N-Q 1 a16-5673_1nq.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 COMPANY

 

Investment Company Act file number

811-06142

 

Aberdeen Japan Equity Fund, Inc.

(Exact name of registrant as specified in charter)

 

1735 Market Street, 32nd Floor

Philadelphia, PA

 

19103

(Address of principal executive offices)

 

(Zip code)

 

Ms. Andrea Melia

Aberdeen Asset Management Inc.

1735 Market Street, 32nd Floor

Philadelphia, PA 19103

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

866-839-5205

 

 

Date of fiscal year end:

October 31

 

 

Date of reporting period:

January 31, 2016

 

 



 

Item 1. Schedule of Investments - The schedule of investments for the three-month period ended January 31, 2016 is filed herewith.

 



 

Portfolio of Investments (unaudited)

 

As of January 31, 2016

 

Shares

 

Description

 

Value 
(US$)

 

LONG-TERM INVESTMENTS—99.1%(a)

 

 

 

COMMON STOCKS—99.1%

 

 

 

JAPAN—99.1%

 

 

 

AUTO COMPONENTS—1.9%

 

 

 

13,500

 

Aisin Seiki Co. Ltd.

 

$

573,246

 

35,200

 

Denso Corp.

 

1,518,105

 

 

 

 

 

2,091,351

 

AUTOMOBILES—6.3%

 

 

 

92,200

 

Honda Motor Co. Ltd.

 

2,499,264

 

72,700

 

Toyota Motor Corp.

 

4,378,689

 

 

 

 

 

6,877,953

 

BANKS—4.4%

 

 

 

481,000

 

Bank of Yokohama Ltd. (The)

 

2,565,518

 

122,100

 

Suruga Bank Ltd.

 

2,216,792

 

 

 

 

 

4,782,310

 

BUILDING PRODUCTS—2.5%

 

 

 

39,900

 

Daikin Industries Ltd.

 

2,695,899

 

 

 

 

 

CHEMICALS—8.9%

 

 

 

193,000

 

Kansai Paint Co. Ltd.

 

2,696,488

 

83,000

 

Nippon Paint Holdings Co. Ltd.

 

1,586,484

 

108,400

 

Shin-Etsu Chemical Co. Ltd.

 

5,536,669

 

 

 

 

 

9,819,641

 

CONSUMER FINANCE—2.2%

 

 

 

103,200

 

AEON Financial Service Co. Ltd.

 

2,374,118

 

 

 

 

 

DIVERSIFIED FINANCIAL SERVICES—1.1%

 

 

 

87,000

 

Japan Exchange Group, Inc.

 

1,236,875

 

 

 

 

 

ELECTRONIC EQUIPMENT INSTRUMENTS & COMPONENTS—4.1%

 

 

 

9,500

 

Keyence Corp.

 

4,482,913

 

 

 

 

 

FOOD & STAPLES RETAILING—6.3%

 

 

 

51,000

 

San-A Co. Ltd.

 

2,353,739

 

101,800

 

Seven & i Holdings Co. Ltd.

 

4,540,530

 

 

 

 

 

6,894,269

 

FOOD PRODUCTS—1.6%

 

 

 

41,800

 

Calbee, Inc.

 

1,737,072

 

 

 

 

 

HEALTH CARE EQUIPMENT AND SUPPLIES—3.7%

 

 

 

37,300

 

Asahi Intecc Co. Ltd.

 

1,719,009

 

35,600

 

Sysmex Corp.

 

2,292,376

 

 

 

 

 

4,011,385

 

HOTELS, RESTAURANTS & LEISURE—1.6%

 

 

 

69,700

 

Resorttrust, Inc.

 

1,756,066

 

 

 

 

 

HOUSEHOLD PRODUCTS—4.2%

 

 

 

98,000

 

Pigeon Corp.

 

2,104,332

 

126,300

 

Unicharm Corp.

 

2,465,362

 

 

 

 

 

4,569,694

 

INTERNET SOFTWARE & SERVICES—1.9%

 

 

 

560,000

 

Yahoo Japan Corp.

 

2,136,353

 

 

See Notes to Portfolio of Investments.

 

Aberdeen Japan Equity Fund, Inc.

 



 

LEISURE PRODUCTS—1.9%

 

 

 

13,000

 

Shimano, Inc.

 

$

2,073,823

 

 

 

 

 

MACHINERY—12.8%

 

 

 

507,300

 

Amada Holdings Co. Ltd.

 

4,791,295

 

24,600

 

FANUC Corp.

 

3,293,684

 

42,500

 

Makita Corp.

 

2,392,184

 

207,000

 

Nabtesco Corp.

 

3,581,533

 

 

 

 

 

14,058,696

 

PERSONAL PRODUCTS—2.1%

 

 

 

56,900

 

Mandom Corp.

 

2,338,155

 

 

 

 

 

PHARMACEUTICALS—6.2%

 

 

 

243,800

 

Astellas Pharma, Inc.

 

3,375,792

 

113,400

 

Chugai Pharmaceutical Co. Ltd.

 

3,473,989

 

 

 

 

 

6,849,781

 

REAL ESTATE MANAGEMENT & DEVELOPMENT—6.8%

 

 

 

241,000

 

Daibiru Corp.

 

1,937,606

 

29,700

 

Daito Trust Construction Co. Ltd.

 

3,775,937

 

90,000

 

Mitsubishi Estate Co. Ltd.

 

1,781,701

 

 

 

 

 

7,495,244

 

ROAD & RAIL—3.8%

 

 

 

45,500

 

East Japan Railway Co.

 

4,182,262

 

 

 

 

 

SPECIALTY RETAIL—1.6%

 

 

 

111,500

 

USS Co. Ltd.

 

1,712,822

 

 

 

 

 

TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—2.1%

 

 

 

84,100

 

Canon, Inc.

 

2,349,958

 

 

 

 

 

TEXTILES, APPAREL & LUXURY GOODS—1.2%

 

 

 

71,200

 

Asics Corp.

 

1,321,846

 

 

 

 

 

TOBACCO—5.7%

 

 

 

158,600

 

Japan Tobacco, Inc.

 

6,211,366

 

 

 

 

 

WIRELESS TELECOMMUNICATION SERVICES—4.2%

 

 

 

181,200

 

KDDI Corp.

 

4,588,456

 

 

 

 

 

108,648,308

 

 

 

Total Common Stocks

 

108,648,308

 

 

 

Total Long-Term Investments—99.1% (cost $102,425,582)

 

108,648,308

 

 

 

 

 

SHORT-TERM INVESTMENT—0.2%

 

 

 

$

229,000

 

Repurchase Agreement, Fixed Income Clearing Corp., 0.03% dated 01/29/2016, due 02/01/2016 repurchase price $229,001, collateralized by U.S. Treasury Bond, maturing 02/15/2043; total market value of $238,823

 

229,000

 

 

 

Total Short-Term Investment—0.2% (cost $229,000)

 

229,000

 

 

 

Total Investments—99.3% (cost $102,654,582) (b)

 

108,877,308

 

 

 

Other Assets in Excess of Liabilities—0.7%

 

740,361

 

 

 

Net Assets—100.0%

 

$

109,617,669

 

 


(a)

 

All securities are fair valued. 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)

 

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)

 

January 31, 2016

 

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 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 by the Fund’s Board of Directors. A security that has been fair valued by the Pricing Committee may be classified as Level 2 or Level 3 depending on the nature of the inputs.

 

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, 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

 



 

Notes to Portfolio of Investments (unaudited) (continued)

 

January 31, 2016

 

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 January 31, 2016 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

 

$

 

$

108,648,308

 

$

 

$

108,648,308

 

Short-Term Investment

 

 

229,000

 

 

229,000

 

Total

 

$

 

$

108,877,308

 

$

 

$

108,877,308

 

 

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

 

The Fund held no Level 3 securities at January 31, 2016.

 

For movements between the Levels within the fair value hierarchy, the Fund has 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. During the period ended January 31, 2016, there were no transfers between Level 1 and Level 2.

 

For the period ended January 31, 2016, there were no significant changes to the fair valuation methodologies.

 

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 $229,000 as of January 31, 2016. The value of the related collateral exceeded the value of the repurchase agreement at January 31, 2016.

 

c. Rights Issues and Warrants:

 

Rights issues give the right, normally to existing shareholders, to buy a proportional number of additional securities at a given price (generally at a discount) within a fixed period (generally a short term period) and are offered at the company’s discretion. Warrants are securities that give the holder the right to buy common stock at a specified price for a specified period of time. Rights issues and warrants are speculative and have no value if they are not exercised before the expiration date. Rights issues and warrants are valued at the last sale price on the exchange on which they are traded.

 

d. Federal Income Taxes:

 

The U.S. federal income tax basis of the Fund’s investments and the net unrealized appreciation as of January 31, 2016 were as follows:

 

Cost

 

Appreciation

 

Depreciation

 

Net
Unrealized
Appreciation

 

$

 102,654,582

 

$

13,869,271

 

$

(7,646,545

)

$

6,222,726

 

 


 


 

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 Japan Equity Fund, Inc.

 

By:

/s/ Alan Goodson

 

Alan Goodson,

 

Principal Executive Officer of

 

Aberdeen Japan Equity Fund, Inc.

 

 

 

Date: March 30, 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/ Alan Goodson

 

Alan Goodson,

 

Principal Executive Officer of

 

Aberdeen Japan Equity Fund, Inc.

 

 

 

Date: March 30, 2016

 

 

By:

/s/ Andrea Melia

 

Andrea Melia,

 

Principal Financial Officer of

 

Aberdeen Japan Equity Fund, Inc.

 

 

 

Date: March 30, 2016