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 28, 2019                                

Date of reporting period:   September 1, 2018 – November 30, 2018

 
 
Item 1. Schedule of Investments
      
Japan Smaller Capitalization Fund, Inc.
      
November 30, 2018 (Unaudited)
      
       

         
Fair    
 
   
Shares
    
Value   
 
JAPANESE EQUITY SECURITIES
            
Banks
            
Fukuoka Financial Group, Inc.
    
53,000
    
$
1,208,588
  
General banking services
                
The Akita Bank, Ltd.
    
147,700
      
3,033,746
  
General banking services
                
The Bank of Okinawa, Ltd.
    
64,100
      
2,108,720
  
General banking services
                
The Keiyo Bank, Ltd.
    
268,800
      
1,894,041
  
General banking services
                
The Musashino Bank, Ltd.
    
81,100
      
2,192,954
  
General banking services
                
The Taiko Bank, Ltd.
    
107,000
      
2,002,686
  
General banking services
                
The Yamanashi Chuo Bank, Ltd.
    
105,900
      
1,551,167
  
General banking services
                
Total Banks (4.0%)
            
13,991,902
  
                 
Chemicals
                
Adeka Corporation
    
247,400
      
3,920,135
  
Manufactures chemical and food products
                
C. Uyemura &  Co., Ltd.
    
51,700
      
3,378,817
  
Plating chemicals
                
Fujikura Kasei Co., Ltd.
    
1,059,500
      
5,916,440
  
Specialty coating materials and fine chemicals
                
Koatsu Gas Kogyo Co., Ltd.
    
646,800
      
5,053,170
  
High-pressured gases and chemicals
                
Sakata Inx Corporation
    
700,200
      
8,344,304
  
Manufactures printing ink
                
Sekisui Jushi Corporation
    
272,600
      
5,368,685
  
Manufactures plastics and other resin materials
                
Shikoku Chemicals Corporation
    
119,400
      
1,310,366
  
Manufactures chemical products
                
Tenma Corporation
    
358,900
      
6,597,299
  
Manufactures synthetic resin products
                
T&K Toka Co., Ltd.
    
195,100
      
2,070,687
  
Manufactures specialized inks for printing applications
                
Yushiro Chemical Industry Co., Ltd.
    
262,400
      
3,133,962
  
Manufactures metalworking fluids
                
Total Chemicals (12.9%)
            
45,093,865
  
                 
Construction
                
Toenec Corporation
    
317,000
      
8,767,164
  
Construction of comprehensive building facilities
                
Totetsu Kogyo Co., Ltd.
    
285,500
      
8,398,908
  
Operates construction-related businesses
                
Yondenko Corporation
    
70,000
      
1,688,114
  
Construction of electrical distribution systems
                
Yurtec Corporation
    
293,700
      
2,421,308
  
Engineering company
                
Total Construction (6.1%)
            
21,275,494
  
                 
Electric Appliances
                
Koito Manufacturing Co., Ltd.
    
30,700
      
1,646,743
  
Manufactures lighting equipment
                
Mabuchi Motor Co., Ltd.
    
88,000
      
3,065,486
  
Manufactures small motors
                
Maxell Holdings, Ltd.
    
77,400
      
1,085,311
  
Manufactures media devices, batteries and electrical appliances
                
Nissin Electric Co., Ltd.
    
99,900
      
836,790
  
Manufactures electric equipment
                
Total Electric Appliances (1.9%)
            
6,634,330
  

                 
Financing Business
                
Hitachi Capital Corporation
    
151,800
      
3,750,377
  
General financial services
                
Ricoh Leasing Company, Ltd.
    
138,400
      
4,504,232
  
Leasing and financial services
                
Total Financing Business (2.4%)
            
8,254,609
  
                 
Food
                
Kameda Seika Co., Ltd.
    
52,900
      
2,497,415
  
Manufactures confectioneries
                
Nichirei Corporation
    
84,700
      
2,391,012
  
Produces frozen foods and provides cold storage warehousing
                
Total Food (1.4%)
            
4,888,427
  
                 
Information and Communication
                
NS Solutions Corporation
    
68,400
      
1,954,974
  
System consulting services and software development
                
OBIC Co., Ltd.
    
26,400
      
2,281,094
  
Computer system integration
                
Okinawa Cellular Telephone Company
    
249,200
      
8,241,917
  
Telecommunications
                
Otsuka Corporation
    
55,900
      
1,880,812
  
Computer information system developer
                
Total Information and Communication (4.1%)
            
14,358,797
  
                 
Iron and Steel
                
Chubu Steel Plate Co., Ltd.
    
266,000
      
1,464,306
  
Manufactures steel-related products
                
Mory Industries Inc.
    
42,200
      
1,009,514
  
Manufactures steel tubing products
                
Nichia Steel Works, Ltd.
    
2,063,900
      
6,126,166
  
Manufactures steel-related products
                
Osaka Steel Co., Ltd.
    
491,400
      
8,660,690
  
Manufactures steel-related products
                
Total Iron and Steel (4.9%)
            
17,260,676
  
                 
Machinery
                
Hisaka Works, Ltd.
    
122,100
      
1,024,894
  
Manufactures heat exchangers and other machinery
                
Miura Co., Ltd.
    
82,100
      
2,187,453
  
Manufactures boilers and related products
                
Nippon Pillar Packing Co., Ltd.
    
122,200
      
1,655,380
  
Manufactures mechanical seals
                
Nitto Kohki Co., Ltd.
    
174,000
      
3,846,743
  
Manufactures machine tools and motor pumps
                
Oiles Corporation
    
360,480
      
6,340,587
  
Manufactures bearing equipment
                
Shibuya Corporation
    
17,100
      
622,790
  
Packing plant business
                
Star Micronics Co., Ltd.
    
12,800
      
190,757
  
Manufactures machinery, electronic components, and precision parts
                
Yamashin-Filter Corporation
    
55,600
      
443,194
  
Manufactures filters
                
Total Machinery (4.7%)
            
16,311,798
  
                 
Metal Products
                
Dainichi Co., Ltd.
    
246,100
      
1,614,872
  
Manufactures oil heating equipment
                
Neturen Co., Ltd.
    
473,500
      
4,270,613
  
Manufactures steel bars and induction heating equipment
                
NHK Spring Co., Ltd.
    
183,600
      
1,633,294
  
Manufactures automobile-related products
                
Piolax, Inc.
    
143,000
      
3,501,475
  
Manufactures automobile-related products
                
Rinnai Corporation
    
57,700
      
4,136,856
  
Manufactures heating appliances and components
                
Shinpo Co., Ltd.
    
1,800
      
18,232
  
Manufactures smokeless roasters
                
Total Metal Products (4.3%)
            
15,175,342
  

                 
Other Products
                
Fuji Seal International, Inc.
    
28,200
      
1,015,881
  
Packaging-related materials and machinery
                
Komatsu Wall Industry Co., Ltd.
    
24,700
      
455,776
  
Manufactures various partitions
                
Nishikawa Rubber Co., Ltd.
    
187,100
      
3,383,241
  
Manufactures rubber automobile parts
                
Pigeon Corporation
    
49,700
      
2,046,483
  
Manufactures baby care products
                
The Pack Corporation
    
216,000
      
6,145,065
  
Manufactures paper and chemical products
                
Total Other Products (3.7%)
            
13,046,446
  
                 
Precision Instruments
                
Nakanishi Inc.
    
106,700
      
2,014,928
  
Manufactures dental instruments
                
Total Precision Instruments (0.6%)
            
2,014,928
  
                 
Real Estate
                
Daibiru Corporation
    
193,900
      
2,121,142
  
Real estate leasing and building management
                
Sanyo Housing Nagoya Co., Ltd.
    
310,900
      
2,858,851
  
Designs and constructs housing
                
Starts Corporation Inc.
    
85,000
      
1,986,964
  
Construction, leasing and management of real estate
                
Total Real Estate (2.0%)
            
6,966,957
  
                 
Retail Trade
                
ABC-Mart, Inc.
    
56,600
      
3,180,587
  
Retail sales of shoes
                
AIN Holdings Inc.
    
2,700
      
208,086
  
Operates pharmacies and drug store chains
                
Amiyaki Tei Co., Ltd.
    
236,900
      
8,554,983
  
Operates barbecue restaurant chains
                
Cosmos Pharmaceutical Corporation
    
30,800
      
6,247,624
  
Operates drug stores
                
Create SD Holdings Co., Ltd.
    
209,600
      
5,713,762
  
Operates pharmacies and drug store chains
                
Daikokutenbussan Co., Ltd.
    
207,900
      
8,212,723
  
Operates supermarkets
                
Don Quijote Holdings Co., Ltd.
    
72,100
      
4,375,470
  
Operates discount stores
                
Hiday Hidaka Corp
    
178,633
      
3,708,442
  
Operates restaurant chains
                
Izumi Co., Ltd.
    
40,800
      
2,310,688
  
Operates shopping centers, real estate, and credit card services
                
Japan Meat Co., Ltd.
    
121,800
      
2,132,720
  
Supermarket business and operation of eating-out stores
                
JINS Inc.
    
30,700
      
1,898,216
  
Retail sales of eyewear and fashion accessories
                
Kura Corporation
    
14,700
      
924,455
  
Operates a sushi restaurant chain
                
Kusuri No Aoki Holdings Co., Ltd.
    
28,500
      
2,108,601
  
Operates drug stores
                
NAFCO Co., Ltd.
    
76,700
      
1,235,604
  
Operates a chain of home and furniture retail outlets
                
Saint Marc Holdings Co., Ltd.
    
20,300
      
495,990
  
Operates restaurant chains
                
Saizeriya Co., Ltd.
    
508,300
      
9,715,163
  
Operates restaurants
                
San-A Co., Ltd.
    
176,100
      
7,390,818
  
Retail sales of home goods
                
Seria Co., Ltd.
    
89,800
      
3,816,312
  
Discount retail sales
                
Sundrug Co., Ltd.
    
25,700
      
866,966
  
Operates pharmacies and drug store chains
                
Yossix Co., Ltd.
    
13,900
      
407,077
  
Operates restaurant chains
                
Total Retail Trade (20.9%)
            
73,504,287
  

                 
Services
                
EPS Holdings, Inc.
    
82,300
      
1,583,877
  
Performs contract medical research services
                
H.I.S. Co., Ltd.
    
124,000
      
4,177,566
  
Travel business
                
Nihon M&A Center Inc.
    
36,000
      
839,318
  
Provides merger and acquisition brokerage services
                
Nippon Air Conditioning Services Co., Ltd.
    
406,200
      
2,722,669
  
Provides maintenance and management of building facilities
                
Step Co., Ltd.
    
157,400
      
2,086,467
  
Operates preparatory schools
                
Tear Corporation
    
77,900
      
473,431
  
Funeral business
                
Total Services (3.4%)
            
11,883,328
  
                 
Textiles and Apparel
                
Seiren Co., Ltd.
    
329,900
      
5,515,041
  
Manufactures synthetic fibers and textile products
                
Total Textiles and Apparel (1.6%)
            
5,515,041
  
                 
Transportation and Warehousing
                
Alps Logistics Co., Ltd.
    
253,100
      
1,988,508
  
General logistics services
                
Japan Transcity Corporation
    
656,400
      
2,844,487
  
General logistics services
                
Meiko Trans Co., Ltd.
    
397,500
      
4,033,294
  
Marine logistics services
                
Trancom Co., Ltd.
    
27,800
      
1,596,477
  
General logistics services
                
Total Transportation and Warehousing (3.0%)
            
10,462,766
  
                 
Transportation Equipment
                
Hi-Lex Corporation
    
164,700
      
3,510,583
  
Manufactures control cables
                
Morita Holdings Corporation
    
85,100
      
1,677,490
  
Operates five business transportation segments
                
Nippon Seiki Co., Ltd.
    
4,300
      
84,080
  
Manufactures transportation equipment parts
                
Nissin Kogyo Co., Ltd.
    
55,500
      
735,209
  
Manufactures automobile brake systems
                
Total Transportation Equipment (1.7%)
            
6,007,362
  
                 
Utilities
                
Keiyo Gas Co., Ltd.
    
97,200
      
2,356,908
  
Produces gas and energy products
                
The Okinawa Electric Power Company, Incorporated
    
194,077
      
3,859,831
  
Produces thermal energy products
                
Total Utilities (1.8%)
            
6,216,739
  

                 
Wholesale Trade
                
Ai Holdings Corporation
    
33,000
      
657,762
  
Information and security equipment
                
Kanaden Corporation
    
324,400
      
3,740,165
  
Factory automation business
                
Kohsoku Corporation
    
368,400
      
3,922,981
  
Food and industrial packaging materials
                
Kondotec Inc.
    
64,800
      
589,584
  
Manufactures construction materials
                
Matsuda Sangyo Co., Ltd.
    
350,400
      
4,604,719
  
Precious metals, electronic materials, and food
                
Nagaileben Co., Ltd.
    
7,100
      
173,537
  
Medical wear business
                
Paltac Corporation
    
46,100
      
2,468,737
  
Cosmetics and daily necessities
                
Ryoden Corporation
    
819,600
      
11,550,271
  
Purchases electronic and electrical devices
                
SIIX Corporation
    
699,800
      
11,144,038
  
Parts procurement, logistics, and manufacturing of electronics
                
Sugimoto & Co., Ltd.
    
218,900
      
3,470,472
  
Machine tools and measuring instruments
                
Techno Associe Co., Ltd.
    
413,100
      
4,377,146
  
Screws and nonferrous metal products
                
Total Wholesale Trade (13.3%)
            
46,699,412
  
                 
TOTAL INVESTMENTS IN JAPANESE EQUITY SECURITIES (98.7%)
          
$
345,562,506
  
                 
FOREIGN CURRENCY
                
Japanese Yen
                
Interest bearing account
          
$
1,858,976
  
TOTAL FOREIGN CURRENCY (0.5%)
            
1,858,976
  
                 
TOTAL INVESTMENTS IN JAPANESE EQUITY
SECURITIES AND FOREIGN CURRENCY (99.2%)
          
$
347,421,482
  
                 
OTHER ASSETS LESS LIABILITIES, NET (0.8%)
            
2,754,191
  
                 
NET ASSETS (100%)
          
$
350,175,673
  
                 

Portfolio securities and foreign currency holdings were translated
at the following exchange rate as of November 30, 2018.

Japanese Yen         JPY       ¥ 113.535 = USD $1.00
Notes to Schedule of Investments (Unaudited)

Costs for Federal Income Tax Purposes
As of November 30, 2018, for federal income tax purposes, subject to change, the aggregate cost of securities was $346,883,307 and net unrealized depreciation was $1,320,801, comprised of gross unrealized appreciation of $14,348,727 and gross unrealized depreciation of $15,669,528. 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 United States generally accepted accounting principles (“U.S. 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. U.S. 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)

At November 30, 2018, all of the Fund’s investments were determined to be Level 1 securities.
During the quarter ended November 30, 2018, there were no transfers between Level 1, Level 2, or Level 3 securities.
During the quarter ended November 30, 2018, 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:  1/24/2019
 
 
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:  1/24/2019
 
 
 
By:   /s/ Amy J. Robles                               
        Amy J. Robles
        Treasurer, Principal Financial Officer
 
Date:  1/24/2019