UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number: |
811-06142 |
|
|
Exact name of registrant as specified in charter: |
Aberdeen Japan Equity Fund, Inc. |
|
|
Address of principal executive offices: |
1900
Market Street, Suite 200 |
|
Philadelphia, PA 19103 |
|
|
Name
and address of agent for service: |
Andrea
Melia |
|
Aberdeen Standard Investments Inc. |
|
1900
Market Street, Suite 200 |
|
Philadelphia, PA 19103 |
|
|
Registrant’s telephone number, including area code: |
1-800-522-5465 |
|
|
Date of fiscal year end: |
October 31 |
|
|
Date of reporting period: |
April 30,
2021 |
Item 1. Reports to Stockholders.
(a) A copy of the report transmitted to shareholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940 (the
“1940 Act”) is filed herewith.
(b) Not applicable.
Aberdeen Japan Equity
Fund, Inc. (JEQ)
Semi-annual Report
April 30, 2021
Stockholder Letter
(unaudited)
Dear Stockholder,
We present this Semi-Annual Report, which covers the activities of
Aberdeen Japan Equity Fund, Inc. (the "Fund"), for the six-month
period ended April 30, 2021. The Fund's investment objective is to
outperform over the long term, on a total return basis (including
appreciation and dividends), the Tokyo Stock Price Index
("TOPIX").
Total Investment Return1
For the six-month period ended April 30, 2021, the total return to
stockholders of the Fund based on the net asset value ("NAV") and
market price of the Fund, respectively, compared to the Fund's
benchmark in US dollar terms is as follows:
NAV2,3 |
|
8.1 |
% |
Market
Price2 |
|
13.2 |
% |
Tokyo
Stock Price Index (Net Dividends)4 |
|
16.0 |
% |
For more information about Fund performance, please visit the Fund
on the web at www.aberdeenjeq.com. Here, you can view quarterly
commentary on the Fund's performance, monthly fact sheets,
distribution and performance information, and other Fund
literature.
NAV, Market Price and Discount
The
below table represents comparison from current six-month period end
to prior fiscal year end of market price to NAV and associated
discount.
|
|
NAV |
|
Closing
Market
Price |
|
Discount |
4/30/2021 |
|
$
10.14 |
|
$
8.91 |
|
12.1% |
10/31/2020 |
|
$
9.80 |
|
$
8.22 |
|
16.1% |
During the six-month period ended April 30, 2021, the Fund's NAV
was within a range of $9.90 to $11.37 and the Fund's market price
was within a range $8.20 to $9.94. During the six-month period
ended April 30, 2021, the Fund's shares traded within a range of a
discount of 10.7% to 17.2%.
Loan Facility and Use of Leverage
The Fund is permitted to borrow for investment purposes as may be
permitted by the 1940 Act or any rule, order or interpretation
thereunder. This allows the Fund to borrow for investment purposes
in the amount up to 33 1/3% of the Fund's total assets. On December
15, 2020, the Fund entered into a lending agreement with BNP
Paribas Prime Brokerage International Ltd. ("BNPP PB"), which
allows the Fund to borrow on an committed basis. On February 8,
2021 the Fund drew down 1,520,000,000 Japanese Yen on the facility.
The Fund's outstanding balance as of April 30, 2021 was
1,520,000,000 Japanese Yen ($13,906,043). See Notes to Financial
Statements Note 7 for further information.
Discount Management Program
Under the Fund's Discount Management Program, the Fund's Board of
Directors has authorized management to make open market purchases,
from time to time, in a maximum aggregate amount during each twelve
month period ended October 31 of up to 10% of the Fund's shares of
stock outstanding as of October 31 of the prior year. Such
purchases may be made opportunistically at certain discounts to net
asset value per share when, in the reasonable judgment of
management based on historical discount levels and current market
conditions, such repurchases may enhance stockholder value. During
the six-month period ended April 30, 2021, the Fund did not
repurchase any shares.
Unclaimed Share Accounts
Please be advised that abandoned or unclaimed property laws for
certain states require financial organizations to transfer
(escheat) unclaimed property (including Fund shares) to the state.
Each state has its own definition of unclaimed property, and Fund
shares could be considered "unclaimed property" due to account
inactivity (e.g., no owner-generated activity for a certain
period), returned mail (e.g., when mail sent to a stockholder is
returned to the Fund's transfer agent as undeliverable), or a
combination of both. If your Fund shares are categorized as
unclaimed, your financial advisor or the Fund's transfer agent will
follow the applicable state's statutory requirements to contact
you, but if unsuccessful, laws may require that the shares be
escheated to the appropriate state. If this happens, you will have
to contact the state to recover your property, which may involve
time and expense. For more information on unclaimed property and
how to maintain an active account, please contact your financial
adviser or the Fund's transfer agent.
|
1 |
Past performance is no guarantee of
future results. Investment returns and principal value will
fluctuate and shares, when sold, may be worth more or less than
original cost. Current performance may be lower or higher than the
performance quoted. Net asset value return data include investment
management fees, custodial charges and administrative fees (such as
Director and legal fees) and assumes the reinvestment of all
distributions. |
|
2 |
Assuming the reinvestment of
dividends and distributions. |
|
3 |
The Fund's total return is based on
the reported net asset value ("NAV") for each financial reporting
period end and may differ from what is reported on the Financial
Highlights due to financial statement rounding or adjustments. |
|
4 |
The Tokyo Stock Price Index
("TOPIX") is a free-float adjusted market capitalization-weighted
index that is calculated based on all the domestic common stocks
listed on the Tokyo Stock Exchange First Section. The TOPIX Index
shows the measure of current market capitalization assuming that
market capitalization as of the base date (January 4, 1968) is 100
points. Indices are unmanaged and have been provided for comparison
purposes only. No fees or expenses are reflected. You cannot invest
directly in an index. |
|
Aberdeen Japan Equity Fund,
Inc. |
1 |
Stockholder Letter
(unaudited) (concluded)
Portfolio Holdings Disclosure
The Fund's complete schedule of portfolio holdings for the second
and fourth quarters of each fiscal year are included in the Fund's
semi-annual and annual reports to stockholders. The Fund files its
complete schedule of portfolio holdings with the Securities and
Exchange Commission (the "SEC") for the first and third quarters of
each fiscal year as an exhibit to its reports on Form N-PORT. These
reports are available on the SEC's website at http://www.sec.gov.
The Fund makes the information available to stockholders upon
request and without charge by calling Investor Relations toll-free
at 1-800-522-5465.
Proxy Voting
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities and
information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12 month period ended
June 30 is available by August 31 of the relevant year: (1) upon
request without charge by calling Investor Relations toll-free at
1-800-522-5465; and (2) on the SEC's website at
http://www.sec.gov.
COVID-19
The illness COVID-19 caused by a novel coronavirus has resulted in
a global pandemic and major disruption to economies and markets
around the world, including the United States. Financial markets
have experienced extreme volatility and severe losses, and trading
in many instruments has been disrupted. Liquidity for many
instruments has been greatly reduced for periods of time. Some
interest rates are very low and in some cases yields are negative.
Some sectors of the economy and individual issuers have experienced
particularly large losses. Although some markets have rebounded,
others have not. These circumstances may recur or continue for an
extended period of time, and may continue to affect adversely the
value and liquidity of the Fund's investments. The ultimate
economic fallout from the pandemic, and the long-term impact on
economies, markets, industries and individual issuers, including
the Fund, are not known. Governments and central banks, including
the Federal Reserve in the U.S., have taken extraordinary and
unprecedented actions to support local and global economies and the
financial markets. The impact of these measures, and whether they
will be effective to mitigate the economic and market disruption,
will vary from market to market and, in some cases, may not be
known for some time.
LIBOR
Under the revolving credit facility, the Fund is charged interest
on amounts borrowed at a variable rate, which may be based on the
London Interbank Offered Rate ("LIBOR") plus a spread. In 2017, the
head of the United Kingdom's Financial Conduct Authority ("FCA")
announced a desire to phase out the use of LIBOR by the end of
2021. However, subsequent announcements by the FCA, the LIBOR
administrator and other regulators indicate that it is possible
that the most widely used LIBOR rates may continue until mid-2023.
It is anticipated that LIBOR ultimately will be discontinued or the
regulator will announce that it is no longer sufficiently robust to
be representative of its underlying market around that time. There
remains uncertainty regarding the future utilization of LIBOR and
the nature of any replacement reference rate. As such, the
potential effect of a transition away from LIBOR on the Fund's
payment obligations under the revolving credit facility and on the
Fund's investments that reference LIBOR cannot yet be
determined.
Investor Relations Information
As part of Aberdeen Standard's commitment to stockholders, we
invite you to visit the Fund on the web at www.aberdeenjeq.com.
Here, you can view monthly fact sheets, quarterly commentary,
distribution, and performance information, and other Fund
literature.
Enroll in Aberdeen Standard's email services and be among the first
to receive the latest closed-end fund news, announcements, videos
and other information. In addition, you can receive electronic
versions of important Fund documents including annual reports,
semi-annual reports, prospectuses, and proxy statements. Sign up
today at https://www.
aberdeenstandard.com/en-us/cefinvestorcenter/contact-us/preferences
Contact Us:
|
• |
Visit:
www.aberdeenstandard.com/en-us/cefinvestorcenter; |
|
• |
Email:
Investor.Relations@aberdeenstandard.com; or |
|
• |
Call: 1-800-522-5465 (toll-free in
the U.S.). |
Yours sincerely,
/s/ Alan Goodson
Alan Goodson
President
2 |
Aberdeen
Japan Equity Fund, Inc. |
Total Investment Return
(unaudited)
The following table summarizes the average annual Fund performance
compared to the TOPIX, the Fund's benchmark, for the six-month,
1-year, 3-year, 5-year and 10-year periods as of April 30,
2021.
|
6
Months |
|
1
Year |
|
3
Years |
|
5
Years |
|
10
Years |
|
Net
Asset Value (NAV) |
8.1% |
|
|
29.6% |
|
|
5.7% |
|
|
8.9% |
|
|
8.3% |
|
Market
Price |
13.2% |
|
|
36.2% |
|
|
5.0% |
|
|
9.1% |
|
|
7.7% |
|
Tokyo
Stock Price Index (Net Dividends) |
16.0% |
|
|
29.1% |
|
|
4.3% |
|
|
8.8% |
|
|
7.2% |
|
Aberdeen Standard Investments Inc. has entered into an agreement
with the Fund to limit investor relations services fees, without
which performance would be lower. This agreement aligns with the
term of the advisory agreement and may not be terminated prior to
the end of the current term of the advisory agreement. See Note 3
in the Notes to Financial Statements. Returns represent past
performance. Total investment return at NAV is based on changes in
the NAV of Fund shares and assumes reinvestment of dividends and
distributions, if any, at market prices pursuant to the dividend
reinvestment program sponsored by the Fund's transfer agent. All
return data at NAV includes fees charged to the Fund, which are
listed in the Fund's Statement of Operations under "Expenses". The
Fund's total investment return is based on the reported NAV on each
financial reporting period end. Total investment return at market
value is based on changes in the market price at which the Fund's
shares traded on the NYSE during the period and assumes
reinvestment of dividends and distributions, if any, at market
prices pursuant to the Fund's dividend reinvestment program.
Because the Fund's shares trade in the stock market based on
investor demand, the Fund may trade at a price higher or lower than
its NAV. Therefore, returns are calculated based on both market
price and NAV. Past performance is no guarantee of future
results. The performance information provided does not reflect
the deduction of taxes that a stockholder would pay on
distributions received from the Fund. The current performance of
the Fund may be lower or higher than the figures shown. The Fund's
yield, return, market price and NAV will fluctuate. Performance
information current to the most recent month-end is available at
www.aberdeenjeq.com or by calling 800-522-5465.
The annualized net operating expense ratio based on the
six-month period ended April 30, 2021 was 0.74%. The annualized net
operating expense ratio excluding interest expense based on the
six-month period ending April 30,2021 was 0.70%
|
Aberdeen Japan Equity Fund,
Inc. |
3 |
Top Ten Equity Holdings
(unaudited)
The following were the Fund's top ten equity holdings as of April
30, 2021:
Name
of Security |
As a
Percentage of Net Assets |
Toyota
Motor Corp. |
5.0% |
Tokio
Marine Holdings, Inc. |
4.3% |
Sony
Group Corp. |
4.1% |
Shin-Etsu
Chemical Co. Ltd. |
4.1% |
Amada
Co. Ltd. |
3.6% |
Asahi
Group Holdings Ltd. |
3.2% |
Recruit
Holdings Co. Ltd. |
2.8% |
Nabtesco
Corp. |
2.8% |
Nippon
Sanso Holdings Corp. |
2.8% |
Keyence
Corp. |
2.7% |
Portfolio Summary
(unaudited)
The following table summarizes the sector composition of the Fund's
portfolio, in S&P Global Inc.'s Global Industry Classification
Standard ("GICS") Sectors, expressed as a percentage of net assets,
as of April 30, 2021.
Sectors |
As a
Percentage of Net Assets |
Consumer
Discretionary |
23.5% |
Industrials |
21.2% |
Information
Technology |
16.8% |
Financials |
10.7% |
Materials |
10.4% |
Health
Care |
9.6% |
Consumer
Staples |
6.9% |
Communication
Services |
5.9% |
Real
Estate |
3.9% |
Short-Term
Investment |
–% |
Liabilities
in Excess of Other Assets |
(8.9)% |
|
100.0% |
Amounts listed as "–" are 0% or round to 0%.
4 |
Aberdeen
Japan Equity Fund, Inc. |
Portfolio of
Investments (unaudited)
As of April 30, 2021
|
Shares
or
Principal
Amount |
|
Value |
|
COMMON
STOCKS—108.9% |
|
JAPAN—108.9% |
|
Communication
Services—5.9% |
|
Coconala,
Inc.(a) |
|
35,700 |
|
$ 665,394 |
|
KDDI
Corp. |
|
95,100 |
|
2,874,819 |
|
Okinawa
Cellular Telephone Co. |
|
18,500 |
|
837,346 |
|
ValueCommerce
Co. Ltd. |
|
47,100 |
|
1,510,353 |
|
Z
Holdings Corp. |
|
445,400 |
|
2,054,303 |
|
|
|
7,942,215 |
|
Consumer
Discretionary—23.5% |
|
Edulab,
Inc. |
|
15,800 |
|
1,036,318 |
|
Koito
Manufacturing Co. Ltd.(b) |
|
48,200 |
|
3,006,747 |
|
Nitori
Holdings Co. Ltd. |
|
9,500 |
|
1,701,501 |
|
Resorttrust,
Inc. |
|
141,200 |
|
2,249,143 |
|
Scroll
Corp. |
|
173,900 |
|
1,591,073 |
|
Shoei
Co. Ltd. |
|
39,600 |
|
1,502,630 |
|
Sony
Group Corp.(b) |
|
56,200 |
|
5,618,814 |
|
Stanley
Electric Co. Ltd. |
|
118,800 |
|
3,400,816 |
|
Toyota
Motor Corp.(b) |
|
90,500 |
|
6,771,587 |
|
USS Co.
Ltd. |
|
127,600 |
|
2,315,407 |
|
Workman
Co. Ltd. |
|
7,900 |
|
514,929 |
|
Yamaha
Corp. |
|
40,200 |
|
2,193,936 |
|
|
|
31,902,901 |
|
Consumer
Staples—6.9% |
|
Asahi
Group Holdings Ltd. |
|
103,300 |
|
4,319,287 |
|
Milbon
Co. Ltd. |
|
20,200 |
|
1,075,608 |
|
Pigeon
Corp. |
|
16,400 |
|
556,591 |
|
Shiseido
Co. Ltd. |
|
26,600 |
|
1,935,716 |
|
Welcia
Holdings Co. Ltd. |
|
48,200 |
|
1,503,907 |
|
|
|
9,391,109 |
|
Financials—10.7% |
|
Japan
Exchange Group, Inc. |
|
71,600 |
|
1,679,264 |
|
Tokio
Marine Holdings, Inc.(b) |
|
120,800 |
|
5,793,192 |
|
Tokyo
Century Corp.(b) |
|
30,100 |
|
1,860,829 |
|
WealthNavi,
Inc.(a) |
|
52,300 |
|
1,998,859 |
|
Zenkoku
Hosho Co. Ltd. |
|
72,000 |
|
3,231,626 |
|
|
|
14,563,770 |
|
Health
Care—9.6% |
|
AS One
Corp. |
|
6,000 |
|
749,152 |
|
Asahi
Intecc Co. Ltd. |
|
38,500 |
|
1,036,299 |
|
Astellas
Pharma, Inc. |
|
127,800 |
|
1,923,526 |
|
BML,
Inc. |
|
35,200 |
|
1,217,767 |
|
Chugai
Pharmaceutical Co. Ltd.(b) |
|
50,600 |
|
1,899,266 |
|
Daiichi
Sankyo Co. Ltd. |
|
52,100 |
|
1,330,656 |
|
Hoya
Corp.(b) |
|
19,100 |
|
2,171,007 |
|
Jeol
Ltd. |
|
23,700 |
|
1,332,720 |
|
Menicon
Co. Ltd. |
|
12,800 |
|
778,577 |
|
Takara
Bio, Inc. |
|
25,700 |
|
656,692 |
|
|
|
13,095,662 |
|
Aberdeen Japan Equity Fund,
Inc.
5
Portfolio of
Investments (unaudited)
(continued)
As of April 30, 2021
|
Shares
or
Principal
Amount |
|
Value |
|
COMMON
STOCKS (continued) |
|
JAPAN
(continued) |
|
Industrials—21.2% |
|
Amada
Co. Ltd.(b) |
|
450,100 |
|
$ 4,881,963 |
|
Daifuku
Co. Ltd. |
|
6,700 |
|
662,244 |
|
Daikin
Industries Ltd.(b) |
|
16,800 |
|
3,388,807 |
|
FANUC
Corp.(b) |
|
13,900 |
|
3,200,930 |
|
Makita
Corp.(b) |
|
52,800 |
|
2,377,860 |
|
MISUMI
Group, Inc.(b) |
|
120,000 |
|
3,389,241 |
|
Nabtesco
Corp. |
|
84,600 |
|
3,806,960 |
|
Nihon
M&A Center, Inc. |
|
26,200 |
|
684,468 |
|
Recruit
Holdings Co. Ltd.(b) |
|
85,700 |
|
3,863,997 |
|
SHO-BOND
Holdings Co. Ltd. |
|
34,900 |
|
1,456,914 |
|
Takuma
Co. Ltd. |
|
55,700 |
|
1,143,797 |
|
|
|
28,857,181 |
|
Information
Technology—16.8% |
|
Advantest
Corp.(b) |
|
28,300 |
|
2,675,341 |
|
Appier
Group, Inc.(a) |
|
33,500 |
|
585,767 |
|
Elecom
Co. Ltd. |
|
72,300 |
|
1,518,628 |
|
Fukui
Computer Holdings, Inc. |
|
23,100 |
|
896,516 |
|
Keyence
Corp.(b) |
|
7,800 |
|
3,744,411 |
|
Murata
Manufacturing Co. Ltd.(b) |
|
37,600 |
|
2,989,478 |
|
NEC
Corp. |
|
32,600 |
|
1,895,223 |
|
NEC
Networks & System Integration Corp. |
|
86,600 |
|
1,489,751 |
|
Otsuka
Corp. |
|
23,600 |
|
1,187,165 |
|
Sanken
Electric Co. Ltd.(a)(b) |
|
39,300 |
|
1,836,050 |
|
Sansan,
Inc.(a) |
|
14,000 |
|
1,150,430 |
|
Tokyo
Electron Ltd. |
|
4,200 |
|
1,907,588 |
|
Zuken,
Inc. |
|
32,200 |
|
883,760 |
|
|
|
22,760,108 |
|
Materials—10.4% |
|
Kansai
Paint Co. Ltd.(b) |
|
88,400 |
|
2,225,824 |
|
Nippon
Paint Holdings Co. Ltd. |
|
99,500 |
|
1,421,241 |
|
Nippon
Sanso Holdings Corp.(b) |
|
201,200 |
|
3,785,058 |
|
Shin-Etsu
Chemical Co. Ltd.(b) |
|
32,700 |
|
5,519,827 |
|
Taoka
Chemical Co. Ltd. |
|
10,600 |
|
1,174,224 |
|
|
|
14,126,174 |
|
Real
Estate—3.9% |
|
Heiwa
Real Estate Co. Ltd.(b) |
|
69,300 |
|
2,359,899 |
|
Tokyu
Fudosan Holdings Corp. |
|
538,800 |
|
2,998,922 |
|
|
|
5,358,821 |
|
Total
Common Stocks |
|
|
147,997,941 |
|
6
Aberdeen
Japan Equity Fund, Inc.
Portfolio
of Investments (unaudited)
(concluded)
As of
April 30, 2021
|
|
|
|
|
Value |
|
Shares |
Description |
|
|
|
(US$) |
|
SHORT-TERM
INVESTMENT—0.0% |
|
|
|
|
|
UNITED
STATES—0.0% |
|
|
|
|
|
19,401 |
State
Street Institutional U.S. Government Money Market Fund, Premier
Class, 0.03%(c) |
|
|
$ 19,401 |
|
|
Total
Short-Term Investment—0.0% (cost $19,401) |
|
|
|
19,401 |
|
|
Total
Investments—108.9% (cost
$127,607,936)(d) |
|
|
|
148,017,342 |
|
|
Liabilities
in Excess of Other Assets—(8.9)% |
|
|
|
(12,094,700 |
) |
|
Net
Assets—100.0% |
|
|
$ 135,922,642 |
|
(a) |
Non-income producing
security. |
(b) |
All or a portion of the
security has been designated as collateral for the line of
credit. |
(c) |
Registered investment
company advised by State Street Global Advisors. The rate shown is
the 7 day yield as of April 30, 2021. |
(d) |
See Note 9 of the
accompanying Notes to Financial Statements for tax unrealized
appreciation/(depreciation) of securities. |
See Notes
to Financial Statements.
Aberdeen Japan Equity Fund,
Inc.
7
Statement
of Assets and Liabilities (unaudited)
Assets |
|
|
|
|
|
|
|
Investments,
at value (cost $127,588,535) |
|
$ |
147,997,941 |
|
Short-term
investments, at value (cost $19,401) |
|
19,401 |
|
Foreign
currency, at value (cost $576,432) |
|
575,652 |
|
Receivable
for investments sold |
|
1,401,443 |
|
Interest
and dividends receivable |
|
1,024,946 |
|
Tax
reclaim receivable |
|
51,623 |
|
Total
assets |
|
151,071,006 |
|
|
|
|
|
Liabilities |
|
|
|
Line of
credit payable (Note 7) |
|
13,906,043 |
|
Payable
for investments purchased |
|
1,075,007 |
|
Investment
management fees payable (Note 3) |
|
37,191 |
|
Interest
expense on line of credit |
|
12,266 |
|
Administration
fees payable (Note 3) |
|
10,274 |
|
Investor
relations fees payable (Note 3) |
|
7,634 |
|
Other
accrued expenses |
|
99,949 |
|
Total
liabilities |
|
15,148,364 |
|
|
|
|
|
Net
Assets |
|
$ |
135,922,642 |
|
|
|
|
|
Composition
of Net Assets |
|
|
|
Common
stock (par value $0.01 per share) (Note 5) |
|
$ |
134,085 |
|
Paid-in
capital in excess of par |
|
100,330,496 |
|
Distributable
earnings |
|
35,458,061 |
|
Net
Assets |
|
$ |
135,922,642 |
|
Net asset
value per share based on 13,408,536 shares issued and
outstanding |
|
$ |
10.14 |
|
See
Notes to Financial Statements.
8 Aberdeen
Japan Equity Fund, Inc.
Statement of Operations
(unaudited)
For the Six-Month Period Ended April 30, 2021
Net
investment income: |
|
Income
|
|
|
|
Dividends
and other income (net of foreign withholding taxes of
$95,276) |
|
$ |
1,249,734 |
|
|
Total
Investment Income |
|
|
1,249,734 |
|
|
Expenses: |
|
|
|
Investment
management fee (Note 3) |
|
|
217,941 |
|
|
Directors'
fees and expenses |
|
|
81,837 |
|
|
Administration
fee (Note 3) |
|
|
59,407 |
|
|
Investor
relations fees and expenses (Note 3) |
|
|
28,985 |
|
|
Independent
auditors' fees and expenses |
|
|
28,311 |
|
|
Reports
to stockholders and proxy solicitation |
|
|
20,228 |
|
|
Insurance
expense |
|
|
19,216 |
|
|
Legal
fees and expenses |
|
|
13,717 |
|
|
NYSE
listing fee |
|
|
11,778 |
|
|
Custodian's
fees and expenses |
|
|
10,153 |
|
|
Transfer
agent's fees and expenses |
|
|
9,476 |
|
|
Miscellaneous |
|
|
16,818 |
|
|
Total
operating expenses, excluding interest expense |
|
|
517,867 |
|
|
Interest
expense (Note 10) |
|
|
33,212 |
|
|
Net
operating expenses |
|
|
551,079 |
|
|
|
|
|
|
|
Net
Investment Income |
|
|
698,655 |
|
|
Net
Realized/Unrealized Gain/(Loss) from Investments and Foreign
Currency Related Transactions: |
|
|
|
Net
realized gain/(loss) from: |
|
|
|
Investment
transactions |
|
|
13,888,155 |
|
|
Foreign
currency transactions |
|
|
(16,892 |
) |
|
|
|
|
13,871,263 |
|
|
Net change in
unrealized appreciation/(depreciation) on:
|
|
|
|
Investments |
|
|
(4,822,666 |
) |
|
Foreign
currency translation |
|
|
544,953 |
|
|
|
|
|
(4,277,713 |
) |
|
Net
realized and unrealized gain from investments and foreign currency
related transactions |
|
|
9,593,550 |
|
|
Net
Increase in Net Assets Resulting from Operations |
|
$ |
10,292,205 |
|
|
See Notes to Financial Statements.
Aberdeen Japan Equity Fund,
Inc. 9
Statements of Changes in Net Assets
|
|
For
the
Six-Month
Period Ended
April 30, 2021
(unaudited) |
|
For
the
Year Ended
October 31, 2020 |
|
Increase/(decrease) in
Net Assets from Operations:
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
Net
investment income |
|
$ 698,655 |
|
$ 749,230 |
|
Net
realized gain from investment transactions |
|
13,888,155 |
|
5,006,941 |
|
Net
realized gain/(loss) from foreign currency transactions |
|
(16,892 |
) |
19,106 |
|
Net
change in unrealized appreciation/(depreciation) on
investments |
|
(4,822,666 |
) |
8,829,605 |
|
Net
change in unrealized appreciation on foreign currency
translation |
|
544,953 |
|
5,047 |
|
Net
increase in net assets resulting from operations |
|
10,292,205 |
|
14,609,929 |
|
Distributions to
Stockholders From:
|
|
|
|
|
|
Distributable
earnings |
|
(5,828,556 |
) |
(3,472,529 |
) |
Net
decrease in net assets from distributions |
|
(5,828,556 |
) |
(3,472,529 |
) |
Reinvestment
of dividends resulting in the issuance of 0 and 2,644 shares of
common stock, respectively |
|
– |
|
20,853 |
|
Change
in net assets from capital stock transactions |
|
– |
|
20,853 |
|
Net
increase/(decrease) in net assets |
|
4,463,649 |
|
11,158,253 |
|
Net
Assets: |
|
|
|
|
|
Beginning
of period |
|
131,458,993 |
|
120,300,740 |
|
End
of period |
|
$135,922,642 |
|
$131,458,993 |
|
Amounts listed as "–" are $0 or round to $0.
See Notes to Financial Statements.
10 Aberdeen Japan Equity Fund,
Inc.
Financial Highlights
|
|
For
the
Six–Month
Period Ended
April 30, 2021 |
|
|
For the
Fiscal Years Ended October 31, |
|
|
|
(unaudited) |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017(a) |
|
|
2016 |
|
PER
SHARE OPERATING PERFORMANCE(b): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset
value, beginning of period |
|
$9.80 |
|
|
$8.97 |
|
|
$8.66 |
|
|
$10.30 |
|
|
$9.51 |
|
|
$8.69 |
|
Net
investment income |
|
0.05 |
|
|
0.06 |
|
|
0.06 |
|
|
0.07 |
|
|
0.07 |
|
|
0.08 |
|
Net
realized and unrealized gains/(losses) on investments and foreign
currencies |
|
0.72 |
|
|
1.03 |
|
|
0.90 |
|
|
(1.23 |
) |
|
1.03 |
|
|
1.03 |
|
Total from
investment operations |
|
0.77 |
|
|
1.09 |
|
|
0.96 |
|
|
(1.16 |
) |
|
1.10 |
|
|
1.11 |
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
(0.06 |
) |
|
(0.07 |
) |
|
(0.07 |
) |
|
(0.06 |
) |
|
(0.09 |
) |
|
(0.08 |
) |
Net
realized gains |
|
(0.37 |
) |
|
(0.19 |
) |
|
(0.58 |
) |
|
(0.42 |
) |
|
(0.23 |
) |
|
(0.23 |
) |
Total
distributions |
|
(0.43 |
) |
|
(0.26 |
) |
|
(0.65 |
) |
|
(0.48 |
) |
|
(0.32 |
) |
|
(0.31 |
) |
Capital
Share Transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact due
to discount management policy |
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
0.01 |
|
|
0.02 |
|
Net asset
value, end of period |
|
$10.14 |
|
|
$9.80 |
|
|
$8.97 |
|
|
$8.66 |
|
|
$10.30 |
|
|
$9.51 |
|
Market
value, end of period |
|
$8.91 |
|
|
$8.22 |
|
|
$7.53 |
|
|
$7.40 |
|
|
$9.17 |
|
|
$8.18 |
|
Total
Investment Return Based on(c): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
value |
|
13.20 |
% |
|
12.75 |
% |
|
11.42 |
% |
|
(15.22 |
%) |
|
16.73 |
% |
|
14.10 |
% |
Net asset
value |
|
8.06 |
% |
|
12.84 |
% |
|
13.41 |
% |
|
(11.67 |
%) |
|
12.78 |
% |
|
14.19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio to
Average Net Assets/Supplementary Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets,
end of period (in millions) |
|
$135.9 |
|
|
$131.5 |
|
|
$120.3 |
|
|
$115.9 |
|
|
$137.7 |
|
|
$127.9 |
|
Average net
assets (in millions) |
|
$149.7 |
|
|
$119.6 |
|
|
$110.2 |
|
|
$134.7 |
|
|
$124.4 |
|
|
$118.4 |
|
Net
operating expenses |
|
0.74 |
%(d) |
|
0.85 |
% |
|
0.94 |
% |
|
0.81 |
% |
|
0.86 |
% |
|
0.92 |
% |
Net
operating expenses, excluding interest expense |
|
0.70 |
%(d) |
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
– |
|
Net
investment income |
|
0.94 |
%(d) |
|
0.63 |
% |
|
0.71 |
% |
|
0.69 |
% |
|
0.78 |
% |
|
0.86 |
% |
Portfolio
turnover |
|
32 |
%(e) |
|
34 |
% |
|
42 |
% |
|
32 |
% |
|
22 |
% |
|
8 |
% |
Line of
credit payable outstanding (000 omitted) |
|
$13,906 |
|
|
$– |
|
|
$– |
|
|
$– |
|
|
$– |
|
|
$– |
|
Asset
coverage ratio on line of credit payable at period end |
|
1,077 |
% |
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
– |
|
Asset
coverage per $1,000 on line of credit payable at period
end |
|
$10,774 |
|
|
$– |
|
|
$– |
|
|
$– |
|
|
$– |
|
|
$– |
|
|
(a) |
Beginning with year ended October
31, 2017, the Fund has been audited by KPMG LLP. Previous years
were audited by different independent registered public accounting
firm. |
|
(b) |
Based on average shares
outstanding. |
|
(c) |
Total investment return based on
market value is calculated assuming that shares of the Fund's
common stock were purchased at the closing market price as of the
beginning of the period, dividends, capital gain, and other
distributions were reinvested as provided for in the Fund's
dividend reinvestment plan and then sold at the closing market
price per share on the last day of the period. The computation does
not reflect any sales commission investors may incur in purchasing
or selling shares of the Fund. The total investment return based on
the net asset value is similarly computed except that the Fund's
net asset value is substituted for the closing market value. |
Amounts listed as "–" are $0 or round to $0.
See Notes to Financial Statements.
Aberdeen Japan Equity Fund,
Inc.
11
Notes to Financial
Statements (unaudited)
April 30, 2021
1. Organization
Aberdeen Japan Equity Fund, Inc. (the "Fund") was incorporated in
Maryland on July 12, 1990 under its original name "The Japan Equity
Fund, Inc." and commenced operations on July 24, 1992. It is
registered with the Securities and Exchange Commission as a
closed-end, diversified management investment company. The Fund's
investment objective is to outperform over the long term, on a
total return basis (including appreciation and dividends), the
Tokyo Stock Price Index ("TOPIX").
2. Summary of Significant Accounting Policies
The Fund is an investment company and accordingly follows the
investment company accounting and reporting guidance of the
Financial Accounting Standards Board ("FASB") Accounting Standard
Codification Topic 946 Financial Services – Investment Companies.
The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial
statements. The policies conform to generally accepted accounting
principles ("GAAP") in the United States of America. The
preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of income and expenses for the period. Actual
results could differ from those estimates. The accounting records
of the Fund are maintained in U.S. Dollars.
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 transact 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. Under normal circumstances, the Valuation Time is
as of the close of regular trading on the New York Stock Exchange
("NYSE") (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 approved by the Board. 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.
Short-term investments are comprised of cash and cash equivalents
invested in short-term investment funds which are redeemable daily.
The Fund sweeps available cash into the State Street Institutional
U.S. Government Money Market Fund, which has elected to qualify as
a "government money market fund" pursuant to Rule 2a-7 under the
Investment Company Act of 1940, as amended, and has an objective,
which is not guaranteed, to maintain a $1.00 per share NAV.
Generally, these investment types are categorized as Level 1
investments.
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 Board. A security that has been fair
valued by the Fund's 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 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, the highest level,
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 similar
assets, and Level 3, the lowest level, measurements
12 Aberdeen Japan Equity Fund,
Inc.
Notes to Financial
Statements (unaudited)
(continued)
April 30, 2021
to valuations based upon unobservable inputs that are significant
to the valuation. Inputs refer broadly to the assumptions that
market participants would use in pricing the asset or liability,
including assumptions about risk, for example the risk inherent in
a particular valuation technique used to measure fair value
including a pricing model and/or the risk inherent in the inputs to
the valuation technique. Inputs may be observable or unobservable.
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).
A summary of standard inputs is listed below:
Security
Type |
Standard
Inputs |
Foreign
equities utilizing a fair value factor |
Depositary
receipts, indices, futures, sector indices/ETFs, exchange rates,
and local exchange opening and closing prices of each
security. |
The following is a summary of the inputs used as of April 30, 2021
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 – Quoted
Prices ($) |
|
|
Level 2 – Other Significant
Observable Inputs ($) |
|
|
Level 3 – Significant
Unobservable Inputs ($) |
|
|
Total ($) |
|
Investments in Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stocks |
|
$ |
2,755,068 |
|
|
$ |
145,242,873 |
|
|
$ |
– |
|
|
$ |
147,997,941 |
|
Money Market Funds |
|
|
19,401 |
|
|
|
– |
|
|
|
– |
|
|
|
19,401 |
|
Total |
|
$ |
2,774,469 |
|
|
$ |
145,242,873 |
|
|
$ |
– |
|
|
$ |
148,017,342 |
|
Amounts listed as "–" are $0 or round to $0.
For the six-month period ended April 30, 2021, there were no
significant changes to the fair valuation methodologies for the
type of holdings in the Fund's portfolio.
b. Foreign Currency Translation:
Foreign securities, currencies, and other assets and liabilities
denominated in foreign currencies are translated into U.S. Dollars
at the exchange rate of said currencies against the U.S. Dollar, as
of the Valuation Time, as provided by an independent pricing
service approved by the Board.
Foreign currency amounts are translated into U.S. Dollars on the
following basis:
|
(i) |
market value of investment
securities, other assets and liabilities – at the current daily
rates of exchange; and |
|
(ii) |
purchases and sales of investment
securities, income and expenses – at the rate of exchange
prevailing on the respective dates of such transactions. |
The Fund does not isolate that portion of gains and losses on
investments in equity securities due to changes in the foreign
exchange rates from the portion due to changes in market prices of
equity securities. Accordingly, realized and unrealized foreign
currency gains and losses with respect to such securities are
included in the reported net realized and unrealized gains and
losses on investment transactions balances.
The Fund reports certain foreign currency related transactions and
foreign taxes withheld on security transactions as components of
realized gains for financial reporting purposes, whereas such
foreign currency related transactions are treated as ordinary
income for U.S. federal income tax purposes.
Aberdeen
Japan Equity Fund, Inc. 13
Notes to
Financial Statements
(unaudited) (continued)
April 30, 2021
Net unrealized currency gains or losses from valuing foreign
currency denominated assets and liabilities at period end exchange
rates are reflected as a component of net unrealized
appreciation/depreciation in value of investments, and translation
of other assets and liabilities denominated in foreign
currencies.
Net realized foreign exchange gains or losses represent foreign
exchange gains and losses from transactions in foreign currencies
and forward foreign currency contracts, exchange gains or losses
realized between the trade date and settlement date on security
transactions, and the difference between the amounts of interest
and dividends recorded on the Fund's books and the U.S. Dollar
equivalent of the amounts actually received.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of
domestic origin, including unanticipated movements in the value of
the foreign currency relative to the U.S. Dollar. Generally, when
the U.S. Dollar rises in value against foreign currency, the Fund's
investments denominated in that foreign currency will lose value
because the foreign currency is worth fewer U.S. Dollars; the
opposite effect occurs if the U.S. Dollar falls in relative
value.
c. Security Transactions, Investment Income and
Expenses:
Security transactions are recorded on the trade date. Realized and
unrealized gains/(losses) from security and foreign currency
transactions are calculated on the identified cost basis. Dividend
income and corporate actions are recorded generally on the ex-date,
except for certain dividends and corporate actions which may be
recorded after the ex-date, as soon as the Fund acquires
information regarding such dividends or corporate actions.
Interest income and expenses are recorded on an accrual basis.
d. Distributions:
The Fund records dividends and distributions payable to its
stockholders on the ex-dividend date. The amount of dividends and
distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax
regulations, which may differ from GAAP. These book basis/tax basis
differences are either considered temporary or permanent in nature.
To the extent these differences are permanent in nature, such
amounts are reclassified within the capital accounts based on their
federal tax basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net
investment income and net realized capital gains for tax purposes
are reported as return of capital.
e. Federal Income Taxes:
The Fund intends to continue to qualify as a "regulated investment
company" (RIC) by complying with the provisions available to
certain investment companies, as defined in Subchapter M of the
Internal Revenue Code of 1986, as amended, and to make
distributions of net investment income and net realized capital
gains sufficient to relieve the Fund from all federal income taxes.
Therefore, no federal income tax provision is required.
The Fund recognizes the tax benefits of uncertain tax positions
only where the position is "more likely than not" to be sustained
assuming examination by tax authorities. Management of the Fund has
concluded that there are no significant uncertain tax positions
that would require recognition in the financial statements. Since
tax authorities can examine previously filed tax returns, the
Fund's U.S. federal and state tax returns for each of the most
recent four fiscal years up to the most recent fiscal year ended
October 31, 2020 are subject to such review.
f. Rights Issues and Warrants:
Rights issues give the right, normally to existing stockholders, 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.
g. Foreign Withholding Tax:
Dividend and interest income from non-U.S. sources received by the
Fund are generally subject to non-U.S. withholding taxes and are
recorded on the Statement of Operations. The Fund files for tax
reclaims for the refund of such withholdings taxes according to tax
treaties. Tax reclaims that are deemed collectible are booked as
tax reclaim receivable on the Statement of Assets and Liabilities.
In addition, the Fund may be subject to capital gains tax in
certain countries in which it invests. The above taxes may be
reduced or eliminated under the terms of applicable U.S. income tax
treaties with some of these countries. The Fund accrues such taxes
when the related income is earned.
In addition, when the Fund sells securities within certain
countries in which it invests, the capital gains realized may be
subject to tax. Based on these market requirements and as required
under GAAP, the Fund accrues deferred capital gains tax on
securities currently held that have
14 Aberdeen
Japan Equity Fund, Inc.
Notes to
Financial Statements
(unaudited) (continued)
April 30, 2021
unrealized appreciation within these countries. The amount of
deferred capital gains tax accrued is reported on the Statement of
Operations as part of the Net Change in Unrealized
Appreciation/Depreciation on Investments.
3. Agreements and Transactions with Affiliates
a. Investment Manager:
Aberdeen Standard Investments (Asia) Limited ("ASIAL") serves as
the Fund's investment manager with respect to all investments.
Pursuant to the Management Agreement, the Manager makes investment
management decisions relating to the Fund's assets. For such
investment services, the Fund pays the Manager at an annual rate of
0.60% of the first $20 million, 0.40% of the next $30 million, and
0.20% of the excess over $50 million of the Fund's average weekly
Managed Assets. For purposes of this calculation, "Managed Assets"
of the Fund means total assets of the Fund, including assets
attributable to investment leverage, minus all liabilities, but not
excluding any liabilities or obligations attributable to leverage
obtained by the Fund for investment purposes through (i) the
issuance or incurrence of indebtedness of any type (including,
without limitation, borrowing through a credit facility or the
issuance of debt securities), (ii) the issuance of preferred stock
or other similar preference securities, and/or (iii) any other
means, but not including any collateral received for securities
loaned by the Fund. During the six-month period ended April 30,
2021, the Fund paid ASIAL $217,941. In addition, the Fund has
agreed to reimburse the Manager for all out-of-pocket expenses
related to the Fund. For the six-month period ended April 30, 2021,
no such expenses were paid to the Manager.
b. Fund Administration:
Aberdeen Standard Investments, Inc. ("ASII"), an affiliate of
ASIAL, serves as the Fund's administrator, pursuant to an agreement
under which ASII receives a fee, payable quarterly by the Fund, at
an annual fee rate of 0.08% of the value of the Fund's average
weekly net assets. During the six-month period ended April 30,
2021, ASII earned $59,407 from the Fund for administration
services.
c. Investor Relations:
Under the terms of the Investor Relations Services Agreement, ASII
provides and pays third parties to provide investor relations
services to the Fund and certain other funds advised by ASIAL or
its affiliates as part of an Investor Relations Program. Under the
Investor Relations Services Agreement, the Fund owes a portion of
the fees related to the Investor Relations Program (the "Fund's
Portion"). However, Investor Relations Services fees are limited by
ASII so that the Fund will only pay up to an annual rate of 0.05%
of the Fund's average weekly net
assets. Any difference between the capped rate of 0.05% of the
Fund's average weekly net assets and the Fund's Portion is paid for
by ASII.
Pursuant to the terms of the Investor Relations Services Agreement,
ASII (or third parties engaged by ASII), among other things,
provides objective and timely information to stockholders based on
publicly-available information; provides information efficiently
through the use of technology while offering stockholders immediate
access to knowledgeable investor relations representatives;
develops and maintains effective communications with investment
professionals from a wide variety of firms; creates and maintains
investor relations communication materials such as fund manager
interviews, films and webcasts, publishes white papers, magazine
articles and other relevant materials discussing the Fund's
investment results, portfolio positioning and outlook; develops and
maintains effective communications with large institutional
stockholders; responds to specific stockholder questions; and
reports activities and results to the Board and management
detailing insight into general stockholders sentiment.
During the six-month period ended April 30, 2021, the Fund incurred
investor relations fees of approximately $28,985. For the six-month
period ended April 30, 2021, ASII did not waive any investor
relations fees because the Fund did not reach the capped
amount.
4. Investment Transactions
Purchases and sales of investment securities (excluding short-term
securities) for the six-month period ended April 30, 2021, were
$55,080,659 and $46,244,333, respectively.
5. Capital
The authorized capital of the Fund is 30 million shares of $0.01
par value per share of common stock. During the six-month period
ended April 30, 2021, the Fund did not repurchase any shares
pursuant to its Discount Management Program and reinvested 0 shares
pursuant to its Dividend Reinvestment and Cash Purchase Plan. As of
April 30, 2021, there were 13,408,536 shares of common stock issued
and outstanding.
6. Discount Management Program
The Fund's Discount Management Program authorizes management to
make open market purchases, from time to time, in a maximum
aggregate amount during each twelve month period ended October 31
of up to 10% of the Fund's shares of stock outstanding as of
October 31 of the prior year. Such purchases may be made
opportunistically at certain discounts to net asset value per share
when, in the reasonable judgment of management based on historical
discount levels and current market conditions, such repurchases may
enhance stockholder value. During the six-month period ended April
30, 2021, the Fund did not repurchase any shares.
Aberdeen Japan Equity Fund,
Inc. 15
Notes to
Financial Statements
(unaudited) (continued)
April 30, 2021
The Board of Directors authorized the Discount Management Program
in order to potentially enhance share liquidity and increase
stockholder value through the potential accretive impact of the
purchases to the Fund's NAV. There is no assurance that the Fund
will purchase shares in any specific amounts.
7. Line of Credit
On December 15, 2020, the Fund executed a Prime Brokerage Agreement
with BNP Paribas Prime Brokerage International Ltd. ("BNPP PB").
The maximum commitment amount is $20,000,000. The terms of the
lending agreement indicate the rate to be 1 month LIBOR plus 0.85%
per annum on amounts borrowed. The BNPP PB facility provides a
secured, committed line of credit for the Fund where certain Fund
assets are pledged against advances made to the Fund. The Fund has
granted a security interest in all pledged assets used as
collateral to the BNPP PB facility. On February 8, 2021 the Fund
drew down 1,520,000,000 Japanese Yen on the facility. The Fund's
outstanding balance as of April 30, 2021 was 1,520,000,000 Japanese
Yen ($13,906,043). The average weighted interest rate on borrowings
during the period was of 1.04%. Interest expense related to the
line of credit for the six-month period ended April 30, 2021, was
$33,212.
8. Portfolio Investment Risks
a. Risks Associated with Foreign Securities and
Currencies:
Investments in securities of foreign issuers carry certain risks
not ordinarily associated with investments in securities of U.S.
issuers. These risks include future political and economic
developments and the possible imposition of exchange controls or
other foreign governmental laws and restrictions. In addition, with
respect to certain countries, there is the possibility of
expropriation of assets, confiscatory taxation, and political or
social instability or diplomatic developments, which could
adversely affect investments in those countries.
Certain countries also may impose substantial restrictions on
investments in their capital markets by foreign entities, including
restrictions on investments in issuers of industries deemed
sensitive to relevant national interests. These factors may limit
the investment opportunities available and result in a lack of
liquidity and high price volatility with respect to securities of
issuers from developing countries. Foreign securities may also be
harder to price than U.S. securities.
The value of foreign currencies relative to the U.S. Dollar
fluctuates in response to market, economic, political, regulatory,
geopolitical or other conditions. A decline in the value of a
foreign currency versus the U.S. Dollar reduces the value in the
U.S. Dollars of investments denominated in that foreign currency.
This risk may impact the Fund
more greatly to the extent the Fund does not hedge its currency
risk, or hedging techniques used by the Adviser are
unsuccessful.
b. Focus Risk:
The Fund may have elements of risk not typically associated with
investments in the United States due to focused investments in a
limited number of countries or regions subject to foreign
securities or currency risks. Such focused investments may subject
the Fund to additional risks resulting from political or economic
conditions in such countries or regions and the possible imposition
of adverse governmental laws or currency exchange restrictions
could cause the securities and their markets to be less liquid and
their prices to be more volatile than those of comparable U.S.
securities.
c. Leverage Risk:
The Fund may use leverage to purchase securities. Increases and
decreases in the value of the Fund's portfolio will be magnified
when the Fund uses leverage.
d. Non-U.S. Taxation Risk:
Income, proceeds and gains received by the Fund from sources within
foreign countries may be subject to withholding and other taxes
imposed by such countries, which will reduce the return on those
investments. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes.
If, at the close of its taxable year, more than 50% of the value of
the Fund's total assets consists of securities of foreign
corporations, including for this purpose foreign governments, the
Fund will be permitted to make an election under the Code that will
allow shareholders a deduction or credit for foreign taxes paid by
the Fund. In such a case, shareholders will include in gross income
from foreign sources their pro rata shares of such taxes. A
shareholder's ability to claim an offsetting foreign tax credit or
deduction in respect of such foreign taxes is subject to certain
limitations imposed by the Code, which may result in the
shareholder's not receiving a full credit or deduction (if any) for
the amount of such taxes. Shareholders who do not itemize on their
U.S. federal income tax returns may claim a credit (but not a
deduction) for such foreign taxes. If the Fund does not qualify for
or chooses not to make such an election, shareholders will not be
entitled separately to claim a credit or deduction for U.S. federal
income tax purposes with respect to foreign taxes paid by the Fund;
in that case the foreign tax will nonetheless reduce the Fund's
taxable income. Even if the Fund elects to pass through to its
shareholders foreign tax credits or deductions, tax-exempt
shareholders and those who invest in the Fund through
tax-advantaged accounts such as IRAs will not benefit from any such
tax credit or deduction.
16 Aberdeen
Japan Equity Fund, Inc.
Notes to Financial
Statements (unaudited)
(continued)
April 30, 2021
e. Passive Foreign Investment Company Tax Risk:
Equity investments by the Fund in certain "passive foreign
investment companies" ("PFICs") could subject the Fund to a U.S.
federal income tax (including interest charges) on distributions
received from the PFIC or on proceeds received from the disposition
of shares in the PFIC. The Fund may be able to elect to treat a
PFIC as a "qualified electing fund" (i.e., make a "QEF election"),
in which case the Fund will be required to include its share of the
company's income and net capital gains annually. The Fund may make
an election to mark the gains (and to a limited extent losses) in
such holdings "to the market" as though it had sold and repurchased
its holdings in those PFICs on the last day of the Fund's taxable
year. Such gains and losses are treated as ordinary income and
loss. Because it is not always possible to identify a foreign
corporation as a PFIC, the Fund may incur the tax and interest
charges described above in some instances.
f. Sector Risk:
To the extent that the Fund has a significant portion of its assets
invested in securities of companies conducting business in a
broadly related group of industries within an economic sector, the
Fund may be more vulnerable to unfavorable developments in that
economic sector than funds that invest more broadly.
Consumer Discretionary Sector Risk. To the extent that the
consumer discretionary sector represents a significant portion of
the Fund, the Fund will be sensitive to changes in, and its
performance may depend to a greater extent on, factors impacting
this sector. Consumer discretionary companies are companies that
provide non-essential goods and services, such as retailers, media
companies and consumer services. Companies in the consumer
discretionary sector may be affected by changes in domestic and
international economies, exchange and interest rates, competition,
consumers' disposable income and consumer preferences, social
trends and marketing campaigns.
Industrials Sector Risk. To the extent that the industrial
sector represents a significant portion of the Fund's holdings, the
Fund will be sensitive to changes in, and its performance may be
adversely impacted by issues impacting this sector. The value of
securities issued by companies in the industrials sector may be
adversely affected by supply and demand related to their specific
products or services and industrials sector products in general.
The products of manufacturing companies may
face obsolescence due to rapid technological developments and
frequent new product introduction. Government regulations, world
events, economic conditions and exchange rates may adversely affect
the performance of companies in the industrials sector. Companies
in the industrials sector may be adversely affected by liability
for environmental damage and product liability claims. The
industrials sector may also be adversely affected by changes or
trends in commodity prices, which may be influenced by
unpredictable factors. Companies in the industrials sector,
particularly aerospace and defense companies, may also be adversely
affected by government spending policies because companies involved
in this sector rely to a significant extent on government demand
for their products and services.
Information Technology Sector Risk. To the extent that the
information technology sector represents a significant portion of
the Fund, the Fund will be sensitive to changes in, and its
performance may depend to a greater extent on, factors impacting
this sector. Performance of companies in the information technology
sector may be adversely impacted by many factors, including, among
others, overall economic conditions, short product cycles, rapid
obsolescence of products, competition and government
regulation.
g. Valuation Risk:
The price that the Fund could receive upon the sale of any
particular portfolio investment may differ from the Fund's
valuation of the investment, particularly for securities that trade
in thin or volatile markets or that are valued using a fair
valuation methodology or a price provided by an independent pricing
service. As a result, the price received upon the sale of an
investment may be less than the value ascribed by the Fund, and the
Fund could realize a greater than expected loss or lower than
expected gain upon the sale of the investment. The Fund's ability
to value its investments may also be impacted by technological
issues and/or errors by pricing services or other third-party
service providers.
9. Contingencies
In the normal course of business, the Fund may provide general
indemnifications pursuant to certain contracts and organizational
documents. The Fund's maximum exposure under these arrangements is
dependent on future claims that may be made against the Fund, and
therefore, cannot be estimated; however, the Fund expects the risk
of loss from such claims to be remote.
10. Tax Information
The U.S. federal income tax basis of the Fund's investments
(including derivatives, if applicable) and the net unrealized
appreciation as of April 30, 2021, were as follows:
Tax
Basis of Investments |
|
Appreciation |
|
Depreciation |
|
Net
Unrealized
Appreciation |
$127,847,434 |
|
$
23,752,718 |
|
$
(3,582,810) |
|
$
20,169,908 |
|
Aberdeen Japan Equity Fund,
Inc. |
17 |
Notes to Financial
Statements (unaudited)
(concluded)
April 30, 2021
11. Recent Accounting Pronouncements
In October 2020, the SEC adopted new regulations governing the use
of derivatives by registered investment companies. Rule 18f-4 will
impose limits on the amount of derivatives a fund could enter into,
eliminate the asset segregation framework currently used by funds
to comply with Section 18 of the 1940 Act, and require funds whose
use of derivatives is more than a limited specified exposure to
establish and maintain a derivatives risk management program and
appoint a derivatives risk manager. While the new rule became
effective February 19, 2021, funds will not be required to fully
comply with the new rule until August 19, 2022. It is not currently
clear what impact, if
any, the new rule will have on the availability, liquidity or
performance of derivatives. Management is assessing the impact of
Rule 18f-4 on the Fund.
12. Subsequent Events
Management has evaluated the need for disclosures and/or
adjustments resulting from subsequent events through the date the
financial statements were issued. Based on this evaluation, no
disclosures and/or adjustments were required to the financial
statements as of April 30, 2021.
18 |
Aberdeen
Japan Equity Fund, Inc. |
Dividend
Reinvestment and Optional Cash Purchase Plan
(unaudited)
The Fund intends to distribute to stockholders substantially all of
its net investment income and to distribute any net realized
capital gains at least annually. Net investment income for this
purpose is income other than net realized long-term and short-term
capital gains net of expenses. Pursuant to the Dividend
Reinvestment and Optional Cash Purchase Plan (the "Plan"),
stockholders whose shares of common stock are registered in their
own names will be deemed to have elected to have all distributions
automatically reinvested by Computershare Trust Company N.A. (the
"Plan Agent") in the Fund shares pursuant to the Plan, unless such
stockholders elect to receive distributions in cash. Stockholders
who elect to receive distributions in cash will receive such
distributions paid by check in U.S. Dollars mailed directly to the
stockholder by the Plan Agent, as dividend paying agent. In the
case of stockholders such as banks, brokers or nominees that hold
shares for others who are beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of shares certified
from time to time by the stockholders as representing the total
amount registered in such stockholders' names and held for the
account of beneficial owners that have not elected to receive
distributions in cash. Investors that own shares registered in the
name of a bank, broker or other nominee should consult with such
nominee as to participation in the Plan through such nominee and
may be required to have their shares registered in their own names
in order to participate in the Plan. Please note that the Fund does
not issue certificates so all shares will be registered in book
entry form. The Plan Agent serves as agent for the stockholders in
administering the Plan. If the Directors of the Fund declare an
income dividend or a capital gains distribution payable either in
the Fund's common stock or in cash, nonparticipants in the Plan
will receive cash and participants in the Plan will receive common
stock, to be issued by the Fund or purchased by the Plan Agent in
the open market, as provided below. If the market price per share
(plus expected per share fees) on the valuation date equals or
exceeds NAV per share on that date, the Fund will issue new shares
to participants at NAV; provided, however, that if the NAV is less
than 95% of the market price on the valuation date, then such
shares will be issued at 95% of the market price. The valuation
date will be the payable date for such distribution or dividend or,
if that date is not a trading day on the New York Stock Exchange,
the immediately preceding trading date. If NAV exceeds the market
price of Fund shares at such time, or if the Fund should declare an
income dividend or capital gains distribution payable only in cash,
the Plan Agent will, as agent for the participants, buy Fund shares
in the open market, on the New York Stock Exchange or elsewhere,
for the participants' accounts on, or shortly after, the payment
date. If, before the Plan Agent has completed its purchases, the
market price exceeds the NAV of a Fund share, the average per share
purchase price paid by the Plan Agent may exceed the NAV of the
Fund's shares, resulting in the acquisition of fewer shares than if
the distribution had been paid in shares issued by the Fund on the
dividend payment date.
Because of the foregoing difficulty with respect to open-market
purchases, the Plan provides that if the Plan Agent is unable to
invest the full dividend amount in open-market purchases during the
purchase period or if the market discount shifts to a market
premium during the purchase period, the Plan Agent will cease
making open-market purchases and will receive the uninvested
portion of the dividend amount in newly issued shares at the close
of business on the last purchase date.
Participants have the option of making additional cash payments of
a minimum of $50 per investment (by check, one-time online bank
debit or recurring automatic monthly ACH debit) to the Plan Agent
for investment in the Fund's common stock, with an annual maximum
contribution of $250,000. The Plan Agent will use all such funds
received from participants to purchase Fund shares in the open
market on the 25th day of each month or the next trading
day if the 25th is not a trading day.
If the participant sets up recurring automatic monthly ACH debits,
funds will be withdrawn from his or her U.S. bank account on the
20th of each month or the next business day if the
20th is not a banking business day and invested on the
next investment date. The Plan Agent maintains all stockholder
accounts in the Plan and furnishes written confirmations of all
transactions in an account, including information needed by
stockholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of
the participant, and each stockholder's proxy will include those
shares purchased pursuant to the Plan. There will be no brokerage
charges with respect to common shares issued directly by the Fund.
However, each participant will pay a per share fee of $0.02
incurred with respect to the Plan Agent's open market purchases in
connection with the reinvestment of dividends, capital gains
distributions and voluntary cash payments made by the participant.
Per share fees include any applicable brokerage commissions the
Plan Agent is required to pay.
Participants also have the option of selling their shares through
the Plan. The Plan supports two types of sales orders. Batch order
sales are submitted on each market day and will be grouped with
other sale requests to be sold. The price will be the average sale
price obtained by Computershare's broker, net of fees, for each
batch order and will be sold generally within 2 business days of
the request during regular open market hours. Please note that all
written sales requests are always processed by Batch Order. ($10
and $0.12 per share). Market Order sales will sell at the next
available trade. The shares are sold real time when they hit the
market, however an available trade must be presented to complete
this transaction. Market Order sales may only be requested by phone
at 1-800-647-0584 or using Investor Center through
www.computershare.com/buyaberdeen. ($25 and $0.12 per share).
|
Aberdeen Japan Equity Fund,
Inc. |
19 |
Dividend
Reinvestment and Optional Cash Purchase Plan (unaudited)
(concluded)
The receipt
of dividends and distributions under the Plan will not relieve
participants of any income tax that may be payable on such
dividends or distributions. The Fund or the Plan Agent may
terminate the Plan as applied to any voluntary cash payments made
and any dividend or distribution paid subsequent to notice of the
termination sent to members of the Plan at least 30 days prior to
the record date for such dividend or distribution. The Plan also
may be amended by the Fund or the Plan Agent, but (except when
necessary or appropriate to comply
with
applicable law or the rules or policies of the Securities and
Exchange Commission or any other regulatory authority) only by
mailing a written notice at least 30 days' prior to the effective
date to the participants in the Plan. All correspondence concerning
the Plan should be directed to the Plan Agent by phone at
1-800-647-0584, using Investor Center through
www.computershare.com/buyaberdeen or in writing to Computershare
Trust Company N.A., P.O. Box 505000, Louisville, KY
40233-5000.
20 Aberdeen
Japan Equity Fund, Inc.
Corporate
Information
Directors |
Legal
Counsel |
Radhika
Ajmera, Chair |
Dechert
LLP |
Anthony
Clark |
1900 K
Street N.W. |
Stephen
Bird
|
Washington,
DC 20006 |
P. Gerald
Malone
|
|
Rahn K.
Porter
|
Independent
Registered Public Accounting Firm |
|
KPMG
LLP |
Investment
Manager |
1601
Market Street |
Aberdeen
Standard Investments (Asia) Limited |
Philadelphia,
PA 19103 |
21
Church Street |
|
#01-01
Capital Square Two |
Investor
Relations |
Singapore
049480 |
Aberdeen
Standard Investments Inc. |
|
1900
Market Street, Suite 200 |
Administrator |
Philadelphia,
PA 19103 |
Aberdeen
Standard Investments Inc. |
1-800-522-5465 |
1900
Market Street, Suite 200 |
Investor.Relations@aberdeenstandard.com |
Philadelphia,
PA 19103 |
|
|
Custodian |
Transfer
Agent and Registrar |
State
Street Bank and Trust Company |
Computershare |
1
Lincoln Street |
P.O.
Box 505000 |
Boston,
MA 02111 |
Louisville,
KY 40233 |
|

The
Financial Statements as of April 30, 2021, included in this report,
were not audited and accordingly, no opinion is expressed
thereon.
Notice is
hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Fund may purchase, from
time to time, shares of its common stock in the open
market.
Shares of
Aberdeen Japan Equity Fund, Inc. are traded on the NYSE under the
symbol "JEQ". Information about the Fund's net asset value and
market price is available at www.aberdeenjeq.com.
This
report, including the financial information herein, is transmitted
to the stockholders of Aberdeen Japan Equity Fund, Inc. for their
general information only. It does not have regard to the specific
investment objectives, financial situation and the particular needs
of any specific person. Past performance is no guarantee of future
returns.
JEQ
SEMI-ANNUAL
Item 2. Code of Ethics.
This item is inapplicable to semi-annual report on
Form N-CSR.
Item 3. Audit Committee Financial Expert.
This item is inapplicable to semi-annual report on
Form N-CSR.
Item 4. Principal Accountant Fees and Services.
This item is inapplicable to semi-annual report on
Form N-CSR.
Item 5. Audit Committee of Listed Registrants.
This item is inapplicable to semi-annual report on
Form N-CSR.
Item 6. Schedule of Investments.
(a) Schedule of Investments in securities of unaffiliated
issuers as of close of the reporting period is included as part of
the Reports to Shareholders filed under Item 1 of this
Form N-CSR.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies.
This item is inapplicable to semi-annual report on
Form N-CSR.
Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
(a) Not applicable to semi-annual report on
Form N-CSR.
(b) There
has been no change, as of the date of this filing, in any of the
portfolio managers identified in response to paragraph (a)(1)of
this Item in the registrant’s most recently filed annual report on
Form N-CSR.
Item 9. Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers.
No such purchases were made by or on behalf of the Registrant
during the period covered by the report.
Item 10. Submission of Matters to a Vote of Security
Holders.
During the period ended April 30, 2021, there were no material
changes to the procedures by which shareholders may recommend
nominees to the Registrant’s Board of Directors.
Item 11. 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
(the “Act”) (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 Act (17 CFR 270.30a3(b)) and
Rule 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d15(b)). |
|
(b) |
There were no changes in the
Registrant’s internal control over financial reporting (as defined
in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)))
that occurred during the second fiscal quarter of the period
covered by this report that has materially affected, or is
reasonably likely to materially affect, the Registrant’s internal
control over financial reporting. |
Item 12. Exhibits.
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: July 8, 2021
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 |
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Alan
Goodson, |
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Principal
Executive Officer of |
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Aberdeen Japan
Equity Fund, Inc. |
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Date: July 8 2021
By: |
/s/ Andrea Melia |
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Andrea
Melia, |
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Principal
Financial Officer of |
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Aberdeen Japan
Equity Fund, Inc. |
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Date: July 8, 2021
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