N-Q 1 efc16-096_nq.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number:
811-05992
 
 

JAPAN SMALLER CAPITALIZATION FUND, INC.
 

(Exact name of registrant as specified in charter)

Worldwide Plaza
309 West 49th St
New York, New York 10019
 

(Address of principal executive offices)

Mr. Yutaka Itabashi
Japan Smaller Capitalization Fund, Inc.
Worldwide Plaza
309 West 49th St
New York, New York 10019
 

(Name and address of agent for service)

Registrant’s telephone number, including area code: (800) 833-0018
 
Date of fiscal year end:         February 29, 2016                                

Date of reporting period:     September 1, 2015 – November 30, 2015
 
 
 

Item 1. Schedule of Investments
Japan Smaller Capitalization Fund, Inc.
November 30, 2015 (Unaudited)
 
 
       
Fair
 
   
Shares
   
Value
 
         
JAPANESE EQUITY SECURITIES (97.6%)
       
Banks
       
The Akita Bank, Ltd.
   
1,378,000
   
$
4,886,683
 
General banking services
               
The Daishi Bank, Ltd.
   
358,000
     
1,589,110
 
General banking services
               
Kyushu Financial Group,Inc.†
   
60
     
456
 
General banking services
               
The Taiko Bank, Ltd.
   
1,353,000
     
2,678,991
 
General banking services
               
The Yamanashi Chuo Bank, Ltd.
   
1,471,000
     
7,651,635
 
General banking services
               
Total Banks (4.9%)
           
16,806,875
 
                 
Chemicals
               
C. Uyemura &  Co., Ltd.
   
100,700
     
4,331,007
 
Plating chemicals
               
Fujikura Kasei Co., Ltd.
   
892,200
     
4,076,188
 
Specialty coating materials and fine chemicals
               
Fuso Chemical Co.,Ltd.
   
9,500
     
128,203
 
Manufactures fruit acids, electronic and functional chemical products
               
JSR Corporation
   
161,300
     
2,536,715
 
Manufactures synthetic resin products
               
Koatsu Gas Kogyo Co., Ltd.
   
398,000
     
2,170,381
 
High-pressured gases and chemicals
               
Sakai Chemical Industry Co., Ltd.
   
2,392,000
     
8,191,382
 
Manufactures components for cosmetics and pharmaceuticals
               
Sekisui Jushi Corporation
   
211,800
     
2,846,229
 
Manufactures plastics and other resin materials
               
Soken Chemical & Engineering Co., Ltd.
   
269,900
     
2,295,344
 
Manufactures chemical products
               
Shikoku Chemicals Corporation
   
34,000
     
309,843
 
Manufactures chemical products
               
Takiron Co., Ltd.
   
425,000
     
1,993,427
 
Manufactures resin and composite products
               
Tenma Corporation
   
225,200
     
4,256,194
 
Manufactures synthetic resin products
               
Teraoka Seisakusho Co., Ltd.
   
343,000
     
1,274,803
 
Manufactures various adhesive tapes
               
T&K Toka Co., Ltd.
   
41,500
     
790,396
 
Manufactures specialized inks for printing applications
               
Yushiro Chemical Industry Co., Ltd.
   
50,500
     
603,230
 
Manufactures metalworking fluids
               
Zeon Corporation
   
201,000
     
1,609,892
 
Manufactures synthetic resin products
               
Total Chemicals (10.7%)
           
37,413,234
 
                 
Construction
               
Daiichi Kensetsu Corporation
   
18,700
     
182,402
 
Construction and real estate businesses
               
Kandenko Co., Ltd.
   
90,000
     
616,408
 
Construction of electrical and power facilities
               
Mirai Industry Co., Ltd.
   
35,700
     
493,073
 
Manufactures electrical installation materials
               
MIRAIT Holdings Corporation
   
622,700
     
5,048,099
 
Construction of electrical and telecommunication facilities
               
NDS Co., Ltd.
   
171,000
     
485,677
 
Construction of communication infrastructure
               
Taihei Dengyo Kaisha, Ltd.
   
205,000
     
1,924,734
 
Construction of thermal and nuclear plant facilities
               
Toenec Corporation
   
1,565,000
     
11,226,649
 
Construction of comprehensive building facilities
               
Yondenko Corporation
   
225,000
     
838,067
 
Construction of electrical distribution systems
               
Total Construction (5.8%)
           
20,815,109
 
                 

 
 
Electric Appliances
               
Espec Corp
   
370,200
     
4,322,955
 
Manufactures environmental testing products
               
Hitachi Maxell, Ltd.
   
170,700
     
2,813,371
 
Manufactures media devices, batteries and electrical appliances
               
Hosiden Corporation
   
161,700
     
913,278
 
Manufactures electronic components
               
Kitagawa Industries Co., Ltd.
   
336,800
     
3,432,774
 
Manufactures various industrial and consumer products
               
Koito Manufacturing Co., Ltd.
   
75,100
     
3,047,148
 
Manufactures lighting equipment
               
Nichicon Corporation
   
545,200
     
4,530,429
 
Manufactures capacitors and transformers
               
Nihon Kohden Corporation
   
71,500
     
1,487,093
 
Manufactures medical electronic equipment
               
Total Electric Appliances (5.9%)
           
20,547,048
 
                 
Financing Business
               
Hitachi Capital Corporation
   
135,700
     
3,793,610
 
General financial services
               
Ricoh Leasing Company, Ltd.
   
154,000
     
4,655,116
 
Leasing and financial services
               
Total Financing Business (2.4%)
           
8,448,726
 
                 
Food
               
Fuji Oil Co., Ltd.
   
117,200
     
1,751,866
 
Manufactures oil-related products for cooking
               
Taiyo Kagaku Co., Ltd.
   
49,200
     
370,906
 
General food manufacturer
               
Total Food (0.6%)
           
2,122,772
 
                 
Glass and Ceramics Products
               
Nichiha Corporation
   
249,300
     
3,526,170
 
Manufactures exterior building materials
               
Total Glass and Ceramics Products (1.0%)
           
3,526,170
 
                 
Information and Communication
               
Broadleaf Co., Ltd.
   
167,900
     
1,551,879
 
Business software development, sales, and technical support
               
NS Solutions Corporation
   
39,300
     
1,817,820
 
System consulting services and software development
               
OBIC Co., Ltd.
   
45,500
     
2,418,445
 
Computer system integration
               
Okinawa Cellular Telephone Company
   
155,000
     
3,949,525
 
Telecommunications
               
Otsuka Corporation
   
60,600
     
3,034,180
 
Computer information system developer
               
Software Service Inc.
   
3,900
     
167,419
 
Provides medical information systems
               
Total Information and Communication (3.6%)
           
12,939,268
 
                 
Iron and Steel
               
Chubu Steel Plate Co., Ltd.
   
834,300
     
3,581,471
 
Manufactures steel-related products
               
Mory Industries Inc.
   
1,774,000
     
5,456,025
 
Manufactures steel tubing products
               
Nichia Steel Works, Ltd.
   
1,914,200
     
4,380,463
 
Manufactures steel-related products
               
Nippon Seisen Co., Ltd.
   
380,000
     
1,776,191
 
Manufactures stainless steel wires and metal fibers
               
Osaka Steel Co., Ltd.
   
328,400
     
5,956,131
 
Manufactures steel-related products
               
Tohoku Steel Co., Ltd.
   
400
     
3,863
 
Manufactures specialty steel
               
Total Iron and Steel (6.0%)
           
21,154,144
 
                 

 
 
Machinery
               
Hisaka Works, Ltd.
   
731,700
     
5,967,366
 
Manufactures heat exchangers and other machinery
               
Miura Co. Ltd.
   
77,800
     
1,044,867
 
Manufactures boilers and related products
               
Nippon Pillar Packing Co., Ltd.
   
277,000
     
2,292,786
 
Manufactures mechanical seals
               
Nissei Corporation
   
24,300
     
193,051
 
Manufactures reducers and gears
               
Nitto Kohki Co. Ltd.
   
96,400
     
2,121,535
 
Manufactures machine tools and motor pumps
               
Oiles Corporation
   
337,280
     
5,690,214
 
Manufactures bearing equipment
               
Sato Holdings Corporation
   
134,500
     
3,001,501
 
Manufactures electronic printers and other products
               
Sintokogio, Ltd.
   
151,100
     
1,311,994
 
Manufactures industrial machines
               
Yamashin-Filter Corporation
   
46,200
     
186,705
 
Manufactures filters
               
Total Machinery (6.4%)
           
21,810,019
 
                 
Metal Products
               
Dainichi Co., Ltd.
   
258,000
     
1,566,047
 
Manufactures oil heating equipment
               
Neturen Co., Ltd.
   
562,200
     
4,347,777
 
Manufactures steel bars and induction heating equipment
               
NHK Spring Co., Ltd.
   
369,700
     
3,795,103
 
Manufactures automobile-related products
               
Piolax, Inc.
   
95,500
     
5,238,822
 
Manufactures automobile-related products
               
Rinnai Corporation
   
58,500
     
5,231,437
 
Manufactures heating appliances and components
               
Total Metal Products (5.7%)
           
20,179,186
 
                 
Other Products
               
Fuji Seal International, Inc.
   
125,000
     
3,920,514
 
Packaging-related materials and machinery
               
Nishikawa Rubber Co., Ltd.
   
288,100
     
4,498,129
 
Manufactures rubber automobile parts
               
The Pack Corporation
   
80,100
     
1,976,012
 
Manufactures paper and chemical products
               
Pigeon Corporation
   
64,100
     
1,836,184
 
Manufactures baby care products
               
Total Other Products (3.5%)
           
12,230,839
 
                 
Pharmaceutical
               
KYORIN Holdings, Inc.
   
116,100
     
2,189,535
 
Manufactures pharmaceuticals
               
Total Pharmaceutical (0.6%)
           
2,189,535
 
                 
Precision Instrument
               
Nakanishi Inc.
   
42,100
     
1,501,497
 
Manufactures dental instruments
               
Total Precision Instruments (0.4%)
           
1,501,497
 
                 
Real Estate
               
Keihanshin Building Co., Ltd.
   
916,900
     
5,260,475
 
Real estate leasing and building management
               
Sanyo Housing Nagoya Co., Ltd.
   
133,100
     
1,244,268
 
Designs and constructs housing
               
Total Real Estate (1.9%)
           
6,504,743
 

 
 
                 
Retail Trade
               
ABC-Mart, Inc.
   
31,700
     
1,723,525
 
Retail sales of shoes
               
AIN Pharmaciez Inc.
   
2,300
     
108,066
 
Operates pharmacies and drug store chains
               
Amiyaki Tei Co., Ltd.
   
84,500
     
3,082,265
 
Operates barbecue restaurant chains
               
Arc Land Sakamoto Co., Ltd.
   
191,900
     
4,371,203
 
Retail sales, wholesale, food and real estate
               
Create SD Holdings Co., Ltd.
   
121,800
     
7,926,933
 
Operates pharmacies and drug store chains
               
Daikokutenbussan Co., Ltd.
   
74,400
     
2,967,427
 
Operates supermarkets
               
Heiwado Co., Ltd.
   
37,100
     
894,458
 
Operates supermarkets
               
Hiday Hidaka Corp
   
59,536
     
1,577,417
 
Operates ramen and Chinese restaurant chains
               
Jin Co., Ltd.
   
65,600
     
2,853,331
 
Retail sales of eyewear and fashion accessories
               
Saint Marc Holdings Co., Ltd.
   
77,400
     
2,214,031
 
Operates restaurant chains
               
San-A Co., Ltd.
   
44,600
     
1,947,156
 
Retail sales of home goods
               
Seria Co. Ltd.
   
77,600
     
3,230,447
 
Discount retail sales
               
Shimamura Co., Ltd.
   
21,900
     
2,667,524
 
Retail sales of apparel
               
Start Today Co Ltd
   
89,300
     
3,097,927
 
Operates retail E-commerce websites
               
Studious Co., Ltd.†
   
1,800
     
43,558
 
Retail sales of apparel
               
Sundrug Co., Ltd.
   
15,200
     
978,138
 
Operates pharmacies and drug store chains
               
United Arrows Ltd.
   
67,400
     
2,969,910
 
Retail sales of apparel
               
Yamazawa Co., Ltd.
   
11,700
     
163,399
 
Operates supermarkets
               
Total Retail Trade (12.1%)
           
42,816,715
 
                 
Services
               
EPS Holdings, Inc.
   
101,800
     
1,186,276
 
Performs contract medical research services
               
JP-Holdings, Inc.
   
164,600
     
459,486
 
Operates child-care centers
               
Nihon M&A Center Inc.
   
40,500
     
1,807,596
 
Provides merger and acquisition brokerage services
               
Nomura Co., Ltd.
   
5,600
     
84,661
 
Commercial display business and services
               
Septeni Holdings Co., Ltd.
   
92,300
     
1,754,172
 
Internet advertising and media content business
               
Step Co., Ltd.
   
213,400
     
2,069,407
 
Operates preparatory schools
               
Total Services (2.0%)
           
7,361,598
 

 
 
                 
Textiles and Apparel
               
Hogy Medical Co., Ltd.
   
84,100
     
4,326,820
 
Manufactures medical products
               
Komatsu Seiren Co., Ltd.
   
526,800
     
3,266,049
 
Manufactures synthetic fibers and textile products
               
Seiren Co., Ltd.
   
199,500
     
2,379,818
 
Manufactures synthetic fibers and textile products
               
Total Textiles and Apparel (2.8%)
           
9,972,687
 
                 
Transportation and Warehousing
               
Alps Logistics Co., Ltd.
   
248,300
     
3,094,935
 
General logistics services
               
Japan Transcity Corporation
   
1,666,000
     
6,475,809
 
General logistics services
               
Meiko Trans Co., Ltd.
   
434,000
     
3,578,220
 
Marine logistics services
               
Nissin Corporation
   
512,000
     
1,637,004
 
General logistics services
               
Trancom Co., Ltd.
   
86,800
     
4,627,737
 
General logistics services
               
Total Transportation and Warehousing (5.5%)
           
19,413,705
 
                 
Transportation Equipment
               
Hi-Lex Corporation
   
43,500
     
1,293,739
 
Manufactures control cables
               
Nissin Kogyo Co., Ltd.
   
240,300
     
3,734,273
 
Manufactures automobile brake systems
               
Sanoh Industrial Co., Ltd.
   
372,600
     
2,291,900
 
Manufactures automobile components
               
Tachi-S Co., Ltd.
   
161,000
     
2,717,520
 
Manufactures automobile seats
               
Total Transportation Equipment (3.0%)
           
10,037,432
 
                 
Utilities
               
Keiyo Gas Co., Ltd.
   
388,000
     
1,819,882
 
Produces gas and energy products
               
The Okinawa Electric Power Company, Incorporated
   
274,950
     
6,367,827
 
Produces thermal energy products
               
Total Utilities (2.3%)
           
8,187,709
 

 
 
                 
Wholesale Trade
               
Kanaden Corporation
   
211,600
     
1,698,226
 
Factory automation business
               
Kohsoku Corporation
   
139,100
     
1,145,715
 
Food and industrial packaging materials
               
Matsuda Sangyo Co., Ltd.
   
424,900
     
5,106,524
 
Precious metals, electronic materials, and food
               
Paltac Corporation
   
99,400
     
1,966,544
 
Cosmetics and daily necessities
               
Senshu Electric Co., Ltd.
   
222,800
     
3,162,194
 
Electrical wires and cables
               
Shinko Shoji Co., Ltd.
   
327,700
     
3,379,913
 
Electronic components and devices
               
SIIX Corporation
   
208,500
     
6,598,637
 
Parts procurement, logistics, and manufacturing of electronics
               
SPK Corporation
   
21,700
     
407,304
 
Automobile components for assembly
               
Ryoden Trading Company, Ltd.
   
1,042,000
     
7,111,272
 
Purchases electronic and electrical devices
               
Sugimoto & Co., Ltd.
   
299,500
     
3,626,179
 
Machine tools and measuring instruments
               
Techno Associe Co., Ltd.
   
337,000
     
2,898,808
 
Screws and nonferrous metal products
               
Total Wholesale Trade (10.5%)
           
37,101,316
 
                 
TOTAL JAPANESE EQUITY SECURITIES (97.6%)
         
$
343,080,327
 
                 
INVESTMENT IN FOREIGN CURRENCY
               
Japanese Yen
               
Non- interest bearing account
           
6,540,427
 
                 
TOTAL INVESTMENT IN FOREIGN CURRENCY (1.9%)
         
$
6,540,427
 
                 
TOTAL INVESTMENTS (99.5%)
         
$
349,620,754
 
                 
OTHER ASSETS LESS LIABILITIES, NET (0.5%)
           
1,914,350
 
                 
NET ASSETS (100.0%)
         
$
351,535,104
 
 
Non-income producing security
 
Portfolio Securities and foreign currency holdings were translated at the following exchange rate as of November 30, 2015
 
 
Japanese Yen  ¥
123.23= $1.00  
 
Notes to Schedule of Investments (Unaudited)

Cost for Federal Income Tax Purposes
As of November 30, 2015, for federal income tax purposes, subject to change, the aggregate cost of securities was $305,995,410 and net unrealized appreciation was $37,084,917, comprised of gross unrealized appreciation of $48,395,756 and gross unrealized depreciation of $11,310,839. The aggregate cost of investments for tax purposes will depend upon  Japan Smaller Capitalization Fund, Inc.'s (the "Fund") investment experience during the entirety of its fiscal year and may be subject to changes based on tax regulations. Certain tax related calculations are completed and reviewed annually by the Fund.

Fair Value Measurements
In accordance with generally accepted accounting principles ("GAAP"), fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP also establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund's own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation.

The three-tier 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 investments, interest rates, prepayment speeds, credit risk, etc.)
Level 3 - significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)

The following table summarizes the valuation of the Fund's investments by the above fair value hierarchy levels as of November 30, 2015.

 
 
Investments in
 
Level  
Securities
 
Level 1
   
      Equity Securities
 
$
343,080,327
 
      Foreign Currency
   
6,540,427
 
Level 2
   
-
 
Level 3
   
-
 
Total
 
$
349,620,754
 
         
 
During the quarter ended November 30, 2015, there was a transfer of a security from Level 2 to Level 1.  There were no other transfers between Level 1, Level 2, or Level 3 securities during the quarter ended November 30, 2015.
During the quarter ended November 30, 2015, the Fund did not hold any instruments which used significant unobservable inputs (Level 3) in determining fair value.


 
Item 2.  Controls and Procedures.
 
(a)  The registrant’s Principal Executive Officer and Principal Financial Officer have evaluated the registrant’s disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
 
(b)  There were no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s last fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
 
 
Item 3.  Exhibits.
 
(a)  Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 are attached hereto as an exhibit.
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
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.
 
 
 
Japan Smaller Capitalization Fund, Inc.
 

 
 
By:  /s/ Yutaka Itabashi                                                
        Yutaka Itabashi,
        (President, Principal Executive Officer)
 

 
 
Date:  January 29, 2016
 

 
 
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/ Yutaka Itabashi                                                
        Yutaka Itabashi
        (President, Principal Executive Officer)
 
 
Date:  January 29, 2016
 
By:   /s/ Amy J. Marose                                                  
        Amy J. Marose,
        (Treasurer, Principal Financial Officer)
 
Date:  January 29, 2016