund to the extent total annualized expenses exceed 2.25% of
the Fund's average daily net assets. For the six months ended September 30,
1996, the Advisor agreed to waive fees of $23,583 and reimburse fees totaling
$52,150. Certain officers and trustees of the Fund are also officers and
directors of the Advisor. All officers serve without direct compensation from
the Fund.
Under its Administrative Services Agreement (the "Agreement") with the Fund,
FPS Services, Inc., formerly known as Fund/Plan Services, Inc., the Fund's
Administrator, provides certain administrative services for which the Fund
pays a fee computed at the annual rate of 0.15% of the first $75 million of
total average net assets, 0.10% of the next $75 million of total average net
assets and 0.05% of total net assets in excess of $150 million. As stated in
the Agreement, aggregate administration fees will not be less than $95,000.
Pursuant to Rule 12b-1 under the Act, the Fund adopted a Plan of Distribution
(the "Plan") for the Fund's Class A Shares. As provided in the Plan, the Class
A Shares paid an annual fee of 0.25% of the Fund's average daily net assets
attributable to Class A Shares to FPS Broker Services, Inc., formerly known as
Fund/Plan Broker Services, Inc., the Fund's distributor, as compensation for
its services. Payments made pursuant to the Plan ceased when the Class A
Shares were eliminated.
<PAGE>
THE JAPAN ALPHA FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
3. Investment Transactions
Investment transactions for the six months ended September 30, 1996, excluding
temporary short-term investments, aggregated $2,601,446 and $2,558,644 in
purchases and proceeds from sales, respectively. During the period the Fund
conducted all of its brokerage transactions through Wako Securities Co., Ltd.,
an affiliated broker of the Advisor. The commissions on these transactions are
deemed by the Fund to be fair and reasonable compared to the commissions, fees
or other renumerations received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period. For the six months ended
September 30, 1996, brokerage fees paid to Wako Securities Co., Ltd. were
$44,020.
Wako Securities Co., Ltd. holds 497,941 (96.5%) of the 516,228 shares of The
Japan Alpha Fund.
<PAGE>
THE JAPAN ALPHA FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
For the For the Period
Six Months April 18, 1995*
Ended through
September 30, 1996 March 31, 1996
------------------------------
(unaudited) Class A Shares Class D Shares
------------- -------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period ............................ $ 9.31 $ 10.00 $ 10.00
------------- ------------ --------------
Loss from investment operations:
Net investment loss ............................................ (0.07) (0.14)/1/ (0.12)/1/
Net realized and unrealized loss on investments and
foreign currency related transactions .................... (0.37) (0.58)/1/ (0.57)/1/
------------- ------------ --------------
Total loss from investment operations ..................... (0.44) (0.72) (0.69)
------------- ----------- --------------
Net asset value, end of period .................................. $ 8.87 $ 9.28 $ 9.31
============= =========== =============
Total return .................................................... (4.73%) (7.20%)/2/ (6.90%)
Ratios/Supplemental Data
Net assets, end of period (in 000s) ............................ $ 4,580 $ 4,667 $ 153
Ratio of expenses to average net assets:
Before expense reimbursement and waiver.................... 5.40% /3/ 8.79% /3/ 8.54% /3/
After expense reimbursement and waiver .................... 2.25% /3/ 2.50% /3/ 2.25% /3/
Ratio of net investment income to average net assets:
Before expense reimbursement and waiver.................... (4.54%)/3/ (7.92%)/3/ (7.67%)/3/
After expense reimbursement and waiver .................... (1.39%)/3/ (1.63%)/3/ (1.38%)/3/
Portfolio turnover rate ........................................ 55.56% 122.71% 122.71%
Average commission rate ........................................ $0.0667 $0.0700 $0.0700
</TABLE>
* Commencement of operations
/1/ Calculated using the average shares method
/2/ Total return calculation does not reflect sales load
/3/ Annualized
