N-Q 1 a15-21842_3nq.htm N-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

 

Investment Company Act file number:

811-05770

 

 

Exact name of registrant as specified in charter:

Aberdeen Israel Fund, Inc.

 

 

 

 

Address of principal executive offices:

1735 Market Street, 32nd Floor

Philadelphia, PA 19103

 

 

 

 

Name and address of agent for service:

Ms. Andrea Melia

Aberdeen Asset Management Inc.

1735 Market Street, 32nd Floor

Philadelphia, PA 19103

 

 

 

 

Registrant’s telephone number, including area code:

1-800-522-5465

 

 

Date of fiscal year end:

December 31

 

 

Date of reporting period:

September 30, 2015

 


 

Item 1. Schedule of Investments

 

The schedule of investments for the three-month period ended September 30, 2015 is filed herewith.

 


 

Portfolio of Investments (unaudited)

 

As of September 30, 2015

 

Shares

 

Description

 

Value
(US$)

 

LONG-TERM INVESTMENTS—98.7%

 

 

 

COMMON STOCKS—97.3%

 

 

 

ISRAEL—94.5%

 

 

 

AEROSPACE & DEFENSE—4.5%

 

 

 

49,735

 

Elbit Systems Ltd.(a)

 

$

3,676,568

 

 

 

 

 

 

 

BANKS—12.4%

 

 

 

447,000

 

Bank Hapoalim BM(a)

 

2,249,360

 

514,000

 

Bank Leumi Le-Israel BM(a)(b)

 

1,918,590

 

164,000

 

First International Bank of Israel Ltd.(a)

 

2,039,485

 

324,900

 

Mizrahi Tefahot Bank Ltd.(a)

 

3,841,812

 

 

 

 

 

10,049,247

 

 

 

 

 

 

 

CHEMICALS—10.1%

 

 

 

163,000

 

Frutarom Industries Ltd.(a)

 

6,167,964

 

389,500

 

Israel Chemicals Ltd.(a)

 

2,004,331

 

 

 

 

 

8,172,295

 

 

 

 

 

 

 

COMMUNICATIONS EQUIPMENT—4.3%

 

 

 

168,765

 

Ituran Location & Control Ltd.(a)

 

3,485,726

 

 

 

 

 

 

 

DIVERSIFIED TELECOMMUNICATION SERVICES—5.4%

 

 

 

2,277,000

 

Bezeq The Israeli Telecommunication Corp. Ltd.(a)

 

4,357,722

 

 

 

 

 

 

 

FOOD & STAPLES RETAILING—5.0%

 

 

 

94,316

 

Rami Levy Chain Stores Hashikma Marketing 2006 Ltd.(a)

 

4,029,284

 

 

 

 

 

 

 

FOOD PRODUCTS—5.8%

 

 

 

242,220

 

Osem Investments Ltd.(a)

 

4,679,154

 

 

 

 

 

 

 

INTERNET SOFTWARE & SERVICES—0.5%

 

 

 

233,000

 

Matomy Media Group Ltd.(b)

 

387,718

 

 

 

 

 

 

 

PHARMACEUTICALS—21.6%

 

 

 

53,000

 

Perrigo Co. PLC(a)

 

8,341,319

 

160,820

 

Teva Pharmaceutical Industries Ltd.(a)

 

9,088,600

 

 

 

 

 

17,429,919

 

 

 

 

 

 

 

REAL ESTATE MANAGEMENT & DEVELOPMENT—4.7%

 

 

 

96,000

 

Azrieli Group(a)

 

3,837,807

 

 

 

 

 

 

 

SOFTWARE—17.3%

 

 

 

131,353

 

Check Point Software Technologies Ltd.(b)

 

10,420,234

 

63,000

 

NICE Systems Ltd.(a)

 

3,528,557

 

 

 

 

 

13,948,791

 

 

 

 

 

 

 

SPECIALTY RETAIL—1.2%

 

 

 

471,494

 

Golf & Co. Ltd.(a)

 

999,775

 

 

 

 

 

 

 

TEXTILES, APPAREL & LUXURY GOODS—1.7%

 

 

 

76,000

 

Fox Wizel Ltd.

 

1,375,495

 

 

 

 

 

76,429,501

 

 

 

 

 

 

 

UNITED STATES—2.8%

 

 

 

INFORMATION TECHNOLOGY SERVICES—2.8%

 

 

 

40,000

 

Amdocs Ltd.

 

2,275,200

 

 

 

Total Common Stocks

 

78,704,701

 

 

See Notes to Portfolio of Investments.

 

Aberdeen Israel Fund, Inc.

 


 

PRIVATE EQUITY—1.4%

 

 

 

GLOBAL—0.1%

 

 

 

$

2,237,292

(c)

Emerging Markets Ventures I, L.P.(a)(b)(d)(e)(f)(g)

 

$

60,541

 

 

 

 

 

 

 

ISRAEL—1.3%

 

 

 

1,250,001

(c)

ABS GE Capital Giza Fund, L.P.(a)(b)(d)(f)(g)

 

49,650

 

1,674,588

(c)

BPA Israel Ventures, LLC(a)(b)(d)(e)(f)(g)

 

235,263

 

1,000,000

(c)

Concord Fund I Liquidating Main Trust(a)(b)(d)(f)(g)

 

39,010

 

250,440

(c)

Delta Fund I, L.P.(a)(b)(d)(g)(h)

 

53,619

 

1,250,000

(c)

Giza GE Venture Fund III, L.P.(a)(b)(d)(f)(g)

 

76,513

 

761,184

(c)

Neurone Ventures II, L.P.(a)(b)(d)(g)(h)

 

528,460

 

32,574

(c)

Vidyo, Inc. Trust A (Preferred)(a)(b)(d)(g)(h)(i)

 

25,779

 

15,531

(c)

Vidyo, Inc. Trust B (Preferred)(a)(b)(d)(g)(h)(i)

 

12,291

 

13,219

(c)

Vidyo, Inc. Trust B1 (Preferred)(a)(b)(d)(g)(h)(i)

 

10,461

 

6,864

(c)

Vidyo, Inc. Trust C (Preferred)(a)(b)(d)(g)(h)(i)

 

5,432

 

4,150

(c)

Vidyo, Inc. Trust C1 (Preferred)(a)(b)(d)(g)(h)(i)

 

3,284

 

1,802

(c)

Vidyo, Inc. Trust Common(a)(b)(d)(g)(h)(i)

 

1,426

 

2,713

(c)

Vidyo, Inc. Trust D (Preferred)(a)(b)(d)(g)(h)(i)

 

2,147

 

1,368

(c)

Vidyo, Inc. Trust Warrants(a)(b)(d)(g)(h)(i)

 

1,083

 

 

 

 

 

1,044,418

 

 

 

Total Private Equity—1.4% (cost $4,409,184)

 

1,104,959

 

 

 

Total Long-Term Investments—98.7% (cost $49,897,586)

 

79,809,660

 

 

 

 

 

 

 

SHORT-TERM INVESTMENT—1.2%

 

 

 

$

931,000

 

Repurchase Agreement, Fixed Income Clearing Corp., 0.00% dated 09/30/2015, due 10/01/2015 repurchase price $931,000, collateralized by U.S. Treasury Note, maturing 06/30/2022; total market value of $951,594

 

931,000

 

 

 

Total Short-Term Investment—1.2% (cost $931,000)

 

931,000

 

 

 

Total Investments—99.9% (cost $50,828,586) (j)

 

80,740,660

 

 

 

Other Assets in Excess of Liabilities—0.1%

 

104,857

 

 

 

Net Assets—100.0%

 

$

80,845,517

 

 

(a)

Fair Valued Security. Fair Values are determined pursuant to procedures approved by the Fund’s Board of Directors. See Note (a) of the accompanying Notes to Portfolio of Investments.

(b)

Non-income producing security.

(c)

Represents contributed capital.

(d)

Illiquid security.

(e)

As of September 30, 2015, the aggregate amount of open commitments for the Fund is $888,120.

(f)

In liquidation.

(g)

Restricted security, not readily marketable. See Note (a) of the accompanying Notes to Portfolio of Investments.

(h)

Active investments.

(i)

Vidyo, Inc. Trust was a spinoff from SVE Star Ventures IX. See Note (c) of the accompanying Notes to Portfolio of Investments.

(j)

See accompanying Notes to Portfolio of Investments for tax unrealized appreciation/depreciation of securities.

 

See Notes to Portfolio of Investments.

 


 

Notes to Portfolio of Investments (unaudited)

 

September 30, 2015

 

Summary of Significant Accounting Policies

 

a. Security Valuation:

 

The Fund values its securities at current market value or fair value, consistent with regulatory requirements. “Fair value” is defined in the Fund’s valuation and liquidity procedures as the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants without a compulsion to contract at the measurement date.

 

Equity securities that are traded on an exchange are valued at the last quoted sale price on the principal exchange on which the security is traded at the “Valuation Time” subject to application, when appropriate, of the valuation factors described in the paragraph below. The Valuation Time is as of the close of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time). In the absence of a sale price, the security is valued at the mean of the bid/ask price quoted at the close on the principal exchange on which the security is traded. Securities traded on NASDAQ are valued at the NASDAQ official closing price. Closed-end funds and exchange-traded funds (“ETFs”) are valued at the market price of the security at the Valuation Time. A security using any of these pricing methodologies is determined to be a Level 1 investment.

 

Foreign equity securities that are traded on foreign exchanges that close prior to the Valuation Time are valued by applying valuation factors to the last sale price or the mean price as noted above. Valuation factors are provided by an independent pricing service provider. These valuation factors are used when pricing the Fund’s portfolio holdings to estimate market movements between the time foreign markets close and the time the Fund values such foreign securities. These valuation factors are based on inputs such as depositary receipts, indices, futures, sector indices/ETFs, exchange rates, and local exchange opening and closing prices of each security. When prices with the application of valuation factors are utilized, the value assigned to the foreign securities may not be the same as quoted or published prices of the securities on their primary markets. A security that applies a valuation factor is determined to be a Level 2 investment because the exchange-traded price has been adjusted. Valuation factors are not utilized if the independent pricing service provider is unable to provide a valuation factor or if the valuation factor falls below a predetermined threshold; in such case, the security is determined to be a Level 1 investment.

 

In the event that a security’s market quotations are not readily available or are deemed unreliable (for reasons other than because the foreign exchange on which it trades closes before the Valuation Time), the security is valued at fair value as determined by the Fund’s Pricing Committee, taking into account the relevant factors and surrounding circumstances using valuation policies and procedures approved and established by the Board of Directors of the Fund (the “Board”). A security that has been fair valued by the Pricing Committee may be classified as Level 2 or 3 depending on the nature of the inputs.

 

The Fund also invests in private equity private placement securities, which represented 1.4% of the net assets of the Fund as of September 30, 2015. The private equity private placement securities are deemed to be restricted securities. In the absence of readily ascertainable market values, these securities are valued at fair value as determined in good faith by, or under the direction of the Board pursuant to valuation policies and procedures established by the Board. The Fund’s estimate of fair value assumes a willing buyer and a willing seller neither of whom are acting under the compulsion to buy or sell. Although these securities may be resold in privately negotiated transactions, the prices realized on such sales could differ from the prices originally paid by the Fund or the current carrying values, and the difference could be material. These securities are categorized as Level 3 investments. Level 3 investments have significant unobservable inputs, as they trade infrequently. In determining the fair value of these investments, management uses the market approach which includes as the primary input the capital balance reported; however, adjustments to the reported capital balance may be made based on various factors, including, but not limited to, the attributes of the interest held, including the rights and obligations, and any restrictions or illiquidity of such interests, and the fair value of these private equity investments.

 

In accordance with the authoritative guidance on fair value measurements and disclosures under accounting principles generally accepted in the United States of America (“GAAP”), the Fund discloses the fair value of its investments using a three-level hierarchy that classifies the inputs to valuation techniques used to measure the fair value. The hierarchy assigns Level 1 measurements to valuations based upon unadjusted quoted prices in active markets for identical assets,

 


 

Notes to Portfolio of Investments (unaudited) (continued)

 

September 30, 2015

 

Level 2 measurements to valuations based upon other significant observable inputs, including adjusted quoted prices in active markets for identical assets, and Level 3 measurements to valuations based upon unobservable inputs that are significant to the valuation. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement.

 

The three-level hierarchy of inputs is summarized below:

 

Level 1 — quoted prices in active markets for identical investments;

Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk); or

Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

 

The following is a summary of the inputs used as of September 30, 2015 in valuing the Fund’s investments and other financial instruments at fair value. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Please refer to the Portfolio of Investments for a detailed breakout of the security types:

 

Investments, at Value

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Long-Term Investments

 

 

 

 

 

 

 

 

 

Information Technology Services

 

$

2,275,200

 

$

—

 

$

—

 

$

2,275,200

 

Internet Software & Services

 

387,718

 

—

 

—

 

387,718

 

Software

 

10,420,234

 

3,528,557

 

—

 

13,948,791

 

Textiles, Apparel & Luxury Goods

 

1,375,495

 

—

 

—

 

1,375,495

 

Other

 

—

 

60,717,497

 

—

 

60,717,497

 

Private Equity

 

—

 

—

 

1,104,959

 

1,104,959

 

Short-Term Investment

 

—

 

931,000

 

—

 

931,000

 

Total

 

$

14,458,647

 

$

65,177,054

 

$

1,104,959

 

$

80,740,660

 

 

Amounts listed as “-” are $0 or round to $0.

 

For movements between the Levels within the fair value hierarchy, the Fund were adopted a policy of recognizing transfers at the end of each period. The utilization of valuation factors may result in transfers between Level 1 and Level 2. For the period ended September 30, 2015, securities issued by Azrieli Group and Golf & Co. Ltd. in the amounts of $3,837,807 and $999,775, respectively, transferred from Level 1 to Level 2 because there was a valuation factor applied at September 30, 2015. Also, a security issued by Fox Wizel Ltd., in the amount of $1,375,495 transferred from Level 2 to Level 1 because no valuation was applied at September 30, 2015. For the period ended September 30, 2015, there were no significant changes to the fair valuation methodologies.

 

The significant unobservable inputs used in the fair value measurement of the Fund’s private equity holdings are audited financial statements, interim financial statements, capital calls, distributions and discussions with investment companies. These unobservable inputs are used by taking the most recent quarterly valuation statements and adjusting the value using the unobservable inputs mentioned above. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement.

 

 

 

Fair Value
at 9/30/15

 

Valuation Technique

 

Unobservable
Inputs

 

Range

 

 

 

 

 

 

 

 

 

 

 

Private Equity

 

$

1,104,959

 

Partner Capital Value/Net Asset Value

 

Capital Calls & Distributions

 

($59,632) - $117,330

 

 


 

Notes to Portfolio of Investments (unaudited) (continued)

 

September 30, 2015

 

The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:

 

Investments, at value

 

Balance as of
12/31/2014

 

Accrued
Discounts
(Premiums)

 

Realized Gain
(Loss)

 

Change in Unrealized
Appreciation (Depreciation)

 

Capital
Contributed

 

Distributions /
Sales

 

Net Transfers in
to Level 3

 

Net Transfers out
of Level 3

 

Balance as of
9/30/2015

 

Private Equity

 

$

1,430,844

 

—

 

$

(339,757

)

$

140,090

 

—

 

$

(126,218

)

—

 

—

 

$

1,104,959

 

Total

 

$

1,430,844

 

$

—

 

$

(339,757

)

$

140,090

 

$

—

 

$

(126,218

)

$

—

 

$

—

 

$

1,104,959

 

 

Change in unrealized appreciation/(depreciation) relating to investments still held at September 30, 2015 is $(163,890).

 

b. Repurchase Agreements:

 

The Fund may enter into repurchase agreements under the terms of a Master Repurchase Agreement. It is the Fund’s policy that its custodian/counterparty segregate the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. The repurchase price generally equals the price paid by the Fund plus interest negotiated on the basis of current short-term rates. To the extent that any repurchase transaction exceeds one business day, the collateral is valued on a daily basis to determine its adequacy. Under the Master Repurchase Agreement, if the counterparty defaults and the value of the collateral declines, or if bankruptcy proceedings are commenced with respect to the counterparty of the repurchase agreement, realization of the collateral by the Fund may be delayed or limited. Repurchase agreements are subject to contractual netting arrangements with the counterparty, Fixed Income Clearing Corp. For additional information on the Fund’s repurchase agreement, see the Portfolio of Investments. The Fund held a repurchase agreement of $931,000 as of September 30, 2015. The value of the related collateral exceeded the value of the repurchase agreement at September 30, 2015.

 

c. Restricted Securities:

 

Certain of the Fund’s investments, listed in the chart below, are restricted as to resale and are valued at fair value as determined in good faith by, or under the direction of, the Board under procedures established by the Board in the absence of readily ascertainable market values.

 

Security (1)

 

Acquisition Date(s)

 

Cost

 

Fair Value
At 9/30/15

 

Percent
of
Net
Assets

 

Cumulative
Distributions
Received

 

Open
Commitments
(3)

 

ABS GE Capital Giza Fund, L.P.

 

02/03/98 – 02/13/02

 

$

985,303

 

$

49,650

 

0.06

 

$

1,660,765

 

$

—

 

BPA Israel Ventures, LLC

 

10/05/00 – 12/09/05

 

929,845

 

235,263

 

0.29

 

327,976

 

625,412

 

Concord Fund I Liquidating Main Trust

 

12/08/97 – 09/29/00

 

562,090

 

39,010

 

0.05

 

693,246

 

—

 

Delta Fund I, L.P.

 

11/15/00 – 03/28/07

 

89,240

 

53,619

 

0.07

 

339,118

 

—

 

Emerging Markets Ventures I, L.P.

 

01/22/98 – 01/10/06

 

762,340

 

60,541

 

0.08

 

2,573,955

 

262,708

 

Giza GE Venture Fund III, L.P.

 

01/31/00 – 11/23/06

 

790,786

 

76,513

 

0.10

 

372,474

 

—

 

Neurone Ventures II, L.P.

 

11/24/00 – 02/14/12

 

218,028

 

528,460

 

0.65

 

431,533

 

—

 

Vidyo, Inc. Trust A (Preferred) (2)

 

11/22/13

 

29,796

 

25,779

 

0.03

 

—

 

—

 

Vidyo, Inc. Trust B (Preferred) (2)

 

11/22/13

 

14,207

 

12,291

 

0.02

 

—

 

—

 

Vidyo, Inc. Trust B1 (Preferred) (2)

 

11/22/13

 

12,092

 

10,461

 

0.01

 

—

 

—

 

Vidyo, Inc. Trust C (Preferred) (2)

 

11/22/13

 

6,279

 

5,432

 

0.01

 

—

 

—

 

Vidyo, Inc. Trust C1 (Preferred) (2)

 

11/22/13

 

3,796

 

3,284

 

0.00

 

—

 

—

 

Vidyo, Inc. Trust Common (2)

 

11/22/13

 

1,648

 

1,426

 

0.00

 

—

 

—

 

Vidyo, Inc. Trust D (Preferred) (2)

 

11/22/13

 

2,482

 

2,147

 

0.00

 

—

 

—

 

Vidyo, Inc. Trust Warrants (2)

 

11/22/13

 

1,252

 

1,083

 

0.00

 

—

 

—

 

Total

 

 

 

$

4,409,184

 

$

1,104,959

 

1.37

 

$

6,399,067

 

$

888,120

 

 

(1) Neurone Ventures II, L.P., Delta Fund I, L.P., and Vidyo, Inc. Trust are still considered active investments by the Fund’s Adviser. ABS GE Capital Giza Fund, L.P., BPA Israel Ventures, LLC, Concord Fund I Liquidating Main Trust, Emerging Markets Ventures I, L.P. and Giza GE Venture Fund III, L.P. are in liquidation.

 


 

Notes to Portfolio of Investments (unaudited) (concluded)

 

September 30, 2015

 

(2) Vidyo, Inc. Trust was a spinoff from SVE Star Ventures IX. SVE Star Ventures IX reached the end of its term in 2012 and, accordingly, its entire portfolio was sold in a secondary transaction which closed on December 24, 2012. During the secondary transaction, the Fund’s pro rata holdings in Vidyo (and its affiliate Delta Vidyo) were excluded from the transaction, placed in trust and considered as a distribution-in-kind.

 

(3) The open commitments are unlikely to be called.

 

The Fund may incur certain costs in connection with the disposition of the above securities.

 

d. Federal Income Taxes:

 

The U.S. federal income tax basis of the Fund’s investments and the net unrealized appreciation as of September 30, 2015 were as follows:

 

Cost

 

Appreciation

 

Depreciation

 

Net
Unrealized
Appreciation

 

$

50,828,586

 

$

36,083,878

 

$

(6,171,804

)

$

29,912,074

 

 


 

Item 2. Controls and Procedures

 

(a)         The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Investment Company Act of 1940 (17 CFR 270.30a3(b)) and Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 (17 CFR 240.13a-15(b) or 240.15d-15(b)).

 

(b)         There was no change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 (17 CFR 270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 3. Exhibits

 

(a)         Certification of Principal Executive Officer and Principal Financial Officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is attached hereto as Exhibit 99.302CERT.

 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Aberdeen Israel Fund, Inc.

 

 

By:

/s/ Christian Pittard

 

 

Christian Pittard,

 

 

Principal Executive Officer of

 

 

Aberdeen Israel Fund, Inc.

 

 

 

 

 

Date: November 24, 2015

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

 

By:

/s/ Christian Pittard

 

 

Christian Pittard,

 

 

Principal Executive Officer of

 

 

Aberdeen Israel Fund, Inc.

 

 

 

 

 

Date: November 24, 2015

 

 

 

By:

/s/ Andrea Melia

 

 

Andrea Melia,

 

 

Principal Financial Officer of

 

 

Aberdeen Israel Fund, Inc.

 

 

 

 

 

Date: November 24, 2015